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Share Name Share Symbol Market Type Share ISIN Share Description
Finsbury Food Group Plc LSE:FIF London Ordinary Share GB0009186429 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.0% 89.50 88.00 91.00 89.50 89.50 89.50 222,162 08:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Food Producers 313.3 17.0 9.8 9.1 117

Finsbury Food Group PLC Preliminary Results

26/09/2022 7:01am

UK Regulatory (RNS & others)


TIDMFIF

RNS Number : 5321A

Finsbury Food Group PLC

26 September 2022

 
 Date:       26 September 2022 
 On behalf   Finsbury Food Group Plc ('Finsbury', 'the Company' 
  of:         or 'the Group') 
 Embargoed until: 0700hrs 
 

Finsbury Food Group Plc

Preliminary Results

Summary

The full year figures reflect an evolving trading environment with the ongoing post pandemic recovery being followed by inflationary pressures impacting our operations and total supply chain. The improvement in all figures is a reflection of the robustness of our business model.

   --      Group revenue up 13.9% to GBP357 million. 
   --      Gross margins 32.4% (2021: 32.9%). 
   --      Group EBITDA *(1) up 6.9% to GBP28.7 million. 
   --      Profit before tax *(1) up 12.1% to GBP17.0 million. 
   --      Adjusted Diluted EPS *(2) (pence per share) up 17% to 10.1p. 

-- Net bank debt (excluding IFRS 16 debt), GBP20.6 million (2021: GBP13.1 million), representing 0.7 x FY EBITDA.

Strategic Highlights

   --      Revenue growth, a result of: 

o Strong post Covid-19 recovery in UK foodservice, up 38%,

o UK retail up 7.1%; and

o Overseas division growth of 27%.

-- Taking our ownership to 85% in Lightbody-Stretz Limited deepening our presence in France and Benelux.

-- Innovation in gluten free recipes and product quality which is driving organic growth in both the UK and in Europe

-- Operating Brilliance Programme continues to drive significant operational efficiency which is helping to manage inflationary pressure in the short term.

   --      Clear sustainability agenda driving continued improvement in energy and waste management. 
   --      Continued investment in development, engagement and the health and wellbeing of employees. 

(*1) 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. These APMs along with their definitions are provided in the Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), Operating Profit and Profit Before Tax tables on the following page and the tables in the Financial Review Section. APMs are disclosed as, in the opinion of the Board, this will allow shareholders to gain a clearer understanding of the trading performance of the Group.

(*2) Adjusted EPS has been calculated using profit, excluding amortisation of intangibles, significant non-recurring and other items as shown in the tables in the Financial Review Section net of associated taxation. In the opinion of the Board, the adjustments made will allow shareholders to gain a clearer understanding of the trading performance of the Group.

Commenting on the results, John Duffy, Chief Executive of Finsbury Food Group Plc, said:

"To have delivered a record revenue performance that is in line with market expectations despite the numerous and complex challenges faced in the year - initially the effects of the Covid-19 crisis and more recently significant input cost inflation and falling consumer confidence - demonstrates the resilience and agility of the Group and the enduring appeal of our product range. Throughout the period, our retail business continued to perform well, we saw a bounce back in foodservice, and our overseas division experienced further strong growth. The level of internal response required to deliver these results cannot be understated, and I am grateful to our teams for their considerable efforts.

Pleasingly, we were able to mitigate most of the impact of the macro challenges through revised commercial arrangements, operational improvements and other supply chain initiatives. We will continue in the same vein in the new financial year, as these pressures are expected to worsen.

While significant macro headwinds are set to persist, we have a successful track record of navigating challenging market conditions and are supported by a strong balance sheet. We will continue to meet challenges head on, and I remain confident we will emerge a stronger business well set to deliver on our long-term growth ambitions."

For further information:

 
 Finsbury Food Group 
  John Duffy (Chief 
  Executive) 
  Steve Boyd (Finance 
  Director)                     www.finsburyfoods.co.uk    029 20 357 500 
 Panmure Gordon (UK) 
  Limited 
  Oliver Cardigan (Corporate 
  Finance) 
  Atholl Tweedie 
  Erik Anderson (Corporate 
  Broking) 
  Edward Walsh                                             020 7886 2500 
 Alma PR 
  Sam Modlin 
  David Ison 
  Matthew Young                 finsbury@almapr.co.uk      020 3405 0205 
 

Notes to Editors:

-- Finsbury Food Group Plc (AIM: FIF) is a leading UK and European 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, together with its overseas division, has sales in the financial year ending 2 July 2022 of GBP357 million.

   --      The Company's bakery product range is comprehensive and includes: 
   --      Large premium and celebration cakes; 
   --      Small snacking cake formats such as cake slices and bites; 

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

   --      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 GBP1.031 billion (source: IRI 52 w/e 13th August 2022). The retail bread and morning goods market has a value of GBP5.3 billion (source: Kantar Worldpanel 52 w/e 4th September 2022). The retail Free From cake market is valued at GBP58 million (source: Kantar Worldpanel 52 w/e 4th September 2022). The retail Free From bread and morning goods market is valued at GBP166 million (source: Kantar Worldpanel 52 w/e 4th September 2022).

   --      The Company comprises a core UK bakery division and an overseas division: 

-- The UK bakery division has manufacturing sites in Cardiff, East Kilbride, Hamilton, Salisbury, Sheffield, Manchester, and Pontypool.

-- The overseas division comprises the Company's 85% owned company, Lightbody-Stretz Limited, which supplies and distributes the Group's UK-manufactured products and third-party products, primarily to Europe, and the Company's manufacturing facilities in Rybarzowice and ywiec in Poland.

Adjusted EBITDA and Profit Reconciliation of Statutory to Adjusted

In order to set out the business performance, adjusted measures for the Group are presented which exclude the impact of significant non-recurring items and other items to present adjusted EBITDA, operating profit and profit before tax. In the opinion of the Board the adjusted measure allows shareholders to gain a clearer understanding of the trading performance of the Group. The analysis below shows the movement from adjusted to statutory measures.

