Source - RNS
RNS Number : 1253K
Finsbury Food Group PLC
19 September 2016
 

Date:

19 September 2016

On behalf of:

Finsbury Food Group Plc ('Finsbury', 'the Company' or 'the Group')

Embargoed until:    0700hrs

 

Finsbury Food Group Plc

Preliminary Results

Finsbury Food Group Plc (AIM: FIF), a leading UK speciality bakery manufacturer of cake, bread and morning goods for both the retail and foodservice channels, is pleased to announce its preliminary results for the financial year ended 2 July 2016.

Highlights

 

Summary

·      Group revenue of £319.7m up 24.8%, 52 week revenue £313.5m up 22.4% (2015: £256.2m) and up £12.8m, 5.0% on a like for like basis*1.

·      Gross profit of £102.6m up 30% (2015: £78.9m).

·      Adjusted* operating profit of £17.1m up 37.7% on the prior year, for the 52 week period, operating profit of £16.7m is up 34.7%, (2015: £12.4m) and up 15.7% on a like-for-like basis.

·      Group adjusted* operating profit margin of 5.3% (2015: 4.8%).

·      Adjusted* profit before tax of £16.0m up 40.8% (2015: £11.4m).

·      Record capital investment of £12.1m to ensure long term competitiveness (171% of depreciation).

·      Strong growth in adjusted diluted EPS*2, up 19% to 9.5p per share (2015: 8.0p per share).

·      Final dividend per share of 1.87p taking total dividend for the year to 2.80p up 12% (2015: 2.5p per share).

·      Net debt of £19.7m equates to 0.8 times EBITDA of the Group. Net debt well within the long term banking facility of £51m available to support current and future growth plans.

 

Strategic Highlights

·      Foodservice channel 21.2% (2015: 14.0%) of total UK Bakery sales, with 6 out of 8 sites now supplying into this channel including the launch of a new range of cakes. Revenue is up 5.3% on a like for like basis, well ahead of market growth.

·      Successful integration of Fletchers Group and Johnstones Food Services (JFS) into the Group.

·      Implementation of new Group-wide IT business system is underway.

 

Operational Highlights

·      Investment in exciting new innovation for muffins and doughnuts.

·      Investment in hot cross bun capacity and innovation led to a record number of hot cross buns produced for Easter.

·      Innovation Centre now fully operational and delighting both customers and staff.

·      Successful roll out of vision and values across all levels throughout the Group.

·      JFS winner of Costa supplier of the year.

·      Winner of Celebration Cake Business of the Year for 2016 at the Bakery Industry Awards.


 

*Adjusted operating profit and profit before tax exclude significant non-recurring and other items as shown in the table below and includes amortisation of intangibles.

*1 Like for like growth is calculated using financial data for a 52 week period and only where there are comparative trading figures for the prior year for the acquired businesses. The 52 week period is calculated by eliminating the result for the 53rd week in the financial year ended 2 July 2016.

*2 Adjusted diluted EPS has been calculated using earnings excluding the 53rd week, amortisation of intangibles, significant non-recurring and other items as shown on the face of the Statement of Profit and Loss and Other Comprehensive Income. The adjusted diluted EPS has been given as in the opinion of the Board this will allow shareholders to gain a clearer understanding of the trading performance of the Group.

 

John Duffy, Chief Executive of Finsbury Food Group Plc, commented:

"If 2015 was all about transformation for the Group, then 2016 has been about delivering on our growth strategy and moving even closer to our vision of building the leading speciality bakery group in the UK focused on quality products.

There has been significant top and bottom line growth, as a result of considerable efforts across the whole Company. The integration of Fletchers and Johnstones has been one of our priorities, and we continue to invest across all aspects of the business, diversifying into new channels and widening our customer base, to deliver a stronger platform for future growth and ensure our long term competitiveness.

Looking ahead our strongly performing businesses and a robust balance sheet positions us well to both take advantage of growth opportunities and mitigate challenges ahead. The Group remains as dedicated and focused as ever, and I remain confident that the patient, unwavering strategy adopted will reap benefits for the business in the years ahead."

 

For further information:

 

 

 

Finsbury Food Group Plc

www.finsburyfoods.co.uk

John Duffy (Chief Executive)

029 20 357 500

Stephen Boyd (Finance Director)

 

 

 

Cenkos Securities plc

 

Bobbie Hilliam (Corporate Finance)

 

Alex Aylen (Sales)

 

 

 

Redleaf Communications

[email protected]

Rebecca Sanders-Hewett

020 7382 4730

Sarah Fabietti-Dallison

 

Sam Modlin

 

 

 

Notes to Editors:

Finsbury Food Group Plc (AIM: FIF) is a leading UK manufacturer of cake and bread bakery goods, supplying a broad range of blue chip customers within both the grocery retail and 'out of home eating' foodservice sectors including major multiples and leading foodservice providers.

·      Following the acquisition of the Fletchers Group of bakeries, the Company is one of the largest speciality bakery groups in the UK with annualised sales in 2016 exceeding £300 million.
 

·       The Company's bakery product range is comprehensive and includes:

 

·       Large premium and celebration cakes.

·       Small snacking cake formats such as cake slices and bites.

·       Artisan, healthy lifestyle and organic breads through to rolls, muffins (sweet and savoury) and morning pastries, all of which are available both fresh and frozen dependent on customer channel requirements.

   

 

·       The Company is now the second largest manufacturer of ambient packaged cake (excluding In Store Bakery (ISB)) in the UK, a market valued at £1.090bn (Source Symphony IRI 52 w/e 19 June 2016). The annual retail bread and morning goods market has a value in excess of £4.0 billion (source Kantar Worldpanel 52 weeks to 19 June 2016). The UK foodservice bread and morning goods bakery sector is worth approximately £800 million per annum, 70 per cent of which is in morning goods. The UK foodservice cake and sweet treat bakery sector is worth approximately £600m per annum.
 

·       The Company comprises a UK Bakery division and an Overseas division:

 

·     UK Bakery has manufacturing sites in Cardiff, East Kilbride, Hamilton, Twechar, Salisbury, Sheffield,     London and Manchester.

·     The overseas sector comprise, the Company's 50% owned Company Lightbody Stretz Ltd that supplies and distributes the Group's UK manufactured products and third party products primarily to Europe.

 

 

These figures are for the 53 weeks ended 2 July 2016 and 52 weeks ended 27 June 2015 unless stated otherwise.

 

Adjusted Operating Profit

 

2016

(53 weeks)

£000

2015

(52 weeks)

£000

Results from operating activities

12,791

9,526

 

 

 

Significant non-recurring items - SNR (refer to note 3 for detail)

4,290

3,181

Share options charge

-

(10)

Difference between defined benefit pension scheme charges and cash cost

 

(117)

 

(100)

Movement in the fair value of foreign exchange contracts

134

(181)

Adjustments, SNR and other items

4,307

2,890

Adjusted results from operating activities

17,098

12,416

 

 

 

Impact of 53rd week

(371)

-

Adjusted results from operating activities for 52 weeks

16,727

12,416

 

 

Adjusted Profit before Tax

 

2016

(53 weeks)

£000

 

2015

(52 weeks)

£000

Profit before tax

11,804

8,482

 

 

 

Significant non-recurring items - SNR (refer to note 3 for detail)

4,290

3,181

Share options charge

-

(10)

Difference between defined benefit pension scheme charges and cash cost

 

31

 

54

Movement in the fair value of interest rate swaps

(219)

(28)

Movement in the fair value of foreign exchange contracts

134

(181)

Unwinding of the discount on deferred consideration receivable

-

(105)

Adjustments, SNR and other items

4,236

2,911

Adjusted profit before tax

16,040

11,393

 

 

 

Impact of 53rd week

(358)

-

Adjusted profit before tax for 52 weeks

15,682

11,393

 

 

*Refer to trading results section within the Strategic Report for further details on the adjusted profits.

 

 

Chairman's Statement

 

Building on the Foundations

Moving the business forward to become the leading speciality bakery group in the UK, is driving our agenda. Our structures and processes are adjusting and altering to suit the needs of a significantly larger and more diversified Group. New roles and responsibilities have been taken on by many and we continue to invest in people in order to train and develop our dedicated teams. The Board is undergoing changes as well, ensuring the composition, skills and governance are appropriate for the future.

From the outside, without the previous year's acquisitions of Fletchers and Johnstone's it may appear that this financial year has been less exciting and busy. However, delivering on our vision, integrating these acquisitions and embarking on some exciting projects, whilst achieving a successful financial performance, has actually meant that has been far from the case.

The Results

The headline annual financial results were assisted somewhat by the prior year's acquisitions with turnover for the 53 weeks at just under £320m, up 24.8% (52 weeks, £313.5m up 22.4%), profit before tax at £16.0m for the 53 weeks, up 41% (£15.7m 52 weeks, up 38%) and debt at 0.8 times EBITDA.

Importantly, the underlying business performance was strong and exceeded expectations in a number of areas, including those not benefiting from the acquisitions. A full financial review is available later on in the report.

This favourable outcome has been achieved through the hard work of Finsbury's committed team, sound business decision-making and the reliable manufacture and supply of great quality products. The headwinds we encountered were much as anticipated, principally a challenging market place and an uncertain macro-economic outlook, but strong leadership has meant we have overcome these challenges successfully. 

One of the hidden highlights this year has been the 5% like for like organic revenue growth that the business has achieved, particularly when set against a deflationary and competitive market, with a demanding customer base and a discerning consumer. The emphasis and investment put into innovation, helped by new facilities and driven by talented NPD teams, has really delivered for the Group and is an excellent platform for the future.

