TIDMFIF
RNS Number : 3611M
Finsbury Food Group PLC
16 September 2019
Date: 16 September 2019
On behalf Finsbury Food Group Plc ('Finsbury', 'the Company'
of: 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 the retail
and foodservice channels, is pleased to announce its preliminary
results for the financial year ended 29 June 2019.
Summary
-- Group revenue GBP315.3m up 3.8%, (up 4.0% on a like for like*(1) basis)
-- Adjusted*(2) EBITDA flat at GBP25.5m
-- Profit before tax GBP13.6m up 203%
-- Basic EPS 7.3p up 329%
-- Total dividend increased 6.1% to 3.5p
Strategic highlights
-- Completed the acquisition of Ultrapharm, a manufacturer of
Gluten Free Bread and Morning Goods
-- Second half like for like growth 7.5% compares to first half
of 0.5%, reflecting significant new business gains
-- Investment in automated individually wrapped cake bar
capacity is followed by the successful launch of a new range of
cake bars for 'on the go' consumption
-- Significant number of product launches including the new
'Vegan' brioche style burger bun into Foodservice, approved by The
Vegan society and a new line of Mary Berry cakes
-- Group wide review of bakery processes is leading to the
standardisation of best practice with tangible improvement in
quality and consistency and reduction of production waste
-- Award wins include Bakery Manufacturing company of the year and several Quality Food Awards
-- Successful roll out of a new IT platform, across all companies in UK Bakery
-- Introduced Workplace by Facebook across the Group to drive collaboration
The Group uses Alternative Performance Measures (APMs) which are
non-IFRS measures to monitor performance of its operations and of
the Group as a whole. The reconciliation to IFRS measures is shown
in the tables on page 3.
*(1) Like for like revenue is the revenue from operations
excluding the revenue from the closed bakeries and acquired
businesses.
*(2) Adjusted profit is before significant non-recurring and
other items.
Commenting on the results, John Duffy, Chief Executive of
Finsbury Food Group Plc, said:
"In what has been a continued challenging market environment,
our sales growth and increased dividend demonstrates our ability to
navigate more challenging times and our continued confidence in the
prospects of the Group. Our achievements have been underpinned by
our relentless focus on investment, efficiency and innovation,
alongside our ability to harness the growth available from premium,
healthy and authentic on-trend innovation.
"We are confident that the Group is on a strong footing and able
to drive further growth in the period ahead, as we continue to
build a strong, lean, scale competitor and consolidator."
This announcement contains inside information.
Contact:
Finsbury Food Group
John Duffy (Chief
Executive)
Steve Boyd (Finance
Director) www.finsburyfoods.co.uk 029 20 357 500
Cenkos Securities
Max Hartley
(Corporate Finance)
Alma PR
Rebecca Sanders-Hewett
Sam Modlin finsbury@almapr.co.uk 020 3405 0205
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.
-- The Company is one of the largest speciality bakery groups in
the UK and, with its Overseas division, has sales in the financial
year ending 29 June 2019 exceeding GBP315m.
-- The Company's bakery product range is comprehensive and includes:
o Large premium and celebration cakes.
o Small snacking cake formats such as cake slices and bites.
o 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.
o Gluten Free bread, morning goods and cake ranges.
-- The Company is one of the largest ambient cake manufacturers
in the UK, a market valued at over GBP969 million (source: IRI, 52
w/e 20(th) July 2019). The retail bread and morning goods market
has a value of GBP4.5 billion (source: Kantar Worldpanel 52 w/e
14(th) July 2019). The retail Free From Cake market is valued at
GBP49.5 million (source: Kantar Worldpanel 52 w/e 24(th) March
2019). The retail Free From bread & morning goods market is
valued at GBP125.3 million (source: Kantar Worldpanel 52 w/e 21(st)
April 2019). The UK Out of Home sector Foodservice Bakery sector is
worth approximately GBP747 million per annum (source: derived from
MCA data for 52 weeks to 31(st) March 2019). The UK foodservice
cake and sweet morning goods bakery sector is worth approximately
GBP918 million per annum (UK foodservice data derived from MCA data
for 52 weeks to 31(st) March 2019).
-- The Company comprises a core UK Bakery division and an Overseas division:
o The UK Bakery division has manufacturing sites in Cardiff,
East Kilbride, Hamilton, Salisbury, Sheffield, Manchester, and
Pontypool.
o The Overseas division comprises the Company's 50% owned
company, Lightbody Stretz Ltd, which supplies and distributes the
Group's UK-manufactured products and third party products,
primarily to Europe, and the Company's manufacturing facility in
ywiec in Poland.
-- In September 2018, the Company completed the acquisition of
Free From baker Ultrapharm, giving the Group a significant
opportunity to access an exciting and high growth marketplace and
manufacturing facilities in Pontypool in the UK and in ywiec,
Poland.
Adjusted operating profit reconciliation statutory to
adjusted.
The figures are for the 52 weeks ended 29 June 2019 and 52 weeks
ended 30 June 2018:
Adjusted Operating Profit 2019 2018
GBP000 GBP000
------------------------------------------------ -------- --------
Operating profit 15,293 5,237
------------------------------------------------ -------- --------
Significant non-recurring items - SNR (refer
to Note 4 for detail) 1,200 13,067
Difference between defined benefit pension
scheme charges and cash cost 162 (411)
Movement in the fair value of foreign exchange
contracts 178 (49)
------------------------------------------------ -------- --------
Adjustments, SNR and other items 1,540 12,607
------------------------------------------------ -------- --------
Adjusted operating profit 16,833 17,844
------------------------------------------------ -------- --------
Adjusted Profit before Tax 2019 2018
GBP000 GBP000
------------------------------------------------ -------- --------
Profit before Tax 13,576 4,475
------------------------------------------------ -------- --------
Significant non-recurring items - SNR (refer
to Note 4 for detail) 1,200 13,067
Difference between defined benefit pension
scheme charges and cash cost 444 (134)
Movement in the fair value of foreign exchange
contracts 178 (49)
Discounting of deferred consideration 139 -
Movement in the fair value of interest rate
swaps 382 (143)
------------------------------------------------ -------- --------
Adjustments, SNR and other items 2,343 12,741
------------------------------------------------ -------- --------
Adjusted profit before tax 15,919 17,216
------------------------------------------------ -------- --------
Adjusted operating profit and profit before tax exclude
significant and non-recurring and other items as shown in the
tables above and includes amortisation of intangibles. The adjusted
operating profit 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.
The Financial Review Section within the Strategic Report
provides further details on the adjusted profits.
Chairman's Statement
This robust performance delivered during the year highlights
that our exceptional management team and strategy has again
delivered results that significantly outperform the market against
a backdrop of consumer malaise, cost inflation and macro
uncertainty, which has undermined sentiment in the sector. Our
ability to innovate and provide our customers with desirable and
quality products is testament to the strength of the Group's
creativity, investment and growing operational maturity.
Group revenue increased by 3.8% to GBP315.3m. Adjusted EBITDA
was GBP25.5m and profit before tax was GBP13.6 million. We have
announced a growth in the dividend which will take the total
dividend for the year to 3.5p per share, up 6.1% from last
year.
Delivering on our ever-consistent vision
Our vision is to be the leading speciality bakery group,
producing a broad range of high-quality products that fulfil the
needs and demands of end consumers, delivering a differentiated
product for our customers whilst driving growth for the Group, both
throughout the UK and Europe.
