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Boparan Holdings Limited, the holding company for 2 Sisters Food Group, today announces its second quarter results for the 13 weeks ended 28 January 2012.

Q2 Financial highlights

 Q2 2012PF Q2 2011% change
Group sales £571.8m £508.0m +12.6%
LFL sales* £559.7m £508.0m +10.2%
EBITDA** £46.4m £41.7m +11.3%
LFL EBITDA % of net sales 8.5% 8.2% 30 bps
Profit from ordinary activities before taxation (statutory) £16.8m £9.4m +78.7%
Net cashflow (statutory) £48.2m £18.8m +156%
Net debt*** £630.8m n/a n/a
  • LFL EBITDA % margin of 8.5%; EBITDA margin including Brookes Avana was 8.1%

  • Net debt*** £630.8m at 28 January 2012 as we continue to deleverage the Group; cash balances were £67.2m and £40m RCF remains undrawn

* Like for like sales and EBITDA % (LFL) are based on the 13 weeks ended 28 January 2012 compared to Pro Forma for the prior 13 weeks ended 29 January 2011. LFL excludes the impact of discontinued operations and the acquisition of Brookes Avana which was completed on 30 December 2011
** 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.

Q2 Operational highlights

  • Further sales progress in Q2:

    • Solid Christmas with increased promotional activity

    • Continued focus on investing with customers to deliver sales growth and cash margin

    • Completed the acquisition of Brookes Avana on 30 December 2011 for cash consideration of £30.6m

    • Integration of Northern Foods and synergy delivery on plan; synergy expectations now at the higher end of our £15-£25m range

Ranjit Singh, CEO of 2 Sisters Food Group, said: “2 Sisters has continued to deliver good sales progress in the second quarter, building on the momentum from our first quarter and demonstrating how our virtuous circle to drive volumes and improve efficiency is working.  Despite the challenging and competitive trading environment we operate in, we have recorded good sales growth as we work closely with our customers to deliver value to the consumer. At the half-way stage of our financial year, performance remains in line with our expectations.”

We delivered strong sales momentum in Q2, with Group LFL sales (adjusted to exclude Brookes Avana sales) up 10.2%, helping to drive EBITDA £4.7m ahead of Q2 last year. EBITDA margins, at 8.1%, remained in line with pro forma full year 2011 margins and are broadly flat year on year, reflecting our investment with customers to drive volumes. Excluding Brookes Avana, our underlying EBITDA % margin was 8.5%, slightly ahead of last year’s Q2 pro forma. Our expectation of broadly flat year-on-year margins (compared to the pro forma) for the full year remains unchanged.

Across our operating divisions, Q2 saw strong sales growth in our Poultry division, with sales up 13.2% as our investment to drive volumes continues, including some new business wins year on year.  EBITDA margins in Poultry improved on Q1 but were 0.5% lower versus pro forma Q2 last year, reflecting some short term margin dilution as we focus on driving volumes. 

In Chilled, we delivered further volume growth, with LFL sales up 12.4%, a reflection of our strong product offerings in the growing chilled convenience food markets, with seasonal sandwich and ready meal products for Christmas and Chinese New Year again proving popular. Chilled EBITDA margins excluding Brookes Avana were consistent with Q1 and pro forma Q2 last year. Brookes Avana has made an encouraging start to our aim of achieving EBITDA break even by the end of the year and return to profitability within 12-24 months.

In Branded, Q2 sales were up 0.6% versus the pro forma Q2 2011, reflecting flat volumes in Biscuits and a solid Frozen performance following the Goodfella’s pizza promotional campaign. Biscuits saw increased competitor promotional activity and a higher level of promotions needed to drive sales in the run up to Christmas.  In Frozen, we saw encouraging results following our Goodfella’s pizza campaign, with our focus going forward to increase repeat purchase during 2012. Branded margin was ahead of pro forma Q2 last year but lower than Q1 reflecting increased promotional activity.


We continue to make good progress integrating Northern Foods.  Our individual workstreams continue to deliver cost synergies and we now expect synergy savings to be at the upper end of our previously communicated range of £15-£25 million for the current financial year.

Commodity inflation

Average input costs across the diverse basket of commodities we source remain high in historic terms. Our outlook for the commodity environment remains cautious and we do not see any material easing of commodity costs in the remainder of this financial year.

Brookes Avana

Brookes Avana, which we acquired on 30 December 2011 for £30.6m in cash, has made an encouraging start, with the focus on enhancing its performance in the short term by reducing cost and improving efficiency. Brookes Avana has a strong track record of delivering high quality products for its customers and it has made an encouraging start in seeking to return the business to break even this year. Our aim is to return the business to profitability within 12-24 months by cost reduction and gaining new business to utilise the spare capacity.  As communicated by the previous owner of Brookes Avana, a significant contract loss at the Leicester site will take effect in June 2012 and we continue to seek opportunities to replace lost volumes to secure the future viability of this site.  On 19 March, the Office of Fair Trading (OFT) completed its review of the purchase and we are delighted that the OFT cleared over 96% of this acquisition, namely the main Rogerstone Park chilled ready meals facility, the Avana chilled cakes, puddings and desserts facility and the Leicester chilled pies and pizza facility. Disappointingly, the OFT rejected our proposed Undertakings in Lieu (UIL) in relation to the Avana Christmas puddings business, which is a small part of the overall Brookes Avana business (less than 4% of Brookes Avana sales last year) and we believe that the OFT has failed to understand the very competitive dynamics of the own label market. We will now consider our options to deal with the OFT’s findings in respect of Avana Christmas puddings.

Debt funding and cashflow

The Group has long term funding in place. Our senior £400m 9.875% and €340m 9.75% notes due April 2018 provide the principal funding for the Group. In addition the group has a £40m Revolving Credit Facility (to April 2016) which remains undrawn after completion of the Brookes Avana acquisition. We continue to relentlessly focus on cash and drive working capital, resulting in net cash inflow from operating activities of £48.2m before interest payments and before the acquisition of Brookes Avana for cash consideration of £30.6m. Our net debt position improved as we continue to focus on driving cash and deleveraging the Group. Net debt at 28 January 2012 was £630.8m, with cash balances of £67.2m and the RCF remaining undrawn.

Q3 trading and Outlook

At 2 Sisters, we put the customer at the heart of everything we do, which is reflected in our strong sales momentum during Q1 and Q2.  The first month of our Q3 trading has been in line with our expectations and the Group continues to make progress as we move through our financial year. Whilst we remain cautious in our outlook for the year as a whole and mindful of the highly competitive market environment, we remain in a good position to grow our business over the year.


Please go to the Investor Relations section of the corporate website at www.2sfg.com for contact details.

A copy of this announcement will also be made available at www.2sfg.com 
under the Bond Investors section.

About Boparan Holdings:

Boparan Holdings is the holding company for 2 Sisters Food Group. We are a leading diversified food manufacturer with strong market positions in Poultry, Chilled, Bakery and Frozen categories. We focus on delivering the highest quality products to our customers at the lowest cost.

Next update: Our Q3 update will be made on 19 June 2012.