Investing for the Future

The Group, along with other food businesses, will face inflationary pressures through both commodities cost increases, further driven by currency weakness post Brexit and the National Living Wage.

The teams have done an excellent job in anticipating these changes and our plans and investments are aligned to dealing with these. The Board has both the financial capability and the will to invest for the future. We are investing in new plant, equipment and systems as well as taking on the important change of sustainability and environmental responsibility.

The additional work required to deliver such projects successfully is often forgotten but it is a great testament to the teams to have not just maintained performance, but actually to have bolstered it, whilst undertaking an extensive programme of investment and integration.

Board Development

Alongside the work on business and strategy development, the Board is changing to reflect the different requirements of the business. The Board needs to have the appropriate skills and experience and a clear remit and purpose, across all areas that are being worked on and developed.

In terms of corporate governance, we are focusing on our processes and procedures to ensure that they are in line with best practice and relevant for a business of our size and position. Typically the Board meets at one of our sites to combine the normal meeting agenda with a site update, to ensure, amongst others, that the Non-Executive Directors are well briefed. Our committees have also delivered excellently this year, particularly as both have taken on increased workloads driven by the acquisitions and changes that were undertaken.

During the year we announced the addition of two new Non-Executive Directors, Marnie Millard and Zoe Morgan, and the forthcoming retirements from the Board of Paul Monk and Edward Beale, at the 2016 AGM. I look forward to working with Zoe and Marnie and thank Paul and Edward, who each have been on the Board for over 14 years, for their outstanding contribution and commitment to the Group.

Strategy for Continued Growth

The Board has devoted a lot of time this year to reviewing the Group's strategy. As we are a much larger business and in a much stronger position than previously, we can be ambitious in our plans to grow the business still further. Step changes in turnover will only be achieved through further acquisitions. We are clear on the areas and sectors that are attractive and our prudent approach will be maintained to ensure a clear strategic fit. We have the capability both financially and in terms of leadership to be confident in taking these steps but will do so only if the right opportunities present themselves.

The foundations are laid for the next steps and we are looking forward to another successful year.

Finally, on behalf of the Board I would like to thank everyone who works at Finsbury for delivering such a successful year, their contribution and passion continues to drive the business forward.

Dividend

Subject to shareholder approval at the Company's AGM on 23rd November 2016, the final dividend of 1.87 pence per share will be paid on 16 December 2016 to all shareholders on the register at 18 November 2016 and will be recognised in the financial year ending 1 July 2017.

 

Peter Baker

Non-Executive Chairman                                                                                                   16 September 2016

 

 

Chief Executive's Report

 

2016 has been a tremendously busy but rewarding year for Finsbury. We delivered on our growth aspirations and made great strides towards our vision of building the leading speciality bakery group in the UK focused on quality products.

 

Finsbury has a clear vision and strategy, is demonstrating strong sales and profit growth whilst also stepping up capital investment to unlock future growth and efficiency opportunities. 

 

Integrating the Fletchers and Johnstone's prior year acquisitions whilst cementing a stronger platform for future growth were our twin priorities for the last financial year. Meaningful change is delivered in increments, a gradual evolution of the key elements of a business. Integration of acquired businesses takes considerable time and effort. Management teams across all business have responded with energy and expertise to share knowledge, unlock synergies in a timely fashion and share best practice.

 

Strategically the Group achieved further diversification of channel, customers and products following the prior year acquisitions. Over 21% of our UK Bakery sales are now into the faster growing 'out of home eating' foodservice channel, from zero two years ago, with foodservice items supplied from six of our eight bakeries. We also sell a vast array of specialty cake, bread and morning good products to all major UK grocery retailers from premium to discounter.

 

After several years of unstinting effort across the company, the fruits of change are emerging. It gives me great pleasure to report a significant rise in top and bottom line growth for the current financial year. As the first full trading year following the acquisitions, it was pleasing to exceed the 2014 equity raise sales and profit expectations for shareholders.

 

Trading Performance

 

Results for the full 53-week period ended 2 July 2016 are described in greater depth in the Strategic Report but there are a number of areas I would like to take this opportunity to highlight:

 

·      Group revenue of £319.7m up 24.8%, 52 week revenue £313.5m up 22.4% (2015: £256.2m) and up £12.8m, 5.0% on a like for like basis*1.

·      Adjusted profit before tax of £16.0m up 40.8%, 52 week £15.7m up 38%, (2015: £11.4m) and up 17.1% on a like for like basis*1.

·      Increase in operating gross margin to 5.3% (2015: 4.8%) following record capital investment of £12.1m (2015: £7.4m) and operational initiatives.

·      Strong growth in diluted adjusted*2 EPS, up 19% to 9.5p per share (2015: 8.0p per share).

·      Final dividend per share of 1.87p taking the total dividend for the year to 2.8p per share up 12% (2015: 2.5p per share).

·      Net debt £19.7m (2015: £21.3m) equates to 0.8 times EBITDA of the Group.

·      Foodservice 21.2 % of total UK Bakery sales up from 14.0% and up 5.3% on a like for like basis.

·      Successful integration of Fletchers Group and Johnstone's Food Service Ltd (JFS).

·      Implementation of new Group-wide IT business system is underway.

·      Significant product innovation; including Kara branded cakes launched into Foodservice channel, investment in muffin, doughnut and hot cross bun capability and capacity.

·      Successful roll out of company vision and values across all levels throughout the business.

·      JFS winner of Costa supplier of the year.

·      Winner of Celebration Cake Business of the Year for 2016 at the Bakery Industry Awards.

 

 

Results in Perspective

 

Our business is performing strongly. Organic growth of 5% for the year was well spread, exceeding that of the markets we operate in and our initial expectations, especially in the first half.

 

The UK Bakery division like for like growth of 3% was strong but outshone by stellar growth of over 25% in the Overseas division, the Group's 50% owned European business, as a result of improved distribution of licensed celebration cake and free from bakery ranges. UK Bakery growth was well diversified across different products, customers and channels given the largely new mix brought by both Johnstones and Fletchers.

 

Consumer appetite for the breadth and quality of our offering is clear, illustrated by the continued growth of our premium traditional bespoke products, such as artisan breads and licensed celebration cakes.

 

Our drive to advance has been constant. We are investing across all aspects of the business to deliver a stronger platform for future growth.

 

Investment comes in many forms and our scale requires the correct level of infrastructure. The record £12m annual capital expenditure being most tangible which has facilitated a new artisan bread bakery, increased hot cross bun capacity and further cake automation, ensuring we offer the right growth products at the right price for our customers.

 

Our people are essential to the continued success of the larger Group. As such we have set out to strengthen our culture and the Finsbury way of doing business. Working from the bottom up in small groups at each site we have agreed on a common set of Finsbury Group values, these will cement our approach and behaviours as a business. A more comprehensive long term people strategy has also been created and is now being rolled out. Elements of this include improving employee engagement, implementing talent management and offering an enhanced leadership development programme.

 

As a large, diversified bakery Group, investing in business process is essential. We constantly strive to reap scale benefits and become more efficient, whether automating low skilled bakery tasks or removing inefficiencies within non-value added elements of our business processes. One especially noteworthy project is the upgrade and on-going roll out across the Group businesses of the Fletchers IT software platform following a comprehensive best practice review.

 

Looking ahead, the enlarged multi channel business is in good shape for the growth opportunities and challenges ahead, with strongly performing businesses and a strong balance sheet.

 

The devaluation of Sterling post Brexit will, if maintained, lead to a new era of cost inflation for many of our raw materials regardless of any potential change in consumer confidence or shopping behaviour. Planned future National Living Wage increases will similarly increase our costs and put pressure on our margins. We are working hard to offset this cost inflation through enhanced internal efficiency. Inevitably such pressures are inflationary.

 

We have demonstrated our ability to grow organically as well as by acquisition, which is important for the journey ahead. Investment has already been prioritised as an integral part of our strategy to better prepare us for the uncertain environment ahead, improving our competitiveness and ability to fulfil customers and consumer needs.

 

I would like to thank all the staff across the Finsbury Group for their dedication and unrelenting efforts over recent years. In particular I would like to recognise the major contribution by new people coming into the Group over the past few years.

 

I remain confident that the patient, unwavering strategy adopted and well laid foundations over recent years will reap benefits for the business in the years ahead.

 

 

 

John Duffy

Chief Executive Officer                                                                                                       16 September 2016

 

 

Strategic Report

 

Our strategic objective is to create sustainable value for our shareholders, customers and other stakeholders by building a UK wide speciality bakery group. We will produce a broad range of high quality products, targeted at growing channels and market niches, which deliver growth and differentiation for our major customers whilst fulfilling the needs of end consumers.

 

Our growth strategy will continue to be delivered by a combination of organic growth and targeted acquisitions. Consolidating our market share in existing areas, such as celebration cakes and organic bread, as well as diversifying our existing product capability into new channels such as foodservice cake will deliver the organic growth. Further acquisitions will introduce new product, customer or channel diversification or accelerate market consolidation in our core product areas.

 

Our Markets

The total UK ambient cake market (including pre-packed cake and in-store bakery (ISB)) is valued at £1.09bn (source: Kantar World panel 52 w/e 19 June 2016).  The past 12 months has seen market value and unit sales fall by 0.4% and 1.5% respectively. Ambient Cake is marginally outperforming ISB Cake over this period. We continue to perform well in our core markets of Celebration Cake, Whole Cake and Cake Bites.

