27th October 2015 BOPARAN HOLDINGS – Q4 AND FULL YEAR 2014/15 RESULTS Continued progress in a tough operating environment Focus on operating efficiency and investment 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, today announces its consolidated results for the 13 and 52 weeks ended 1 August 2015 (compared to the 14 and 53 weeks ended 2 August 2014).
Total sales LFL sales1 Operating profit2 Operating profit margin % LFL operating profit1,2 LFL operating profit margin % Profit after exceptional items, before interest and tax Retained profit/(loss) for the quarter after exceptional items, interest & tax Net debt
£756.8m £773.6m £22.2m 2.9% £22.8m 2.9%
£874.5m £797.2m £30.3m 3.5% £28.6m 3.6%
(13.5)% (3.0)% (26.7%) -60bps (20.3%) -70bps
LTM Adjusted EBITDA3 (£m) Net Debt: Adjusted EBITDA3
£164.5m 4.36 x
£185.6m 3.58 x
-£21.1m 0.78 x
1. Like for like (LFL) sales and operating profit are based on the 13 weeks ended 1 August 2015 compared to the 14 weeks ended 2 August 2014, excluding the impact of the 14th week, discontinued operations and the impact of exchange translation. 2. Operating profit is calculated pre-exceptional items and includes profit / (loss) on the Group’s share of joint ventures. 3. Adjusted EBITDA excludes the one-off costs reported at Q2 relating to Avian Influenza (AI) outbreaks and the costs associated with a problematic IT system implementation, which totalled £17.4m, the impact of the 53rd week and the impact of exchange translation.
Q4 highlights Performance in line with guidance, in spite of continued price deflation headwinds Like-for-like sales down 3% to £773.6m Like-for-like operating profit was down 20.3% to £22.8m Positive trends experienced in Q3 continued through Q4 Drive for greater operating efficiency and innovation across all areas of the business Continued focus on prudent cost control and tight management of working capital Investment to drive industry leadership in animal welfare Deepening and strengthening relationships with major customers Investment programme Substantial and targeted investments to drive productivity and efficiency across the business over the next three to four years: o Major £150m investment in UK poultry business o £55m in Meal Solutions o Ongoing focus on increasing frozen pizza capacity in the Branded division following £4m investment o Continued investment in reducing campylobacter
Ranjit Singh, 2 Sisters Food Group CEO, said: “Our aim is to build a better business. During 2015 we focussed on costs, efficiency, investment, innovation and deepening customer relationships. The operating environment for our industry remains tough, but we have seen a consistent improvement in our performance across all our divisions, with a 17.5% increase in life-for-like operating profit to £22.8m from Q3 to Q4. “We are making a number of important investments with the aim of providing our customers and consumers with innovative products, better value and reduced waste. Today we can announce that we are launching a major £150m investment programme in our poultry business that will completely revolutionise our supply chain end-to-end. We are aiming to further align our poultry business with the needs of our customers, creating world class facilities utilising state of the art technology, and driving efficiency. “Our investment plans also include a further £55m development project for our Meal Solutions division, which will create further capacity across all four sites and put us at the forefront of developing the next generation of ready meals. These investments are in addition to our announcement in Q3 of £4m to increase our frozen pizza capacity. “We continue to focus on measures to reduce campylobacter, where we have invested £10m to date. Our efforts have been praised by the Food Standards Agency and have won the approval of major customers. “We have also put increased emphasis on ensuring we are producing the right quality and volume at the right cost. During the year, we restructured Biscuits and Food-to-Go to reduce costs and improve efficiency and have streamlined our UK poultry processes and supply chain. “Our business transformation continues at pace and with a number of investment programmes in place, I am confident we have the right strategy to meet the needs of our major customers who increasingly demand long-term, dedicated partnerships with their suppliers.”
