Cutting to the core of 2 Sisters

When discussing 2 Sisters Food Group and its divisions, one four-letter word keeps cropping up: core. The business uses it frequently in financial reports and, when announcing a new strategy recently, the final line of chief executive Ronald Kers’ statement referenced a “laser-like focus to turn around core business”.

Ranjit Singh Boparan is the undoubted chicken king, having created a very successful business off the back of poultry. But is that all he considers core to the firm?

There have already been two major disposals from 2 Sisters this year. In January, 2 Sisters’ parent company Boparan Holdings sold frozen pizza brand Goodfella’s to Nomad Foods in a deal worth around £200m. Then, at the end of July, it sold its red meat business to Irish processor Kepak Group for an undisclosed sum.

So what does that leave? Holland’s Pies has been the subject of rumours for some time now, as have Donegal Catch and Fox’s Biscuits. There’s also the remainder of Green Isle.

And then there are the businesses that fly under the radar. It would be hard to argue that Christmas pudding maker Matthew Walker should be considered core, and bakery plant Gunstones also seems more peripheral. Depending on who you ask and when, alleged disposals could happen any day.

Cut loose red meat

If the business is willing cut loose red meat, it’s logical to believe it’s only poultry and ready meals that are completely safe. The latter received a massive investment recently, thanks to a big Marks & Spencer contract win, so that shouldn’t be going anywhere.

In his transformation agenda statement, Kers went to great lengths to point out the growth potential of poultry, as well as providing own-label produce for retailers, further suggesting that part of the business would stay put.

Bernard Matthews, acquired by Boparan Private Office last year, is another wing that bears consideration. Having recently secured major retail contracts, it is planning to take on 400 new employees, so things are going well in Norfolk, especially after some tough times for the brand. And, of course, it’s poultry, which places it firmly in the core category.

Businesses cut and acquire all the time, so 2 Sisters might be doing nothing new. But few food firms have the scope and variety of offer that 2 Sisters has – or that air of mystery that attracts so much media attention.

There’s also talk that the reason Boparan stepped down from the 2 Sisters chief executive role was to personally lead a crack team to oversee the disposals.

‘Expected for a while’

When the 2 Sisters red meat division was sold to Kepak, analyst Clive Black of Shore Capital said the deal wasn’t a total surprise. “The disposal of 2 Sisters’ red meat business has been expected for a while as Ranjit Singh seeks to engineer more focus into his food group while also reducing ongoing indebtedness; this disposal follows on from the sale of Goodfella’s pizza to Nomad Foods. As such, it is a welcome development in his strategic business planning process.”

He added: “We would expect ... additional disposals of non-core activities by his company in due course.”

There’s that word again: core. With a £250m debt due to be paid in 2019, £330m due in 2021 and a further €330m in the same year, that’s the real core of the matter. And disposing of even some of these divisions would create a lot of capital to help pay off this money ahead of schedule.

When these theories were put to 2 Sisters, a spokesman said it never comments on acquisition or disposal rumours, but added: “Speculation is normal for a company like ours. When you’re a very large, multi-site, multi-product, multi-branded business, it goes with the territory.”