 

Annual retail bread and morning goods sales are in excess of £4.0 billion (source: Kantar World panel 52 weeks to 19 June 2016) but the market is in decline, driven by the fall in sales of packaged sliced bread. We are a niche player in the packaged sliced bread market, instead we are focussed on the growing sectors of bread and morning goods such as artisan bread, hot cross buns and rolls through to doughnuts, muffins and morning pastries.  The foodservice bread and morning goods market continues to grow and has sales in excess of £800 million and the UK foodservice cake and sweet treats market is worth approximately £600 million per annum (source: NPD group/management 52 weeks to 30 June 2016).  Growth is coming from a number of categories with the star being added value burger buns such as brioche burger buns.

 

Our Business

The Group consists of the UK Bakery and the Overseas sectors businesses.

UK Bakery

UK Bakery has eight factories each with its own range of products and manufacturing capabilities and employing in excess of 3,000 people across the following bakery companies. 

·      Lightbody of Hamilton Ltd is based in Hamilton and is the UK's largest supplier of celebration cakes.

·      Memory Lane Cakes Ltd is based in Cardiff and is the leading manufacturer of the UK retailers own label sharing cake.

·      Fletchers Group of Bakeries has three factories located in Sheffield, Manchester and London. It produces a wide range of fresh and frozen bread and morning good products, which are distributed to leading UK retailers and foodservice customers.

·      Johnstone's Food Service Ltd is based in East Kilbride and produces bite style cake products, including its renowned caramel shortcake. It supplies foodservice customers, particularly national coffee shop chains.

·      Nicholas & Harris Ltd is based in Salisbury and produces a range of speciality bread and morning goods which are distributed to UK retailers and, following the Fletchers acquisition, to foodservice customers.

·      Campbells Cake Company Ltd is based in Twechar near Glasgow and produces cold set products such as caramel shortbread and tiffin for retailers.

 

The Company's bakery product range is comprehensive and includes:

Large premium and celebration cakes.

Small snacking cake formats such as cake slices and bites.

Artisan, healthy lifestyle and organic breads through to rolls, muffins (sweet and savoury) and morning pastries, all of which are available both fresh and frozen dependent on customer channel requirements.

 

Brands and Licences
 

The Group is proud to have a well balanced portfolio of retailer own label business and a strong and evolving licensed branded portfolio, all supported by collaborative and strategic partnerships. We also have our own cake brand, Memory Lane, and the Kara foodservice brand.
 

-     Kara
 

Kara is the foodservice brand of the Finsbury Food Group, distributing to more than 300 wholesalers, independents and end-users such as pubs, hotels and restaurant chains. The Kara brand has been operating in the foodservice sector for more than three decades and is synonymous with the famous floured bap.   Today the Kara brand has a fantastic variety of frozen bakery products, providing foodservice customers with a one stop shop for their bakery requirements.  We continue to extend the range and this year have launched artisan breads, continental pastries and cakes.
 

-     Thorntons
 

The Group continues to have a strong and long standing relationship with Thorntons, part of the Ferrero group. A combination of strong performance on core business and successful NPD has led to Thorntons being one of the fastest growing brands in the cake category over the last 12 months. Thorntons maintains a strong presence across both Celebration and Snacking cake.
 

-     Weight Watchers
 

Weight Watchers remains a large food brand with a presence across multiple UK grocery categories. This year the brand is changing to better reflect the evolving approach consumers are taking to manage their weight, health and lifestyle needs.
 

-     Character Licensed Portfolio
 

Character licenses remain a key focus for the business and continue to play a vital role in our overall success within Celebration cake and Snacking cake. We are proud to have strong, and in many cases long standing, relationships with multiple partners such as Disney, Warner Bros. Nickelodeon, Carte Blanche and Entertainment One. These partnerships allow the business to develop products that meet key consumer occasions for all ages. Successful licenses for the Group this year have included Minions, Star Wars and Batman which have been linked to big movie releases and the more evergreen licenses of Me to You, Peppa Pig and Paw Patrol.
 

-     Vogel's
 

The consumers' need for healthy nutritious food is the driver behind the Vogel's brand.  Founded on the principles of Alfred Vogel, the pioneering Swiss nutritionist, Vogel's is a range of 'clean label' seeded breads crammed to bursting with seeds and grains. The loaves are baked without added sugar, emulsifiers, enzymes, or artificial preservatives or flavourings. And the best thing about Vogel's - the way we bake it, means that it makes the most fantastic toast!

 

 


Brands and Licences (continued)
 

 

-     Village Bakery
 

The country's leading Rye bread brand, targeted at consumers aiming to avoid wheat, comprising a range of wholemeal and seeded loaves. The bread is made with the simplest of all recipes: Organic Rye flour, water and a little sea salt, with no added yeast, emulsifiers or enzymes.
 

-     Cranks

A range of what our customers call 'Proper Bread' made with organic stoneground flour from a specially selected group of English farmers. Cranks bread is fermented for longer - up to six hours - to give it great flavour and texture without using any additives such as emulsifiers and enzymes. Cranks is the UK's leading organic bread brand.  

 

Overseas

The Group has a 50% owned Company, Lightbody Stretz Ltd, that supplies and distributes the Group's UK manufactured and third party products primarily to Continental European markets, particularly in France and Benelux.

 

Principal Risks and Uncertainties

The Group operates in an environment which is continually changing and as a result the risks it faces will also change over time. The assessment of risks and the development of strategies for dealing with these risks are achieved on an ongoing basis through the way in which the Group is controlled and managed internally. A formal review of these risks is carried out by the Group on an annual basis.  The review process involves the identification of risks, assessment to determine the relative likelihood of them impacting the business and the potential severity of the impact, and determination of what needs to be done to manage them effectively.

 

The Directors have identified the following as the principal risks and uncertainties that face the Group:

 

Competitive Environment and Customer Requirements

The environment remains competitive within the Bakery sector. The monitoring of key performance indicators at customer level such as service levels and customer complaints is part of the risk management process associated with this specific risk. Providing quality products, investing in innovation (with our innovation centre fully operational) and competing on value helps to strengthen customer relations and support growth initiatives.  The Group invests heavily in category management, new product development and marketing skills. This investment has helped create an insight into customers and consumer demands.

 

Product Quality

Product quality is a key strength of the Group and failure to maintain a high standard of food quality and safety would have a severe impact on service levels and customer relationships. The Group's quality assurance procedures, managed at site level, are reviewed continuously with improvements made as appropriate.  The operating subsidiaries are subject to regular internal and independent food safety and quality control audits including those carried out by, or on behalf of, our customers.  The Group maintains product recall insurance cover to mitigate the potential impact of such an occurrence.

 

Labour costs, prices and supply

The Group, along with other food businesses, will face the risk of inflationary pressures through both commodities cost increases, further driven by currency weakness post Brexit and the National Living Wage.

 

The Group maintains a high level of expertise in its buying team and will consider long term contracts where appropriate to reduce uncertainty in input prices.  The team also cultivates strong relationships with major suppliers to ensure continuity of supply at competitive prices.  Regular renovation and innovation in our product range can help to manage margin pressures in an effective manner as far as the competitive environment allows. The Group also purchases forward foreign currency in order to minimise the fluctuation of input costs linked to future currency conversion rates. Ongoing capital investment and improvements in operational efficiency help reduce the impacts of inflation.

 

Economic Environment

The market place remains challenging and there is an uncertain macro-economic outlook following the vote to leave the EU. Currency hedging and long term contracts give the Group time to plan and formulate strategies to face future challenges. The Group will continue to focus on quality and value and will explore new channels, new products and new formats to gain competitive advantage. Forging strong customer relationships and aligning strategic business plans through innovation and category management helps create mutual growth opportunities.

 

Pension fund deficit

The valuation of the one defined benefit pension scheme on a technical provision basis can cause large fluctuations in valuations based on factors outside of the Group's control. There is an agreed deficit recovery plan fixed until September 2023 or until a new schedule is agreed based on the next valuation which will be at 31 December 2018. The Company enjoys a close relationship and regular communication with the trustees.  

 

 

Trading Results

 

The year to 2 July 2016 is a 53 week year, a week longer than the previous year. Continuing Group revenue for the 53 week period to 2 July 2016 was £319.7 million (2015: £256.2 million).  The continuing Group revenue for the 52 week period is £313.5m (2015: £256.2 million).

 

Operating Profit margins were 5.3% (2015: 4.8%). Capital investment, improvement in operational efficiency and product mix are the main drivers for the improvement in margin. Inflationary increases and employee pay rises have been offset by operational improvements and returns from capital investment. Administrative expenses have increased driven by the full year impact of acquired businesses, having the correct level of infrastructure in place for the enlarged Group, increased retailer marketing support, new product development, range support, remuneration for outperformance of targets and improvements in the fabric of the workplace.

 

Group system
 

The Group is upgrading its systems with the objective of having a common ERP across UK Bakery.  The ERP system is the latest version of the existing system within the Fletchers business acquired in 2014.  Recognising the inherent risks to a systems upgrade, an appropriate Corporate Governance structure has been put in place, the key aspect of which is the establishment of a Steering Committee comprising senior operational management from both businesses and chaired by an independent implementation specialist.  Furthermore, KPMG have been engaged to sit on the Steering Committee and to act as independent auditors of the whole project. The fact that the new ERP system is the latest version of the existing system in operation within the Fletcher's business is also a significant risk reduction factor.

 

Dividend

 

Subject to shareholder approval at the Company's AGM on 23rd November 2016, the final dividend of 1.87 pence per share will be paid on 16 December 2016 to all shareholders on the register at 18 November 2016 and will be recognised in the financial year ending 1 July 2017.