We continue to build a business of scale, but also one that can
deal with the manufacturing complexity and flexibility required for
the breadth of ranges we deliver to the foodservice and the retail
markets - from specialist, artisan products to premium or
higher-margin products. For ten years we've been delivering this
while improving efficiency, investing strategically and
thoughtfully, whilst reducing debt and improving
diversification.
We believe scale will become increasingly important in the food
manufacturing sector as we see our main customers getting larger.
Over the years we have made major acquisitions and investments,
targeting opportunities based on consumer trends, market niches,
new channels and added-value products that retail and foodservice
customers are trying to develop. As such, we are well positioned to
continue to successfully deliver this increasing product range to
our larger customers whilst still maintaining strong relationships
with our smaller customers.
Illustrating our ability to complete strategic and complementary
acquisitions, the acquisition of Ultrapharm has accelerated our
access to the high growth Free From market. We have established a
robust platform, increased capacity through a new bakery and
resourced the business to allow it to have all the key ingredients
to drive further growth.
Through a combination of organic growth and targeted
acquisitions in what is a very fragmented market, we will continue
to invest, consolidate and therefore grow in areas where we believe
we can drive the most value, such as artisan bread, Free From and
foodservice.
Operational agility delivering results
Our diversification, agility and innovation has allowed the
Group to not only adapt but also perform well in the face of the
cost pressures and market volatility we have seen of late. We've
continued to not only drive efficiency, but at the same time
deliver innovation, allowing us to maintain our leading position in
the market.
As part of our drive to ensure excellence across the Group, our
Operating Principles were launched in the first half of the year,
and are now being applied consistently across the Group. This
allows us to deliver group wide initiatives to drive scale,
productivity and best practice. This will be a major strategic
theme over the coming years as we unlock benefits from these
investments, including our recent IT roll out across the Group.
Board
The Board is committed to high standards of corporate
governance, and has chosen to comply with the QCA Corporate
Governance Code. In April we announced that Zoe Morgan, a
Non-Executive Director of the Company and Chairman of the
Remuneration Committee, would not be seeking renewal of her
directorship. I would like to thank Zoe for her valuable
contribution over the last three years to both the Board and to the
Company. Subsequently, Marnie Millard, a Non-Executive Director of
the Company, took over the Chairmanship of the Remuneration
Committee from 1st July 2019.
People
Our people are truly the heartbeat of the Group. Over the last
few years we have implemented a considerable number of Group wide
initiatives to ensure that we really are being the best that we can
be. The hard work of our teams on a day-to-day basis and engagement
with the new initiatives we have introduced has been truly
inspiring. With these projects now materially complete, the Group
is focused on harnessing the outcomes of these initiatives to drive
productivity. Alongside this, the teams' skill and ability to
continuously create products that appeal to our customers is
remarkable. I would like to thank them all for their tireless
effort and look forward to working together to continue to deliver
baking brilliance.
Peter Baker
Non-Executive Chairman
13 September 2019
Chief Executive's Report
Performance review
The Board is pleased to report its full year results, which show
strong sales momentum which has continued into the new financial
year. The Group has grown sales year on year, driven by organic
growth, the Ultrapharm acquisition and previously communicated new
business wins, despite the challenging retail environment and
unprecedented input cost inflation we have experienced over the
period. This robust performance has been delivered with a
continuous focus on innovation using our extensive knowledge of our
markets and what our end consumers want.
The relentless investment and efficiency focus of recent years
has enabled us to navigate this market environment successfully. As
we come out of our intense investment phase, with capital
expenditure of GBP11.0m in the period, the Group will continue to
benefit from the investments made for years to come. The true
measure of success is that we have once again achieved underlying
growth ahead of our market and have demonstrated the growth
available from premium, healthy and authentic on-trend
innovation.
Illustrating this, following the launch of our own Free From
brand in Europe last year, Wiso, we have also launched Free From
cakes in addition to the comprehensive Free From bread and morning
goods ranges. These products capitalise on the fact that making the
choice to avoid gluten or embrace veganism are growing lifestyle
and health choice across North America, Europe and UK.
The Group's diversification by channel has truly delivered in
the period with our 'out of home eating' foodservice market, where
we supply pub and restaurant chains, fast-food outlets and contract
caterers, being a particularly strong performer. As consumer habits
change it is vital that our product offering remains on trend and
relevant to our end customers, illustrated by the success of our
vegan brioche-style buns.
We continue to have a broad portfolio of licensed brands that
are complementary to our retailer own label business and
Foodservice range. This offering is vital in meeting consumer
trends and expectations with our portfolio evolving all the time.
The second half of the year has been particularly active with the
big block buster movie releases of Toy Story 4 and the latest
Avengers and Spiderman instalments, which have all broken cinematic
records and have their own cake range. We also continued to keep
our core evergreen product portfolio licenses fresh with a relaunch
of our Batman, Minions, Pokemon, Paw Patrol, Peppa Pig, Trolls and
Me to You cakes.
Artisan breads, which may be hand-crafted, require long
fermentation, baking in stone ovens, and a skilled team, continues
to grow strongly. As such, we are looking to invest in further
capacity to capitalise on this growing trend, going forward.
Innovation and craftmanship
Key components of our strategy are creating innovative,
high-quality bakery products that anticipate and deliver on key
market trends, ensuring customer and consumer needs are at the
heart of our decision making. We always strive to be front and
centre of these trends and this is driven by our deep knowledge of
the markets we serve combined with the skill and experience of our
employees. An example of this is the successful launch of a new
range of cake bars for on the go consumption which drove our
investment in automated individually wrapped cake bar capacity, and
the launch of our vegan brioche style bun into Foodservice, which
is approved by The Vegan Society. We are constantly listening,
monitoring, and testing to make sure that we're on top of trends as
they emerge.
Be it foodservice, licensed brands or retailer owned brands -
evolving consumer trends such as indulgence, health and wellbeing,
or adapting single serve product formats for convenient out of home
eating occasions have played a large part in driving the growth in
our core division, enabling the Group to perform ahead of the wider
market.
Illustrating this ability to deliver innovative, on trend and
high-quality products, the Group was delighted to be recognised at
the Food Manufacturer Excellence Awards, winning the Bakery
Manufacturer of the year. Meanwhile, a number of our products were
placed in the winner's category at the Quality Food Awards.
Sitting at the heart of the Group is our ability to innovate and
craft products that our customers want to purchase.
Maximising the benefits of the Group's structure
Throughout the last couple of years, a core part of our strategy
has been to ensure that all our businesses acknowledge and embrace
the key strengths of the Group, whilst benefitting from common
approaches. Our newly introduced IT platform has been implemented
to support common business processes and further efficiency
improvement, and we have also developed our Group-wide people
strategy. Now that both of these have been rolled out across the
Group, we are starting to see the benefits that this approach is
expected to deliver.
We are building a Group-wide Process Blueprint which is
standardising processes and practices to improve plant performance
and reliability, which of course delivers improved efficiency and
quality. We know that there are still aspects that we can further
improve and we are in the process of setting up a Group Bakery
Efficiency Programme and an Operational Supply Chain Forum, which
will continue to drive improvements in quality and consistency,
plus further reduce production waste.
All of the initiatives mentioned above are examples of our
Operating Principles in action. The Finsbury Operating Principles
effectively help to achieve our Purpose and Strategy, creating
long--term shareholder value through share price growth and
attractive dividends.
We know that the benefits of utilising our Group structure and
expertise will help us to be the leading speciality group that we
strive to be.