 
 Adjusted EBITDA                                         2022      2021 
                                                       GBP000    GBP000 
---------------------------------------------------  --------  -------- 
 Adjusted EBITDA                                       28,747    26,904 
 Significant non-recurring items - (see Note 
  4)                                                  (1,898)       958 
 Difference between Defined Benefit Pension Scheme 
  charges and cash cost                                   417       473 
 Movement in the fair value of foreign exchange 
  contracts                                             (821)       696 
---------------------------------------------------  --------  -------- 
 Adjustments, significant non-recurring and other 
  items                                               (2,302)     2,127 
---------------------------------------------------  --------  -------- 
 EBITDA                                                26,445    29,031 
---------------------------------------------------  --------  -------- 
 
 
 Adjusted Operating Profit                               2022        2021 
                                                       GBP000      GBP000 
---------------------------------------------------  --------  ---------- 
 Adjusted operating profit                             17,807      16,100 
 Significant non-recurring items - (see Note 
  4)                                                  (1,898)         958 
 Difference between Defined Benefit Pension Scheme 
  charges and cash cost                                   417         473 
 Movement in the fair value of foreign exchange 
  contracts                                             (821)         696 
---------------------------------------------------  --------  ---------- 
 Adjustments, significant non-recurring and other 
  items                                               (2,302)       2,127 
---------------------------------------------------  --------  ---------- 
 Operating profit                                      15,505      18,227 
---------------------------------------------------  --------  ---------- 
 
 
 Adjusted Profit Before Tax                              2022      2021 
                                                       GBP000    GBP000 
---------------------------------------------------  --------  -------- 
 Adjusted profit before tax                            16,956    15,126 
 Significant non-recurring items - (see Note 
  4)                                                  (1,898)       958 
 Difference between Defined Benefit Pension Scheme 
  charges and cash cost                                   132       249 
 Movement in the fair value of foreign exchange 
  contracts                                             (821)       696 
 Discounting of deferred consideration                   (54)     (105) 
 Movement in the fair value of interest rate 
  swaps                                                  (18)        89 
---------------------------------------------------  --------  -------- 
 Adjustments, significant non-recurring and other 
  items                                               (2,659)     1,887 
---------------------------------------------------  --------  -------- 
 Profit before tax                                     14,297    17,013 
---------------------------------------------------  --------  -------- 
 
 
 
 Group Performance        Statutory Measures 
  Measures 
 Group Revenue            *(2) 
  GBP356.8m 
  up 13.9% 
 Adjusted EBITDA*1        EBITDA 
  GBP28.7m                 GBP26.4m 
  up 6.9% 
 Adjusted Operating       Operating Profit 
  Profit(*1)               GBP15.5m 
  GBP17.8m up 10.6% 
 Adjusted Profit(*1)      Profit Before Tax 
  Before Tax               GBP14.3m 
  GBP17.0m up 12.1% 
 Adjusted Diluted EPS     Diluted EPS 
  10.1p up 17.4%           7.9p 
 Capital Investment       *(2) 
  GBP12.5m up 103% 
 Net Debt (excl leases)   Net Debt (incl leases) 
  GBP20.6m up 57.3%        GBP29.6m 
 
 

*(1) 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. These APMs along with their definitions are provided in the Adjusted EBITDA, Operating Profit and Profit Before Tax tables on the previous page and the tables in the Financial Review Section. APMs are disclosed as, in the opinion of the Board, this will allow shareholders to gain a clearer understanding of the trading performance of the Group.

Adjusted EPS has been calculated using profit, excluding amortisation of intangibles, significant non-recurring and other items as shown in the tables above net of associated taxation. In the opinion of the Board, the adjustments made will allow shareholders to gain a clearer understanding of the trading performance of the Group.

*(2) Measures that do not vary are shown in the first column only.

Chairman's Statement

The Group delivered a record revenue figure for the full year ended 2 July 2022; this was achieved during a period of exceptional macroeconomic turbulence. The financial year was set against a backdrop of further Covid-19 restrictions which helpfully eased as the year progressed. There were, though, increasing and now persistent ongoing pressures from input cost inflation, staff shortages and other supply chain disruptions.

The period under review saw a number of testing obstacles for the wider consumer sector and the manner in which Finsbury successfully navigated these headwinds is testament to the diligence and experience of our management team. Whilst these various pressures are likely to persist in the near future, I am confident that we have the best possible team in place to continue executing on our strategy and to further strengthen our position in the market as our business is aligned with long-term consumer trends .

The challenges have been significant. Our commercial teams have needed to be in constant dialogue with our customers and suppliers to deliver the necessary revised commercial arrangements to address this volatile situation. However, our focus on strategic execution has not wavered and we have continued to make good progress against our objectives, based around our three pillars of Excellence, Growth and Responsibility and underpinned by our Operating Principles.

One such objective has been to bring the Group businesses closer together to operate as a single cohesive unit. This is giving us both uniformity and improved efficiency in our processes, procurement, procedures and communication. In turn, this will make us stronger, creating a platform that will enhance our future performance.

The hard work and dedication of the whole Finsbury team has enabled us to navigate these challenges and changes while still achieving strategic progress and delivering a commercial performance in line with market expectations. The clarity of our strategy and the resilience of our business model means the Company is well positioned for continued growth.

A Robust Performance

Our agile management of the evolving macroeconomic situation has allowed us to deliver a robust performance for the period with the Group posting record revenue figures, alongside notable operational successes and continued investment. The full year figures do reflect the beneficial impact of the relaxation of Covid-19 restrictions, compared with the previous 12 months trading.

Group revenue increased by 13.9% to GBP356.8 million, bolstered by a particularly strong second half performance with revenue up 18.7%, against the corresponding period in the prior year. Adjusted EBITDA increased by 6.9% to GBP28.7million (2021: GBP26.9 million), adjusted profit before tax increased by 12.1% to GBP17.0 million (2021: GBP15.1 million) and the Group delivered adjusted diluted EPS of 10.1p. The Group's net bank debt position by year end was GBP20.6 million (2021: GBP13.1 million) as the business increased its stake in Lightbody-Stretz Limited, its European distribution subsidiary, from 50% to 85% in February 2022.

It is pleasing and reassuring that the 13.9% increase in Group revenues was driven by 8.7% of volume growth which indicates the quality, relevance and innovation of the Group's products. The Group's sales growth has been achieved through a good performance in the Group's UK bakery, up 12.1%, which includes a continuation of the recovery in foodservice (up 38.1%). There was also an impressive 26.6% increase in the Group's overseas division. The overseas performance is particularly pleasing and reflects the management team's excellent execution and growth ambitions, along with our continued desire to invest in the European opportunity.

The Group also successfully negotiated a new four plus one year GBP120 million credit facility (GBP60 million core plus GBP60 million accordion) effective as of 27 June 2022. Whilst the current stock market conditions persist and lower ratings of food manufacturers are weighing heavily on share prices, these new credit facilities will provide financial flexibility for the Group to pursue its significant growth ambitions. As communicated in the February 2022 Interim Results announcement, the Board continues to explore opportunities to accelerate the growth of the Group through targeted acquisitions. The continued successful execution of the Group's strategy positions us well to succeed in both the retail grocery and out-of-home channels in the UK and Europe particularly through the development of a strong licensed brand portfolio to complement our core retailer brand relationships.

