2 Sisters Food Group Q4 2017/18 Update Bond Holder Presentation 20 - - PowerPoint PPT Presentation

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2 Sisters Food Group Q4 2017/18 Update Bond Holder Presentation 20 - - PowerPoint PPT Presentation

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Boparan Holdings Limited 2 Sisters Food Group Q4 2017/18 Update Bond Holder Presentation 20 TH NOVEMBER 2018 1 This presentation is for information purposes only and must not be used or relied upon for the purpose of making any investment

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20TH NOVEMBER 2018

2 Sisters Food Group Q4 2017/18 Update

Bond Holder Presentation

Boparan Holdings Limited

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This presentation is for information purposes only and must not be used or relied upon for the purpose of making any investment decision or engaging in any investment activity. Whilst the information contained herein has been prepared in good faith, neither Boparan Holdings Limited (the “Company”), its subsidiaries (together, the “Group”) nor any of the Group’s directors, officers, employees, agents or advisers makes any representation or warranty in respect of the fairness, accuracy or completeness of the information or opinions contained in this presentation and no responsibility or liability will be accepted in connection with the same. The information contained herein is provided as at the date of this presentation and is subject to updating, completion, revision, verification and further amendment without notice. This presentation contains forward-looking statements in relation to the Group. By its very nature, forward-looking information requires the Company to make assumptions that may not materialise

  • r that may not be accurate. Forward-looking statements involve known and unknown risks,

uncertainties and other important factors beyond the control of the Company that could cause the actual performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Nothing in this presentation should be construed as a profit forecast. Past performance cannot be relied on as a guide to future performance.

Disclaimer

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Agenda

2 | Financial Performance and Financing Update 1 | Executive S ummary 3 | M&A Update 4 | S trategy and Turnaround Plan 5 | Outlook

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2017 was challenging but root causes are being addressed

FY 2017/2018 was a tough year but despite operational challenges we were still able to strengthen our balance sheet Highlights of the year

  • Challenging year in the Core
  • Net Debt reduction

programme initiated

  • Successful execution of

planned disposals

  • New Management team in

place £m FY 2017/18 FY 2016/17 YoY Change Group Revenue 3,339.1 3,288.9 1.5% EBITDA 118.4 161.2 (26.6)% Protein Revenue 2,338.9 2,268.6 3.1% EBITDA 30.6 65.1 (53.0)% Chilled Revenue 609.2 612.1 (0.5)% EBITDA 44.6 38.6 15.5% Branded Revenue 391.0 408.2 (4.2)% EBITDA 43.2 57.5 (24.9)%

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Agenda

2 | Financial Performance and Financing Update 1 | Executive S ummary 3 | M&A Update 4 | S trategy and Turnaround Plan 5 | Outlook

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Q4 2017/2018 Results

Q4 Performance overview

  • Underlying LFL sales growth offset by impact of

Goodfella's disposal within the period

  • Profit margins have weakened due to performance in the

UK poultry business

  • Net debt has reduced by 24.3% year on year due to

successful execution of the disposal programme

  • Comparable leverage has moved from 4.9x to 5.8x year
  • n year highlighting the imperative to improve EBITDA in

the core business

  • 1. Like for like (LFL) sales and EBITDA are adjusted for the impact of exchange translation

and including only those businesses that were owned throughout both periods. Therefore, both Q4 FY18 and Q4 FY17 exclude the results of the disposed businesses Goodfella's pizza and Red Meat. 2. EBITDA is stated before depreciation, amortisation and pension scheme administration costs.

Group Q4 2017/2018 Results Q4 17/18 Q4 16/17 YoY change Revenue, £m 803.7 815.7 (1.5)% EBITDA, £m 27.6 38.9 (29.0)% LTM EBITDA, £m 118.4 161.2 (26.6)% Revenue LFL, £m 694.0 683.7 1.5% EBITDA LFL, £m 27.1 33.0 (17.9)% EBITDA LFL Margin % 3.9% 4.9% (100)bps LFL LTM EBITDA, £m 103.6 136.5 (24.1)% Net debt, £m 601.8 795.2 (24.3)% Proforma Leverage 5.81x 4.93x 0.88x

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Protein Q4 2017/18 Results

  • Double digit growth in European business
  • 150 basis points margin decline driven by performance in UK
  • Feed costs continue to increase by 3.3% yoy in the quarter
  • Progress with site closures

£m Q4 17/18 Q4 16/17 YoY change Revenue LFL 492.2 485.8 1.3% Revenue 601.9 587.8 2.4% EBITDA LFL 9.2 16.3 (43.6)% EBITDA LFL Margin 1.9% 3.4% (150)bps EBITDA 9.7 17.0 (42.9)%

Like for like (LFL) sales and EBITDA are adjusted for the impact of exchange translation and including only those businesses that were owned throughout both

  • periods. Therefore, both Q4 FY18 and Q4 FY17 exclude the results of the disposed businesses Goodfella's pizza and Red Meat.

