Merger going well as tycoon pledges to increase turnover

NORTHERN Foods’ new parent company said its integration is going to plan but warned of the tough consumer environment and surging commodity prices.

West Midlands food tycoon Ranjit Boparan bought the Yorkshire-based company in a £342m deal in April and is merging it with his 2 Sisters Food Group, a major European poultry supplier.

In an update to bondholders, his Boparan Holdings umbrella company said it is likely to hit its target of £2bn sales for the year to the end of July. Earnings before interest, tax, depreciation and amortisation are likely to reach £170m, it added.

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Mr Boparan has pledged to grow the group’s turnover to £3bn by 2015.

The group said that adjusted like-for-like sales grew 4.5 per cent over the year, and two per cent on an unadjusted basis.

“We have seen a solid financial and operating performance during the period, in what remains a challenging consumer environment and with continued commodity pressures,” said Mr Boparan in a statement.

“The integration work following our acquisition of Northern Foods is progressing to plan and we believe we have the right recipe to become fit for growth and further develop our business in the years ahead.

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“We have received positive feedback from our customers and stakeholders, and we remain fully focused on delivering the highest quality for the lowest cost.”

Mr Boparan said he plans to soon split the group into five operating divisions – UK poultry, European poultry, chilled, frozen and bakery – “ensuring we have a sharper focus on our performance”.

2 Sisters, Tesco’s biggest chicken supplier, was hit by surging feed costs during the year. In the UK, it also saw reduced volumes as consumers cut back on waste.

Mr Boparan said the poultry business continues to trade in line with expectations across the UK and Europe, and is focusing on recovering the impact of higher feed costs.

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Its chilled business, which includes salads, ready meals and sandwiches, performed well, added Mr Boparan. It is thought to be narrowly outperforming a market growing at about eight per cent year-on-year.

The branded division, which includes frozen and bakery, has seen higher promotional activity. It is investing in new products, such as Fox’s Ambers in the biscuit market.

In frozen pizzas, where the group’s market share sits just above 20 per cent, it has been launching new Goodfella’s products such as flatbread and garlic bread.

With double-digit rises in commodities such as cheese and cocoa, Mr Boparan said he is wary about the outlook.

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“Like many predominantly UK-focused businesses, we share the cautious economic outlook into our next financial year,” he said.

“However, we have quality products, strong brands and we will continue to progress our integration programme, both to deliver targeted synergies and to become fit for growth. “

No figure was put on the total savings Mr Boparan hopes to make from merging the companies, but these are thought to be less than the targeted £40m synergies from Northern’s aborted merger with Irish food group Greencore.

Savings so far have included closing Northern’s Leeds head office, axing highly-paid staff such as its former finance director, Simon Herrick, and shrinking its supplier base.

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Greencore this week announced a deal to pay £113m for Uniq, the remainder of the former Unigate.

Mr Boparan funded his acquisition of Northern through a high-interest £695m bond issue, which he used to repay a short-term loan from his bankers as well as clear Northern’s historic debt. It also established a new £40m revolving credit facility.

The privately-owned company is only obliged to provide updates because of the bond issue.

New chairman for food group

Food tycoon Ranjit Boparan has appointed the former chief executive of ITV as 2 Sisters Food Group’s new chairman.

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Charles Allen will sit as independent non-executive chairman of the new parent of Northern Foods.

Mr Allen, an experienced media executive who until last year was a non-executive director of Tesco, is also a senior adviser to Goldman Sachs. The investment bank marketed Mr Boparan’s £695m bond issue in April.

The appointment of Mr Allen will help create a more formal board strategy to give more certainty to bondholders.

Mr Allen said: “I am really looking forward to working with Ranjit and his team as we continue to build the business.”