2 Sisters owner Boparan remained £23.1m in the red last year, despite a double-digit rise in sales as soaring cost inflation hit the poultry giant’s bottom line.

Newly filed accounts for the year to 29 July showed the group’s sales topped £3bn again after increasing annual revenues by 10.1% from £2.8bn due to price increases.

In particular, it saw sales gains of more than £250m in its core poultry operations, which were up 11.6% to £2.4bn as price increases in the UK were supported by a higher proportion of higher-welfare poultry sales in Europe.

However, it said its UK poultry business continued to experience “volatility” amid “operational challenges” as well as the affect of retail inflation on consumer demand. It also saw operations affected by extreme heat in the early summer of 2022 and a record season of avian flu in the winter.

Meanwhile, it experienced disruption as it transitioned from one major retail customer to another, which affected the supply and demand balance.

Despite these factors, and the marked increase of input costs, it posted an increase of adjusted EBIT margin to 1.7% from 1.3%.

Its meals and bakery business saw a 4.2% increase to £590m, with like-for-like growth higher still at 10.8% due to the disposals of the Holland’s and Portumna pastry businesses and Elkes Biscuits.

But EBIT margins in the division fell back to 2.3% from 3.4% amid “operational inefficiencies” driven by labour availability issues in two key factories ahead of the Christmas period.

Therefore, overall EBIT margins remained broadly flat, with adjusted EBIT rising to £54.1m from £47.7m.

Operating profits edged up to £40.1m from £39.7m due to a rise in exceptional items to £8.6m largely related to the closure of its Llangefni site.

Including £62.3m of net finance charges up from £48.8m due to higher interest rates, the group made a £23.1m pre-tax loss and a statutory loss of £32.6m.

“While the financial performance was disappointing, the results were impacted by significant headwinds during the year,” the accounts stated.

“We’re looking at a lot of opportunity in the business, now that it’s right sized, to think about investment for the future, capacity for growth, and most importantly driving forward our new sustainability strategy.

“If we enjoy a period of stability with less volatility, then we can see many opportunities ahead and we’re poised to take advantage of those.”

A Boparan spokesman added that the group “continues to make good progress toward stable and sustainable profitability” in the current financial year.

It expects financial performance to improve this year as a result of it mitigating the challenges weighing down performance in the first half of its 22/23 financial year and a portfolio “well placed to weather a challenging economy”.

In addition to the operating losses, the group saw its pension deficit rise from just £8m to £89.3m, primarily related to its Northern Foods scheme.

The spokesman said pension deficit position was largely affected by market volatility at the time of filing, and “as a snapshot does not reveal the full picture”.

“In fact the deficit has more than halved over the past five years, with the group contributing £250m, with a further £235m scheduled by 2031,” he said.

Overall net debt rose to £525.6m from £487.8m.

Elsewhere, the group increased its ESG reporting as part of its ‘Better for All’ strategic plan and its target of becoming net zero by 2040.

The company has created measurable sustainability KPIs in areas such as carbon emissions, food waste, water and energy efficiency, and deforestation-free feeds.

Topics