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Chilled Q4 2017/18 Results

  • Strong sales performance, particularly in sandwiches
  • Strong cost efficiencies across the chilled business

£m Q4 17/18 Q4 16/17 YoY change Revenue LFL 137.3 131.7 4.3% Revenue 137.3 131.7 4.3% EBITDA LFL 10.7 8.5 25.9% EBITDA LFL Margin 7.8% 6.5% 130bps EBITDA 10.7 8.5 25.9%

Like for like (LFL) sales and EBITDA are adjusted for the impact of exchange translation and including only those businesses that were owned throughout both

  • periods. Therefore, both Q4 FY18 and Q4 FY17 exclude the results of the disposed businesses Goodfella's pizza and Red Meat.

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Branded Q4 2017/18 Results

  • Weak period of sales for Fox's
  • Gross margin pressure in Fox's has led to margin dilution in the branded businesses
  • verall
  • Whilst frozen sales have continued to perform well, margins are down slightly with

EBITDA flat £m Q4 17/18 Q4 16/17 YoY change Revenue LFL 64.5 66.2 (2.6)% Revenue 64.5 96.2 (33.0)% EBITDA LFL 7.2 8.2 (12.2)% EBITDA LFL Margin 11.2% 12.3% (110)bps EBITDA 7.2 13.4 (46.3)%

Like for like (LFL) sales and EBITDA are adjusted for the impact of exchange translation and including only those businesses that were owned throughout both

  • periods. Therefore, both Q4 FY18 and Q4 FY17 exclude the results of the disposed businesses Goodfella's pizza and Red Meat.

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£m FY 17/18 Profit on disposal of operations (117.4) Non-recurring costs as a result of business disposal 3.6 Impairment of fixed assets 3.3 Impairment of goodwill 31.6 Write-off of balance sheet items 9.1 Redundancy, disruption and closure costs 34.2 Other claims and settlements 4.0 Other exceptional items 0.8 Total exceptional items (30.8) £3.2m Cash exceptional costs excluding disposal proceeds

Exceptional costs / (income)

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Proforma P&L Analysis

£m Q1 Q2 Q3 Q4 FY Year 2017/2018 LFL Revenue 709.0 704.3 690.8 694.0 2,798.1 LFL EBITDA 28.0 24.9 23.6 27.1 103.6 LFL EBITDA Margin 3.9% 3.5% 3.4% 3.9% 3.7% Year 2016/2017 LFL Revenue 680.2 685.0 677.6 683.7 2,726.5 LFL EBITDA 38.7 34.9 29.9 33.0 136.5 LFL EBITDA Margin 5.7% 5.1% 4.4% 4.8% 5.0% Commentary

  • Continued sales growth
  • Margin fell by circa 200 basis

points across 2016/17 and first half of 2017/18

  • Q4 2017/18 includes a one-off

non-trading benefit of £3m on pensions

  • Continuation of this expected in

early part of 2018/19 Historic Reported Revenue and EBITDA adjusted to exclude red meat and pizza, and for foreign exchange differences

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FY 2017/18 Cashflow

Cashflow, £m

185.3 9.5 27.1 59.0 8.3 Other

  • perating items

EBITDA FY 2017/18 Working capital movement Exceptionals 6.7 Pensions Interest and tax paid Others Disposal of

  • perations

3.2 51.0 Capex (net) £118.4m 237.5 Financial leases 5.8 Cash inflow FY 2017/18

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Debt & Financing Update

Long term funding and net debt, £m 245 250 330 250 5.25% due 2019 28 End of Year Cash Balance Committed Facilities excl. RCF 4.375% due 2021 Net Debt 16/17 Net Debt 17/18 5.50% due 2021 Financial Leases £852m £602m £795m

  • 193

Strategy: Long Term Flexible Funding

  • 2019s to be repaid as follows:
  • £95m by end of Dec ’18
  • £95m by end of Apr ’19
  • £60m by end of May ’19
  • RCF extended to Mar 2021,

increased to £80m and covenant reduced to £75m EBITDA

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2 | Financial Performance and Financing Update 1 | Executive S ummary 3 | M&A Update 4 | S trategy and Turnaround Plan 5 | Outlook

Agenda

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Red Meat Sandwiches

Update on M&A

  • £370m EV value
  • Over 9x multiple

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Agenda

2 | Financial Performance and Financing Update 1 | Executive S ummary 3 | M&A Update 4 | S trategy and Turnaround Plan 5 | Outlook