 

The following analysis is included to show what the Directors consider to be the underlying performance of the Group and eliminates the impact of significant non-recurring items and certain charges required by IFRS

 

53 week period ended 2 July 2016

 

Operating performance

 

Non-recurring significant items

 

 

Defined benefit pension scheme

 

Fair value of interest rate swaps/ foreign exchange contracts

As per Consolidated Statement of Comp-rehensive Income

 

£000

 

£000

 

 

£000

 

£000

£000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

319,680

 

-

 

 

-

 

-

319,680

Cost of sales

(217,092)

 

-

 

 

-

 

-

(217,092)

Gross profit

102,588

 

-

 

 

-

 

-

102,588

Other costs excluding depreciation & amortisation

(77,861)

 

(4,290)

 

 

117

 

(134)

(82,168)

EBITDA

24,727

 

(4,290)

 

 

117

 

(134)

20,420

Depreciation & amortisation

(7,629)

 

-

 

 

-

 

-

(7,629)

Results from operating activities

17,098

 

(4,290)

 

 

117

 

(134)

12,791

Finance income

2

 

-

 

 

-

 

219

221

Finance costs

(1,060)

 

-

 

 

(148)

 

-

(1,208)

Profit before tax

16,040

 

(4,290)

 

 

(31)

 

85

11,804

Share of losses of equity-accounted investees after tax

(14)

 

-

 

 

-

 

-

(14)

 

 

 

 

 

 

 

 

 

 

Taxation

(3,272)

 

-

 

 

6

 

(20)

(3,286)

Profit for the year

12,754

 

(4,290)

 

 

(25)

 

65

8,504

 

 

Details of non-recurring significant items are detailed in note 3. Share option awards are now an ongoing part of the reward structure, the charges now form part of the ongoing cost of the business and are not considered an adjusting item in 2016.

 
 

 

52 week period ended 27 June 2015

 

 

Operating performance

 

Non-recurring significant items

 

Share options charge

 

 Defined benefit pension scheme

 

Fair value of interest rate swaps/ foreign exchange contracts

 

Unwinding of discount on deferred consideration

 

As per Consolidated Statement of Comp-rehensive Income

 

 

£000

 

£000

 

£000

 

£000

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

256,166

 

 

-

 

-

 

-

 

-

 

256,166

Cost of sales

(177,276)

 

-

 

-

 

-

 

-

 

-

 

(177,276)

Gross profit

78,890

 

 

-

 

-

 

-

 

-

 

78,890

Other costs excluding depreciation & amortisation

(60,638)

 

(3,181)

 

10

 

100

 

181

 

-

 

(63,528)

EBITDA

18,252

 

 

10

 

100

 

181

 

 

 

15,362

Depreciation & amortisation

(5,836)

 

-

 

-

 

-

 

-

 

-

 

(5,836)

Results from operating activities

12,416

 

(3,181)

 

10

 

100

 

181

 

-

 

9,526

Finance income

1

 

 

-

 

-

 

28

 

105

 

134

Finance costs

(1,024)

 

-

 

-

 

(154)

 

-

 

-

 

(1,178)

Profit before tax

11,393

 

 

10

 

(54)

 

209

 

105

 

8,482

Taxation

(2,452)

 

644

 

(2)

 

11

 

(42)

 

(21)

 

(1,862)

Profit for the year

8,941

 

(2,537)

 

8

 

(43)

 

167

 

84

 

6,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Details of non-recurring significant items are detailed in note 3.
 

Earnings per Share (EPS)

 

EPS comparatives to the prior year can be distorted by significant non-recurring items and IFRS adjustments, as well as the impact of the 53rd week for the current financial year.  The Board is focused on growing adjusted diluted EPS, which is calculated by eliminating the impact of the items highlighted above and amortisation of intangibles and incorporates the dilutive effect of share options.  Adjusted diluted EPS is 9.5p for the 52 week period (2015: 8.0p). 

 

 

52 week

2016

52 week

2015

52 week

2014

Basic EPS

5.9p

5.8p

6.7p

Adjusted* basic EPS

9.6p

8.3p

6.9p

Diluted** basic EPS

5.8p

5.6p

6.3p

Adjusted* diluted** EPS

9.5p

8.0p

6.5p

 

* Adjusted EPS measures are calculated by eliminating the impact of significant non-recurring items, IFRS adjustments and amortisation of intangibles. Further details can be found in note 6.

** Diluted EPS takes basic EPS and incorporates the dilution effect of share options.

 

Non-Financial Key Performance Indicators

 

A range of non-financial key performance indicators are monitored at site level covering, amongst others, customer service, quality and health and safety.  The Group board receives an overview of these on a regular basis.

 

Prior Year Acquisitions

 

On 30 October 2014 the Group acquired the Fletchers Group of Bakeries (Fletchers) for £56 million, funded in part by an oversubscribed equity raise of £35 million. The remainder was funded through debt. The acquisition brought opportunities in new foodservice channels, retail customer diversification and complementary product ranges. Fletchers fits well within our UK bakery business and the Group.

 

On 26 May 2015 the Group acquired 25% of the ordinary share capital of Dr Zak's Limited. Dr Zak's develops and supplies high protein food including bread, pasta and bagels.

 

On 16 June 2015 the Group acquired the business, production assets, stock and customer list of Johnstone's Just Desserts Ltd ('Johnstone's') out of administration. This acquisition signalled the escalation of Finsbury's entry into the foodservice cake channel and in particular the high growth national coffee shop segment. This is in line with the Group's channel diversification strategy, indicated at the acquisition of Fletchers. 

 

Cash Flow

 

There was an increase in our working capital requirement of £3.9 million compared to the last financial year. Corporation tax payments made in the financial year totalled £1.6 million (2015: £1.2 million), the payments in the current and prior year took account of the research and development tax relief due to the Group and tax losses being utilised. Capital expenditure in the year amounted to £12.1 million (2015: £7.4 million). 

 

Debt and Bank Facilities

 

The Group's total net debt including deferred consideration payable is £19.7 million (2015: £21.3 million) down £1.6 million from the prior year. Within this total, £10.8 million is due within one year, including cash at bank and invoice finance (2015: £9.3 million). 

 

The Group's debt facility is a bilateral facility with HSBC Bank Plc and Lloyds Bank Plc totalling £50.9m, the key features of the facility are as follows:

 

§ overdraft (£2.0m)

§ term loan (£13.4m)

§ confidential invoice discounting facility (£22.0m)

§ mortgage facility (£3.5m)

§ rolling asset finance facility (£2.0m)

§ revolving credit facility (£8.0m)

 

Note 8 gives details of the amounts drawn on these facilities and maturity dates.

 

The Group is able to offer strong asset backing to secure its borrowings.  The Group owns freehold sites at Memory Lane in Cardiff, Fletchers' site at Sheffield and Lightbody and Campbells in Scotland.  In addition, the Group has a strong trade debtor book to support the invoice discounting facility, made up primarily of the UK's major multiple retailers.  This debtor book stood at £44.9 million (2015: £42.8 million) at the period end date.

 

The Group recognises the inherent risk from interest rate rises. To mitigate these risks, the Group has two interest rate swaps in place with a total coverage of £9.0 million (2015: £14.0 million) equivalent to 46% (2015: 66%) of year end net bank debt at a weighted average rate of 1.8% (2015: 2.5%).

 

The effective interest rate for the Group at the year end, taking account of the interest rate swaps in place and deferred consideration with base rate at 0.5% and LIBOR at 0.584%, was 3.00% (2015: 4.04%). A £5.0 million swap fixed at 3.6% expired on 1 July 2016. On 7 September 2016 the Group entered into a forward dated swap for £20.0 million for five years from 3 July 2017 (fixed) at 0.455%.

 

Financial Covenants

 

The Board reviews the Group's cash flow forecasts and key covenants on a regular basis to ensure that it has adequate facilities to cover its trading and banking requirements with an appropriate level of headroom.  The forecasts are based on management's best estimates of future trading. There has been no breach of covenants during the year.

 

Interest cover (based on adjusted earnings before interest, tax, depreciation and amortisation - EBITDA) for the 53 weeks to 2 July 2016 was 23.4 (2015: 17.8). Net bank debt to EBITDA (based on adjusted EBITDA) for the year to 2 July 2016 was 0.8 (2015: 1.0).

 

Taxation

 

The Group taxation charge for the year was £3.3million (2015: £1.9 million).  This represents an effective rate of 20.4% on profits before non-recurring significant items (2015: 22.0%).  

 

Further details on the tax charge can be found in note 5 to the Group's financial statements.

 

Environmental Matters

 

The Group has re-launched its Sustainability Strategy across the business with a broad focus on Supply Chain, People and the Environment. Each site has an Environmental Champion and KPIs have been standardised across the Group. The Group is working together with specialist advisors to further develop environmentally sustainable business practices. Energy reduction and environmental sustainability projects have continued around the business. From a new effluent plant at Grain D'Or; new energy efficient refrigeration plant and high insulating ovens at Nicholas and Harris; to a solar panelled skip! LED lighting replacement continues across the Group and compressed air leak surveys are underway. Environmental considerations are at the heart of our decision making. Working partnerships with local universities have created a key project that will deliver quality improvement and waste reduction and for which funding is currently being sought.

 

 

Employee Social and Community Issues

 

All manufacturing sites are active within their local communities and have developed strong links with local schools, universities and charities. As an example Fletcher's in Sheffield have been working with Ecclesfield Primary School on an environmental awareness project and have funded an outdoor classroom in which to conduct work related to sustainability and the environment.

