Boparan Holdings: announces Q3 2014/2015 results

Birmingham / UK. (2sfg) Boparan Holdings Limited, the parent company for 2 Sisters Food Group, a leading diversified food manufacturer with strong positions in Protein, Chilled and Branded categories, announces its third quarter consolidated results for the 13 weeks ended 02 May 2015. Financial highlights:

	Q3 2015	Q3 2014	Change
Total sales	779.7 million GBP	811.4 million GBP	(3.9 percent)
LFL sales	798.7 million GBP	789.9 million GBP	(1.1) percent
Operating Profit	18.9 million GBP	19.4 million GBP	(2.5) percent
Operating profit margin in percent	2.4 percent	2.4 percent	–
LFL operating profit	19.4 million GBP	19.4 million GBP	–
LFL operating profit margin in percent	2.4 percent	2.5 percent	(0.1) percent
Profit / (loss) after exceptional items, before interest and tax	16.3 million GBP	(14.7) million GBP	31.0 million GBP
Retained profit / (loss) for the quarter after exceptional items, interest and taxation	0.5 million GBP	(28.6) million GBP	29.1 million GBP

Q3/2015 Operational highlights

Solid performance which is in line with guidance, in spite of price deflation headwinds. LFL sales are up 1.1 percent to 798.7 million GBP. LFL operating profit remains flat. Profit after exceptional items for the quarter is 16.3 million GBP, up 31 million GBP on last year.

CEO Ranjit Singh comments:

«This is an encouraging performance and in line with expectations. It underlines our commitment to focus on building a better business which leads the food sector and is passionate about putting customers and consumers first».

«We have said targeted investment will be the key to our future growth, and I am pleased to announce plans for continued investment in our Protein business with further plans being finalised for investment in our Chilled division. These investments will take our performance and ranges to the next level».

«In our UK poultry division, we have reviewed our operational configuration resulting in announced changes that will go a long way to offsetting the external challenges we face in this market».

«In our Chilled business, we are looking at further investment in capacity to enable us to meet our growth ambitions, and we can report a good performance by our Branded division».

«All this activity sets a very solid foundation for future growth of the business».

Divisional performance

Protein: During Q3, the business continued to feel the effects of the Avian Flu outbreaks and negative consumer sentiment following FSA campylobacter reporting. However, like-for-like revenues for the total Protein division are up 0.8 percent to 560.9 million GBP. We now see positive volume trends starting to return in poultry as deflation, passed on to the supermarkets, is starting to filter through to consumers. Our latest market share figures show that we are regaining share in the poultry sector.

Our UK poultry footprint review continues at pace, which will further streamline our operational capacity and provide greater cost efficiencies for the division.

Chilled: Like-for-like sales continue to improve versus last year to 145.3 million GBP, up 1.9 percent, driven by a strong performance in our ready meals division.

We are in the process of finalising further major investments in ready meals and hope to be able to fully announce details at our next update. With more retailer product launches in the pipeline and further contract gains since the Q2 announcement, the division has almost recovered to pre-horsegate performance levels.

Branded: The Frozen division continues to perform strongly and is ahead of last year in the majority of product sectors. Like-for-like revenue now stands at 92.5 million GBP, 2 percent ahead of last year. We are also investing in Frozen pizza capacity to enable new product launches, and we have also secured a contract for more retailer ranges for launch in November 2015.

In Biscuits, we continue to be pleased with our turnaround and have invested further in marketing and promotions. We have recently addressed the cost base of this business across all functions and this along with new product launches will enable us to drive benefits later in the year going forward.

Debt funding and cash flow

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

We continue to focus on cash and working capital management, and this resulted in a net cash inflow from operating activities of 9.7 million GBP before interest, tax and capital expenditure. This quarter includes a cash outflow relating to a seasonal unwind of working capital amounting to 25.0 million GBP (Q2 2014 21.5 million GBP). Our Net debt:EBITDA ratio increased to 4.87 times (Q2 2015: 4.58 times) and Net debt at 2 May 2015 was 742.3 million GBP, including cash balances of 96.0 million GBP (Q2 2015: Net Debt 702.7 million GBP; Cash 127.5 million GBP).

Outlook

The operating environment remains challenging, but we have put in place a strategy that is delivering improved performance throughout the business. We remain cautiously optimistic and expect profitability for Q4 will not be materially different from last year. This combination of prudent cost control, further efficiency gains and targeted investments puts the business in good shape for the future.