Dividend

Given the robust performance and sound financial position of the Group, the Board will be recommending a final dividend of 1.67 pence per share at the forthcoming AGM, which will take the total dividend for the year to 2.50 pence per share (2021: 2.4 pence).

Considerable Operational Progress Despite Macroeconomic Headwinds

We have continued to invest and focus on the deployment of our Operating Brilliance Programme ("OBP") which, facilitated by a cloud-based, Group-wide IT system, has enabled us to recover this inflation, whether it be through operating efficiency or price increases.

We are progressively delivering a suite of best-in-class business systems and increased efficiencies, to optimise our business operations. This will help protect us in the short term and be ready for when the market returns to more normal conditions.

There is still a lot of work to be done, however, the progress made this year has been significant. We have continued to strengthen our category-leading new product development (NPD) expertise and have further implemented best practice through our Process Blueprint, a product design framework delivering quality and efficiency. Steps like these should ultimately help us to create long--term shareholder value, through share price appreciation and attractive dividends.

A Responsible Business

At Finsbury we hold social responsibility at the very core of our ethos and, as we challenge ourselves to be a more conscientious and socially impactful business, accountability around our progress is important.

As part of our ongoing social responsibility programme, we will continue the journey to our target of reducing emissions in line with the Science Based Targets initiative ("SBTi") methodology. Alongside this, we will work with our supply and customer partners to source raw materials in a sustainable and ethical way.

Investment and development of people is key to our success, and we are committed to investing in our staff to help attract and retain talent through exploring new recruitment channels, and mechanisms to engage and retain our existing workforce. Alongside this, we have invested in graduate talent, apprenticeships and leadership development for the future, as well as launching our Diversity and Inclusion strategy through a series of policies, campaigns and training programmes to build awareness and understanding.

Our People

Our people are the bedrock of our business and the culture that pervades across Finsbury has helped us to endure difficult conditions with great professionalism and calm. It is their focus which has resulted in our year-on-year progression in quality performance, with complaint numbers and rates continuing to reduce on a yearly comparative basis.

Our teams have worked extremely hard to create the right working conditions for Finsbury to succeed and, on behalf of the Board, I would like to take this opportunity to thank all members of staff for their dedication and commitment.

I would also like to extend my appreciation to the Board and wider Executive team who have done an excellent job in navigating the Group through what has been an exceptionally challenging period. Through their leadership and expertise, Finsbury has not deviated from its strategic ambitions and the robust set of results reflects their success.

Outlook

The past year has been set against a backdrop of exceptional macroeconomic headwinds. Finsbury has faced unprecedented challenges as a result and, simply taken at face value, the in line performance does not convey the monumental levels of hard work that took place behind the scenes to deliver it. These results are a great achievement. Management deserves a great deal of credit for its stewardship and I am incredibly grateful to our colleagues who have all played an important role in getting us to this point. FY22 was another year in which the agility and resilience of the Finsbury model was put to the test, and again it was proven to be more than fit for purpose even in the most volatile of trading conditions.

Whilst we recognise that the future is difficult to predict with any certainty as the true impact of the inflationary environment is not yet known, we remain confident in our strategy. The past few years have not been easy, but we continue to stand up well. Across our Group, NPD continues at pace, we have diversification of products, channels and markets which stand us in good stead and, ultimately, we have a strong track record of moving forwards as a business in difficult times. This gives the Board confidence that the Group will continue to make progress and deliver profitable growth.

Peter Baker

Non-Executive Chairman

23 September 2022

Chief Executive's Report

The period under review was a year in which Finsbury had to navigate significant post-pandemic challenges impacting the availability and cost of all inputs whether it be materials, utilities, labour and, indeed, overheads in general. The impact and scale of these additional inflationary pressures throughout the year exceeded GBP27 million and the level of response required across the business to address them and go on to deliver a record sales performance cannot be overstated. For many years we have been investing to reinforce and optimise the Group, making it as nimble, adaptable and able to withstand adversity, as possible. FY22 was a real test of how far we have come, and I am proud of how we performed.

Within our markets, overall demand for food and drink has remained resilient. Our retail business performed well, we continued to see a bounce back in foodservice, and our overseas division continued to see strong growth.

Record Revenue Performance Despite Challenging Environment

The Group delivered a very strong full year performance, particularly given the environment in which we were operating in. Total sales of GBP356.8 million represent a 13.9% increase of which volume is 8.7% versus the corresponding period in the prior year. The Group delivered a strong second half performance, with H2 revenues up 18.7% (of which volume is 10.0%) against the corresponding period in the prior year.

This growth in sales has been driven by a stable performance in the Group's core division, UK bakery, up 12.1%, which includes a continuation of the robust recovery in foodservice, up 38.1%, and a 26.6% increase in the Group's overseas division.

Unprecedented pressure from input cost inflation, staff shortages and other supply chain disruptions persisted throughout the period. Pleasingly, the Group was able to mitigate much of the impact through revised pricing and commercial arrangements, operational improvements and supply chain initiatives. It will continue in the same vein as further inflationary cost pressures are expected in the new financial year.

Strategic Review

Our strategy is central to the ongoing success of our business and is spread over three key pillars: Excellence, Growth and Responsibility.

Excellence

We invest in our people and our operating sites to form a strong foundation to underpin our strategy. We create innovative high-quality bakery products that anticipate key market trends and ensure that customer and consumer needs are at the heart of our decision making.

Growth

Our Group seeks to drive growth both organically and through acquisition, targeting both the retail grocery and out-of-home channels in the UK and Europe. We have developed a strong licensed brand portfolio to complement our core retailer brand relationships.

Responsibility

Our commitment to building a sustainable operating model is built on a holistic framework that puts our people's development, engagement and health and wellbeing at the heart of our business. We strive to continually reduce our impact on the planet by investing in technology, expertise and driving shared ownership across our growth partners.

   1.     Excellence 

The implementation of our Operating Brilliance Programme (OBP), centred around building people and process capability, continues to deliver meaningful benefits to performance.

In light of the challenging landscape we have been operating in for several years, we have focused on building resilience across the Group and creating a platform for continually improving performance. In FY22, our initiatives were responsible for a combined GBP4.5 million of gross annual savings and we expect these benefits to continue.

A major focus in FY22 has been the development of a suite of best-in-class systems, all linked to our business intelligence software, with a view to delivering Group-wide, high-quality data which we can use to make more effective decisions.

