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FY12 Financial highlights

 FY 2012PF FY 2011% change
Total sales £2,339.2m £2,063.6m +13.4%
LFL sales* £2,259.6m £2,063.0m +9.5%
EBITDA** £190.3m £170.0m +11.9%
EBITDA LFL margin % 8.4% 8.3% +10bps
Operating profit before exceptional items £108.1m £89.6m 20.6%
Profit / (loss) for the year after exceptional items, interest and taxation £42.5m (£17.0)m 350%
Net cashflow from operating activities (statutory) £253.8m £59.m 329%
Net debt*** £533.8m £655.1m -18.5%
Net Debt: EBITDA 2.80 3.85 +27.3%

* Like for like (LFL) sales are based on the 52 weeks ended 28 July 2012 compared to Pro Forma (PF) for the prior 52 weeks ended 30 July 2011. LFL excludes the acquisition of Brookes Avana which was completed on 30 December 2011 and the impact of exchange translation.
** EBITDA is pre-restructuring costs. Pro forma comparative is on the basis that the Group as it stood at 30 July 2011 was in existence for the entire period ended 30 July 2011 and after Uffculme feed mill and one off item adjustments.
*** Net debt comprises bank loans, bonds and finance leases, after offsetting cash and cash equivalents of £144.8m (FY 2011: cash balances of £57.0m). 

FY12 Operational highlights

  • Good sales performance (LFL sales up 9.5%), ahead of the market:
    • Strong contributions from Chilled and Poultry to drive volumes
    • Branded recovery continues; Frozen improving and Biscuits solid
    • New Poultry business secured with Sainsbury’s for FY13
    • New retail business secured in European Poultry
  • Integration of Northern Foods nearing completion with annualised synergies delivered in line with expectations
  • Work in progress to restore growth at Brookes Avana following £30m cash acquisition in December 2011

Ranjit Singh, CEO of 2 Sisters Food Group, said: “2 Sisters Food Group delivered a good sales performance over the course of the year. Despite the challenging economic environment and the competitive sector we operate in, our focus on putting the customer at the heart of everything we do means that we have benefited from new business, with both existing and new customers.

“We continue to embed our customer and cash culture across the Group following the acquisitions of Northern Foods and Brookes Avana last year. Our Integration programme has delivered in line with our expectations and we generated synergies at the top end of our forecast range, with re-investment of synergies to drive further growth. We made good progress in deleveraging the Group and generating cash, with our leverage ratio now at 2.8 times; a good performance.

“Whilst we have made a solid start to our new financial year, looking ahead, we remain cautious in a difficult economic environment. Trading conditions are very challenging with high food commodity inflation, further recent significant increases in feed prices and cash conscious consumers.  Despite these pressures, we will continue to work with our customers to deliver quality and value to consumers, invest in our brands, in innovation and our people, and drive efficiency over the course of the year.”

FY12 and Q4 2012 performance

Our focus on the customer saw Group like for like (LFL) sales (adjusted to exclude Brookes Avana sales) increase by 9.5% for FY12, driven by volumes, with Group LFL sales in Q4 up 10.0%.

Our focus on cash margin drove FY12 EBITDA to £190.3m, which was 11.9% or £20.3m ahead of PF FY 2011. FY12 margins, at 8.1%, were in line with pro forma full year 2011 margins (PF FY 2011 EBITDA margin: 8.2%), including synergies from our integration programme, which we have re-invested to support continued growth. We expect our margins to remain flat in 2012/13 as we focus on growing sales and cash margin, and recovering inflation.


The Poultry division saw LFL sales increase by 10.1% for the full year, and 6.2% for Q4, a good performance which reflects continued investment with customers to drive volumes.  EBITDA margins in Poultry were slightly down over the year as we focus on cash margin.  Our European business continued to diversify towards more supply into the retail market, with retail tenders secured for FY13. In the UK, we also secured significant new business with Sainsbury’s, from 2013. There have been further significant increases in feed prices over the last few months which will result in further inflation in poultry and other protein markets. We continue to work closely with our customers on recovery of these higher feed prices, as this is essential to secure the viability and supply of the poultry farming and processing capability in the UK.  However, as with previous commodity increases, we do anticipate some short term margin pressure in our Poultry segment as we see the lag between commodity price increases and recovery.


