Goodfella's pizza deal boosts profits for 2 Sisters
The £200 million sale of the Goodfella's pizza business delivered a welcome boost to profits for Boparan Holdings, parent group of the 2 Sisters Food group.
Against a backdrop of difficult trading conditions, the sale helped boost pre-tax profits for the third quarter to £97.4m, up £88m on the same period a year ago.
But tough times for West Midlands-based 2 Sisters were underlined by a dramatic 77 per cent slump in its operating profits, down to £3.1 million. And its operating profit margin in the 13 weeks to April 28 shrank to just 0.4 per cent compared to 1.7 per cent a year ago.
April also saw 2 Sisters confirm the closure of its poultry processing factory in Scotland. It warned in February that 900 jobs were at risk at Cambuslang and in the West Midlands, where it proposes the closure of factories in Smethwick and Wolverhampton.
It also sold its Irish Green Isle business, which makes Goodfella's frozen pizza, to Bird's Eye owner Nomad Foods.
Headed by founder Ranjit Singh Boparan, sometimes dubbed the Black Country Chicken King, 2 Sisters includes Fox’s Biscuits and is the UK’s biggest chicken processor, supplying Tesco, Sainsbury’s M&S, Aldi and Lidl.
Based in Birmingham, it ran into trouble last year after a hygiene scandal at its major West Bromwich plant, which resulted in a month-long closure and retraining for all 850 staff working there.
The third quarter saw sales for the 2 Sisters Group rise 1.8 per cent to 836.7 million, while net debt was cut by £172m to £622.6m.
The company said it had seen further strong cash generation, while its reorganisation was seeing consultation exercises continuing regarding the three poultry site closures and the exiting of the Five Star Fish wholesale business in Grimsby
Earlier this year Mr Boparan was elevated to the role of president of the Boparan Holdings and former Muller food group CEO Ronald Kers was recruited as chief executive from June 1. Mr Boparan said: “During the third quarter we delivered performance in line with our expectations, as messaged in our Q2 call. We have also strengthened our balance sheet considerably with the disposal of the Goodfella’s pizza business.
“We are making good progress with our Change programme as we refocus on our core strengths.
“The appointment of Ronald Kers as CEO will help to further accelerate the work we have already started to change our business, introducing greater transparency, a stronger colleague voice, and simplifying a complex organisation.
“Under Ronald’s leadership I am confident we can take the business performance to the next level, with our focus on what has always been at the heart of our business - delivering great quality food at competitive prices for our customers.”
The company said that in his new role, Mr Boparan "will continue to oversee the strategic direction of the company, with a focus on reducing debt, supporting development of a world-class leadership team and continuing the drive towards the creation of a better, more transparent and simpler business."
The business has split its mergers and acquisitions activity from its core financial work. Group chief financial officer Richard Pike is leaving the business, with UK and Ireland finance director Craig Tomkinson replacing him from July .
Mr Tomkinson rejoined 2 Sisters in April, having previously been with the company from 2010 to 2016 and playing a major role in the £346m Northern Foods takeover and the £80 purchase of the UK arm of Vion Foods in 2013.
The group's protein division saw a 1.2 per cent rise in like for like sales in the third quarter but operating profit slumped £12.5m to a £5.8m loss, with volume growth offset by the hit from beef, poultry and fish price inflation.
The chilled foods arm saw a £500,000 rise in like-for-like sales to £148.6m, with operating profit up to £2.8m due to cost cutting and volume increases.
Sales fell slightly for its branded division, to £99.5m, while operating profit slipped to £6.1m due to underlying commodity inflation and foreign exchange costs.
The company said: "We are taking clear actions to address the disappointing performance in our Protein business. The four announced site closures will reduce overheads by around £20m on an annualised basis and we are currently exploring opportunities to drive further efficiency improvement through the business.
"Our Chilled business is performing well and we will continue to see improvement from our Branded business into the final quarter.
"We remain confident that our refined strategy is enabling us to strengthen our balance sheet, stabilise our core operations and position us to move forwards positively into 2018/19."