FY22 systems investment included:

-- An integrated Group Supply Chain Planning System, which will enable us to move to an integrated business planning model;

-- A Product Lifecycle Management System, which will transform our development process, ensuring we have an effective product design framework to deliver profitable growth; and

-- A Group-wide Computerised Maintenance Management System (CMMS) roll out has commenced in all bakeries.

The final piece in the best-in-class systems jigsaw is a new HR system, which will be implemented in FY23. Once in place, this system will materially reduce administration workload and improve areas like skills training and development effectiveness within the business.

Moving forwards, we remain focused on extending, embedding and sustaining our Operational Brilliance Programme at an increasingly Group-wide level, including at interfaces with key customers and suppliers to promote best practice both internally and externally.

   2.     Growth 

The Board is committed to driving growth through a combination of organic growth and targeted acquisitions.

We are delighted to report continued growth across our portfolio in the UK and Europe as we continue to work collaboratively with our partners to drive growth in our key markets. We are particularly focused on capitalising on the continued rapid growth within our Lightbody Europe subsidiary aligned to our celebration, small cake and Free From category strategies, accelerating progress through our licensed brand portfolio and a strong innovation pipeline.

As sales patterns have become more normalised throughout the period following the impact of lockdowns, we have continued to succeed in both the retail grocery and out-of-home channels in the UK and Europe, working closely with our foodservice partners to enable a strong recovery. We continued to embed our whole cake strategy and accelerate our small cake performance, led by food to go with our indulgent and plant based snacking offer outperforming the market across both the grocery and convenience channels.

From a brand portfolio perspective, we continued to go from strength to strength. We have invested in our gluten free business in the UK and Poland, expanding capacity and capability and driving double-digit growth. In Europe, we have extended our Free From 'Wiso' brand, which we will look to drive further scale in FY23, leveraging our Lightbody Europe business model to deliver this. Three of the top five celebration cake lines in the UK are Finsbury's and our Xbox product is the fastest growing cake in the market. We continue to hold the broadest license portfolio, which we continually evolve to ensure that we are catering to the diverse range of consumer needs.

To remain a leader in our key channels, we will implement consumer-led growth strategies across cake product categories and focus on targeted bread consumer-led growth in both retail and out of home markets. Product development is also a key future focus as we increase capacity and capability in two strategically important category areas of buns and rolls and celebration cake. Further development and implementation of our Group Free From strategy will continue as we seek to drive further growth within this sector by extending our reach wider into speciality bread, morning goods, sweet treat and cake categories.

The Board continues to explore opportunities to accelerate the growth of the Group through targeted acquisitions and strategic investments. In February 2022 we acquired a further 35% shareholding in Lightbody-Stretz Limited, taking our ownership from 50% to 85%, reflecting our continued belief in the opportunity in Europe.

The Group's new credit facility provides financial flexibility for the Group to pursue its significant growth ambitions, as and when appropriate, potentially through further M&A.

   3.     Responsibility 

Finsbury has always prided itself on being a responsible business that acts with integrity and care, both for our people and towards the planet.

A primary focus has been to further develop key skills, subject matter expertise and capability in addition to investing in graduate talent, apprenticeships and leadership development for the future.

This year saw the launch of our Diversity and Inclusion strategy through a series of policies, campaigns and training programmes to develop awareness and understanding. We also progressed our Health and Wellbeing and Community Engagement programmes, including further developing our partnerships with UK charities Grocery Aid and Fareshare at a Group level, whilst continuing to support team member nominated charities at a local level. We will soon be redeploying our Employee Engagement survey to assess the impact of our Employee Engagement Programme with a view to driving continued improvement in our workplace culture.

Sustainability is in our DNA, with metrics and goals embedded within all our business strategies. As a result of our focus on driving recycling rates, 85% of our waste is now recycled (up from 80% last year) with the balance being used to generate power. We remain a certified zero land fill business and as part of our commitment to the WRAP objectives on plastic usage, 91% of our packaging is now recyclable. We will continue to increase the recycling rate through the training and the application of technology.

"Scope 1 and 2" emissions have been reduced by 20% against our 2016 base line, and we are creating a Supplier Partner Sustainability Forum to work collaboratively on reducing the Group's environmental impact. This will include the measurement of our "Scope 3" emissions with our key suppliers.

We now have live data monitoring systems for electricity use for all our key assets, helping teams to calculate the impact of action in real-time and saving up to 10% of energy usage. The implementation of these systems has allowed us to convert 90% of our lighting to LED and we will achieve the complete 100% transition later in the calendar year 2022, saving over 260 tonnes of CO(2) per annum. Automated live usage monitoring will be extended to gas and water to help teams to identify reduction opportunities.

Raw materials continue to be sourced in line with a variety of sustainable and ethical standards, including Fair Trade and the Rainforest Alliance. Our palm oil adheres to the RSPO segregated sustainability standard. Moving forward, we will persist in working with our supply and customer partners to source raw materials in a sustainable and ethical way.

I would like to take this opportunity to personally thank our teams across the Group for their continued hard work, determination and commitment. Without their efforts we would not have been able to navigate the challenges we have faced and, in turn, deliver a record performance.

Outlook

Finsbury has faced unprecedented challenges in recent years, first triggered by the Covid-19 crisis and now by arguably the most challenging input cost inflation in decades and falling consumer confidence. Despite these, the resilience and swift response across our business enabled us to deliver a record revenue performance in the period under review.

Looking ahead, macro-economic and inflationary headwinds are set to persist at levels in excess of that experienced in FY22. However, Finsbury is no stranger to responding to difficult trading conditions and uncertainty. Since long before the onset of Covid-19, we have been focused on diversifying products, channels and markets; unifying our businesses; identifying efficiencies; and making the Group more resilient and able to respond quickly and effectively to changing dynamics. The work our teams have put in over the past several years continues to leave us in a strong position relative to many.

The continuation of our Operating Brilliance Programme has resulted in significant progress to date and there is encouraging momentum as we move through the new financial year. FY22 saw further expansion of our international footprint, continued reinforcement of our best-in-class systems, and further advances in refining and strengthening our product range, such as in gluten free. In FY23, we aim to continue in a similar vein, making incremental improvements to our operations, such as through the launch of a new Group-wide HR system, that will stand us in good stead as we navigate the challenges ahead.

While we now have two months of trading under our belt in the new financial year, the complexity of the pressures we are facing and the uncertain outlook around the phasing and extent of the impact of rising inflation and energy prices on consumer demand means it is difficult to predict how the rest of the year will unfold. The effectiveness of government policy to tackle the cost of living crisis, with energy price inflation sitting at the centre and affecting both consumers and companies, is another important variable that muddies the picture. However, we are experienced in dealing with adversity; our business is aligned with long-term consumer trends; we have a proven, agile model; and we continue to execute a strategy that we believe will continue to improve the business irrespective of external turbulence.