Strength in collaboration
We are seeing encouraging results from our people strategy
throughout the Group. The positive momentum is illustrated by a
number of internal promotions into senior roles over the last year.
These promotions demonstrate the benefits of this programme, as
well as our commitment to growing our people with the business.
Employee engagement and communication has been significantly
improved with the introduction of Workplace, a collaboration
platform, across the Group in the first half. The use of this
platform has enabled colleagues to collaborate more effectively
across teams, projects, sites and accelerate functional best
practice transfer as well as create instant communication
opportunities and increase transparency.
I would like to thank all of our employees for the way in which
they have embraced and engaged with all the initiatives that we
have introduced over the last few years. They have responded
brilliantly, and we're very grateful for that. We believe that by
working together, we become stronger as a Group.
Broadening our Group through acquisition
In September 2018 we acquired a specialist Free From bakery,
Ultrapharm. As with all acquisitions, we completed a comprehensive
multi-function assessment, utilising expert resource from across
the Group as well as the existing management team, against Group
standards and best practice before creating a prioritised
integration action plan. Additional expert resources from across
the Group have complemented management to implement the year one
plan which is now largely complete as expected.
In addition, we have invested in new capacity, with a new bakery
in Poland, alongside additional resources and skills to deliver a
stronger platform for anticipated future growth.
Whilst we remain committed to future acquisition-led growth as
part of our strategy, as always, we are focused on driving organic
growth and efficiency within the current Group structure. With any
further acquisitions we would be looking to introduce new product,
customer or channel diversification, or accelerate market
consolidation in our main product areas.
Outlook
We are confident that the strong second half performance will
continue into the year ahead, as the core business continues to
perform well with strong quarter one growth to date, outperforming
Finsbury's respective markets.
We have made a number of significant investments across the
Group that have stood us in good stead throughout what has been a
more difficult period. With the Group now in its strongest position
in recent years and having completed a period of intense
investments including the IT platform roll out and the new Free
From bakery in Poland, we are expecting to significantly reduce our
capital spend going forward as we focus on driving further
efficiencies from the new systems and processes and utilise our
additional capacity.
Whilst the wider macroeconomic and political environment remains
challenging in the UK, our drive for innovation, outperformance of
foodservice and our entry in the Free From market provides a strong
footing to continue to drive organic growth. Our Group wide drive
for efficiency and productivity coupled with the skill of our
people provides Finsbury with a backbone to achieve further
growth.
By maintaining a longer-term strategic approach, given an
uncertain consumer and inflationary cost environment outlook, we
are confident that we will continue to build a strong, lean, scale
competitor and consolidator.
John Duffy
Chief Executive Officer
13 September 2019
Financial Review
Group revenue for the 52-week period to 29 June 2019 is GBP315.3
million, 3.8% higher than last year. Like for like Group revenue
(excluding the revenue from the closed bakeries and acquired
businesses) is, at GBP301.8 million, up 4.0% or GBP11.6 million.
Growth in continuing revenue is within markets that are seeing
value growth with a slight volume decline.
We have stripped significant and non-recurring costs of GBP1.2m,
which primarily relate to acquisition and restructuring costs, as
well as a number of other non trading items listed below, out of
operating profit, to give adjusted operating profit, which provides
a clearer presentation of the underlying trading performance of the
Group. Adjusted operating profit at GBP16.8 million is down 5.7% on
last year. Adjusted operating profit margins are 5.3% (2018: 5.9%),
a consequence of a challenging global environment. We saw a second
half year growth through a combination of organic growth, new
business wins, price recovery and the acquisition of Ultrapharm.
The Group's performance is seen as resilient attributable to our
capital investment, the diversification of the Group into
foodservice and high growth areas such as Free From, our constant
drive for efficiency and our relentless drive to deliver on
customer trends.
Dividend
Subject to shareholder approval at the Company's AGM on 20
November 2019, the final dividend of 2.34 pence per share will be
paid on 23 December 2019 to all shareholders on the register at 22
November 2019, and will be recognised in the year ending 27 June
2020.
The tables below show what the Directors consider to be the
underlying performance of the Group. The adjustments eliminate the
impact of significant and non-recurring items and other accounting
items that do not reflect the underlying performance of the
Group.
52 week period ended 29 June 2019
Fair value
of interest As per
Defined rate swaps/ Consolidated
Significant benefit foreign Discounting Statement
Operating non-recurring pension exchange of deferred of Comprehensive
performance items scheme contracts consideration Income
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ------------- --------------- --------- ------------- ---------------- ------------------
Revenue 315,281 - - - - 315,281
Cost of sales (219,849) - - - - (219,849)
---------------------- ------------- --------------- --------- ------------- ---------------- ------------------
Gross profit 95,432 - - - - 95,432
Other costs excluding
depreciation &
amortisation (69,905) (1,200) (162) (178) - (71,445)
EBITDA 25,527 (1,200) (162) (178) - 23,987
Depreciation &
amortisation (8,694) - - - - (8,694)
---------------------- ------------- --------------- --------- ------------- ---------------- ------------------
Operating Profit 16,833 (1,200) (162) (178) - 15,293
---------------------- ------------- --------------- --------- ------------- ---------------- ------------------
Finance income 77 - - - - 77
Finance costs (991) - (282) (382) (139) (1,794)
---------------------- ------------- --------------- --------- ------------- ---------------- ------------------
Profit before tax 15,919 (1,200) (444) (560) (139) 13,576
---------------------- ------------- --------------- --------- ------------- ---------------- ------------------
Taxation (3,605) 128 75 95 24 (3,283)
---------------------- ------------- --------------- --------- ------------- ---------------- ------------------
Profit for the year 12,314 (1,072) (369) (465) (115) 10,293
---------------------- ------------- --------------- --------- ------------- ---------------- ------------------
52 week period ended 30 June 2018
Fair value As per
Defined of interest Consolidated
Significant benefit rate swaps/ Statement
Operating non-recurring pension foreign exchange of Comprehensive
performance items scheme contracts Income
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ------------- --------------- --------- ------------------ ------------------
Revenue 303,600 - - - 303,600
Cost of sales (211,511) - - - (211,511)
------------------------------ ------------- --------------- --------- ------------------ ------------------
Gross profit 92,089 - - - 92,089
Other costs excluding
depreciation & amortisation (66,489) (13,067) 411 49 (79,096)
EBITDA 25,600 (13,067) 411 49 12,993
Depreciation & amortisation (7,756) - - - (7,756)
------------------------------ ------------- --------------- --------- ------------------ ------------------
Operating profit 17,844 (13,067) 411 49 5,237
------------------------------ ------------- --------------- --------- ------------------ ------------------
Finance income 24 - - 143 167
Finance costs (652) - (277) - (929)
------------------------------ ------------- --------------- --------- ------------------ ------------------
Profit before tax 17,216 (13,067) 134 192 4,475
------------------------------ ------------- --------------- --------- ------------------ ------------------
Share of losses
of equity accounted
investees after
tax - - - - -
------------------------------ ------------- --------------- --------- ------------------ ------------------
Taxation (3,708) 2,452 (23) (32) (1,311)
------------------------------ ------------- --------------- --------- ------------------ ------------------
Profit for the year 13,508 (10,615) 111 160 3,164
------------------------------ ------------- --------------- --------- ------------------ ------------------
Earnings per Share (EPS)
EPS comparatives to the prior year can be distorted by
significant non-recurring items and other items highlighted above.