Divisional performance Protein Like-for-like sales in our Protein division in Q4 were in line with our expectations at £549.9m, 6% lower than the same period last year. In the period, we have been working hard to mitigate the effects of the Avian Influenza outbreaks, negative consumer sentiment following FSA campylobacter reporting and the impact of deflation throughout 2015 and we are encouraged by the positive trends which continued in Q4, where our share of the UK poultry market grew by 4% versus Q3. Like-for-like sales for the full year in the Protein division were down 3.2% to £2,208.8m. We continue to build our leadership in UK poultry and this has been further demonstrated by our award winning £10m campylobacter reduction programme launched last November. With the further use of our new factory interventions, we anticipate an even greater removal of campylobacter, reducing its presence to significantly less than the industry target. The success of these trials means we are now looking at rolling this initiative out to a wider customer base. We have continued to cement our strong position with leading customers as well as securing major business wins in poultry and in red meat with new customers. Chilled The turnaround of our Chilled division has continued at pace, and Q4 like-for-like sales were up 3.2% and operating profit significantly ahead. The chilled business has also seen good contract wins during the year, resulting in like-for-like sales for the full year being up 1.9% to £596.5m. Building on this success, we have focused on improving efficiency and investing in our innovation capability. We continue to see further opportunities to grow our Ready Meals business, and have recently announced a £55m investment to support our growth strategy. On average the ‘Chilled Ready Meals’ sector is growing at roughly 3% per annum and our business in this sector is already outpacing that growth. This investment will give us sufficient capacity to enable us to support future growth. Branded The Branded division continued to perform well over Q4 with like-for-like sales up 8.4% to £92.8m, resulting in like-for-like sales for the full year up 1.9% at £391.8m. Our frozen business has seen growth across the UK and Ireland. We have successfully launched a number of new products including Deli Di Lusso and Little Fellas in the UK, and Sweetfellas & Gluten Free pizzas in Ireland. Holland’s Pies confirmed its position as the number one individual pie brand in frozen pastry and we have secured new contracts in pastry and fish, which will contribute in the new trading year. The biscuit market has been under pressure for some time due to intense competition and during the period, we have continued to invest in marketing and promotions which has resulted in a positive impact on our market share and out performance against the market. Fox’s considerably outgrew the market in Q4 with strong like-for-like growth in both sales and volumes, up 5.3% and 17.1% respectively. We have recently launched ‘Frozen’ and ‘Star Wars’ Disney licenced brands and are encouraged by initial customer response. Investment Programme As outlined at our Q3 announcement, we continue to focus on building a better business, a key part of which includes a targeted investment programme. As we continue to improve our UK poultry footprint, we are launching a major multi-year £150m investment programme to further align our poultry business with the needs of our customers,
creating world class facilities with state of the art technology, driving efficiency and revolutionising our supply chain end-to-end. In addition, our investment plans include a multi-year £55m development project for our Meal Solutions division to overhaul our manufacturing facilities. The programme includes rebuilds and upgrades to four factories, including Pennine in Sheffield, where we will develop best in class commercial and operational processes to support continued innovation, expand capacity and drive further profitability. Board Changes On 1st August 2015, two new non-executive directors were appointed to strengthen our Board and provide additional expertise to help the Group become a better business. Susan Murray, a non-executive director of FTSE 20 Compass Group plc, and chair of its corporate social responsibility committee and former Chairman of Farrow and Ball, was joined by Ros Rivaz currently non-executive director of Rexam plc, the FTSE 250 global beverage can maker. Both Susan and Ros will become members of the Audit and Remuneration Committees. Debt funding and cash flow Our long term funding includes the senior notes, £250m 5.25% notes due 2019; £330m 5.50% notes due 2021 and €300m 4.375% notes due 2021, which provide the principal funding for the Group. In addition the Group has a £60m Revolving Credit Facility (to 2018) which remains undrawn. We continue to focus on cash and working capital management, and this resulted in a net cash inflow from operating activities for the year of £78.7m before interest, tax and capital expenditure (2014: £79.2m). Our Net debt:adjusted EBITDA ratio increased to 4.36 times (2014: 3.58 times) and Net debt at 1 August 2015 was £716.6m, including cash balances of £118.7m (2014: Net Debt £664.6m; Cash £168.3m). Outlook We expect the operating environment to remain difficult for the grocery industry in the face of continued food price deflation, and a highly competitive grocery market. Against this background, our investments across our Protein, Chilled and Branded divisions will continue to improve our performance. We have a clear sense of direction and a strategy that is already delivering results and we remain confident of the outlook for our business as we go into the new financial year. Enquiries: Please go to the Investor Relations section of the corporate website www.2sfg.com/investor-relations/investor-contacts/ A copy of this announcement will also be made available at www.2sfg.com/investor-relations/ About Boparan Holdings: Boparan Holdings is the parent company for 2 Sisters Food Group headquartered in Birmingham. We are a leading diversified food manufacturer with strong market positions in Protein, Chilled, Bakery and Frozen categories. We focus on delivering the highest quality products to our customers at the lowest cost. Next update: Our Q1 2015/16 announcement will be made on 15th December 2015.
Appendix Results for the 52 weeks ended 1 August 2015
Total sales LFL sales1 Operating profit2 Operating profit margin % LFL operating profit1 LFL operating profit margin % Retained loss for the year after exceptional items, interest and taxation Net debt Net Debt: Adjusted EBITDA3
2015 £3,140.2m £3,197.1m £58.8m 1.9% £60.4m 1.9%
2014 £3,419.2m £3,252.1m £89.5m 2.6% £98.2m 3.0%
Change (8.2%) (1.7%) (34.3%) -70bps (38.5%) -110bps
(£4.6m) £716.6m 4.36 x
(£143.3m) £664.6m 3.58 x
+£138.7m +£52.0m 0.78 x
Like for like (LFL) sales and operating profit are based on the 52 weeks ended 1 August 2015 compared to the 53 weeks ended 2 August 2014, excluding the impact of the 53rd week, discontinued operations and the impact of exchange translation.
Operating profit is calculated pre exceptional items and includes profit / (loss) on the Group’s share of joint ventures.
Adjusted EBITDA excludes the one-off costs reported at Q2 relating to Avian Influenza (AI) outbreaks and the costs associated with a problematic IT system implementation, which totalled £17.4m, the impact of the 53rd week and the impact of exchange translation.