These factors combined give us confidence that, whilst we can't control the headwinds we are facing, we will be well positioned once the macro-economic situation stabilises.

John Duffy

Chief Executive Officer

23 September 2022

Financial Review

Group revenue to 2 July 2022 is GBP356.8 million, 13.9% higher than last year. The growth in revenue is the result of volume uplift of 8.7% and price uplift of 5.2%. The recovery of foodservice is driving much of this growth with a 38% increase year-on-year uplift, while retail revenues remain positive. Sales from our overseas division increased by 27% year on year driven by a strong cake performance in the large French retailers. Group adjusted operating profit at GBP17.8 million is up 10.6% on last year. Despite the unprecedented inflationary pressures and challenging macro environment, the Group has increased both revenue and operating profit. Adjusted operating profit margins are 5.0% (2021: 5.1%), a consequence of the continuing success of our Operating Brilliance Programme partially mitigating the extraordinary challenges.

Dividend

The dividend was reinstated during the year. For the full year to 26 June 2021, a dividend of 2.40p per share was paid on 21 December 2021 to shareholders on the register at the close of business on 26 November 2021.

An interim dividend for the year ending 2 July 2022 of 0.83p per share (2021: nil) was paid on 21 April 2022 to shareholders on the register at the close of business on 25 March 2022.

The Board of Directors is recommending a final dividend for the year ending 2 July 2022 of 1.67p per share, taking the full year dividend to 2.50p per share (2021: 2.40p). The final dividend will be paid on 21 December 2022 to shareholders on the register at the close of business on 25 November 2022. The election deadline for participants in the Company's Dividend Re-investment Plan will be 30 November 2022.

The tables below show what the Directors consider to be the trading performance of the Group. The adjusted measures eliminate the impact of significant and non-recurring items and other accounting items, that are not deemed to reflect the continuing performance of the Group.

53 week period ended 2 July 2022

 
                                                                         Movement 
                                                                           in the 
                                                                       Fair value 
                                        Significant                   of interest                               As per 
                                     non-recurring-    Defined               rate                         Consolidated 
                                              items    Benefit      swaps/foreign      Discounting           Statement 
                        Operating              Note    Pension           exchange      of deferred    of Comprehensive 
                      performance                 4     Scheme          contracts    consideration              Income 
                           GBP000            GBP000     GBP000             GBP000           GBP000              GBP000 
------------------  -------------  ----------------  ---------  -----------------  ---------------  ------------------ 
 Revenue                  356,808                 -          -                  -                -             356,808 
 Cost of sales          (241,183)                 -          -                  -                -           (241,183) 
------------------  -------------  ----------------  ---------  -----------------  ---------------  ------------------ 
 Gross profit             115,625                 -          -                  -                -             115,625 
 Other costs 
  excluding 
  depreciation and 
  amortisation           (86,878)           (1,898)        417              (821)                -            (89,180) 
 EBITDA                    28,747           (1,898)        417              (821)                -              26,445 
 Depreciation and 
  amortisation           (10,940)                 -          -                  -                -            (10,940) 
------------------  -------------  ----------------  ---------  -----------------  ---------------  ------------------ 
 Operating profit          17,807           (1,898)        417              (821)                -              15,505 
------------------  -------------  ----------------  ---------  -----------------  ---------------  ------------------ 
 Finance income                 -                 -          -                  -                -                   - 
 Finance costs              (851)                 -      (285)               (18)             (54)             (1,208) 
------------------  -------------  ----------------  ---------  -----------------  ---------------  ------------------ 
 Profit before tax         16,956           (1,898)        132              (839)             (54)              14,297 
------------------  -------------  ----------------  ---------  -----------------  ---------------  ------------------ 
 Taxation                 (3,050)               198       (33)                166               10             (2,709) 
------------------  -------------  ----------------  ---------  -----------------  ---------------  ------------------ 
 Profit for the 
  year                     13,906           (1,700)         99              (673)             (44)              11,588 
------------------  -------------  ----------------  ---------  -----------------  ---------------  ------------------ 
 

52 week period ended 26 June 2021

 
                                                                         Movement 
                                                                           in the 
                                                                       Fair value 
                                            Significant               of interest                               As per 
                                         non-recurring-    Defined    rate swaps/                         Consolidated 
                                                  items    Benefit        foreign      Discounting           Statement 
                            Operating              Note    Pension       exchange      of deferred    of Comprehensive 
                          performance                 4     Scheme      contracts    consideration              Income 
                               GBP000            GBP000     GBP000         GBP000           GBP000              GBP000 
----------------------  -------------  ----------------  ---------  -------------  ---------------  ------------------ 
 Revenue                      313,258                 -          -              -                -             313,258 
 Cost of sales              (210,273)                 -          -              -                -           (210,273) 
----------------------  -------------  ----------------  ---------  -------------  ---------------  ------------------ 
 Gross profit                 102,985                 -          -              -                -             102,985 
 Other costs excluding 
  depreciation and 
  amortisation               (76,081)               958        473            696                -            (73,954) 
 EBITDA                        26,904               958        473            696                -              29,031 
 Depreciation and 
  amortisation               (10,804)                 -          -              -                -            (10,804) 
----------------------  -------------  ----------------  ---------  -------------  ---------------  ------------------ 
 Operating profit              16,100               958        473            696                -              18,227 
----------------------  -------------  ----------------  ---------  -------------  ---------------  ------------------ 
 Finance income                     -                 -          -             89                -                  89 
 Finance costs                  (974)                 -      (224)              -            (105)             (1,303) 
----------------------  -------------  ----------------  ---------  -------------  ---------------  ------------------ 
 Profit before tax             15,126               958        249            785            (105)              17,013 
----------------------  -------------  ----------------  ---------  -------------  ---------------  ------------------ 
 Taxation                     (2,995)             (182)       (62)          (149)               20             (3,368) 
----------------------  -------------  ----------------  ---------  -------------  ---------------  ------------------ 
 Profit for the year           12,131               776        187            636             (85)              13,645 
----------------------  -------------  ----------------  ---------  -------------  ---------------  ------------------ 
 

Other Significant and Non-Recurring Items

Significant non-recurring cost (SNR) of GBP1.9 million relates to acquisition costs for aborted transactions of GBP1.6 million, litigation and legal fees of GBP0.9 million, asset disposals of GBP0.2 million offset by the release of provisions for onerous leases and factory closure costs of GBP0.8 million. All items have been excluded from operating profit in the table below to better reflect the ongoing trading position.

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 10.1p (2021: 8.6p).