The Board is focused on growing adjusted diluted EPS which is
calculated by eliminating the impact of the items highlighted above
as well as amortisation of intangibles and incorporates the
dilutive effect of share options. Adjusted diluted EPS is 9.0p
(2018: 9.8p).
52 week 52 week
2019 2018
------------------------- -------- --------
Basic EPS 7.3p 1.7p
Adjusted basic EPS 9.3p 10.2p
Diluted** basic EPS 7.0p 1.6p
Adjusted* diluted** EPS 9.0p 9.8p
*Further details on adjustments can be found in Note 7.
**Diluted EPS takes basic EPS and incorporates the dilutive
effect of share options.
Cash Flow
There was an increase in our working capital of GBP5.6 million
(2018: GBP1.3 million decrease) in the financial year. Corporation
Tax payments made in the financial year totalled GBP2.0 million
(2018: GBP3.3 million). The payments in the current and prior year
took account of the research and development tax relief due to the
Group, tax losses being utilised, and a higher tax rate charged on
overseas profits. Capital expenditure in the year amounted to
GBP11.0 million (2018: GBP12.6 million).
Debt and Bank Facilities
The Group's total net debt is GBP35.6 million (2018: GBP15.6
million), up GBP20.0 million from the prior year. During the year,
the Group acquired Ultrapharm for an initial consideration of
GBP16.9m. The Group has a revolving credit facility available until
February 2023 of GBP55.0 million provided by a club of three banks
- HSBC, Rabobank and RBS, with scope for it to be increased by up
to a further GBP35.0 million.
The Group is able to offer strong asset backing to secure its
borrowings. The Group owns freehold sites in Cardiff, Sheffield and
Scotland. In addition, the Group has a strong trade debtor book
made up primarily of the UK's major multiple retailers. This debtor
book stood at GBP45.2 million (2018: GBP40.0 million) at the
period-end date.
The Group recognises the inherent risk from interest rate rises,
and uses interest rate swaps to mitigate these risks. The Group has
two swaps, one for GBP20.0 million for five years from 3 July 2017
(fixed) at 0.455% and one for GBP5.0 million for three years from
28 March 2019 (fixed) at 1.002%. The total balance of swaps at 29
June 2019 is GBP25.0 million (2018: GBP20.0 million). The
counterparty to these transactions is HSBC Bank Plc.
The effective interest rate for the Group at the year end,
taking account of the interest rate swap in place with base rate at
0.750% and LIBOR at 0.715%, was 2.047% (2018: base rate 0.500%and
LIBOR 0.501% effective interest rate 1.66%).
Financial Covenants
The Board reviews the Group's cash flow forecasts and key
covenants regularly, to ensure 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 and the Board do not expect any in the forecast periods.
Interest cover (based on adjusted earnings before interest, tax,
depreciation and amortisation - EBITDA) for the 52 weeks to 29 June
2019 was 28.0 (2018: 40.7). Net bank debt to EBITDA (based on
adjusted EBITDA) for the year to 29 June 2019 was 1.4 (2018:
0.6).
Taxation
The Group taxation charge for the year was GBP3.3million (2018:
GBP1.3 million). This represents an effective rate of 22.6% on
profits before significant and non-recurring and other items (2018:
21.5%). You can find further details on the tax charge in Note 6 to
the Group's Financial Statements.
Financial and Non-Financial Key Performance Indicators
We monitor a range of financial and non-financial KPIs at site
level covering, amongst others, productivity, quality and health
and safety. The Group Board receives a regular overview of all
KPIs.
The Strategic Report was approved by the Board of Directors on
13 September 2019 and was signed on its behalf by:
Stephen Boyd
Director
Consolidated Statement of Comprehensive Income
for the 52 weeks ended 29 June 2019 and 52 weeks ended 30 June
2018
2019 2018
Note GBP000 GBP000
---------------------------------------- ---- --------- ---------
Revenue 2 315,281 303,600
Cost of sales (219,849) (211,511)
----------------------------------------- ---- --------- ---------
Gross profit 95,432 92,089
----------------------------------------- ---- --------- ---------
Administrative expenses - underlying 3 (78,939) (73,785)
Administrative expenses - significant
and non-recurring 4 (1,200) (13,067)
----------------------------------------- ---- --------- ---------
Operating profit 15,293 5,237
----------------------------------------- ---- --------- ---------
Finance income 5 77 167
Finance cost 5 (1,794) (929)
----------------------------------------- ---- --------- ---------
Net finance cost (1,717) (762)
----------------------------------------- ---- --------- ---------
Profit before tax 13,576 4,475
----------------------------------------- ---- --------- ---------
Taxation 6 (3,283) (1,311)
----------------------------------------- ---- --------- ---------
Profit for the financial year 10,293 3,164
----------------------------------------- ---- --------- ---------
Other comprehensive (expense)/income
Items that will not be reclassified
to profit and loss
Remeasurement on defined benefit
pension scheme (332) (172)
Movement in deferred taxation on
pension scheme liability 56 29
----------------------------------------- ---- --------- ---------
Other comprehensive expense for the
financial year, net of tax (276) (143)
----------------------------------------- ---- --------- ---------
Total comprehensive income for the
financial year 10,017 3,021
----------------------------------------- ---- --------- ---------
Profit attributable to:
Equity holders of the parent 9,287 2,180
Non-controlling interest 1,006 984
----------------------------------------- ---- --------- ---------
Profit for the financial year 10,293 3,164
----------------------------------------- ---- --------- ---------
Total comprehensive income attributable
to:
Equity holders of the parent 9,011 2,037
Non-controlling interest 1,006 984
----------------------------------------- ---- --------- ---------
Total comprehensive income for the
financial year 10,017 3,021
----------------------------------------- ---- --------- ---------
Earnings per ordinary share
Basic 7 7.3 1.7
Diluted 7 7.0 1.6
Consolidated Statement of Financial Position
at 29 June 2019 and 30 June 2018
Note Restated
2019 2018
GBP000 GBP000
----------------------------------- ---- --------- ---------
Non-current assets
Intangibles 8 97,664 83,313
Property, plant and equipment 57,009 49,922
Investments in equity accounted - -
investees
Other financial assets 28 28
Deferred tax assets 3,655 3,890
----------------------------------- ---- --------- ---------
158,356 137,153
----------------------------------- ---- --------- ---------
Current assets
Inventories 14,805 13,456
Trade and other receivables 49,724 44,575
Cash and cash equivalents 12,358 9,363
Other financial assets - fair
value of derivatives 176 558
----------------------------------- ---- --------- ---------
77,063 67,952
----------------------------------- ---- --------- ---------
Total assets 235,419 205,105
----------------------------------- ---- --------- ---------
Current liabilities
Other interest-bearing loans
and borrowings 9 (335) -
Trade and other payables (55,543) (55,598)
Provisions (2,640) (3,798)
Other financial liabilities
- fair value of derivatives (218) (40)
Deferred consideration (1,000) -
Current tax liabilities (306) -
----------------------------------- ---- --------- ---------
(60,042) (59,436)
----------------------------------- ---- --------- ---------
Non-current liabilities
Other interest-bearing loans
and borrowings 9 (47,390) (24,685)
Provisions (3,434) (4,623)
Deferred consideration (1,824) -
Deferred tax liabilities (1,800) (1,243)
Pension fund liability (11,312) (10,536)
----------------------------------- ---- --------- ---------
(65,760) (41,087)
----------------------------------- ---- --------- ---------
Total liabilities (125,802) (100,523)
----------------------------------- ---- --------- ---------
Net assets 109,617 104,582
----------------------------------- ---- --------- ---------
Equity attributable to equity
holders of the parent
Share capital 1,304 1,304
Share premium account 64,956 64,956
Capital redemption reserve 578 578
Employee share reserve (3,616) (3,282)
Retained earnings 44,207 38,954
----------------------------------- ---- --------- ---------
107,429 102,510
Non-controlling interest 2,188 2,072
----------------------------------- ---- --------- ---------
Total equity 109,617 104,582
----------------------------------- ---- --------- ---------
In the prior year accounts, GBP24,685,000 was presented as
"Current liability - Other interest-bearing loans and borrowings".
