Q3 Results 2015/2016

Continued progress in a tough environment;
Better Before Bigger strategy paying off

Boparan Holdings Limited, the parent company for 2 Sisters Food Group, a leading food manufacturer with strong positions in Protein, Chilled and Branded categories, today announces its consolidated results for the 13 weeks ended 30th April 2016.

¹ Like for like (LFL) sales and operating profit are based on the 13 weeks ended 30th April 2016 compared to the 13 weeks ended 2nd May 2015, excluding the impact of exchange translation.

² Operating profit is calculated pre-exceptional items and includes profit / (loss) on the Group’s share of joint ventures.

³ LTM Adjusted EBITDA includes the impact of exchange translation.

Q3 headlines

• Encouraging performance in tough markets
• Further progress in spite of price deflation, currency headwinds and EU referendum uncertainty
• Total sales up 0.6% from £779.7m to £784.5m
• Operating profit up 15.9% from £18.9m to £21.9m
• Like for like operating profit up 13.2% from £18.9m to £21.4m; like for like profit margin up to 2.8%
• Continued deepening and strengthening of relationships with major customers
• Investment programme continues – poultry footprint programme and Chilled division

 

Ranjit Singh, 2 Sisters Food Group CEO, said:

“This is another positive performance, with the progress we experienced in previous quarters continuing and the Group improved total sales and operating profit, despite the volatile grocery market, deflationary pressure and uncertainties around the EU Referendum.

“As we continue to deepen customer relationships, we have delivered further successes throughout our business with new contract wins and new product launches. Our Protein business has seen existing contracts extended as well as new launches for new customers in the UK and in Europe. Our Chilled division has seen market share gains in the Indian Ready Meals category and Food To Go has increased ranging and received recognition for excellence with three honours at the British Sandwich Awards.

“Our Branded division also continues to perform extremely well with growth at Fox’s Biscuits and Goodfellas pizza.

“Our investment programme continues at pace. We are investing to improve efficiency and delivery, fundamentally changing the supply chain, and our strategic investment project continues on time and to budget, with a £6m extension and equipment upgrade at one of our facilities in Nottinghamshire.

“A major upgrade of our Scunthorpe poultry facility has started, other capital works at Carlisle and Rogerstone are now complete, and our Pennine rebuild continues and we remain on track for completion in 2017. With some production now live at our Added Value site in Derby, this will enable us to accelerate our Protein Footprint Programme quicker without increasing cost.

“The strategy we set out last year is delivering. A commitment to great food, innovation and efficiency, and great customer relationships is helping us to succeed.”

 

Divisional performance

Protein

Like for like sales in our Protein division in Q3 were down 2.6% at £533.3m (Q3 2014/15: £547.3m). Operating profit was £8.9m (Q3 2014/15: £9.4m).

The marginal decline in life for like sales is as a result of continuing price deflation, combined with a temporary loss of sales in Red Meat.

However, we have continued to cement our strong position with leading customers by offering them new products. In addition, poultry performance with our retailers is strengthening due to retail investment in price as competitive positions take root, and we have won new business with customers in Primary and Added Value poultry categories. We should see this new business begin to come through in our new financial year.

Our new Added Value site in Derby has launched BBQ kebabs and marinated half chicken, and the major refurbishment and upgrade of the remainder of the site is on track to be completed by the end of this summer.

We have also renewed contracts with a Discounter customer and won additional frozen BBQ and Scottish fresh whole bird business.

The division will be increasing its share of rotisserie poultry from June, moving to sole supply status with a leading UK retail chain, and has gained further business in this category from July with another customer.

As part of our customer diversification strategy in Red Meat, we have launched a total of ten new frozen products with a national high street frozen retailer, and two of our brands, Posh Butcher and Welsh Butcher, have been successfully launched into Europe as well as the UK foodservice sector.

 

Chilled

Our Chilled division saw like for like sales increase by 2.3% to £148.7m (Q3 2014/15: £145.3m) and operating profit up 44% to £2.6m (Q3 2014/15: £1.8m), driven by improved market share and new product launches.

Our strategic investment project continues on time and to budget, with capital works at Pennine progressing well. In addition, we are investing a further £6m at our Food To Go site in Nottinghamshire to accommodate extra business and install new equipment. By further simplification of our business, our Chilled division has also seen continued improvements in margin.

In Meal Solutions, since our new Indian Ready Meals category relaunch, announced last quarter, market share has increased substantially to take the category to the number three market share position with our customers.

New healthy vegetable ranges have received substantial TV and press activity, reaffirming our innovator status within these categories. Additionally, a further five new launches within our Taste range also reflect the latest trends for Central and South American cuisine. New business with a Discounter sector customer also reinforces our continued strong growth performance with newer customers.

Food To Go continues its good progress with more than 30 new product launches, including the new ultrathin premium pizza and deli roll ranges. Independent recognition of new ranges came with three wins at the British Sandwich Awards 2016 in May.

 

Branded

The Branded division continued to perform well with Q3 like for like sales up 4.5% to £91.0m (Q3 2014/15: £87.1m) and operating profit increasing by 35% to £10.4m (Q3 2014/15: £7.7m).

Our investments in quality and new ranges at Fox’s Biscuits have helped us deliver another strong performance with sales and market share up substantially over the quarter.

Fox’s Biscuits saw volume sales growth in the quarter against a flat overall market, as well as double digit growth with key customers. There have been further successful launches of the new Chocolatey Bar range and the existing ‘hero ranges’ continue to perform well.

In Frozen, the Goodfella’s brand continues to grow strongly in the UK with brand share up 2% in Q3, following on from the launch of our ‘best ever’ recipe. The division has won new private label retailer contracts in pizza which will start in Q1 2017 and new pastry contracts won in major UK retailers that started in this quarter.

Our Irish brands continue to show strong year-on-year growth with highlights including Green Isle vegetables and Donegal Catch, and Green Isle Heat & Eat chicken which launched in March with listings in all key Irish retailers. Matthew Walker’s Aldi golden topped fruit pudding won a Quality Award during the quarter.

 

Debt funding and cash flow

Our long term funding includes the senior notes, £250m 5.25% notes due 2019; £330m 5.50% notes due 2021 and €300m 4.375% notes due 2021, which provide the principal funding for the Group. In addition the Group has a £60m Revolving Credit Facility (to 2018) which remains undrawn.

We continue to focus on cash and working capital management, and this resulted in a net cash inflow from operating activities for the quarter of £34.2m before interest, tax and capital expenditure (Q3 2014/15: £9.7m).

Our Net debt:adjusted EBITDA ratio improved to 4.04 times (Q3 2014/15: 4.40 times) for the quarter and we have experienced a net debt decrease of £31.3m to £711.0m compared to the equivalent quarter last year, including cash balances of £127.9m.

 

Outlook

The steady progress continues and performances across our business show that our commitment to efficiency, innovation and investment to drive profitable sales is starting to pay off. Despite the volatile grocery market, increasing cost pressures and the uncertainty arising from the EU referendum, our Better Before Bigger strategy remains on course and we remain cautiously optimistic that we will continue to deliver for the remainder of this financial year.

Enquiries:

Please go to the Investor Relations section of the corporate website

www.2sfg.com/investors

 

About Boparan Holdings:

Boparan Holdings is the Parent company for 2 Sisters Food Group headquartered in Birmingham. We are a leading diversified food manufacturer with strong market positions in Protein, Chilled, Bakery and Frozen categories. We focus on delivering the highest quality products to our customers at the lowest cost.

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