 
                             2022   2021 
-------------------------  ------  ----- 
 Basic EPS                   8.4p   9.8p 
 Adjusted basic EPS         10.8p   9.1p 
 Diluted** basic EPS         7.9p   9.3p 
 Adjusted* diluted** EPS    10.1p   8.6p 
 

* 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

Cash generated from operating activities increased to GBP28.7m. Increased working capital of GBP2.5m driven by the growth in the business reduced this to GBP26.2m. Interest paid totals GBP0.7m. Taxation at GBP2.0m (2021 GBP3.9m) is lower than 2021 attributable to the benefit of capital super allowances. Cash out flows relating to SNRs (note 4) cost GBP2.3m and should be considered as one off in nature.

The resulting net cash from operating activities is GBP21.3m which finances a doubling of spend on capital investment (GBP12.5 million) and an acquisition outflow of GBP6.1m as the Company increased its stake in Lightbody-Stretz Limited by 35% to 85%. The cash flows associated with dividend are GBP4m relating to the 2.4pps 2021 full and final dividend paid in December 2021, GBP3.0m and GBP1.0m for the interim dividend for 2022 paid April 2022 (0.83pps).

Debt and Bank Facilities

The Group's total net debt is GBP20.6 million (2021: GBP13.1 million), up GBP7.5 million from the prior year, for the reasons given above.

The Group recognises the inherent risk from interest rate rises and uses interest rate swaps to mitigate these risks. During the year the Group had 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 Group entered into a forward dating swap commencing 3 July 2022 to 10 June 2027 with a coverage of GBP10.0 million fixed at a rate of 2.589%. At the year end date the total balance of swaps was GBP20.0 million (2021: GBP25.0 million). The counterparty to these transactions is HSBC Bank Plc.

The effective interest rate for the Group during the year, taking account of the interest rate swap in place with average base rate at 0.60% and LIBOR at 0.263%, was 1.7% (2021: base rate 0.10% and LIBOR at 0.052%, was 2.0%).

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. As noted earlier, 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 53 weeks to 2 July 2022 was 48.6 (2021: 27.2) minimum cover required is 4.0 times. Net bank debt to EBITDA (based on adjusted EBITDA) for the 53 weeks to 2 July 2022 was 0.7 (2021: 0.5); maximum level required under our new banking facility is 3.0 times.

Taxation

The Group taxation charge for the year was GBP2.7 million (2021: GBP3.4 million). The effective rate of tax on profits before significant and non-recurring and other items is 18.9% (2021: 19.8%). You can find further details on the tax charge in Note 6.

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 23 September 2022 and was signed on its behalf by:

Stephen Boyd

Director

Financial Statements

Consolidated Statement of Comprehensive Income

for the 53 weeks ended 2 July 2022

 
                                                               2022       2021 
                                                   Note      GBP000     GBP000 
------------------------------------------------   -----  ---------  --------- 
 
 
Revenue                                              2      356,808    313,258 
Cost of sales                                             (241,183)  (210,273) 
-------------------------------------------------  -----  ---------  --------- 
Gross profit                                                115,625    102,985 
-------------------------------------------------  -----  ---------  --------- 
Administrative expenses                              3     (98,222)   (85,716) 
Administrative items - significant and 
 non-recurring                                       4      (1,898)        958 
-------------------------------------------------  -----  ---------  --------- 
Operating profit                                             15,505     18,227 
-------------------------------------------------  -----  ---------  --------- 
Finance income                                       5            -         89 
Finance cost                                         5      (1,208)    (1,303) 
-------------------------------------------------  -----  ---------  --------- 
Net finance cost                                            (1,208)    (1,214) 
-------------------------------------------------  -----  ---------  --------- 
Profit before tax                                            14,297     17,013 
-------------------------------------------------  -----  ---------  --------- 
Taxation                                             6      (2,709)    (3,368) 
-------------------------------------------------  -----  ---------  --------- 
Profit for the financial year                                11,588     13,645 
-------------------------------------------------  -----  ---------  --------- 
 
Other comprehensive income 
Items that will not be reclassified to 
 profit and loss 
Remeasurement on Defined Benefit Pension 
 Scheme                                                       7,815        396 
Movement in deferred taxation on Pension 
 Scheme liability                                           (1,954)        811 
-------------------------------------------------  -----  ---------  --------- 
Other comprehensive income for the financial 
 year, net of tax                                             5,861      1,207 
-------------------------------------------------  -----  ---------  --------- 
Total comprehensive income for the financial 
 year                                                        17,449     14,852 
-------------------------------------------------  -----  ---------  --------- 
 
Profit attributable to: 
Equity holders of the Parent                                 10,472     12,347 
Non-controlling interest                                      1,116      1,298 
-------------------------------------------------  -----  ---------  --------- 
Profit for the financial year                                11,588     13,645 
-------------------------------------------------  -----  ---------  --------- 
 
Total comprehensive income attributable 
 to: 
Equity holders of the Parent                                 16,333     13,554 
Non-controlling interest                                      1,116      1,298 
-------------------------------------------------  -----  ---------  --------- 
Total comprehensive income for the financial 
 year                                                        17,449     14,852 
-------------------------------------------------  -----  ---------  --------- 
 
Earnings pence per ordinary share 
Basic                                                7          8.4        9.8 
Diluted                                              7          7.9        9.3 
 
  The Notes on pages 19 to 27 form an integral part of these Financial 
  Statements. 
 

Financial Statements

Consolidated Statement of Financial Position

at 2 July 2022

 
 
                                                    2022       2021 
                                         Note     GBP000     GBP000 
---------------------------------------  ----  ---------  --------- 
Non-current assets 
   Intangibles                            8       87,355     88,019 
   Property, plant and equipment                  62,672     59,015 
   Deferred tax assets                             4,072      5,961 
---------------------------------------  ----  ---------  --------- 
                                                 154,099    152,995 
Current assets 
   Inventories                                    23,281     15,027 
   Trade and other receivables                    58,148     50,986 
   Cash and cash equivalents                       7,381      9,523 
   Other financial assets - fair value 
    of derivatives                                    20        405 
---------------------------------------  ----  ---------  --------- 
                                                  88,830     75,941 
---------------------------------------  ----  ---------  --------- 
Total assets                                     242,929    228,936 
---------------------------------------  ----  ---------  --------- 
Current liabilities 
   Other interest-bearing loans and 
    borrowings                            9      (1,605)    (2,039) 
   Trade and other payables                     (74,284)   (62,490) 
   Provisions                                      (697)      (222) 
   Other financial liabilities - fair 
    value of derivatives                           (575)      (121) 
   Deferred consideration                          (496)      (976) 
   Current tax liabilities                         (731)      (689) 
---------------------------------------  ----  ---------  --------- 
                                                (78,388)   (66,537) 
---------------------------------------  ----  ---------  --------- 
Non-current liabilities 
   Other interest-bearing loans and 
    borrowings                            9     (35,388)   (31,029) 
   Provisions                                       (18)      (160) 
   Deferred consideration                              -      (466) 
   Deferred tax liabilities                      (3,699)    (2,944) 
   Pension fund liability                        (6,582)   (14,529) 
---------------------------------------  ----  ---------  --------- 
                                                (45,687)   (49,128) 
---------------------------------------  ----  ---------  --------- 
Total liabilities                              (124,075)  (115,665) 
---------------------------------------  ----  ---------  --------- 
 
