2 Sisters Food Group has reported a sharp fall in profits in its fourth quarter results, which the firm described as a reflection of the “harsh external environment coupled with underperformance in some parts of our business”.
Like for like sales in the 13 weeks to 28 July were £694 million, a 1.5% increase on the same period the year before. But operating profit for the period was £4.9 million, a 68.8% decrease on the year before. Overall, the business made a £54.9 million loss, a significant increase on the £17.6 million loss the year before.
The firm said reduced sales and profit reflect business disposals as well as the tough operating environment. Retailer price pressure and a lag on customer price increases, inflation, the weak pound and weather have all been factors, in addition to site closures and the associated short-term operational disruption. The business noted it had been able to reduce its debts, which now stand at £601.8m.
Ronald Kers, CEO, 2 Sisters Food Group, said: “Our Q4 results reflect the difficult macro-economic backdrop and the challenges we have faced in our own business. Against this backdrop we have a clear strategic plan which we are executing at pace to improve business performance.
“We remain focused on addressing our core UK and European poultry operations and providing the right environment for our Chilled and Branded businesses to flourish. The high level of non-cash exceptional costs reported during the period reflects a reset of the baseline of the business and provides a platform for turnaround.
“I am pleased to report a significant new customer contract in our Chilled business with a strategic customer, which underlines future growth and investment.
“The completion of two major disposals (with a further expected to complete in early 2019) strengthens our cash position and improves our financial flexibility, and I have immediately begun our transformation with a strengthened leadership team.
“Under my leadership we will strive for excellence in execution of everything we do, improve our processes and systems and ultimately build a high performance culture that’s about discipline, agility and making products that realise as much value for us as they do for our customers.
“By focusing on our core with a new team, we are laying strong foundations for a more consistently performing and profitable future. I expect to see the margin improvements associated with the turnaround programme from our third quarter onwards.”
Outlook
2 Sisters said there was “substantive and clear action taking place to stabilise and grow our businesses. Continuing disposal activity and a new management team driving through a clear transformation strategy means we are taking the right steps to address performance, and we expect margin improvements from Q3 onwards.
“We remain confident that the new management team and transformation strategy will enable us to strengthen our balance sheet, stabilise our core operations and position us to move forwards positively into the new financial year.”
Management changes
CEO Ronald Kers and CFO Craig Tomkinson both joined the executive Board and took full responsibilities in June and July respectively. Further senior hires have included:
Andrew McInnes joined the business on October 29 as managing director of UK Poultry. McInnes joined from Muller where he was managing Ddrector of milk & ingredients, previously having an 11-year track record at Muller as CFO and in various commercial finance roles.
Seb Jones joined after a 23-year career at Muller, most recently as global group integration director, and Lee Greenbury has taken up the role of group people & compliance director after seven years at Muller, most recently as director of legal for Muller UK & Ireland.
Ronald Kers added: “To truly become a leading international food business, trusted and respected by all stakeholders, we need to have the strongest possible leadership team. We continuously need to set the bar higher and deliver for our customers, consumers and ourselves.”