 

Technical Matters

 

All sites have achieved A, or the highest AA, rating under the new, much tougher British Retail Consortium version 7 standard with several of these audits now being unannounced. This is a strong performance across the business and a reflection of the work done. Due to the additional requirement to understand the vulnerabilities in supply chains the Group are implementing a supply chain mapping system which will eventually be rolled out to capture all suppliers.

 

Health continues to be a major focus for the business with tougher 2017 salt targets and the Government's Childhood Obesity Strategy. As a result, we have formulated a health strategy which focuses on a broad range of health metrics. Dedicated resource has been released to work on formulation development in key areas of the business and the capture of health metrics is being supported by an IT project. As part of the Food and Drink Federation, Finsbury has a voice in recommending appropriate categories for sugar targets to Public Health England and we continue to play an active role in this area.

 

The Johnstone's acquisition has integrated rapidly into the technical requirements of the Group and the site now has a new Technical Manager.

 

The Strategic Report was approved by the Board of Directors on 16 September 2016 and was signed on its behalf by:

 

 

Stephen Boyd (Director)

 

 

 

Financial Statements

Consolidated Statement of Profit and Loss and Other Comprehensive Income

for the 53 weeks ended 2 July 2016 and 52 weeks ended 27 June 2015

 

 

 

 

2016

 

2015

 

 

Note

£000

 

£000

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

1

319,680

 

256,166

Cost of sales

 

 

(217,092)

 

(177,276)

Gross profit

 

 

102,588

 

78,890

Administrative expenses

 

2

(89,797)

 

(69,364)

Results from operating activities

 

 

12,791

 

9,526

Finance income

 

4

221

 

134

Finance cost

 

4

(1,208)

 

(1,178)

Net finance cost

 

 

(987)

 

(1,044)

Profit before tax and share of losses of equity-accounted investees

 

 

 

11,804

 

 

8,482

Share of losses of equity-accounted investees

 

 

(14)

 

-

Profit before tax

 

 

11,790

 

8,482

Taxation

 

5

(3,286)

 

(1,862)

Profit for the financial year

 

 

8,504

 

6,620

 

 

 

 

 

 

Other comprehensive (expense)/income

 

 

 

 

 

Items that will not be reclassified to profit and loss

 

 

 

 

 

Remeasurement on defined benefit pension scheme

 

 

(2,595)

 

(153)

Movement in deferred taxation on pension scheme liability

 

 

 

 

390

 

 

31

Other comprehensive expense for the financial year, net of tax

 

 

 

(2,205)

 

 

(122)

Total comprehensive income for the financial year

 

 

6,299

 

6,498

 

 

 

 

 

 

Profit attributable to:

 

 

 

 

 

Equity holders of the parent

 

 

7,791

 

6,179

Non-controlling interest

 

 

713

 

441

Profit for the financial year

 

 

8,504

 

6,620

 

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

 

Equity holders of the parent

 

 

5,586

 

6,057

Non-controlling interest

 

 

713

 

441

Total comprehensive income for the financial year

 

 

6,299

 

6,498

 

 

 

 

 

 

Earnings per ordinary shares

 

 

 

 

 

Basic

 

6

6.1

 

5.8

Diluted

 

6

6.0

 

5.6

 

 

 

The notes on pages 22 to 33 form an integral part of these Financial Statements

 

 

Consolidated Statement of Financial Position

 at 2 July 2016 and 27 June 2015                                                                                                                                    

 

Note

 

2016

2015

 

 

 

£000

£000

Non-current assets

 

 

 

 

Intangibles

7

 

77,596

80,071

Property, plant and equipment

 

 

50,501

46,038

Investments in equity accounted investees

 

 

211

225

Other financial assets

 

 

28

28

Deferred tax assets

 

 

3,492

4,446

 

 

 

131,828

130,808

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

 

12,577

11,268

Trade and other receivables

 

 

50,332

48,381

Cash and cash equivalents

 

 

3,024

61

Current tax asset

 

 

-

40

Other financial assets - fair value of foreign exchange contracts

 

 

-

117

 

 

 

65,933

59,867

Total assets

 

 

197,761

190,675

 

 

 

 

 

Current liabilities

 

 

 

 

Other interest-bearing loans and borrowings

8

 

(13,829)

(9,288)

Trade and other payables

 

 

(64,357)

(62,283)

Provisions

 

 

(247)

(252)

Deferred purchase consideration

 

 

-

(50)

Other financial liabilities-fair value of interest rate swaps/foreign exchange

 

 

(157)

(359)

Current tax liabilities

 

 

(1,210)

-

 

 

 

(79,800)

(72,232)

 

 

 

 

 

Non-current liabilities

 

 

 

 

Other interest-bearing loans and borrowings

8

 

(8,740)

(11,746)

Provisions and other liabilities

 

 

(141)

(161)

Deferred tax liabilities

 

 

(1,547)

(103)

Pension fund liability

 

 

(6,463)

(3,837)

 

 

 

(16,891)

(15,847)

Total liabilities

 

 

(96,691)

(88,079)

 

 

 

 

 

Net assets

 

 

101,070

102,596

 

 

 

 

 

Equity attributable to equity holders of the parent

 

 

 

 

Share capital

 

 

1,304

1,280

Share premium account

 

 

64,956

64,952

Capital redemption reserve

 

 

578

578

Employee share reserve

 

 

(3,920)

-

Retained earnings

 

 

36,569

34,580

 

 

 

99,487

101,390

Non-controlling interest

 

 

1,583

1,206

Total equity

 

 

101,070

102,596

 

 

 

 

 

These financial statements were approved by the Board of Directors on 16 September 2016 and were signed on its behalf by:

 

 

Stephen Boyd (Director)      

 

Registered Number 00204368

 

The notes on pages 22 to 33 form an integral part of these Financial Statements

Consolidated Statement of Changes in Equity

for the 53 weeks ended 2 July 2016 and 52 weeks ended 27 June 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share

Capital

Share

premium

Capital redemption reserve

Employee share reserve

Retained

Earnings

Non-controlling

interest

Total

equity

 

 

 

£000

£000

£000

£000

£000

£000

£000

 

 

 

             

             

             

 

 

             

             

 

Balance at 29 June 2014

 

669

31,480

578

-

29,849

1,127

63,703

 

 

 

 

 

 

 

 

 

 

 

Profit for the financial year

 

-

-

-

-

6,179

441

6,620

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income/(expense):

 

 

 

 

 

 

 

 

 

Remeasurement of defined benefit pension

 

 

 

-

 

-

 

-

 

-

 

(153)

 

-

 

(153)

 

Deferred tax movement on pension scheme remeasurement

 

 

 

-

 

-

 

-

 

-

 

31

 

-

 

31

 

Total other comprehensive expense

 

-

-

-

-

(122)

-

(122)

 

Total comprehensive income for the period

 

 

-

 

-

 

-

 

-

 

6,057

 

441

 

6,498

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners, recorded directly in equity:

 

 

 

 

 

 

 

 

 

Shares issued during the year

 

611

33,472

-

-

-

-

34,083

 

Impact of share based payments

 

-

-

-

-

(10)

-

(10)

 

Deferred tax on share options

 

-

-

-

-

243

-

243

 

Dividend paid

 

-

-

-

-

(1,559)

(362)

(1,921)

 

Balance at 27 June 2015

 

1,280

64,952

578

-

34,580

1,206

102,596

 

 

 

 

 

 

 

 

 

 

 

Balance at 28 June 2015

 

1,280

64,952

578

-

34,580

1,206

102,596

 

 

 

 

 

 

 

 

 

 

 

Profit for the financial year

 

-

-

-

-

7,791

713

8,504

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (expense)/ income:

 

 

 

 

 

 

 

 

 

Remeasurement on defined benefit pension

 

 

 

-

 

-

 

-

 

-

 

(2,595)

 

-

 

(2,595)

 

Deferred tax movement on pension scheme remeasurement

 

 

 

-

 

-

 

-

 

-

 

390

 

-

 

390

 

Total other comprehensive expense

 

-

-

-

-

(2,205)

-

(2,205)

 

Total comprehensive income for the period

 

 

-

 

-

 

-

 

-

 

5,586

 

713

 

6,299

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners, recorded directly in equity:

 

 

 

 

 

 

 

 

 

Own shares acquired

 

-

-

-

(3,920)

-

-

(3,920)

 

Shares issued during the year

 

24

4

-

-

(23)

-

5

 

Impact of share based payments

 

-

-

-

-

306

-

306

 

Deferred tax on share options

 

-

-

-

-

(575)

-

(575)

 

Dividend paid

 

-

-

-

-

(3,305)

(336)

(3,641)

 

Balance at 2 July 2016

 

1,304

64,956

578

(3,920)

36,569

1,583

101,070

 

 

 

 

 

The notes on pages 22 to 33 form an integral part of these Financial Statements.