Net assets                                       118,854    113,271 
---------------------------------------  ----  ---------  --------- 
 
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                        (5,696)    (5,374) 
   Retained earnings                              57,456     49,021 
---------------------------------------  ----  ---------  --------- 
                                                 118,598    110,485 
Non-controlling interest                             256      2,786 
---------------------------------------  ----  ---------  --------- 
Total equity                                     118,854    113,271 
---------------------------------------  ----  ---------  --------- 
 
 

The Financial Statements on pages 13 to 16 were approved by the Board of Directors on 23 September 2022 and were signed on its behalf by:

Stephen Boyd (Director)

Registered Number 00204368

The Notes on pages 17 to 27 form an integral part of these Financial Statements.

Financial Statements

Consolidated Statement of Changes in Equity

for the 53 weeks ended 2 July 2022

 
                                                          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 28 June 
 2020                                1,304    64,956          578   (3,378)     34,918            2,210     100,588 
 
Profit for the financial 
 year                                    -         -            -         -     12,347            1,298      13,645 
Other comprehensive: 
Remeasurement on Defined 
 Benefit Pension                         -         -            -         -        396                -         396 
Deferred tax movement 
 on Pension Scheme 
 remeasurement                           -         -            -         -        811                -      811 
--------------------------------  --------  --------  -----------  --------  ---------  ---------------  ---------- 
Total other comprehensive 
 income                                  -         -            -         -      1,207                -       1,207 
--------------------------------  --------  --------  -----------  --------  ---------  ---------------  ---------- 
Total comprehensive 
 income for the period                   -         -            -         -     13,554            1,298      14,852 
--------------------------------  --------  --------  -----------  --------  ---------  ---------------  ---------- 
 
Transactions with 
 owners, recorded directly 
 in equity: 
Shares acquired during 
 the year                                -         -            -   (1,996)          -                -     (1,996) 
Impact of share-based 
 payments                                -         -            -         -      1,001                -       1,001 
Deferred tax on share 
 options                                 -         -            -         -         89                -          89 
Foreign exchange translation 
 differences                             -         -            -         -      (541)                -       (541) 
Dividend paid                            -         -            -         -          -            (722)       (722) 
--------------------------------  --------  --------  -----------  --------  ---------  ---------------  ---------- 
Balance at 26 June 
 2021                                1,304    64,956          578   (5,374)     49,021            2,786     113,271 
--------------------------------  --------  --------  -----------  --------  ---------  ---------------  ---------- 
 
Balance at 27 June 
 2021                                1,304    64,956          578   (5,374)     49,021            2,786     113,271 
 
Profit for the financial 
 year                                    -         -            -         -     10,472            1,116      11,588 
Other comprehensive: 
Remeasurement on Defined 
 Benefit Pension                         -         -            -         -      7,815                -       7,815 
Deferred tax movement 
 on Pension Scheme                                                        - 
 remeasurement                           -         -            -         -    (1,954)                -    (1,954) 
--------------------------------  --------  --------  -----------  --------  ---------  ---------------  ---------- 
Total other comprehensive 
 income                                  -         -            -         -      5,861                -       5,861 
--------------------------------  --------  --------  -----------  --------  ---------  ---------------  ---------- 
Total comprehensive 
 income for the period                   -         -            -         -     16,333            1,116      17,449 
--------------------------------  --------  --------  -----------  --------  ---------  ---------------  ---------- 
 
Transactions with 
 owners, recorded directly 
 in equity: 
Shares acquired during 
 the year                                -         -            -     (500)          -                -       (500) 
Shares issued during 
 the year                                -         -            -       178          -                -         178 
Impact of share-based 
 payments                                -         -            -         -      1,524                -       1,524 
Transactions with                                                                                                 - 
 non-controlling interests               -         -            -         -    (4,962)          (1,121)     (6,083) 
Costs associated with 
 transactions with 
 non-controlling interests               -         -            -         -      (375)                -       (375) 
Foreign exchange translation 
 differences                             -         -            -         -       (67)                -        (67) 
Dividend paid                            -         -            -         -    (4,018)          (2,525)     (6,543) 
--------------------------------  --------  --------  -----------  --------  ---------  ---------------  ---------- 
Balance at 2 July 
 2022                                1,304    64,956          578   (5,696)     57,456              256     118,854 
--------------------------------  --------  --------  -----------  --------  ---------  ---------------  ---------- 
 
 
 

Financial Statements

Consolidated Cash Flow Statement

for the 53 weeks ended 2 July 2022

 
 
                                                               2022      2021 
                                                     Note    GBP000    GBP000 
---------------------------------------------------  ----  --------  -------- 
Cash flows from operating activities 
Profit for the financial year                                11,588    13,645 
   Adjustments for: 
   Depreciation                                         3     7,407     7,235 
   Depreciation right-of-use assets                     3     1,986     1,752 
   Significant non-recurring items                      4     1,898   (1,125) 
   Significant non-recurring items - impairment 
    of fixed assets                                     4         -       167 
   Net finance costs                                    5     1,208     1,214 
   Taxation                                             6     2,709     3,368 
   Amortisation of intangibles                          8     1,547     1,817 
   Change in fair value of foreign exchange 
    contracts                                                   821     (696) 
   Contributions by employer to Pension 
    Scheme                                                    (417)     (473) 
Operating profit before changes in working 
 capital                                                     28,747    26,904 
 
   Changes in working capital: 
   Increase in inventories                                  (8,254)     (568) 
   Increase in trade and other receivables                  (7,847)  (11,274) 
   Increase in trade and other payables                      13,589    14,749 
---------------------------------------------------  ----  --------  -------- 
Cash generated from operations before 
 costs of disposals and acquisitions                         26,235    29,811 
 
