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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Finsbury Food Group Plc | LSE:FIF | London | Ordinary Share | GB0009186429 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 110.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMFIF
RNS Number : 1253K
Finsbury Food Group PLC
19 September 2016
Hot Features
Premium
Date: 19 September 2016
On behalf Finsbury Food Group Plc ('Finsbury',
of: '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 GBP319.7m up 24.8%, 52 week revenue GBP313.5m up 22.4% (2015: GBP256.2m) and up GBP12.8m, 5.0% on a like for like basis(*1) .
-- Gross profit of GBP102.6m up 30% (2015: GBP78.9m).
-- Adjusted* operating profit of GBP17.1m up 37.7% on the prior year, for the 52 week period, operating profit of GBP16.7m is up 34.7%, (2015: GBP12.4m) 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 GBP16.0m up 40.8% (2015: GBP11.4m).
-- Record capital investment of GBP12.1m 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 GBP19.7m equates to 0.8 times EBITDA of the Group. Net debt well within the long term banking facility of GBP51m 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 53(rd) week in the financial year ended 2 July 2016.
*(2) Adjusted diluted EPS has been calculated using earnings excluding the 53(rd) 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 finsbury@redleafpr.com 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 GBP300 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 GBP1.090bn (Source Symphony IRI 52 w/e 19 June 2016). The annual retail bread and morning goods market has a value in excess of GBP4.0 billion (source Kantar Worldpanel 52 weeks to 19 June 2016). The UK foodservice bread and morning goods bakery sector is worth approximately GBP800 million per annum, 70 per cent of which is in morning goods. The UK foodservice cake and sweet treat bakery sector is worth approximately GBP600m 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 2015
(53 weeks) (52 weeks)
GBP000 GBP000
------------------------------------- ------------ ------------
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 53(rd) week (371) -
------------------------------------- ------------ ------------
Adjusted results from operating
activities for 52 weeks 16,727 12,416
===================================== ============ ============
Adjusted Profit before Tax
2016 2015
(53 weeks) (52 weeks)
GBP000 GBP000
--------------------------------------- ------------- -------------
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 53(rd) 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 GBP320m, up 24.8% (52 weeks, GBP313.5m up 22.4%), profit before tax at GBP16.0m for the 53 weeks, up 41% (GBP15.7m 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 23(rd) 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 GBP319.7m up 24.8%, 52 week revenue GBP313.5m up 22.4% (2015: GBP256.2m) and up GBP12.8m, 5.0% on a like for like basis(*1) .
-- Adjusted profit before tax of GBP16.0m up 40.8%, 52 week GBP15.7m up 38%, (2015: GBP11.4m) 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 GBP12.1m (2015: GBP7.4m) 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 GBP19.7m (2015: GBP21.3m) 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 GBP12m 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 GBP1.09bn (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 GBP4.0 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 GBP800 million and the UK foodservice cake and sweet treats market is worth approximately GBP600 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:
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.
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 GBP319.7 million (2015: GBP256.2 million). The continuing Group revenue for the 52 week period is GBP313.5m (2015: GBP256.2 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
Fair value
of interest As per
Defined rate swaps/ Consolidated
Non-recurring benefit foreign Statement
Operating significant pension exchange of Comp-rehensive
performance items scheme contracts Income
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ------------- -------------- --------- ------------- -------------------
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
Fair
value
of
interest As per
rate Consolidated
Defined swaps/ Unwinding Statement
Non-recurring Share benefit foreign of discount of
Operating significant options pension exchange on deferred Comp-rehensive
performance items charge scheme contracts consideration Income
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ------------ -------------- -------- --------- ---------- -------------- ---------------
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 (3,181) 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 (3,181) 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 53(rd) 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 52 week 52 week
2016 2015 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 GBP56 million, funded in part by an oversubscribed equity raise of GBP35 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 GBP3.9 million compared to the last financial year. Corporation tax payments made in the financial year totalled GBP1.6 million (2015: GBP1.2 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 GBP12.1 million (2015: GBP7.4 million).
Debt and Bank Facilities
The Group's total net debt including deferred consideration payable is GBP19.7 million (2015: GBP21.3 million) down GBP1.6 million from the prior year. Within this total, GBP10.8 million is due within one year, including cash at bank and invoice finance (2015: GBP9.3 million).
