Boparan's Departure Highlights 'Transformational' Change Under Way At 2 Sisters: Analysis

By Steve Wynne-Jones
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Boparan's Departure Highlights 'Transformational' Change Under Way At 2 Sisters: Analysis

In announcing the decision of Ranjit Singh Boparan to step down as chief executive of 2 Sisters Food Group earlier today, the company described the move as a "transformational change".

Given the 25-year journey of the self-styled 'Chicken King', in which he developed 2 Sisters from a small poultry-cutting operation in the West Midlands to one of the UK's biggest food groups, that description seems something of an understatement.

The 51-year-old will remain involved with the group, albeit from a distance, taking the position of president at Boparan Holdings Limited (BHL), the parent company of 2 Sisters. However, in terms of the day-to-day running of the business, there's no doubt that the entrepreneur leaves big shoes to fill.

2 Sisters has said that it is "considering external and internal candidates" for the role, with company COO Martyn Fletcher, who held a number of directorial positions with Morrisons before joining the company in 2016, stepping in on a temporary basis.

Whoever takes control of the business will be likely to continue the turnaround work that his or her predecessor has accelerated since the start of the year.


All Change

Ahead of his departure, Boparan had been very active in terms of "turning the page" on what was a challenging end to 2017, instigating a number of disposals in a bid to built a leaner, more agile business.

Last weekend, for example, The Sunday Times reported that 2 Sisters is currently exploring the £50 million (€57 million) sale of Donegal Catch, a frozen-fish brand that sits within the group's Green Isle business. Corporate financial advisors Clearwater International have reportedly been hired to advise on the deal.

Green Isle was also home to the Goodfella's pizza brand before the latter's recent sale to Nomad Foods, for £200 million.

2 Sisters also recently announced the closure of three poultry plants – in Cambuslang, Scotland, in Smethwick and in Wolverhampton – resulting in the potential loss of 900 jobs, while it said that it would be creating 1,000 new jobs within its poultry supply chain.


Challenging Times

Inevitably, following Boparan's departure, analysts will also point to the challenges that 2 Sisters Food Group faced in the second half of last year.

In December, Boparan Holdings Limited announced a 57.6% decrease in operating profit, to £8.4 million, while operating profit margin fell by 140 basis points, impacted by commodity price inflation and a suspension of operations at one of its locations.

Net debt rose by £46 million, to currently stand at £823.6 million, with the company set to unveil its Q2 performance on 22 March.

The Q1 announcement followed on from a ratings downgrade by Moody's on Boparan Holdings Limited in November, with the ratings agency saying that it expects EBITDA improvements at the business to be "constrained" over the coming year.


"While the company is undertaking a number of measures to improve profitability and cash-flow generation, including price increases, efficiency savings and better working capital management, Moody's cautions that these initiatives are subject to a high degree of execution risks, and notes that other unforeseen operational and accounting issues have been more frequent in recent years," a representative for the agency said.

To further complicate matters, last autumn, an investigation by The Guardian highlighted alleged breaches of food safety at one of 2 Sisters' facilities in the West Midlands, which led to a parliamentary investigation.

In response to the inquiry, 2 Sisters has pledged to introduce a number of measures, such as installing CCTV at its facilities, using 'mystery workers' to keep an eye on standards, and employing full-time Food Standards Agency inspectors.

It has also pledged to share all of the audit and inspection data from its poultry plants, in an effort to increase transparency in the food supply chain.


Concluding its investigation, the House of Commons' Environment, Food and Rural Affairs Committee said that it was "pleased" at the measures that 2 Sisters is taking to address future issues at its facilities.

Turning The Page

Eager to draw a line under what was one of the most challenging periods in the business's history, 2 Sisters started 2018 on an optimistic note.

Commenting on the Goodfella's sale at the start of the year, Boparan said that it "represents our first major step to transform 2 Sisters and build a better business" – improvements that will now fall under his successor's remit.

Following this week's announcement, Boparan similarly appeared in bullish mood, saying that he remains "fully committed to building a better, more transparent business, modernising our company and simplifying our operations.

"I want to take a broader industry leadership role and concentrate more on the issues and challenges that affect not only our business, but also the food sector in general, such as Brexit, social responsibility, and sustainability,” he added.

Something tells us that we haven't heard the last of the Chicken King ...!

© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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