This has been restated to "Non-current liabilities - Other
interest-bearing loans and borrowings". Refer also to "Basis of
preparation" note.
These Financial Statements were approved by the Board of
Directors on 13 September 2019 and were signed on its behalf
by:
Stephen Boyd (Director)
Registered Number 00204368
The Notes on pages 15 to 23 form an integral part of these
Financial Statements.
Consolidated Statement of Changes in Equity
for the 52 weeks ended 29 June 2019 and 30 June 2018
Capital Employee
Share Share redemption share Retained Non-controlling Total
Capital premium reserve reserve Earnings interest equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- ---------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
Balance at 1 July
2017 1,304 64,956 578 (3,585) 39,862 1,887 105,002
Profit for the
financial
year - - - - 2,180 984 3,164
Other comprehensive
(expense)/ income:
Remeasurement on
defined
benefit pension - - - - (172) - (172)
Deferred tax
movement
on pension scheme
remeasurement - - - - 29 - 29
------------------- ---------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
Total other
comprehensive
expense - - - - (143) - (143)
------------------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
Total comprehensive
income for the
period - - - - 2,037 984 3,021
------------------- ---------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
Transactions with
owners, recorded
directly
in equity:
Shares issued from
EBT - - - 303 (217) - 86
Impact of
share-based
payments - - - - 1,138 - 1,138
Deferred tax on
share
options - - - - 58 - 58
Foreign exchange
translation
differences - - - - 34 - 34
Dividend paid - - - - (3,958) (799) (4,757)
------------------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
Balance at 30 June
2018 1,304 64,956 578 (3,282) 38,954 2,072 104,582
------------------- ---------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
Balance at 30 June
2018 1,304 64,956 578 (3,282) 38,954 2,072 104,582
Profit for the
financial
year - - - - 9,287 1,006 10,293
Other comprehensive
(expense)/ income:
Remeasurement on
defined
benefit pension - - - - (332) - (332)
Deferred tax
movement
on pension scheme
remeasurement - - - - 56 - 56
------------------- ---------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
Total other
comprehensive
expense - - - - (276) - (276)
------------------- ---------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
Total comprehensive
income for the
period - - - - 9,011 `1,006 10,017
------------------- ---------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
Transactions with
owners, recorded
directly
in equity:
Shares issued from
EBT - - - (499) - - (499)
Shares issued
during
the year - - - 165 (165) - -
Impact of
share-based
payments - - - - 696 - 696
Deferred tax on
share
options - - - - (256) - (256)
Foreign exchange
translation
differences - - - - 250 - 250
Dividend paid - - - - (4,283) (890) (5,173)
------------------- ---------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
Balance at 29 June
2019 1,304 64,956 578 (3,616) 44,207 2,188 109,617
------------------- ---------- --------------- --------------- --------------- ---------- ---------- ----------------- ---------------
The notes on pages 15 to 23 form an integral part of these Financial Statements.
Consolidated Cash Flow Statement
for the 52 weeks ended 29 June 2019 and 30 June 2018
Note 2019 2018
GBP000 GBP000
-------------------------------------------------- ----- -------- --------
Cash flows from operating activities
Profit for the financial year 10,293 3,164
Adjustments for:
Taxation 6 3,283 1,311
Net finance costs 5 1,717 762
Depreciation 7,366 7,041
Amortisation of intangibles 8 1,328 715
Significant non-recurring items 4 1,200 13,067
Contributions by employer to pension scheme 162 (411)
Change in fair value of foreign exchange
contracts 178 (49)
-------------------------------------------------- ----- -------- --------
Operating profit before changes in working
capital 25,527 25,600
Changes in working capital:
Increase in inventories (62) (757)
(Increase)/decrease in trade and other
receivables (3,321) 6,235
Decrease in trade and other payables (2,199) (4,160)
-------------------------------------------------- ----- -------- --------
Cash generated from operations before
costs of disposals and acquisitions 19,945 26,918
Costs relating to closure of bakeries
and acquisitions (3,534) (4,594)
Interest paid (856) (634)
Tax paid (2,040) (3,338)
-------------------------------------------------- ----- -------- --------
Net cash generated from operating activities 13,515 18,352
-------------------------------------------------- ----- -------- --------
Cash flows from investing/divesting activities
Purchase of property, plant and equipment
and intangibles (11,016) (12,606)
Disposal of property, plant and equipment - 768
Purchase of companies 1 (16,915) -
-------------------------------------------------- ----- -------- --------
Net cash used in investing activities (27,931) (11,838)
-------------------------------------------------- ----- -------- --------
Cash flows from financing activities
Repayment of invoice discounting 10 - (11,646)
Drawdown/(Repayment) of revolving credit 10 22,144 25,000
Repayment of mortgage and bank loans 10 - (8,794)
Drawdown/(Repayment) of asset finance
liabilities 10 828 (57)
Options exercised/(purchase) of shares
by employee benefit trust (499) 86
Dividend paid to non-controlling interest (890) (799)
Dividend paid to shareholders (4,283) (3,958)
-------------------------------------------------- ----- -------- --------
Net cash generated from / (used in) financing
activities 17,300 (168)
-------------------------------------------------- ----- -------- --------
Net increase in cash and cash equivalents 2,884 6,346
Opening cash and cash equivalents 9,363 3,024
Effect of exchange rate fluctuations on
cash held 111 (7)
-------------------------------------------------- ----- -------- --------
Cash and cash equivalents at end of period 12,358 9,363
-------------------------------------------------- ----- -------- --------
The Notes on pages 15 to 23 form an integral part of these Financial
Statements.
Presentation of Financial Statements
Basis of Preparation
Background
The financial information on pages 11 to 14 is extracted from
the Group's consolidated financial statements for the 52 week
period ended 29 June 2019, which were approved by the Board of
Directors on 13 September 2019.
The financial information does not constitute statutory accounts
within the meaning of sections 434(3) and 435(3) of the Companies
Act 2006 or contain sufficient information to comply with the
disclosure requirements of International Financial Reporting
Standards (IFRS) and related interpretations as adopted for use in
the European Union.
The Company's auditors, PricewaterhouseCoopers LLP, have given
an unqualified report on the consolidated financial statements for
the 52 week period ended 29 June 2019. The auditors' report did not
include reference to any matters to which the auditors drew
attention without qualifying their report and did not contain any
statement under section 498 of the Companies Act 2006. The
consolidated financial statements will be filed with the Registrar
of Companies, subject to their approval by the Company's
shareholders on 20 November 2019 at the Company's Annual General
Meeting.
Basis of accounting
The Group's consolidated financial statements for the year ended
29 June 2019 have been prepared in accordance with International
Financial Reporting Standards (IFRS) and related interpretations as
adopted for use in the European Union and those parts of the
Companies Act 2006 that are applicable to companies reporting under
IFRS.