The Group's debt facility is a bilateral facility with HSBC Bank Plc and Lloyds Bank Plc totalling GBP50.9m, the key features of the facility are as follows:
-- overdraft (GBP2.0m)
-- term loan (GBP13.4m)
-- confidential invoice discounting facility (GBP22.0m)
-- mortgage facility (GBP3.5m)
-- rolling asset finance facility (GBP2.0m)
-- revolving credit facility (GBP8.0m)
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 GBP44.9 million (2015: GBP42.8 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 GBP9.0 million (2015: GBP14.0 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 GBP5.0 million swap fixed at 3.6% expired on 1 July 2016. On 7 September 2016 the Group entered into a forward dated swap for GBP20.0 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 GBP3.3million (2015: GBP1.9 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 GBP000 GBP000
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
GBP000 GBP000
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
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 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
GBP000 GBP000
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 GBP0.3m (2015: profit GBP0.3m) 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 UK Bakery Overseas Group Total
2 July 2016 GBP000 GBP000 Operations Group
GBP000 GBP000
---------------------------------- ---------- --------- ------------ ---------
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
GBP000 GBP000
Investments 253 Loans and borrowings (22,570)
Financial
instruments - Financial instruments (157)
Cash and cash 3,024 Cash and cash -
equivalents equivalents
Taxation balances 28 Taxation balances -
Unallocated
assets 3,305 Unallocated liabilities (22,727)
------------------- ------- ------------------------ ------------
With regard to revenue, five customers with sales of GBP66m, GBP62m, GBP39m, GBP29m and GBP24m 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 UK Bakery Overseas Group Total
27 June 2015 GBP000 GBP000 Operations Group
GBP000 GBP000
--------------------------- ---------- --------- ------------ ---------
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
GBP000 GBP000
Investments 253 Loans and borrowings (21,034)
Financial
instruments 117 Financial instruments (359)
Cash and cash 61 Cash and cash -
equivalents equivalents
Taxation balances 71 Taxation balances (184)
------------------- ------- ------------------------ ------------
Unallocated
assets 502 Unallocated liabilities (21,577)
------------------- ------- ------------------------ ------------
With regard to revenue, five customers with sales of GBP53m, GBP36m, GBP27m, GBP24m and GBP20m 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 2016 2015
by destination
GBP000 GBP000
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 United Europe Total
by country of origin Kingdom
GBP000 GBP000 GBP000
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 Europe Total
Kingdom
GBP000 GBP000 GBP000
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
GBP000 GBP000
---------------------------------------- ------ ------
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 GBP539,000 (2015: GBP403,000) relating to the Fletchers acquisition in October 2014.
Auditor's remuneration:
2016 2015
GBP000 GBP000
----------------------------------------- ------ ------
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 GBP4,290,000 relates to impairment of goodwill acquired in 2007, (2015: GBP3,181,000 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
GBP000 GBP000
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
GBP000 GBP000
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
GBP000 GBP000
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 GBP275,000 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 GBP381,000 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 GBP172,170 (2015: GBP191,300). 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 52 weeks 52 weeks
to to to
2 Jul 2016 2 Jul 2016 27 Jun
2015
---------------------------- ---------- ---------------------- ---------------------- ----------------------
Profit
Profit attributable
to equity holders
of Company (basic) GBP000 7,791 7,528 6,179
Significant non-recurring,
amortisation of
intangibles and
other items GBP000 4,692 4,692 2,643
---------------------------- ---------- ---------------------- ---------------------- ----------------------
Numerator for adjusted
earnings per share
calculation (adjusted
basic) GBP000 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 Customer Total
and licences relationships
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---------- --------- -------------- --------------- ----------
Cost at 28 June
2014 52,968 - 822 - 53,790
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 GBP1,754,000 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 2015
GBP000 GBP000
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.
Frequency Non-Current
of Year Facility Drawn Current GBP000
2016 Margin Repayments of maturity GBP000 GBP000 GBP000
-------------------- ------------ ------------ ------------- ---------- -------- --------- -----------
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
-----------
Frequency Non-Current
of Year Facility Drawn Current GBP000
2015 Margin Repayments of maturity GBP000 GBP000 GBP000
-------------------- ------------ ------------- ------------- ---------- -------- --------- -----------
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 Minimum
lease lease
payments Interest Principal payments Interest Principal
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- --------- -------- --------- --------- -------- ---------
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 GBP48.9 million (2015: GBP48.9 million). At the period end date the facility utilised was GBP22.7 million (2015: GBP21.3 million), giving GBP26.2 million (2015: GBP27.6 million) headroom.
9. Analysis of Net Debt
At year At year
ended ended
27 June Cash flow 2 July
2015 GBP000 2016
GBP000 GBP000
--------------------------- ----------- ------------ -----------
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 (50) - -
payable
--------------------------- ----------- ------------ -----------
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
END
FR GGUMUBUPQGQQ
(END) Dow Jones Newswires
September 19, 2016 02:00 ET (06:00 GMT)
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