BFP Big Food Grp.

RNS Number:4758S
Big Food Group PLC
6 March 2002

                                                                  6th March 2002

THE BIG FOOD GROUP PLC



Strategic Review Update


In line with the timetable announced in July 2001, the Group has now completed
its three phase strategic review.  Today the Board is pleased to announce its
conclusions from the final phase of this process which covers the financial
implications and investment programmes associated with the implementation of its
strategic plans.  This phase includes detailed costings for the Group budget for
2002/03 and the Three Year Plan to 2004/05 ("the Period").


Over the Period total capital investment and Revenue Development costs are
expected to be approximately £375 million.  It is currently intended to fund the
programme with internally generated cash flow, a sale and leaseback transaction
and debt from bank and capital markets. The benefits expected to flow from the
strategy are significant, contributing to an incremental operating profit return
on investment of approximately 17% by 2004/05.

Commenting on today's announcement Bill Grimsey, Chief Executive, said : "We
have clear and thoroughly researched plans to develop the business and are
pleased to announce that we expect to implement these plans without recourse to
shareholders.  The new management team, completed only last November, is already
working successfully to ensure that our plans are implemented vigorously and
effectively to capitalise on our position as the UK's only integrated food
provider."



REVIEW PROCESS

Last July it was announced that the Board's plans would be developed in three
phases.  In July 2001 the strategic objectives for the Group and its four routes
to market (Retail, Home Shopping, Cash & Carry and Foodservice) were announced.
In November 2001,  the operational initiatives were set out to implement the
strategic objectives.  Phase three of this process was reviewed by the Board at
the end of February 2002 as planned and is the subject of today's announcement.



INVESTMENT PROGRAMME

Booker Cash & Carry



Our objective is to leverage market leadership to become the most efficient UK
food and grocery wholesale operator. As announced in November 2001, we will be
implementing a range of initiatives to achieve this including research to
deliver new customer centred wholesale propositions and the establishment of a
comprehensive customer profitability model; the establishment of a professional
delivered wholesale service in two pilot branches in 2002; enhancement of the '
Premier' symbol group offer with tailored ranges and pricing; development of a
new business model for wholesale in the UK in conjunction with selected key
suppliers and the trial of an e-business package based on a transactional web
site with at least 50 customers in 2002.



These plans are expected to involve incremental capital investment of
approximately £43 million in excess of maintenance capital expenditures during
the next three years.



Woodward Foodservice



Our objective is to take at least the number two position in the UK foodservice
market within five years.  As announced in November 2001, we will be
implementing a range of initiatives designed to achieve this which may include
the launch of a temperature controlled distribution centre in the South East to
substantially complete national coverage; the launch and roll out of an ambient
product service based on pick centres located on Booker sites; the completion of
the range to offer a full service in ambient, chilled, and frozen temperature
regimes and exploit group sourcing opportunities in fresh meat and beers, wines
and spirits; the expansion of the independent sales force nationally to support
all temperature regimes and target customers and the expansion of the national
account sales force to win new business based on the full range service.



These plans are expected to involve incremental capital investment of
approximately £17 million in excess of maintenance capital expenditures during
the next three years.


Iceland Foods



Our objective is to dominate high street food retailing through a renewed focus
on core customers and frozen food.  As announced in November 2001, we will be
implementing a range of initiatives designed to achieve this which may include a
strategic refit programme based on store segmentation; a new store opening
programme designed to deliver 80 new stores by 2004/05; the re-engineering and
re-launch of home delivery as a key point of difference; the establishment of an
active supplier partnership programme based on ECR (Efficient Consumer Response)
principles; the implementation of new in-store processes to improve efficiency,
and the integration of the electrical appliances business into both store and
support centre operations to increase market share.



These plans are expected to involve incremental capital investment of
approximately £80 million in excess of maintenance capital expenditures during
the Period.



Home Shopping



Our objective is to capture sales from new customers. As announced in November
2001, we will be implementing a range of initiatives designed to achieve this
which may include the rollout of 10 pick centres based on Booker sites following
the successful launch of the pilot centre at Sunbury; the establishment and
sourcing of a product range which enables customers to complete a full primary
shop and the launch of a new web site in 2002 designed to improve the on-line
shopping experience for the target customers.



These plans are expected to involve incremental capital investment of
approximately £12 million in excess of maintenance capital expenditures during
the period.



GROUP FUNCTIONS



We announced in July 2001 that our strategy was to capitalise on our unique
position as an integrated food business bringing together retail, wholesale,
foodservice and home shopping. Our customer facing activities are supported by
central functions comprising Information Systems, Human Resources, Logistics and
Finance. Capital investment in these areas to support the planned integration is
budgeted at £7 million during the Period. This investment will be targeted
primarily at creating common systems platforms, harmonising benefits and
developing shared services as an important plank in the development of an
updated system infrastructure involving expenditure totalling approximately £50
million across the four customer-facing businesses over the Period.