The Directors are satisfied that the Group has adequate
resources to continue to operate for a period of not less than 12
months from the date of approval of the financial statements and
that there are no material uncertainties around their assessment.
Accordingly, the Directors continue to adopt the going concern
basis of accounting.
The Group's principal accounting policies have been consistently
applied throughout the year and will be set out in the notes to the
Group's 2019 Annual Report.
Restatement of prior year comparatives
The prior year comparatives in the consolidated financial
statements have been restated to reflect the following prior year
adjustments:
The Other interest-bearing loans and borrowings within current
liabilities has been reduced by GBP24.7m and the Other
interest-bearing loans and borrowings within Non-current
liabilities has been increased by GBP24.7m to reflect the
appropriate classification of the Group's Revolving Credit Facility
which has a maturity date of February 2023. This adjustment does
not impact any other primary financial statement.
Accounting standards adopted during the year
In the current year, the Group has adopted, with effect from 1
July 2018, the following new accounting standards:
- IFRS 9 Financial instruments
- IFRS 15 Revenue from contracts with customers
In accordance with the transitional provisions in IFRS 9 and
IFRS 15 comparative figures have not been restated. The adoption of
these new standards has not had a material effect on the Group's
financial statements.
Accounting standards issued but not yet adopted
IFRS 16 "Leases" is effective for accounting periods commencing
on or after 1 January 2019. The Group will apply the standard for
the first time for the year ending 27 June 2020. IFRS 16 represents
a fundamental change in lease accounting for lessees, because, with
the exception of leases of less than 12 months duration and leases
of low value assets, all leases are brought on balance sheet. The
impact of this, had the Group applied IFRS 16 for the year ended 29
June 2019, is considered to have an immaterial impact on profit
before tax whilst increasing EBITDA by approximately GBP3-GBP4
million for the year ending 29 June 2019. Both Assets and
Liabilities are expected to increase by GBP11-GBP12 million on
adoption as at 29 June 2019 with an immaterial impact to Total Net
Assets.
No other new standards, new interpretations or amendments to
standards or interpretations have been published which are expected
to have a significant impact on the Group's financial
statements.
1. Acquisition
On 3 September 2018 the Group acquired the entire share capital
of Ultrapharm Limited (Ultrapharm) for GBP16.9 million plus up to
GBP3 million payable in annual instalments to the period to 30 June
2021 and a final incentive payment subject to performance criteria
over the period to 30 June 2021. No provision has been made for a
final incentive payment as the criteria are not currently expected
to be met. As a specialist 'Free From' bakery, the business has an
extensive product range including bread, buns & rolls and other
morning goods. Ultrapharm has a diverse customer base with long
term blue-chip customers, including Finsbury itself, where it
supplies Free From products to Lightbody Europe.
The cash outflow under 'purchase of companies' of GBP16,915,000
on the face of the Consolidated Cash Flow Statement in the 52 weeks
ended 29 June 2019 relates to the following:
GBP000
--------------------------------------------------- -------
Initial consideration 14,869
Debt settled 2,792
Cash acquired (746)
--------------------------------------------------- -------
Cash consideration (excluding acquisition costs) 16,915
Working capital adjustment (60)
--------------------------------------------------- -------
Discounted deferred consideration net of deferred
taxation 2,737
--------------------------------------------------- -------
Total consideration including working capital
adjustment 19,592
--------------------------------------------------- -------
The acquisition had the following effect on the Group's assets
and liabilities:
Fair value
and book value
GBP000
-------------------------------------------- ----------------
Acquiree's net assets at acquisition date:
Property, plant and equipment 5,766
Stock 1,200
Trade and other receivables 2,392
Deferred tax liability (381)
Trade and other payables (2,652)
Net identifiable assets 6,325
Intangible 1,721
Goodwill 11,546
-------------------------------------------- ----------------
19,592
-------------------------------------------- ----------------
The post-acquisition revenue included within these financial
results amounts to GBP15,690,000 (including GBP2,584,000 of
inter-company sales) and an operating profit of GBP295,000.
2. Revenue and Segment Information
Operating segments are identified on the basis of the internal
reporting and decision making. The Group's Chief Operating Decision
Maker is deemed 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 assesses profit performance
principally through adjusted profit measures consistent with those
disclosed in the Annual Report and Accounts.
The UK Bakery segment manufactures and sells bakery products to
UK grocery and food service sectors. It comprises six subsidiaries
all of which manufacture and supply food products through the
channels described above. These subsidiaries have been aggregated
into one reportable segment as they share similar economic
characteristics. The economic indicators considered are the nature
of the products and production process, the type and class of
customer, the method of distribution and the regulatory
environment.
The Overseas segment procures and sells bakery products to
European grocery and food service sectors. It comprises Lightbody
Europe and Ultraeuropa. Ultraeuropa has manufacturing facilities in
Poland where it manufactures and sells Free From bakery products
into the European markets.
The Company acquired Ultrapharm on 3 September 2018, the prior
year financial results include those relating to the closed
bakeries, the table below shows the acquired revenue net of
inter-company sales and the like for like revenue.
Revenue UK Bakery Overseas Total Group
52 weeks to 29 June 2019 2018 2019 2018 2019 2018
2019 and 52 weeks GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
to 30 June 2018.
--------- -------- --------- -------- ----------- --------
Total 278,533 271,127 36,748 32,473 315,281 303,600
--------- -------- --------- -------- ----------- --------
From acquired business 8,239 - 4,867 - 13,106 -
--------- -------- --------- -------- ----------- --------
From closed business 336 13,354 - - 336 13,354
--------- -------- --------- -------- ----------- --------
Like for like 269,958 257,773 31,881 32,473 301,839 290,246
--------- -------- --------- -------- ----------- --------
Reportable Segments 52 weeks to 52 weeks to
29 June 2019 30 June 2018
GBP000 GBP000
Total Total
------------------------------------ -------------- --------------
Revenue UK Bakery 278,533 271,127
Revenue Overseas 36,748 32,473
------------------------------------ -------------- --------------
Total revenue 315,281 303,600
------------------------------------ -------------- --------------
Adjusted operating profit UK
Bakery 14,180 15,496
Adjusted operating profit Overseas 2,653 2,348
Total adjusted operating profit 16,833 17,844
------------------------------------ -------------- --------------
Significant non-recurring and
other items (1,200) (13,067)
Defined benefit pension scheme (162) 411
Fair value foreign exchange
contracts (178) 49
------------------------------------ -------------- --------------
Operating profit 15,293 5,237
Finance income 77 167
Finance expense (1,794) (929)
------------------------------------ -------------- --------------
Net finance cost (1,717) (762)
------------------------------------ -------------- --------------
Profit before taxation 13,576 4,475
------------------------------------ -------------- --------------
Taxation (3,283) (1,311)
------------------------------------ -------------- --------------
Profit for the financial year 10,293 3,164
------------------------------------ -------------- --------------
The Group has three customers (2018: three) which individually
account for 10 per cent or more of the Group's total revenue. These
customers individually account for 19 per cent, 12 per cent and 10
per cent. In the prior year these same three customers accounted
for 20 per cent, 13 per cent and 10 per cent of the revenue in the
52 weeks to 30 June 2018. In addition to the Europe sales disclosed
in Reportable Segments, the Group also made sales to European
markets through UK-based organisations.
