2 Sisters Food Group slides further into debt

Boparan Holdings, the firm’s parent company, added £21.5M to net debt in the 13 weeks to the end of January, increasing it from £681.2M in the previous quarter to £702.7M.

“During the period the business’ results were impacted by two issues, one of which (AI) was notified at our Q1 announcement,”​ said ceo Ranjit Boparan. “The outbreaks of AI across Europe disrupted the business in a number of ways.​

“For a limited period of time, the business suffered a shortfall in availability of chickens in the Netherlands which impacted both sales and the operational efficiency of the business. The outbreaks also resulted in the closure of a number of overseas markets for our by-products.​

“This impacted the returns we were able to make from these products as well as the need to write down stock values. The combined impact of these factors on the profit of our protein division in the quarter amounted to £6.2M.”​

IT difficulties​

A new IT system installed at one of its protein sites towards the end of the previous financial year had also caused difficulties, Boparan said. “It has now come to light that the managerial, operational and accounting controls around this system required significant improvement.​

“We have estimated that the results for the quarter have been adversely affected by £11.2M due to production inefficiencies and stock write offs. Controls have now been strengthened in all areas and a thorough audit of this implementation has been undertaken to ensure any subsequent implementations are adequately supported.”​

2 Sisters reported a 2% decrease in like-for-like sales in its protein division in Q2 and a £3.6M reduction in operating profit.

However, its chilled food and frozen food operations performed well, with like-for-like chilled sales up 2.9% as the division moved into recovery phase.

Competitive edge​

The commissioning of its new Gunstones bakery gave it a competitive edge in the food-to-go sector and the relaunch of Marks & Spencer’s Taste range had contributed to strong ready meals performance, it said.

Like-for-like frozen food sales rose by 5.4% in the quarter. In addition, over the first half of the current financial year its Goodfella’s and Holland’s pies ranges grew their like-for-like market shares by 3.9% and 15% respectively, 2 Sisters said.

The company reported like-for-like sales for the quarter down 1.3%, from £818.3M in the same period last year to £807.3M. It also took a £17.6M hit to operating profit during Q2, recording a £4.3M loss versus a £13.3M profit in the same period last year. It posted pre-tax profit of £15.1M for the latest quarter.

Boparan predicted bird flu would continue to hit group profitability during 2 Sisters’ third financial quarter, as international trade for its products remained restricted.

The firm was working hard to improve operational efficiency and effectiveness across all its sites, he said.

Earlier this month, 2 Sisters confirmed that it planned to cut jobs across its biscuits business​.