                                   

 

 

Consolidated Cash Flow Statement

for the 53 weeks ended 2 July 2016 and 52 weeks ended 27 June 2015     

 

 

 

 

 

Note

2016

2015

 

 

£000

£000

Cash flows from operating activities

 

 

 

Profit for the financial year

 

8,504

6,620

Adjustments for:

 

 

 

Taxation

5

3,286

1,862

Net finance costs

4

987

1,044

Depreciation

 

7,090

5,433

Amortisation of intangibles

7

539

403

Non-cash Impairment of goodwill

7

4,290

-

Share of losses of equity-accounted investees after tax

 

14

-

Share options charge/(credit)

 

-

(10)

Contributions by employer to pension scheme

 

(117)

(100)

Fair value charge/(credit) for foreign exchange contracts

 

134

(181)

Operating profit before changes in working capital

 

24,727

15,071

 

 

 

 

Changes in working capital:

 

 

 

Increase in inventories

 

(1,091)

(1,004)

Increase in trade and other receivables

 

(2,253)

(7,259)

Increase in trade and other payables

 

1,711

10,510

Cash generated from operations

 

23,094

17,318

 

 

 

 

Interest paid

 

(1,180)

(923)

Tax paid

 

(1,603)

(1,164)

Net cash from operating activities

 

20,311

15,231

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

 

(12,141)

(7,354)

Purchase of subsidiary companies

 

-

(40,809)

Deferred consideration (paid)/received

 

(50)

3,000

Settlement of acquired debt

 

-

(19,740)

Cash received with acquisition

 

-

4,990

Net cash used in investing activities

 

(12,191)

(59,913)

 

 

 

 

Cash flows from financing activities

 

 

 

Drawdown of new facility

 

-

24,028

Drawdown/(repayment) of invoice discounting

 

7,427

(8,159)

(Repayment)/drawdown of revolving credit

 

(2,000)

-

Repayment of mortgage and bank loans   

 

(3,672)

(3,622)

Repayment of asset finance liabilities

 

(284)

(380)

Issue of ordinary share capital

 

5

34,083

Purchase of shares by employee benefit trust

 

(2,835)

-

Dividend paid to non-controlling interest

 

(336)

(362)

Dividend paid to shareholders

 

(3,305)

(1,559)

Net cash from financing activities

 

(5,000)

44,029

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

3,120

(653)

Opening cash and cash equivalents

 

61

592

Effect of exchange rate fluctuations on cash held

 

(157)

122

Cash and cash equivalents at end of period

 

3,024

61

 

The notes on pages 22 to 33 form an integral part of these Financial Statements.

 

 

 

Notes to the Consolidated Financial Statements

(Forming part of the Financial Statements)

 

The financial information set out above does not constitute the company's statutory accounts for the 53 week period ended 2 July 2016 or the 52 week period ended 27 June 2015, but is derived from those accounts.  Statutory accounts for 2015 have been delivered to the registrar of companies, and those for 2016 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

 

1       Revenue and Segment Information

 

Operating segments are identified on the basis of internal reporting and decision making. The Group's Chief Operating Decision Maker is considered to be the Board as it is primarily responsible for the allocation of resources to segments and the assessment of performance by segment.

 

The Board uses adjusted operating profit, reviewed on a regular basis, as the key measure of the segments' performance.  Operating profit in this instance is defined as profit before the following:

 

Ø net financing expense

Ø share option charges

Ø significant non-recurring items

Ø fair value adjustments relating to acquisitions

Ø pension charges or credits in relation to the net pension position

Ø revaluation of interest rate swaps and forward foreign currency contracts.

 

The UK Bakery segment manufactures and sells bakery products to the UK's multiple grocers and foodservice sectors. This segment primarily comprises the operations of Memory Lane Cakes Ltd, Lightbody Group Ltd, Campbells Cake Company Ltd, Johnstone's Food Service Ltd, Fletchers Bakeries Ltd and Nicholas & Harris Ltd. These subsidiaries are aggregated into a single segment after considering the following criteria:

 

Ø the nature of the products - products are similar in nature and are classed as manufactured bakery products

Ø the production process - the production processes have the same or similar characteristics

Ø the economic characteristics  - the average gross margins are expected to be similar

 

The core operation of the Overseas segment is the distribution of the Group's UK manufactured products along with the sale of third party products primarily to Europe.

 

Costs of Group operations plus a 10% premium have been allocated across the segments on the basis of their operating profit. The premium has been charged to reflect the synergies achieved from obtaining resources centrally giving benefits across the operating segments. Operating profit levels have been chosen as the basis, as this reflects the underlying performance of the segment and is also the return the Group expects from those segments.

 

A purchasing premium of 2% is charged from Group operations, and is calculated on materials and packaging spend at segmental level. This charge is based on the rationale that Group operations, through its Group buyers, optimises the Group's procurement spend through leveraging its purchasing power.

 

This has resulted in a loss from continuing operations of £0.3m (2015: profit £0.3m) being presented within the Group Operations segment.

 

The Group's finance income and expenses cannot be meaningfully allocated to the individual operating segments.

 

 

1       Revenue and Segment Information (continued)
 

 

 

53 week period ended 2 July 2016

UK Bakery

 

£000

Overseas

 

£000

Group Operations

£000

Total Group

 

£000

Continuing

 

 

 

 

Revenue

 

 

 

 

External

291,196

28,484

-

319,680

Total underlying profit

15,887

1,511

(300)

17,098

Fair value foreign exchange contracts

 

 

 

(134)

Share options charge

 

 

 

-

Defined benefit pension scheme

 

 

 

117

Significant non-recurring items

 

 

 

(4,290)

Results from operating activities

 

 

 

12,791

Finance income

 

 

 

221

Finance cost

 

 

 

(1,208)

Net finance cost

 

 

 

(987)

Share of losses of equity-accounted investees after tax

 

 

 

 

(14)

Profit before taxation

 

 

 

11,790

Taxation

 

 

 

(3,286)

Profit for the financial year

 

 

 

8,504

 

 

 

 

 

At 2 July 2016

 

 

 

 

Segment assets

187,827

6,337

292

194,456

Unallocated assets

 

 

 

3,305

Consolidated total assets

 

 

 

197,761

Segment liabilities

(61,557)

(5,355)

(7,052)

(73,964)

Unallocated liabilities

 

 

 

(22,727)

Consolidated total liabilities

 

 

 

(96,691)

 

 

 

 

 

Other segment information

 

 

 

 

Capital expenditure

(12,115)

(26)

-

(12,141)

Depreciation included in segment profit

7,063

27

-

7,090

Amortisation

539

-

-

539

Impairment of goodwill

4,290

-

-

4,290

Inter-segmental sale / (purchases)

8,488

(8,488)

-

-

 

Analysis of unallocated assets and liabilities:

 

Assets

 

Liabilities

 

£000

 

£000

Investments

253

Loans and borrowings

(22,570)

Financial instruments

-

Financial instruments

(157)

Cash and cash equivalents

3,024

Cash and cash equivalents

-

Taxation balances

28

Taxation balances

-

Unallocated assets

3,305

Unallocated liabilities

(22,727)

 

With regard to revenue, five customers with sales of £66m, £62m, £39m, £29m and £24m account for 69% of revenue, which is attributable to the UK Bakery and Overseas segments above.

Impairment loss relates to the Anthony Alan Foods Ltd acquisition in 2007 which falls under the UK Bakery segment.
 

1.      Revenue and Segment Information (continued)

 

 

 

 

52 week period ended 27 June 2015

UK Bakery

 

£000

Overseas

 

£000

Group Operations

£000

Total Group

 

£000

Continuing

 

 

 

 

Revenue

 

 

 

 

External pre acquisition

164,255

22,186

-

186,441

External acquired

69,725

-

-

69,725

Total Revenue

233,980

22,186

-

256,166

Profit pre acquisition

7,748

1,154

347

9,249

Profit from acquired businesses

3,167

-

-

3,167

Total underlying profit

10,915

1,154

347

12,416

Fair value foreign exchange contracts

 

 

 

181

Share options charge

 

 

 

10

Defined benefit pension scheme

 

 

 

100

Significant non-recurring items

 

 

 

(3,181)

Results from operating activities

 

 

 

9,526

Finance income

 

 

 

134

Finance cost

 

 

 

(1,178)

Profit before taxation

 

 

 

8,482

Taxation

 

 

 

(1,862)

Profit for the financial year

 

 

 

6,620

 

 

 

 

 

At 27 June 2015

 

 

 

 

Segment assets

183,623

5,042

1,508

190,173

Unallocated assets

 

 

 

502

Consolidated total assets

 

 

 

190,675

Segment liabilities

(53,660)

(4,056)

(8,786)

(66,502)

Unallocated liabilities

 

 

 

(21,577)

Consolidated total liabilities

 

 

 

(88,079)

 

 

 

 

 

Other segment information

 

 

 

 

Capital expenditure

7,320

34

-

7,354

Depreciation included in segment profit

5,414

19

-

5,433

Amortisation

403

-

-

403

Inter-segmental sales / (purchases)

6,072

(6,072)

-

-

 

Analysis of unallocated assets and liabilities:

 

Assets

 

Liabilities

 

£000

 

£000

Investments

253

Loans and borrowings

(21,034)

Financial instruments

117

Financial instruments

(359)

Cash and cash equivalents

61

Cash and cash equivalents

-

Taxation balances

71

Taxation balances

(184)

Unallocated assets

502

Unallocated liabilities

(21,577)

 

With regard to revenue, five customers with sales of £53m, £36m, £27m, £24m and £20m account for 62% of revenue, which is attributable to the UK Bakery and Overseas segments above.

 

1.      Revenue and Segment Information (continued)

 

An analysis by geographical segment is shown below:

 

 

 

 

 

 

Geographical split of revenue by destination

 

2016

2015

 

 

£000

£000

Continuing:

 

 

 

 

 

United Kingdom

 

 

 

286,562

230,299

Europe

 

 

 

33,118

25,856

Rest of World

 

 

 

-

11

Total continuing

 

 

 

319,680

256,166

 

Capital expenditure on segment assets is detailed in note 3.