3. Administrative Expenses and Auditors' Remuneration
Included in profit are the following:
2019 2018
GBP000 GBP000
----------------------------------------------- ------ ------
Amortisation of intangibles 1,328 715
Depreciation of owned tangible assets 7,072 6,859
Depreciation on assets under finance leases
and hire purchase contracts 294 182
Impairment of assets & goodwill - 987
Loss on foreign exchange 166 260
Hire of plant and machinery - operating leases 765 797
Hire of other assets - operating leases 806 1,302
Movement on fair value of foreign exchange
contracts 178 (49)
Research and development 1,987 1,567
Share option charges 697 1,138
Government grants - 25
Auditors' remuneration:
2019 2018
GBP000 GBP000
------------------------------------------------------- ------- ------
Audit of these Financial Statements 60 60
Amounts receivable by the auditors and its
associates in respect of:
Audit of the Financial Statements of subsidiaries
of the Company 133 120
Taxation compliance services - 24
Other tax advisory - 10
Other services - 173
------------------------------------------------------- ------- ------
The auditors' remuneration for the current year is in respect
of PricewaterhouseCoopers LLP and is in respect of KPMG LLP in
the prior year with fees for other services relates to pension
advisory services and services relating to information technology.
4. Significant Non-Recurring Items
The Group presents certain items as significant and
non-recurring. These relates 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. They reflect costs that will not be repeated
and therefore do not reflect ongoing trading of business which is
most meaningful to users.
Included within significant non-recurring items shown in the
table In the Financial Review section on page 8 are the following
costs:
2019 2018
GBP000 GBP000
---------------------------------------------- ------ ------
Site closures - reorganisation people costs - 2,266
Site closures - property, leases and contract
costs (152) 9,604
Site closures - legal and professional costs - 121
Other reorganisation people costs 823 -
Impairment of assets and investments - 373
Acquisition related costs 529 703
---------------------------------------------- ------ ------
1,200 13,067
---------------------------------------------- ------ ------
The site closure provision relates primarily to the closure of
the Grain D'Or site during the prior year.
5. Finance Income and Cost
Recognised in the Consolidated Statement of Comprehensive
Income
2019 2018
GBP000 GBP000
Finance income
Change in fair value of interest rate swaps - 143
Interest on interest rate swap agreements 60 18
Bank interest receivable 17 6
Total finance income 77 167
-------------------------------------------- ------- ------
Finance cost
Interest on net pension position (282) (277)
Change in fair value of interest rate swaps (382) -
Bank interest payable (1,130) (638)
Interest on interest rate swap agreements - (14)
-------------------------------------------- ------- ------
Total finance cost (1,794) (929)
-------------------------------------------- ------- ------
6. Taxation
Recognised in the Consolidated Statement of Comprehensive
Income
2019 2018
GBP000 GBP000
Current tax
Current year 2,969 1,236
Adjustments for prior years 194 (93)
------------------------------ -------- --------
Total current tax 3,163 1,143
------------------------------ -------- --------
Deferred tax
Origination and reversal of
temporary differences 136 328
Adjustments for prior years (16) (160)
------------------------------ -------- --------
Total deferred tax 120 168
------------------------------ -------- --------
Total tax expense 3,283 1,311
------------------------------ -------- --------
Reconciliation of effective tax rate
The weighted average hybrid rate of UK, Polish and French tax is
21.4% (2018: 22.5%). The tax assessed for the period is higher
(2018: higher) than the hybrid rate of UK and French tax. The UK
corporation tax rate for the period is 19.0% (2018: 19.0%). The
differences are explained below:
2019 2018
GBP000 GBP000
Profit before taxation before losses from
equity accounted investees 13,576 4,475
------------------------------------------------- ------ ------
Tax using the UK corporation tax rate of 19.00%,
(2018: 19.00%) 2,579 850
Overseas profits charged at different taxation
rate 481 277
Non-deductible expenses 195 586
Restatement of opening net deferred tax due
to rate change and differences in rates (60) (49)
R&D uplift current year (90) (100)
Adjustments to tax charge in respect of prior
periods 178 (253)
Tax expense (excluding prior year disallowable
impairment) 3,283 1,311
================================================= ====== ======
The UK corporation tax rate reductions from 20% to 19% from 1
April 2017 and 18% from 1 April 2020 were substantively enacted on
26 October 2015. An additional reduction to 17% from 1 April 2020
was substantively enacted on 6 September 2016. The deferred tax
assets and liabilities at 29 June 2019 have been calculated based
on these rates.
The adjustment of GBP178,000 for prior year includes ineligible
capital spends offset and disallowable expenses being different to
the assumed levels at the time of preparation of the Annual
Report.
The Company has an unrecognised deferred tax asset of GBP162,605
(2018: GBP162,605) relating to capital losses carried forward. This
asset has not been recognised in the financial statements as it is
not expected that suitable gains will arise in the future in order
to utilise the underlying capital losses.
7. 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 127,511,000 (2018:
127,611,000).
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 29 June
2019, the diluted weighted average number of shares in issue was
131,889,000, (2018: 132,162,000).
An adjusted earnings per share has been calculated to show the
trading performance of the Group. 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
-- The taxation effect at the appropriate rate on adjustments
-- Amortisation of intangible assets
52 weeks to 52 weeks to
29 June 2019 30 June 2018
------------------------------------- -------------------- --------------------
Profit GBP000 GBP000
Profit attributable to equity
holders of Company (basic) 9,287 2,180
Significant non-recurring and
other items 2,021 10,344
Intangible amortisation net of
deferred tax 564 446
------------------------------------- -------------------- --------------------
Numerator for adjusted earnings
per share calculation (adjusted
basic) 11,872 12,970
------------------------------------- -------------------- --------------------
Shares Basic Diluted Basic Diluted
------------------------------------- --------- --------- --------- ---------
Weighted average number of ordinary '000 '000 '000 '000
shares in issue during the period
127,511 127,511 127,611 127,611
Dilutive effect of share options - 4,378 - 4,551
------------------------------------- --------- --------- --------- ---------
127,511 131,889 127,611 132,162
------------------------------------- --------- --------- --------- ---------
Earnings per share (pence per
share)
------------------------------------- --------- --------- --------- ---------
Basic and diluted 7.3 7.0 1.7 1.6
Adjusted basic and adjusted diluted 9.3 9.0 10.2 9.8
------------------------------------- --------- --------- --------- ---------
Significant non-recurring and other items net of taxation are
tabled in the Financial Review section on page 8 and comprise:
significant non-recurring charges GBP1,072,000 (2018:
GBP10,615,000), defined benefit pension scheme charge GBP369,000
(2018: income GBP111,000) and fair value of interest rate swaps,
foreign exchange contracts charge GBP465,000 (2018: GBP160,000
income) and the unwinding of deferred consideration discounting
charge GBP115,000 (2018: nil).
8. Intangibles
Intangible assets comprise customer relationships, brands and
goodwill.
