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Boparan Holdings Limited, the holding company for 2 Sisters Food Group, today announces its first quarter (Q1) results for the 13 weeks ended 27 October 2012.

Q1 2012/13 Financial highlights

 Q1 2013Q1 2012Q1 2013 vs Q1 2012
Total sales £616.7m £565.0m + 9.2 %
LFL sales* £587.0m £559.3m + 5.0 %
Operating profit before exceptional items £30.7m £27.1m + £3.6m
Net debt** £542.6m £647.2m -16.2 %
Net Debt: EBITDA 2.77 3.78 -1.01

* Like for like (LFL) sales are based on the 13 weeks ended 27 October 2012 compared to the 13 weeks ended 29 October 2011. LFL excludes discontinued operations, the acquisition of Brookes Avana which was completed on 30 December 2011 and the impact of exchange translation.
** Net debt comprises bank loans, bonds and finance leases, after offsetting cash and cash equivalents of £140.4m (Q1 2012: cash balances of £65.4m).

Q1 2012/13 Operational highlights

  • A solid start to our new financial year, in line with expectations:
    • Like for like (LFL) sales up 5.0%
    • Continued growth in Chilled and Poultry
    • Good progress made in recovering higher feed prices
    • Steady performance in Branded, Biscuits market tough and highly promotional; Frozen recovery continuing
  • Brand investment in Fox’s Biscuits during Q1; TV, radio, social media
  • Brookes Avana recovering and focused on growth; consultation commenced on proposed Leicester site closure
  • Continued reduction in Net Debt:EBITDA ratio to 2.77x with cash balances of £140.4m, despite impact of seasonal working capital build

Ranjit Singh, CEO of 2 Sisters Food Group, said: “We have made a solid start to our new financial year, in challenging market conditions.  Despite the tough consumer environment and lapping sales gains made last year, we grew sales during the first quarter as we work hard to deliver food for every meal occasion.

“Trading conditions remain challenging, with high food commodity inflation, notably poultry feed costs and increased levels of promotions. Nevertheless, we have made good progress so far in recovering the impact of higher feed costs. By continuing to put the customer at the heart of everything we do, and being prepared to invest in growth, we remain well placed to grow our business.”

Q1 2012/13

Our focus on the customer saw Group like for like (LFL) sales (adjusted to exclude Brookes Avana sales) increase by 5.0% for Q1 2012/13.

Q1 Group operating profit, before restructuring costs, was £30.7m (Q1 2012 operating profit: £27.1m) and profit for the period was lower versus last year, with a loss of £(5.1)m (Q1 2011/12: profit  £2.0m), after charging exceptional costs of £12.1m, mainly in respect of the proposed Leicester site closure announced in October 2012, of which £4.3m were non-cash costs.  Q1 operating profit margin was slightly ahead of the prior year Q1 and our expectations of broadly flat margins for the full year remain unchanged, as we focus on investing to grow sales and cash margin, and recover inflation. Net interest costs were £(17.9)m (Q1 2011/12: £(19.1)m).


Our Poultry division saw LFL sales increase by 6.2% for Q1. LFL operating profit margin % in Poultry was slightly lower in the quarter, reflecting the impact of higher feed costs, which we are progressively recovering by working closely with our customers. As previously communicated, we will see some short term margin pressure in Poultry, with a lag between the impact of higher feed prices and recovery.  In the longer term, we expect the trend for market growth in poultry to continue, driven by the relative lower cost and health attributes of poultry. Our investment to increase processing capacity to supply new business gains in H2 and longer term growth is progressing to plan. In our European business, we saw the continued build of new business supplying the retail market, in line with our strategy to develop retail customers in Europe.


Chilled Q1 LFL sales were up 6.3% as our core markets of Ready Meals, Sandwiches, Salads and Pizza continue to grow.  Whilst LFL Operating profit margin % was slightly ahead, driven by annualised synergies, total operating profit margin % was slightly lower, which includes the Brookes Avana business.  In Ready Meals, we launched Asian cuisine and we are focusing on restoring growth to the Brookes Avana ready meals and cakes business, which we acquired in December 2011. We announced a proposal, in October 2012, to close the Brookes Avana Leicester site in 2013.  As part of the undertakings following the Brookes Avana acquisition, we sold the Avana Christmas pudding equipment, which comprised one production line, to Sargents Bakeries in October 2012 for a nominal amount. Our seasonal Christmas puddings have sold well into retailers, in line with our plan, although we anticipate a higher level of seasonal promotions this year.


In Branded, LFL sales were up 0.4% with Frozen continuing to steadily recover, driving operating profit margin % improvement, whilst Biscuits performance was impacted by higher levels of promotions, increases in own label sales and a later phasing of seasonal business. In Frozen, we saw our Goodfella’s brand maintain a steady market share and increase its new product development (NPD) programme with the launch of Goodfella’s Superiore and Flavour Fellas during the quarter.

Commodity inflation

As previously communicated, commodity input costs have increased, particularly feed costs, as well as others in the diverse basket of commodities we source.  We have made good progress, to date, to progressively recover the significant increases in wholesale feed prices, through selling price increases, volumes and efficiency.

Debt funding and cashflow

We have long term funding in place with the senior £400m 9.875% and €340m 9.75% notes due April 2018 providing the principal funding for the Group and our £40m Revolving Credit Facility (to April 2016) remains undrawn. We continue to relentlessly focus on cash and deleveraging, resulting in net cash inflow from operating activities of £2.1m before interest, tax and capital expenditure. This was achieved despite our seasonal working capital build ahead of Christmas, which included the impact of the seasonal business of Brookes Avana this year.  Our net debt:EBITDA ratio improved slightly at 2.77 times (2.80 times at the end of FY12) as we continue our strategy to lower our leverage ratio. Net debt at 27 October 2012 was £542.6m, reflecting the normal seasonal working capital build. Net debt included cash balances of £140.4m.


Whilst our markets remain challenging and competitive and the wider economic outlook remains uncertain, we have made a solid start to our new financial year. We continue to remain cautious on the outlook, with food commodity inflation remaining high and high levels of promotional activity. We have made good progress, to date, on progressively recovering the impact of significant increases in wholesale feed prices impacting Poultry and protein production.  We expect markets to continue to be challenging and, reflecting our focus on top line sales growth and cash, we will invest where we see opportunities for growth.

Next update: Our Q2 2013 announcement will be made on 21 March 2012.