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
  0.50 0.59% 85.50 84.00 87.00 86.00 85.00 85.00 370,923 12:07:28
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Food Producers 303.6 4.5 1.7 50.3 109

Finsbury Food Group PLC Preliminary Results

16/09/2019 7:00am

UK Regulatory (RNS & others)


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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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