Boparan Holdings: Q1 Results 2016/2017

Birmingham / UK. (2sfg) Boparan Holdings Limited, the parent company for 2 Sisters Food Group, a leading food manufacturer with strong positions in Protein, Chilled and Branded categories, announces its consolidated results for the 13 weeks ended 29th October 2016.

Q1 2016/2017 Q1 2015/2016(4) Y-o-Y
Total sales 818.3 mio. GBP 778.3 mio. GBP 5.1 percent
LFL sales(1) 797.0 mio. GBP 778.3 mio. GBP 2.4 percent
Operating profit(2) 19.8 mio. GBP 17.7 mio. GBP 11.9 percent
Operating profit margin percent 2.4 percent 2.3 percent 10bps
LFL operating profit(1,2v) 18.6 mio. GBP 17.7 mio. GBP 5.1 percent
LFL operating profit margin percent 2.3 percent 2.3 percent 0bps
Profit after exceptional items, before interest and tax 18.7 mio. GBP 17.6 mio. GBP 1.1 mio. GBP
Retained profit  after exceptional items, interest + tax 0.1 mio. GBP 0.4 mio. GBP (0.3 mio. GBP)
Net Debt 777.6 mio. GBP 726.3 mio. GBP 51.3 mio. GBP
LTM Adjusted Ebitda(3) 180.6 mio. GBP 157.6 mio. GBP 23.0 mio. GBP
Net Debt: LTM Adjusted Ebitda(3) 4.31 x 4.61 x (0.3) x

1. Like-for-like (LFL) sales and operating profit are based on the 13 weeks ended 29th October 2016 compared to the 13 weeks ended 31st October 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 associate and joint venture.
3. Ebitda is stated before depreciation, amortisation and defined benefit pension scheme administration costs. Current Year LTM Adjusted Ebitda excludes the impact of exchange translation. LTM Adjusted Ebitda excludes the one-off costs reported at Q2 last year relating to Avian Influenza (AI) outbreaks and the costs associated with a problematic IT system implementation, which totalled 17.4 million GBP.
4. The comparative Q1 2015-16 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 Q1 2015-16 results was to reduce operating profit in total by 0.4 million GBP from the 18.1 million GBP previously reported (+0.6 million GBP – reduction in depreciation to reflect deemed cost adjustments and – 1.0 million GBP – recognition of defined benefit pension scheme admin costs).

Q1 headlines

  • A further Quarter of sales and operating profit progress
  • Chilled and Branded divisions reporting operating profit improvements
  • Total sales up 5.1 percent from 778.3 million GBP to 818.3 million GBP; like-for-like up 2.4 percent to 797.0 million GBP
  • Operating profit up 11.9 percent from 17.7 million GBP to 19.8 million GBP
  • Like-for-like operating profit up 5.1 percent from 17.7 million GBP to 18.6 million GBP
  • Net debt:LTM Adjusted Ebitda ratio down to 4.31x from 4.61x
  • Strengthening operating environment to counter inflationary pressures
  • Innovation and investment streams on track

Ranjit Singh, 2 Sisters Food Group CEO, said: «The positive momentum we saw across the Group in our last financial year continues in our quarter one results, but we expect strong headwinds in 2017 and the business is taking action now to prepare for these challenges.

«The market remains very difficult following the uncertainties around the UK’s decision to leave the EU. Currency-driven inflation and the price-pressured retail grocery market will make next year one of our toughest.

«Our investments will unlock cost efficiencies and help accelerate our growth programmes across the Group. Running parallel with this, we are focusing strongly on a ‘cost out’ and efficiency culture throughout the organisation, with some significant benefits already delivered.

«Our Protein footprint programme progresses at pace and the expanded capabilities at our Scunthorpe and Derby sites will enable us to deliver more volume and extended product offerings in Added Value Protein in 2017. Our Red Meat division is restructuring to improve efficiency and reduce its overhead base in order to remain competitive.

«Investment projects in our Chilled division are on track, supplemented by major product launches for customers, including traditional British ranges and early launches of new Christmas sandwich lines.

«Our Brands are working hard to recover ingredients inflation; implementing further overhead restructures and targeted capital investments to drive efficiencies in Biscuits, and rolling out energy reduction and waste initiatives at our Frozen sites.

«Our Better Before Bigger strategy underpins our drive to maintain excellence in a cost-conscious operating environment. We are well positioned to negotiate the predicted 2017 headwinds and to ensure we deliver for customers on quality, service and price».

Divisional performance

Protein: Overall like-for-like sales in our Protein division in Q1 were up 1.0 percent at 535.4 million GBP (Q1 2015/16: 530.2 million GBP). Operating profit* was down 2.6 million GBP to 6.0 million GBP (Q1 2015/16: 8.6 million GBP).

Our site expansion programme is progressing, but this is underpinned by an aggressive cost focus throughout the division, with benefits already delivered in support function rationalisation. In Red Meat, we are consulting with colleagues on a proposal to consolidate our retail packing function that will realise substantial cost benefits.

During Q1, we moved to sole supply for a major customer’s breaded chicken, we secured additional wing business with a High Street frozen retailer and we won a UK Quality Food Award for a butter-basted crown.

Chilled: Our Chilled division saw like-for-like sales increase by 5.8 percent to 156.6 million GBP (Q1 2015/16: 148.0 million GBP) and operating profit* up 209.1 percent to 3.4 million GBP (Q1 2015/16: 1.1 million GBP).

The division’s strategic investments are on track, and efficiency gains have also been made with supplier, wastage and material consolidation.

As in previous years, Q1 is characterised by substantial launch activity, with more than 200 new ranges, including re-invigorated Gastropub and wood-fired pizza ranges which has driven a major uplift in sales. Our branded partnership launch has been extended with two lines launched and more expected for 2017.

Branded: The Branded division is performing well with Q1 like-for-like sales up 4.9 percent to 105.0 million GBP (Q1 2015/16: 100.1 million GBP) and operating profit* increasing by 30.0 percent to 10.4 million GBP (Q1 2015/16: 8.0 million GBP).

New premium ranges at Fox’s Biscuits have helped deliver another good performance with sales and market share up over the quarter. The expected headwinds of ingredient inflation have been mitigated with cost-to-serve and logistics initiatives with our customers and a reinvigorated waste reduction programme in factories, in addition to a marketing spend reallocation to drive sales in-store.

In Frozen, innovation has been rewarded with two Quality Award wins for Green Isle Foods for Steak + Bishops Finger Ale pie and a premium range of sausage rolls. Operational gains have also been made with pizza efficiency and quality capex investment into our Naas site, delivering ahead of plan, and LEAN initiatives have now been implemented across three of the Irish sites.

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 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 16.0 million GBP before interest, tax and capital expenditure (Q1 2015/16: 28.8 million GBP).

Our Net debt:adjusted Ebitda ratio has reduced to 4.31 times (Q1 2015/16: 4.61 times) compared to the equivalent quarter last year. This is despite an increase in net debt at the quarter end to 777.6 million GBP (including cash balances of 72.6 million GBP), which has been driven primarily by increased capital expenditure year on year.


The business expects strong headwinds in 2017 but is taking action now to mitigate them, particularly the impacts of inflation. Efficiency and innovation, supplemented by targeted investment, will help drive profitable sales and protect the business in a volatile operating environment. EU exit uncertainty, as well as cost pressures and the tough grocery market are likely to remain for the foreseeable future. However, we are well placed to deliver for our customers.