 

 

 

 

 

 

 

 

 

 

 

Geographical split by country of origin

 

 

United Kingdom

 

Europe

 

Total

 

 

 

£000

£000

£000

2016

 

 

 

 

 

Revenue

 

 

291,196

28,484

319,680

Operating profit

 

 

15,587

1,511

17,098

 

 

 

 

 

 

Total assets

 

 

191,424

6,337

197,761

Total liabilities

 

 

(91,336)

(5,355)

(96,691)

Net assets

 

 

100,088

982

101,070

 

 

 

 

 

 

 

 

 

United Kingdom

Europe

Total

 

 

 

£000

£000

£000

2015

 

 

 

 

 

Revenue

 

 

233,980

22,186

256,166

Operating profit

 

 

11,262

1,154

12,416

 

 

 

 

 

 

Total assets

 

 

185,633

5,042

190,675

Total liabilities

 

 

(84,023)

(4,056)

(88,079)

Net assets

 

 

101,610

986

102,596

 

 

 

             

             

             

The net assets shown under Europe comprises Lightbody Stretz Ltd, being the 50% owned parent company of Lightbody Europe SAS, the French based selling and distribution business.

 

2.      Expenses and Auditor's Remuneration

 

Included in profit are the following:

 

2016 

2015 

 

£000

£000

 

 

 

Amortisation of intangibles

539

403

Depreciation of owned tangible assets

6,770

5,096

Depreciation on assets under finance leases and hire purchase contracts

320

337

Loss on foreign exchange

(326)

(140)

Hire of plant and machinery - operating leases

810

679

Hire of other assets - operating leases

1,877

1,452

Movement on fair value of foreign exchange contracts

134

(181)

Research and development

2,287

1,737

Share option charges/(credits)

739

(10)

 

 

 

Amortisation of intangibles for the year was £539,000 (2015: £403,000) relating to the Fletchers acquisition in October 2014.

 

Auditor's remuneration:

 

2016

2015

 

£000

£000

 

 

 

Audit of these Financial Statements

47

26

 

 

 

Amounts receivable by the auditor and its associates in respect of:

 

 

Audit of the Financial Statements of subsidiaries of the Company

122

116

Taxation compliance services

22

16

Services related to corporate finance transactions

-

278

Other services

104

176

 

 

 

The auditor's remuneration is in respect of KPMG LLP. Fees for other services relates to pension advisory services, services relating to information technology and services relating to remuneration.

3.     Non-Recurring Significant Items

 

The Group presents certain items as non-recurring and significant. These relate to items which, in management's judgement, need to be disclosed by virtue of their size or incidence in order to obtain a more meaningful understanding of the financial information.

 

A charge of £4,290,000 relates to impairment of goodwill acquired in 2007, (2015: £3,181,000 relates to acquisition transaction costs). These are included in administrative expenses in the Consolidated Statement of Profit and Loss and Other Comprehensive Income.

 

 

4.     Finance Income and Cost

 

Recognised in the Consolidated Statement of Profit and Loss

 

2016

2015

 

£000

£000

Finance income

 

 

Change in fair value of interest rate swaps

219

28

Bank interest receivable

2

1

Unwinding of discount of deferred consideration receivable

-

105

Total finance income

221

134

 

 

 

Finance cost

 

 

Interest on net pension position

(148)

(154)

Bank interest payable

(787)

(748)

Interest on interest rate swap agreements

(273)

(276)

Total finance cost

(1,208)

(1,178)

 

 

 

5.     Taxation

Recognised in the Consolidated Statement of Profit and Loss

 

 

 

 

2016 

2015 

 

£000

£000

Current tax

 

 

Current year

2,745

1,221

Adjustments for prior years

82

(121)

Total current tax

2,827

1,100

 

 

 

Deferred tax

 

 

Origination and reversal of temporary differences

928

753

Retirement benefit deferred tax charge

(6)

(11)

Adjustments for prior years

(463)

20

Total deferred tax

459

762

Total tax expense

3,286

1,862

Reconciliation of effective tax rate

The weighted average hybrid rate of UK and French tax is 21.8% (2015: 22.8%). The tax assessed for the period is lower (2015: lower) than the hybrid rate of UK and French tax. The UK corporation tax rate for the period is 20.00%, (2015: 20.75 %). The differences are explained below:

 

2016 

2015 

 

£000

£000

 

 

 

Profit before taxation before losses from equity-accounted investees

11,804

8,482

 

 

 

Tax using the UK corporation tax rate of 20.00%, (2015: 20.75%)

2,361

1,760

Overseas profits charged at different taxation rate

207

173

Non-deductible expenses

99

239

Amortisation of intangible asset

-

60

Temporary differences*

7

(143)

Restatement of opening net deferred tax due to rate change and differences in rates

275

(28)

R&D uplift current year

(140)

(98)

Adjustments to tax charge in respect of prior periods

(381)

(101)

Tax expense (excluding significant non-recurring item)

2,428

1,862

Tax rate for the period (excluding disallowable impairment)

20.6%

22.0%

Disallowable intangible impairment

858

-

Total tax expense

3,286

1,862

 

*Temporary differences relate to share based payments.

Reductions in the corporation tax rate from 21% to 20% (effective from 1 April 2014) were substantively enacted on 2 July 2013. Legislation has been introduced in the Summer Finance Bill 2015 to reduce the main rate of corporation tax from 20% to 19% from 1 April 2017 and 18% from 1 April 2020.The deferred tax asset at 2 July 2016 has been calculated based on the rate of 18% substantively enacted at the balance sheet date. The impact through the profit and loss of reduction from 20% to 18% on recognised net deferred tax asset is £275,000 charge.

A further reduction in the UK corporation tax rate to 17% from 1 April 2020 was announced in the Budget on 16 March 2016. This rate will not affect the measurement of deferred tax until it has been substantively enacted.

The adjustment of £381,000 for prior year includes deferred tax on amortisation of intangibles (see note 7 for further details), ineligible capital spend and additional tax relief on qualifying R&D expenditure for prior periods.

The Company has an unrecognised deferred tax asset of £172,170 (2015: £191,300). This asset has not been recognised in these Financial Statements as suitable profits to utilise the underlying capital losses are not expected to arise in the future.

 

6.     Earnings Per Ordinary Share

Basic earnings per share for the period is calculated on the basis of profit for the year after tax, divided by the weighted average number of shares in issue being 126,938,000 (2015: 106,759,000). 

 

Basic diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of all potential dilutive ordinary shares. At 2 July 2016, the diluted weighted average number of shares in issue was 129,206,000, (2015: 110,507,000).

 

An adjusted earnings per share and an adjusted diluted earnings per share have also been calculated for a 52 week period as in the opinion of the Board this will allow shareholders to gain a clearer understanding of the trading performance of the Group and year on year comparisons. These adjusted earnings per share exclude:

 

·      Reorganisation and other significant non-recurring items

·      IAS 39 'Financial Instruments: Recognition and Measurement' fair value adjustment relating to the Group's interest rate swaps and foreign exchange contracts

·      IAS 19 (revised) 'Accounting for retirement benefits' relating to net income

·      IFRS 3 'Business Combinations' discount charge relating to deferred consideration payable and receivable.

·      The taxation effect at the appropriate rate on adjustments

·      Amortisation of intangible assets

 

Significant non-recurring items are tabled in the Strategic Report on page 13.

 

 

 

53 weeks to

2 Jul 2016

52 weeks to

2 Jul 2016

52 weeks to

27 Jun 2015

Profit

 

 

 

 

 

 

 

Profit attributable to equity holders of Company (basic)

 

£000

 

7,791

 

7,528

 

6,179

Significant non-recurring, amortisation of intangibles and other items

 

£000

 

4,692

 

4,692

 

2,643

Numerator for adjusted earnings per share calculation (adjusted basic)

 

£000

 

12,483

 

12,220

 

8,822

 

 

 

 

 

 

 

 

Shares

'000

Basic

Diluted

Basic

Diluted

Basic

Diluted

Weighted average number of ordinary shares in issue during the period

 

'000

 

126,938

 

126,938

 

126,938

 

126,938

 

106,759

 

106,759

Dilutive effect of share options

'000

-

2,268

-

2,268

-

3,748

 

 

126,938

129,206

126,938

129,206

106,759

110,507

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

Basic and diluted

Pence

6.1

6.0

5.9

5.8

5.8

5.6

Adjusted basic and adjusted diluted

Pence

9.8

9.7

9.6

9.5

8.3

8.0

 

 

 

 

7.     Intangibles

Intangible assets comprise customer relationships, brands and goodwill.

 

 

Goodwill

Software

Brands and licences

Customer relationships

Total

 

£000

£000

£000

£000

£000

Cost at 28 June 2014

52,968

-

822

-

Cost at 27 June 2015

71,704

-

3,683

5,909

81,296

Adjustment in respect of prior year acquisition (see note below)

 

1,754

 

-

 

-

 

-

 

1,754

Additions

-

600

-

-

600

Cost at 2 July 2016

73,458

600

3,683

5,909

83,650

 

 

 

 

 

Amortisation at 28 June 2014

-

-

(822)

-

(822)

Charge for the year 27 June 2015

-

-

(107)

(296)

(403)

Amortisation at 27 June 2015

-

-

(929)

(296)

(1,225)

Charge for the year 2 July 2016

(4,290)

-

(144)

(395)

(4,829)

Amortisation/impairment at 2 July 2016

 

(4,290)

 

-

 

(1,073)

 

(691)

 

(6,054)

 

 

 

 

 

Net book value at 28 June 2014

52,968

-

-

-

52,968

Net book value at 27 June 2015

71,704

-

2,754

5,613

80,071

Net book value at 2 July 2016

69,168

600

2,610

5,218

77,596

 

 

 

 

 

 

A deferred tax liability in respect of the intangible assets recognised as part of the prior year acquisition has been updated and reflected in the current year Financial Statements, resulting in an increase in the deferred tax liability of £1,754,000 and a corresponding increase in goodwill. The deferred tax liability will unwind in line with the amortisation of the intangible assets.