Goodwill Business Brands Customer Total
systems and licences relationships
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- --------- --------- -------------- --------------- --------
Cost at 1 July 2017 73,458 3,843 3,683 5,909 86,893
Additions - 3,726 - - 3,726
--------------------------- --------- --------- -------------- --------------- --------
Cost at 30 June 2018 73,458 7,569 3,683 5,909 90,619
--------------------------- --------- --------- -------------- --------------- --------
Acquired 11,546 - - 1,721 13,267
Additions - 2,412 - - 2,412
--------------------------- --------- --------- -------------- --------------- --------
Cost at 29 June 2019 85,004 9,981 3,683 7,630 106,298
--------------------------- --------- --------- -------------- --------------- --------
Accumulated amortisation
at 1 July 2017 (4,290) - (1,216) (1,085) (6,591)
--------------------------- --------- --------- -------------- --------------- --------
Charge for the year - (178) (143) (394) (715)
--------------------------- --------- --------- -------------- --------------- --------
Accumulated amortisation
at 30 June 2018 (4,290) (178) (1,359) (1,479) (7,306)
--------------------------- --------- --------- -------------- --------------- --------
Charge for the year - (648) (143) (537) (1,328)
--------------------------- --------- --------- -------------- --------------- --------
Accumulated amortisation
at 29 June 2019 (4,290) (826) (1,502) (2,016) (8,634)
--------------------------- --------- --------- -------------- --------------- --------
Net book value at 1 July
2017 69,168 3,843 2,467 4,824 80,302
--------------------------- --------- --------- -------------- --------------- --------
Net book value at 30 June
2018 69,168 7,391 2,324 4,430 83,313
--------------------------- --------- --------- -------------- --------------- --------
Net book value at 29 June
2019 80,714 9,155 2,181 5,614 97,664
--------------------------- --------- --------- -------------- --------------- --------
The customer relationships acquired during the year were
purchased as part of the Ultrapharm acquisition, those recognised
in the opening costs 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
between ten and fifteen years for customer relationships. 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. The business systems are considered to have
finite useful lives and are amortised on a straight-line basis over
their estimated useful lives of ten years.
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.
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 and growth rates
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 three-year
period based on the detailed financial forecasts approved by
management for the next three years. The cashflows beyond this
forecast are extrapolated to perpetuity using a 0.5% (2018: nil)
growth rate on a prudent, when compared to long term UK GDP, basis,
to reflect the uncertainties of forecasting further than three
years. Changes in revenue and direct costs in the detailed three
year plan 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 11% (2018: 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.
The carrying amount of goodwill has been allocated to cash
generating units or groups of cash generating units as follows:
2019 2018
GBP000 GBP000
GBP000 GBP000
-------------------------- -------- --------
Lightbody of Hamilton 45,698 45,698
Fletchers Bakery 20,118 20,118
Ultrapharm 11,546 -
Nicholas & Harris 2,980 2,980
Johnstone's Food Service 372 372
-------------------------- -------- --------
80,714 69,168
-------------------------- -------- --------
Sensitivity analyses have been carried out by the Directors on
the carrying value of all remaining goodwill using pre-tax discount
rates ranging between 8.0% and 12.5% which would not result in an
impairment of any cash generating units. The table below
illustrates the discount rate that would need to be applied for
there to be zero headroom when comparing discounted cashflows
against carrying amount of goodwill.
Discount rate
Lightbody of Hamilton 18.8%
Fletchers Bakery 15.0%
Nicholas & Harris 45.9%
Johnstone's Food
Service 83.5%
Further sensitivity analysis has been carried out using a range
of factors such as growth rate and cost increases. These
include:
-- If future growth rate assumption of 0.5% was replaced with zero growth rate
-- If future growth rate assumption of 0.5% was replaced with a decline of 2%
In addition, the Group has a cross-functional team which has
prepared a number of strategies to minimise the impact of Brexit.
We buy some commodities from Europe. Any tariffs on trade will
therefore have a bearing on the Group. We have contingency planning
in place, looking at alternative UK sources of products. Higher
logistics and administration costs may result from border delays
and could necessitate higher stock levels. We are developing labour
strategies to retain and develop existing workers, attract and hire
new workers and reduce labour, while boosting productivity with our
capital investment program. We believe we have strategies that
would minimise the impact and the directors are satisfied with the
carrying value of the cash generating units.
During the year the Group acquired a specialist Free From
bakery, Ultrapharm. As part of the due diligence process a
comprehensive multi-function assessment was completed, utilising
expert resource from across the Group as well as the existing
management team against Finsbury Group standards and best practice
before creating a prioritised integration action plan. Additional
expert resources from across the Group have complemented management
to implement the year one plan which is largely complete.
Ultrapharm has been tested for impairment during the reporting
period and the directors are satisfied with the carrying value of
the cash generating units.
9. 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.
Frequency Non-Current
of Year of Facility Drawn Current GBP000
2019 Margin Repayments maturity GBP000 GBP000 GBP000
----------------- ------------ ------------ ----------- ---------- -------- --------- -----------
Revolving credit 1.50%/LIBOR Varies 2023 55,000 47,144 - 47,144
Finance Lease Various Monthly 2023 828 828 335 493
Unamortised transaction
costs (247) - (247)
------------------------------- ------------------------ ---------- -------- --------- -----------
47,725 335 47,390
------------------------------------------------------- ---------- -------- --------- -----------
Frequency Non-Current
Restated of Year of Facility Drawn Current GBP000
2018 Margin Repayments maturity GBP000 GBP000 GBP000
----------------- ------------ ------------ ----------- ---------- -------- --------- -----------
Revolving credit 1.30%/LIBOR Varies 2023 45,000 25,000 - 25,000
Unamortised transaction
costs (315) - (315)
------------------------------- ------------------------ ---------- -------- --------- -----------
24,685 - 24,685
------------------------------------------------------- ---------- -------- --------- -----------
In the prior year accounts, the Revolving Credit facility and
unamortised transaction costs of GBP24,685,000 were disclosed as
"Current". Refer also to "Basis of preparation" note.
Finance lease liabilities are payable as follows:
2019 2018
Minimum Minimum
lease lease
payments Interest Principal payments Interest Principal
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- --------- -------- --------- --------- -------- ---------
Less than one year 380 45 335 - - -
Between one and
five years 548 55 493 - - -
------------------- --------- -------- --------- --------- -------- ---------
928 100 828 - - -
------------------- --------- -------- --------- --------- -------- ---------
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 net bank
debt: EBITDA, interest cover, debt service cover and capital
expenditure.
The revolving credit bank facility available for drawdown is
GBP55 million plus a further GBP35 million accordion facility
(2018: GBP45 million plus a further GBP45 million accordion). At
the period end date, the facility utilised was GBP47.1 million
(2018: GBP25.0 million), giving GBP7.9 million (2018: GBP20.0
million) headroom plus a further GBP35 million (2018: GBP45
million) accordion.
10. Analysis of Net Debt
Restated
At year ended At year
30 June Cash flow ended
2018 GBP000 29 June
GBP000 2019
GBP000
------------------------------ --------------- ------------ ----------
Cash and cash equivalents 9,363 2,995 12,358
Debt due within one year - - -
Debt due after one year (25,000) (22,144) (47,144)
Hire purchase obligations
due within one year - (335) (335)
Hire purchase obligations
due after one year - (493) (493)
------------------------------- --------------- ------------ ----------
Total net bank debt (15,637) (19,977) (35,614)
------------------------------- --------------- ------------ ----------
Debt (24,685) (23,040) (47,725)
Cash and cash equivalents 9,363 2,995 12,358
Unamortised transaction
costs (315) 68 (247)
------------------------------- --------------- ------------ ----------
Total net bank debt (15,637) (19,977) (35,614)
------------------------------- --------------- ------------ ----------
Cash and cash equivalents 9,363 2,995 12,358
------------------------------- --------------- ------------ ----------
Total debt payable excluding
cash (25,000) (22,972) (47,972)
In the prior year accounts, the Debt and transaction costs of
GBP24,685,000 and GBP315,000 respectively were disclosed as "Debt
due within one year". Refer also to "Basis of preparation"
note.
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of this information may apply. For further information, please
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END
FR GGUBUBUPBGCA
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