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  • 20+ site visits and review
  • Retail & Food Services

customer meetings

  • Insights & Feedback
  • Opportunities
  • Strategic Investment Review

and Approval

  • Brexit preparedness review
  • UKP balance sheet review
  • Assessment of the senior

leadership team

  • Clarify new organisation

structure

  • Key new appointments:

critical positions filled by Food Industry experts

  • Kick off the UKP strategy

design with OC&C

  • Structured and disciplined

monthly business review

  • Close off FY17/18
  • Secure adequate financing
  • Continue disposal program
  • Close Five Star Fish,

Cambuslang, Basildon

  • 5 year contract won - Chilled

First 100 Days Report

  • Agree clear roles and

responsibilities b/w CEO and President

  • Align with Board: 12 month

plan to stabilise the business

  • Direct the BUs:
  • FY Plan and OGSM
  • Divisional governance
  • Introduce the New Vision

Align Diagnose Design Deliver

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Our goal is to be the leading, international Poultry Plus business in Europe, famous for people and quality

Mission Vision Objective Passionate about creating together delicious, quality poultry and poultry related food sold under some of the world’s best known retail and food service brands To become the leading, international Poultry Plus business in Europe, famous for quality products and its people Turnaround BHL group performance by focusing on Poultry Plus core, strengthening

  • ur balance sheet and improving our
  • rganisational capability. Expand thereafter

from stronger core, internationally. Goals - Revenue 2018 Target £2.6bn £3.3bn

  • 21%

EBITDA 2018 Target >5x 2x

  • 60%

Leverage Organisational capability

CAPABILITY PROFIT

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Our Poultry Plus turnaround strategy

2SFG has redefined strategy clearly especially in where to play and how to play Build the Enablers Turnaround the core Create the Spike

Turnaround the UK Poultry Business Turnaround the NL Poultry Business Fix the basics Realise Value from Non-Core High Performance Team and Organisation Turnaround the UK Poultry Business Deliver Growth in Ready Meals Drive Growth in Poland For Future Growth: Consolidate European Poultry market

Focus on Poultry (UK + EU) and Ready Meals (UK)

Excellence in Execution

Focus of next slide

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Actions are being taken to turn around UK Poultry

New ways of working Excellence in Execution

  • 1. Clear and aligned strategies, KPIs and

action plans throughout organisation

  • 2. Clear responsibilities and accountabilities
  • 3. Transformation team

Do Things Right

  • 4. Health, Safety, Service and Quality right

all the time

  • 5. Improve core processes and systems
  • 6. Low risk simplification of IT landscape

High Performance Culture

  • 7. Culture of Discipline, Agility,

Transparency, Empowerment, Respect

  • 8. Highly skilled and motivated workforce

Very high Very low

Increase Revenue and Margin Reduce Costs Footprint Optimisation Growth in revenue Headcount Reduction Efficiency Improvement Margin Improvement Inflation Recovery UKP Turnaround Actions Estimated EBITDA benefit

Very high Very low Very high Very low Very high Very low Very high Very low Very high Very low

Actions being taken

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Experienced and proven new management team to turn business around

Highly experienced team with significant business transformation experience Ronald Kers Craig Tomkinson Andrew McInnes Seb Jones Lee Greenbury Helen Sisson Group CEO Group CFO MD UK Poultry Transformation Director People & Compliance Director Technical Director

  • Senior advisor to

several PE firms

  • Successfully

transformed the Muller Group and also Muller UK as CEO

  • CEO at Nestle and

GM experience at Lactalis, P&G

  • Familiar with UKP

(FD in 2012-15)

  • Senior Finance

Roles at PwC, Whitbread & Tesco

  • Chartered

Accountant

  • Experienced in

Food Sector e.g. MD Muller Milk; Dairy

  • Strong finance

experience e.g. CFO Muller

  • Expert in systems

and processes transformation

  • Integration

Director

  • IT Director
  • Business Change

Director

  • Strong legal

background e.g. Legal Director roles at Muller; Enterprise

  • Legal Advisor to

various companies

  • Highly experienced

in Technical e.g. Group Technical Director, Greencore

  • Technical advisors

to various groups

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Agenda

2 | Financial Performance and Financing Update 1 | Executive S ummary 3 | M&A Update 4 | S trategy and Turnaround Plan 5 | Outlook

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Priorities

New Management Team accelerating turnaround plan and executing transformation strategy Simplifying business and focus on core strengths Further disposals, strong cash management and debt reduction 1 2 3

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Thank you!

Boparan Holdings Limited

Two Sisters Food Group

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