Q4 and Full Year Results 2015/2016

2016 momentum continues;
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 and 52 weeks ended 30th July 2016.

1. Like for like (LFL) sales and operating profit are based on the 13 weeks ended 30th July 2016 compared to the 13 weeks ended 1st August 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 and pension scheme administration costs.

3. EBITDA is stated before depreciation, amortisation and pension scheme administration costs. Current Year LTM Adjusted EBITDA excludes the impact of exchange translation. Prior Year LTM Adjusted EBITDA excludes the one-off costs reported at Q2 that year relating to Avian Influenza (AI) outbreaks and the costs associated with a problematic IT system implementation, which totalled £17.4m.

4. The comparative Q4 2015 results have been restated to take into account first time adoption of FRS 102 during the period ended 30 July 2016. The effect of adopting FRS102 on Q4 2015 results was to reduce operating profit in total by £3.4m. (+£0.7m reduction in depreciation to reflect deemed costs adjustments; -£3.3m pension scheme admin costs and -£0.8m change in fair value of derivatives recognised on balance sheet).

Q4 highlights

• Better Before Bigger strategy paying off in tough environment
• Third consecutive quarter of operating profit progress
• Operating profit improvements in all divisions
• Total sales up 2.4% from £756.8m to £775.0m; like-for-like up 0.8% to £763.0m
• Operating profit up 39.9% from £18.8m to £26.3m
• Like for like operating profit up 34.6% from £18.8m to £25.3m; like for like profit margin up to 3.3%
• Net debt reduced; Net debt:Adjusted EBITDA ratio now 3.91x
• Close partnership approach with major customers paying off
• Investment programme continues

 

Ranjit Singh, 2 Sisters Food Group CEO, said:

“We are pleased to report another encouraging performance with continuing improvements in sales and operating profit. The market remains tough with the uncertainties around the UK’s decision to leave the EU, currency-driven inflation and the volatile grocery market still applying great pressures on the food manufacturing sector.

“Our investments will unlock cost efficiencies and help accelerate our Protein Footprint Programme. This is already beginning to deliver as we see our new Derby site producing Ready To Cook chicken for major customers and the £45m refurbishment of our Scunthorpe facility enabling it to increase volume throughput.

“Overall, the Chilled division is showing encouraging profit growth and our strategic investments here puts us in a strong position for the future. We continue to launch new products and win new business, including a substantial £40m contract for breaded fish and launches in traditional ready meals and soup categories, which will help to offset business which transfers to other suppliers in 2017.

“Our Branded division continues its good progress. Our Frozen and Biscuits businesses continue to see gains in market share in both the UK and in Ireland, with a new contract for own label pizza won for a Frozen retailer and a raft of own label and new product launches for Biscuits.

“Our Better Before Bigger strategy is showing it was the right thing to do for our business and it is delivering promising results. We are well positioned to succeed in this tough environment given our close partnership approach with our key customers where quality, service and price will always remain paramount.”

 

Divisional performance

Protein

Overall sales in our Protein division in Q4 were up 0.8% at £542.0m (Q4 2014/15: £537.6m). Operating profit was up 25% to £12.0m (Q4 2014/15: £9.6m).

During Q4 we moved to sole supply for a major customer’s rotisserie chicken at the expense of a competitor, a reflection of the category and operational support we have given the customer.

In addition, our Ready To Cook ranges have been extended at our Derby facility which means we can further accelerate our poultry footprint programme.

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

The division launched new ranges for two customers in the quarter, and has won numerous quality awards, including the Best Overall Red Meat product at the Meat Management Awards, and the only one of four suppliers to win a Gold award at the World Steak Awards.

 

Chilled

Our Chilled division saw like-for-like sales increase by 7.3% to £140.4m (Q4 2014/15: £130.9) and operating profit up to £4.5m (Q4 2014/15: £1.2m), driven by targeted investments, new contract wins and new product launches.

The division is making strategic investments at Rogerstone, Manton Wood and Gunstones bakery which will help create a strong foundation for sustained growth and help mitigate customer contract transfers due in 2017.

A British Traditional Meals category is being relaunched and major new premium soup ranges will be launched for winter 2016. Alongside this, successful tie-ups with other food manufacturers have diversified our product range. 

 

Branded

The Branded division is performing well with Q4 like-for-like sales up 3.2% to £91.1m (Q4 2014/15: £88.3m) and operating profit increasing by 22.5% to £9.8m (Q4 2014/15: £8.0m).

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

There have been further successful launches in the premium tier including the new Granola cookies and Viennese chocolate-dipped biscuits ranges and the existing core ranges continue to perform well. The Chunkie range has also been supplemented with the launch of the chocolate Orange Chunkie.

In Frozen, the Goodfella’s brand continues to grow strongly in the UK and Ireland and Donegal Catch Creations has won an Irish Marine Seafood Award. The division has also seen an increase year-on-year in export orders for its Christmas puddings.

 

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 2019).

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 £52.3m (Q4 2014/15: £46.2m). 

Our Net debt:adjusted EBITDA ratio improved to 3.91 times (Q4 2014/15: 4.45 times).

 

Outlook

Good progress and performances across our business show that our commitment to customer partnerships, efficiency, innovation and investment to drive profitable sales is continuing to pay off. Despite the uncertainty arising from the UK’s decision to exit the EU, continuing cost pressures and the tough grocery market, we remain well placed to continue to deliver in our new 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.

 

 

Appendix 1 - Full Year Results

1. Like for like (LFL) sales and operating profit are based on the 52 weeks ended 30th July 2016 compared to the 52 weeks ended 1st August 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 and pension scheme administration costs.

3. EBITDA is stated before depreciation, amortisation and pension scheme administration costs. Current Year LTM Adjusted EBITDA excludes the impact of exchange translation. Prior Year LTM Adjusted EBITDA excludes the one-off costs reported at Q2 relating to Avian Influenza (AI) outbreaks and the costs associated with a problematic IT system implementation, which totalled £17.4m.

4. The comparative FY 2015 results have been restated to take into account first time adoption of FRS 102 during the period ended 30 July 2016.  The effect of adopting FRS102 on FY 2015 results was to reduce operating profit in total by £1.6m. (+£2.5m reduction in depreciation to reflect deemed costs adjustments; -£3.3m pension scheme admin costs and -£0.8m change in fair value of derivatives recognised on balance sheet). 

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