REVENUE DEVELOPMENT COSTS



In addition to the capital investments noted above, the Company has also
budgeted Revenue Development costs of approximately £5.0 million which it
expects to charge to the profit and loss account in 2002/03.  These costs relate
to customer research, delivery and Premier fascia development at Booker,
employee recruitment at Woodward and HR initiatives across the Group. It is
expected that additional Revenue Development costs totalling approximately £17
million will be incurred during the subsequent two years.



EXCEPTIONAL COSTS



Exceptional costs for 2002/03 are expected to comprise operating costs of
approximately £7 million and financing costs of approximately £13 million.




The operating costs relate principally to our planned creation of an integrated
finance function centred on a transaction processing centre at Deeside,
including project and consulting fees, accelerated depreciation of IS software
and employee costs.



The expected financing costs relate to the requirement to reschedule existing
bank facilities as described below.



FINANCIAL RETURNS



The benefits expected to flow from the implementation of our strategy are
significant, contributing to a forecast operating return on investment of
approximately 17% by 2004/05, measured by the increase in operating profit as a
percentage of total investment (including maintenance capital) over the three
year period.



RE-FINANCING



The company currently has loan facilities with a syndicate of banks which extend
to 1 October 2002.  These short term facilities were put in place in June 2001.



As previously announced, one of our objectives has been to analyse and put in
place a capital structure capable of supporting our strategic plans. The Group
has now identified its preferred sources of finance for the medium to long term
and is currently working on detailed proposals to implement its financing plan.
The plan is designed to enable us to fund all expenditures outlined above and
involves refinancing and reducing our senior credit facilities from current
levels through a sale and leaseback transaction and debt from bank and capital
markets. In addition, notwithstanding the costs noted above, the Company intends
to be cash positive in each of the three years covered by its strategic plan. In
light of the re-financing plan there is no current intention to raise equity
finance.



The impact on the annual pre-tax profit arising from this financing strategy is
expected to be approximately £10.0 million on a proforma basis. The actual
effect in 2002/2003 will be lower depending on the completion date of the
refinancing. The impact is measured against the current bank base rate of 4%
which may change over time.



CURRENT TRADING



For the period to 1 March 2002 like-for-like net sales performances have been as
follows:


                                                                      8 weeks             24 weeks
Booker Cash and Carry                                                 -2.1%               0.3%
Woodward Foodservice                                                  9.4%                13.0%
Iceland Foods                                                         -3.7%               -2.1%
Group                                                                 -2.4%               -0.3%



For Booker, the like-for-like increase in non-tobacco products is 0.5% over the
eight-week period despite stronger promotional activity last year. Tobacco and
phonecard sales were 4.8% down.  For Iceland, the decline in customer
transactions experienced over Christmas has continued into the New Year and has
been partially offset by an increase in average basket size. The underlying
performance of Iceland reinforces the need to implement quickly the main strands
of our strategic review.



CONCLUSION



This announcement completes the three-phase strategy process announced last
year. The Company has made considerable progress in the last twelve months,
notably in assembling its senior management team and laying foundations for the
integration of the operating businesses into a coherent group. Successful
implementation of our strategic initiatives should be the cornerstone of value
creation for shareholders.



ENQUIRIES:



The Big Food Group plc
Bill Grimsey, Chief Executive            Tel :  020 7796 4133 (on 6.3.2002)
Bill Hoskins, Finance Director           Tel :  01244 830 100 (thereafter)

Hudson Sandler                           Tel :  020 7796 4133
Keith Hann
Andrew Hayes
Noemie de Andia





A presentation to equity analysts will be made today at 9.30am at UBS Warburg, 1
Finsbury Avenue, London EC2M 2PP. To notify attendance, please call Bernadette
Ocampo at Hudson Sandler on 020 7796 4133 or e-mail
Bernadette.Ocampo@hspr.co.uk.



This announcement is only for circulation to persons to whom it may lawfully be
issued in circumstances in which Section 21(1) of the Financial Services and
Markets Act 2000 does not apply to the Company.

This announcement is not an offer for sale of securities in the United States.
The debt securities referred to above may not be sold in the United States
absent registration or an exemption from registration under the U.S. Securities
Act of 1933, as amended.  If The Big Food Group plc undertakes an offering of
the debt securities referred to above it will not register that offering in the
United States or conduct a public offering of those securities in the United
States.  Any such offer of debt securities to be made in the United States will
be made only by means of an offering memorandum, which will contain detailed
information about the company and its management and financial statements. In
connection with any offering of debt securities the underwriters therefor may
engage in transactions that stabilise, maintain or otherwise affect the price of
those securities.



                      This information is provided by RNS
            The company news service from the London Stock Exchange


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