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There is hope the embattled UK turkey processor can be revitalised under the stewardship of Ranjit Singh Boparan, the UK businessman with extensive interests in poultry. However, there are questions about what will happen to the pensions of Bernard Matthews’ staff, while the company’s commercial performance is in need of improvement.

Bernard Matthews, the UK-based turkey processor and said to be the largest in Europe, has its second owner in little more than three years after a sale this week to the country’s “Chicken King”.

Private-equity firm Rutland Partners, which bought Bernard Matthews in September 2013, this week sold the business to Boparan Private Office, the private investment vehicle of UK food industry tycoon Ranjit Singh Boparan in a pre-pack administration deal.
Mr Boparan’s interests include 2 Sisters Food Group, one of the country’s largest grocery suppliers and already one of its biggest protein processors.

Bernard Matthews was acquired out of administration, sparking relief among the company’s 2,000 workers and also in the wider poultry sector.

Those close to Mr Boparan, perhaps with their tongue lodged firmly in their cheek, quipped the businessman had “saved Christmas” through the acquisition of a supplier that accounts for 40% of turkey sales in the country. Others in the industry were remarking Mr Boparan now owned Christmas dinner, what with one of the businesses in his 2 Sisters empire being Matthew Walker, the Christmas pudding maker.

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However, beyond the wisecracks, there are one or two questions hanging over Bernard Matthews. One centres on the pension entitlements of the staff at the business. Mr Boparan is understood to have made an offer for Bernard Matthews that included the company’s pension liabilities – but which was turned down by Rutland Partners (the private-equity firm has declined to comment).

Bernard Matthews staff who are now employees of Mr Boparan will see him continue with the company’s pension arrangements. However, the fact Bernard Matthews was put into administration before the sale has effectively wiped the slate clean, meaning all pension liabilities before the deal have moved to the UK’s Pension Protection Fund – which could mean a cut to the entitlements staff had accrued before the takeover.
The PPF told us it would assess the situation but there is uncertainty about the pension pots staff will enjoy.

Second, Bernard Matthews has been a business under pressure for some time. The company was facing declining sales when Rutland Partners bought it and its performance has hardly improved – in the most recent figures lodged with Companies House, sales are lower than at the time of Rutland Partners’ investment and Bernard Matthews was loss-making.

When Rutland Partners invested in Bernard Matthews, the company had posted sales of GBP341.4m in the 12 months to 1 July 2012. In the previous reporting period, the 18 months to 3 July 2011, the company booked sales of GBP470.8m. Before the deal had been finalised, Bernard Matthews had issued a cautious outlook on 2013, voicing concerns over rising feed costs and poor consumer sentiment.

The most recent numbers at Companies House showed Bernad Matthews generated sales of GBP276.1m in the year to GBP276.7m, down from GBP306.8m the year before.

The decline in sales led Bernard Matthews to run up an operating loss before exceptional costs of GBP859,000, compared to GBP427,000 a year earlier. There was an improvement in Bernard Matthews’ bottom line year-on-year, with the company booking a net loss of GBP4.3m, versus a loss of GBP9.3m the previous year.

The report with Companies House showed Bernard Matthews believed it had seen “key improvements in all areas of the business” over the 12-month period, including the “development of strategic relationships with key retailers” to enable longer-term planning.

However, Deloitte, which had been appointed as administrators for Bernard Matthews before the sale to Boparan Private Office, spoke of the turkey processor having had operating “in a challenging market” and said it was “pleased” the business could make “a fresh start under new owners”. It is clear the company has found the going tough.

The hope is Mr Boparan’s experience in poultry will stand Bernard Matthews in good stead. 2 Sisters was at pains to say Bernard Matthews had been acquired by Mr Boparan’s private investment vehicle but it would be a surprise if he did not look to integrate the business with his existing protein assets in some way. That said, there are some question marks about how he would do that and how much support Bernard Matthews will need, with some industry watchers remarking on the “under-invested” nature of the company’s facilities.

And what of demand in the UK for turkey, Bernard Matthews’ core product? Per capita consumption lags other developed markets, while turkey struggles in the UK to be seen in the same light as chicken, more a seasonal delicacy than an all-year-round meat.

Bernard Matthews has a new owner but stiff challenges lie ahead.