 

The brand and customer relationships recognised were purchased as part of the acquisition of Fletchers Group of Bakeries in October 2014. They are considered to have finite useful lives and are amortised on a straight line basis over their estimated useful lives of twenty years for brands and fifteen years for customers. The intangibles were valued using an income approach, using Multi-Period excess earnings Method for customer relationships and Relief from Royalty Method for brand valuation. The amortisation of intangibles has been charged to administrative expenses in the Income Statement.

 

Goodwill has arisen on acquisitions and reflects the future economic benefits arising from assets that are not capable of being identified individually and recognised as separate assets. The goodwill reflects the anticipated profitability and synergistic benefits arising from the enlarged Group structure. The goodwill is the balance of the total consideration less fair value of assets acquired and identified. The carrying value of the goodwill is reviewed annually for impairment. The carrying value of all goodwill has been assessed during the year and a non-cash impairment of goodwill arising from an acquisition in 2007 has been made during the year.

 

 

 

 

7.      Intangibles (continued)

 

The Group tests goodwill for impairment on an annual basis, or more frequently if there are indications that the goodwill may be impaired. The recoverable amounts of the cash generating units are determined from value in use calculations.  The key assumptions for the value in use calculations are the discount rate used for future cash flows and the anticipated future changes in revenue, direct costs and indirect costs. The assumptions used reflect the past experience of management and future expectations.

 

The Group prepares cash flow forecasts covering a five year period based on the detailed financial forecasts approved by management for the next three years with estimated growth and inflation of 3% (2015: 3%) and 3% (2015: 3%) respectively thereafter (with the exception of Anthony Alan Foods Limited, see below).The cashflows beyond this forecast are extrapolated to perpetuity using a nil growth rate on a prudent basis, to reflect the uncertainties of forecasting further than five years. Changes in revenue and direct costs are based on past experience and expectations of future changes in the market. 

 

The revenue growth rate combines volume, mix and price of products. An inflation factor has been applied to costs of sales, variable costs and indirect costs and takes into consideration the general rate of inflation, movements in commodities, improvement in efficiencies from capital investment and operations and purchasing initiatives.

 

A pre-tax discount rate of 10% (2015: 10%) has been used in these calculations. The Group has considered the economic environment and higher level of return expected by equity holders due to the perceived risk in equity markets when selecting the discount rate. The discount rate used for each cash generating unit has been kept constant as the market risk is deemed not to be materially different between the different segments of the bakery sector, nor over time.

 

A non-cash impairment of the goodwill arising from the acquisition of Anthony Alan Foods Ltd in 2007 has been made during the year. The impairment reflects the challenging market and changing dynamics of the 'healthier' grocery market. The related goodwill has been fully impaired and reflected in both the Lightbody of Hamilton and Memory Lane Cakes cash generating units accordingly. The impairment is shown as a significant non-recurring item within administrative expenses.

 

Sensitivity analyses have been carried out by the Directors on the carrying value of all remaining goodwill using discount rates ranging between 8.6% and 15.0% which would not result in an impairment of any cash generating units. Management believe any increase in discount rates above 15% to be remote.

 

The carrying amount of goodwill has been allocated to cash generating units or groups of cash generating units as follows:

 

2016

£000

 

2015

£000

Nicholas & Harris

2,980

 

2,980

Lightbody of Hamilton

45,698

 

48,474

Memory Lane Cakes

-

 

1,514

Fletchers Bakery

20,118

 

18,364

Johnstone's Food Service

372

 

372

 

69,168

 

71,704

 

 

 

8.     Other Interest-Bearing Loans and Borrowings

 

This note provides information about the contractual terms and repayment terms of the Group's interest-bearing loans and borrowings, which are measured at amortised cost, using the effective interest rate method.  

 

 

 

2016

 

 

Margin

Frequency of

Repayments

 

Year of maturity

 

Facility

£000

 

Drawn

£000

 

Current

£000

Non-Current

£000

 

 

 

 

 

 

 

 

Invoice Discounting

1.50%/base

On demand

Revolving*

22,000

10,824

10,824

-

Term loan

2.00%/LIBOR

Quarterly

2019

13,400

8,905

2,568

6,337

Revolving credit

2.00%/LIBOR

Varies

2019

8,000

-

-

-

Mortgage

1.75%/LIBOR

Quarterly

2022

3,470

2,826

369

2,457

Finance lease liabilities

1.76%/base

Monthly

various

2,000

190

133

57

Overdraft

2.00%/base

On demand

-

2,000

-

-

-

 

 

 

 

50,870

22,745

13,894

8,851

Unamortised transaction costs

 

 

 

(176)

(65)

(111)

 

 

 

 

 

22,569

13,829

8,740

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured bank loans and mortgages over one year

 

 

 

8,851

Unamortised transaction costs

 

 

 

 

 

(111)

 

 

 

 

 

 

 

8,740

 

 

 

 

 

 

 

 

Repayments are as follows:

 

 

 

 

 

 

Between one and two years

 

 

 

 

 

2,940

Between two and five years

 

 

 

 

 

 

4,817

Between five and ten years

 

 

 

 

 

 

983

 

 

 

 

 

 

 

8,740

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

Margin

Frequency of

Repayments

 

Year of maturity

 

Facility

£000

 

Drawn

£000

 

Current

£000

Non-Current

£000

 

 

 

 

 

 

 

 

Invoice Discounting

1.50%/base

On demand

Revolving*

22,000

3,397

3,397

-

Term loan

2.00%/LIBOR

Quarterly

2019

13,400

12,116

3,211

8,905

Revolving credit

2.00%/LIBOR

Varies

2019

8,000

2,000

2,000

-

Mortgage

1.75%/base

Quarterly

2022

3,470

3,287

461

2,826

Finance lease liabilities

1.76%/base

Monthly

various

2,000

474

284

190

Overdraft

2.00%/base

On demand

-

2,000

-

-

-

 

 

 

 

50,870

21,274

9,353

11,921

Unamortised transaction costs

 

 

 

(240)

(65)

(175)

 

 

 

 

 

21,034

9,288

11,746

 

 

 

 

 

 

 

 

Secured bank loans and mortgages over one year (included above)

 

 

 

11,921

Unamortised transaction costs

 

 

 

 

 

(175)

 

 

 

 

 

 

 

11,746

 

 

 

 

 

 

 

 

Repayments are as follows:

 

 

 

 

 

 

Between one and two years

 

 

 

 

 

 

3,006

Between two and five years

 

 

 

 

 

 

7,389

Between five and ten years

 

 

 

 

 

 

1,351

 

 

 

 

 

 

 

11,746

 

 

 

 

 

                 

* Revolving maturity above relates to the payment terms on the invoice discounting which is up to 90 days from the date of invoice. The invoice discounting facility renewal date is October 2019.

 

8.      Other Interest-Bearing Loans and Borrowings (continued)

 

Finance lease liabilities are payable as follows:

 

 

 

 

 

 

 

 

 

2016

 

 

2015

 

 

Minimum lease payments

Interest

Principal

Minimum lease payments

Interest

Principal

 

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

Less than one year

136

3

133

294

10

284

Between one and five years

58

1

57

194

4

190

 

194

4

190

488

14

474

 

All of the above loans are denoted in pounds sterling, with various interest rates and maturity dates. The main purpose of the above facilities is to finance the Group's operations.

 

As part of the bank borrowing facility the Group needs to meet certain covenants every six months. There were no breaches of covenants during the year. The covenant tests required are as follows:

 

Net bank debt : EBITDA

Interest cover

Debt service cover

Capital expenditure

 

The bank facilities (excluding overdraft) available for drawdown are £48.9 million (2015: £48.9 million).  At the period end date the facility utilised was £22.7 million (2015: £21.3 million), giving £26.2 million (2015: £27.6 million) headroom.

 

9.     Analysis of Net Debt

 

 

 

 

 

At year ended

27 June

2015

£000

 

 

 

Cash flow

£000

 

At year ended

2 July

2016

£000

Cash at bank

 

61

 

2,963

 

3,024

Debt due within one year

 

(5,672)

 

2,735

 

(2,937)

Debt due after one year

 

(11,731)

 

2,937

 

(8,794)

Invoice discounting due within one year

 

(3,397)

 

(7,427)

 

(10,824)

Hire purchase obligations due within one year

 

(284)

 

151

 

(133)

Hire purchase obligations due after one year

 

(190)

 

133

 

(57)

Total net bank debt

 

(21,213)

 

1,492

 

(19,721)

 

 

 

 

 

 

 

Debt

 

(21,034)

 

-

 

(22,569)

Cash at bank

 

61

 

-

 

3,024

Unamortised transaction costs

 

(240)

 

-

 

(176)

Total net bank debt

 

(21,213)

 

-

 

(19,721)

Deferred consideration payable

 

(50)

 

-

 

-

Total net debt including deferred consideration payable

 

 

(21,263)

 

 

-

 

 

(19,721)

Cash at bank

 

61

 

-

 

3,024

Total debt including deferred consideration payable excluding cash

 

 

(21,324)

 

 

-

 

 

(22,745)

 

 

 

 

 

 

 

 

 


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