Chilled delivered strong volume growth over the year, with FY12 LFL sales up 10.5% and Q4 LFL sales up 11.0%, a strong performance in the growing Ready Meals, Sandwiches and Salads markets.  We worked closely with customers on developing specific ‘British themed’ product offerings for the Queen’s Diamond Jubilee, the Euro 2012 football championship and the Olympic Games. Chilled EBITDA margins, excluding Brookes Avana, were broadly in line with the prior year. In the Brookes Avana business, we have made progress to deliver a break-even performance by the year end. We have taken tough actions to improve efficiency, including announcing the proposed closure, subject to consultation, of the Leicester factory in early October. Whilst we are attracting new business into the Rogerstone Park and Avana sites, Leicester has been operating well below capacity following business lost under previous ownership. We are proposing to close the Leicester factory by April 2013 and transfer the remaining business to other sites. At the end of July we transferred our food assembly operation at Colnbrook, near London Heathrow airport, to DHL Supply Chain. This was a non-core activity and enables DHL to manage all the logistics activity associated with the operation supplying British Airways.  We continue to supply food to British Airways on its short haul routes from London Heathrow.


Branded reflected a steady performance in Biscuits, where sales growth was driven by higher promotional activity to meet the demands of cash conscious consumers, and an improving performance in Frozen, where our work to reinvigorate the Goodfella’s pizza brand is steadily seeing our market share increase. FY12 Branded LFL sales were up 6.8% versus last year’s pro forma and up 18.1% in Q4 against a weak Q4 last year, with EBITDA margins slightly ahead, reflecting the steady improvement in Frozen. In Biscuits, we saw a number of British themed products for the summer’s sporting events, both in own label and brand.

We will see investment in new brand campaigns during Q1, including our Fox’s Biscuits, Rocky and Goodfella’s pizza brands, with multi-channel campaigns including radio, TV, social media, national press and lifestyle press. Goodfella’s will also launch a brand campaign to support new products including the premium Superiore range.


Our Integration programme and synergies delivered in line with our expectations and we have re-invested some of our synergy benefits to support continued growth.  We will continue to focus on other efficiency opportunities over the course of this year.

Commodity inflation

Input costs continue to increase in the diverse basket of commodities we source, particularly in proteins such as poultry, beef, pork and lamb. The recent significant increases in feed prices will continue to put pressure on food inflation and we will aim to progressively recover these through selling price increases, volumes and efficiency.

Debt funding and cashflow

Our long term funding includes the senior £400m 9.875% and €340m 9.75% notes due April 2018 which provide the principal funding for the Group. In addition the Group has a £40m Revolving Credit Facility (to April 2016) which remains undrawn. We continue to relentlessly focus on cash and deleveraging, resulting in net cash inflow from operating activities of £253.8m before interest, tax and capital expenditure. Our net debt:EBITDA ratio continued to improve, to 2.8 times (from 3.3 times at the end of Q3) as we deleverage the Group. Net debt at 28 July 2012 was £533.8m, including cash balances of £144.8m, with the RCF remaining undrawn.

Q1 trading and Outlook

In a challenging and competitive environment, we have made a solid start to our new financial year. Looking ahead, we remain cautious on the outlook, with food commodity inflation remaining high, including recent significant increases in wholesale feed prices impacting Poultry and protein production. We are working closely with our customers to recover these higher input costs – through a phased recovery – as this is essential to secure the viability and supply of the poultry farming and processing capability in the UK.

We will continue to invest in our brands, our people and in innovation, working closely with our customers to drive further sales growth over the coming year.

Next update: Our Q1 2013 announcement will be made on 18th December 2012.