   Significant non-recurring costs                          (2,254)     (364) 
   Interest paid                                              (678)     (715) 
   Tax paid                                                 (2,018)   (3,926) 
---------------------------------------------------  ----  --------  -------- 
Net cash generated from operating activities                 21,285    24,806 
---------------------------------------------------  ----  --------  -------- 
 
Cash flows from investing activities 
   Purchase of property, plant and equipment 
    and intangibles                                        (12,545)   (6,190) 
   Purchase of companies                               11   (1,000)     (500) 
---------------------------------------------------  ----  --------  -------- 
Net cash used in investing activities                      (13,545)   (6,690) 
---------------------------------------------------  ----  --------  -------- 
 
Cash flows from financing activities 
   Lease payments                                           (2,275)   (2,789) 
   Drawdown/(repayment) of revolving credit                   5,444  (13,753) 
   Purchase of shares by Employee Benefit 
    Trust                                                     (500)   (1,996) 
   Transactions with non-controlling interest          11   (6,083)         - 
   Dividend paid to non-controlling interest                (2,525)     (722) 
   Dividend paid to shareholders                            (4,018)         - 
---------------------------------------------------  ----  --------  -------- 
Net cash generated used in financing 
 activities                                                 (9,957)  (19,260) 
---------------------------------------------------  ----  --------  -------- 
 
   Net decrease in cash and cash equivalents                (2,217)   (1,144) 
   Opening cash and cash equivalents                          9,523    10,173 
   Effect of exchange rate fluctuations 
    on cash held                                                 75       494 
---------------------------------------------------  ----  --------  -------- 
Cash and cash equivalents at end of 
 period                                                       7,381     9,523 
---------------------------------------------------  ----  --------  -------- 
 
  The Notes on pages 17 to 27 form an integral part of these Financial 
  Statements. 
 

Notes to the Consolidated Financial Statements

Presentation of Financial Statements

Basis of Preparation

The financial information on pages 15 to 18 is extracted from the Group's consolidated Financial Statements for the 53 week period ended 2 July 2022, which were approved by the Board of Directors on 23 September 2022.

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 in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006. The "requirements of the Companies Act 2006" here means accounts in accordance with "International Accounting Standards" as defined in section 474(1) of that Act, as it applied immediately before Implementation Period ("IP") completion day (end of transition period), including where the Group also makes use of standards which have been adopted for use within the United Kingdom in accordance with regulation 1(5) of the International Accounting Standards and the European Public Limited Liability Company (Amendment etc.) (EU Exit) Regulations 2019

The Company's auditors, PricewaterhouseCoopers LLP, have given an unqualified report on the consolidated Financial Statements for the 53 week period ended 2 July 2022. 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 17 November 2022 at the Company's Annual General Meeting.

Basis of Accounting

The Group's consolidated Financial Statements for the year ended 2 July 2022 have been prepared and approved by the Directors in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006. 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 2022 Annual Report.

Going Concern

In the current climate in which we navigate well-publicised macro challenges, relevant judgements and assumptions must be made. The Group continues to operate in a complex trading environment with pressure from inflation, supply chain disruptions, labour availability impacted by the pandemic, political, economic and legislative changes and economic factors linked to the ongoing conflict in Ukraine. The conflict between Russia and Ukraine continues to develop and is likely to have a broad impact on the global economy. Whilst navigating these challenges the health and safety of our employees is a top priority.

When considering going concern, judgement must be made as to the impact of the ongoing macro challenges. Forecasts have been built on a bottom-up basis and stress tested to prepare an approved budget used as a basis for reviewing going concern. Risks and opportunities have been considered, and plausible downside risks have been assessed. Having reviewed the Group's short and medium-term plans and available financial facilities, the Board has reasonable expectations that the Group has adequate resources to continue in operational existence for the next 12 months and the foreseeable future.

The Group meets its funding requirements through internal cash generation and bank credit facilities, which are committed until June 2027. Committed banking facilities are GBP60.0 million with a further accordion available of GBP60.0 million, net bank debt at the year end was GBP20.6 million. The Group's forecasts and projections, taking account of possible changes in trading performance, show that the Group will be able to operate comfortably within its current bank facilities. The Group has a relatively conservative level of debt to earnings.

The Board reviews the Group's covenants on a regular basis to ensure that it has adequate facilities to cover its trading and banking requirements with an appropriate level of headroom. The forecasts are based on management's best estimates of future trading. There has been no breach of covenants during the year and none expected during the next 12 months. All covenant tests were passed at the year end.

We have delivered record revenue performance, a demonstration of the Group's resilience and strategic focus. We continue to reap the benefits of our Operating Brilliance Programme which has been one of the key drivers behind our positive performance.

We have not been immune to the challenges arising from sudden and unexpected input cost inflation over the period. However, we have been able to mitigate the impact of these pressures through commercial negotiation and operational improvements have seen the benefit of these actions in our second half profit performance. We have also been affected by staff shortages and supply chain disruption. We will continue to monitor closely and work through ongoing pressures using the same strategies employed to date. While headwinds are set to persist, we have a successful track record of navigating challenging market conditions, and the steps we have taken to optimise the business to date stand us in good stead.

We have seen recovery in foodservice, steady sales in retail and strong overseas performance and have the benefits of the decisive mitigation actions throughout the year. We continue to see opportunities for significant sales growth through gaining market share in existing areas, and targeted acquisitions, with our increased holding of our French subsidiary to 85% in February reflecting our continued desire to invest behind our European growth.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing the Financial Statements for both the Group and the Parent Company.

   1.     Significant Accounting Policies 

New and Upcoming Standards

The following new standards, new interpretations and amendments to standards and interpretations are applicable for the first time for the financial year ended 2 July 2022.

-- Amendments to IFRS 7, IFRS 4, and IFRS 16 - Interest rate benchmark reform - Phase 2 (effective 1 January 2021);

-- Amendments to IFRS 4 Insurance Contracts - Deferral of IFRS 9 (effective 1 January 2021); and

-- Amendment to IFRS 16, 'Leases' - Covid-19 related rent concessions extension of the practical expedient (effective 1 April 2021).

No ne of the amendments to the above standards had a material impact on the Financial Statements.

There are a number of new standards, interpretations and amendments to existing standards that are not yet effective and have not been adopted early by the Group. The future introduction of these standards is not expected to have a material impact on the Financial Statements of the Group.

-- Amendments to IAS 1 - Presentation of Financial Statements on Classification of Liabilities (effective 1 January 2023).

Work will continue in the new financial year to assess the impact of the new standards and interpretations on the Group's Financial Statements.

   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 Financial Statements.

The UK bakery segment manufactures and sells bakery products to UK grocery and foodservice 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 foodservice 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 UK bakery segment also made sales directly to overseas markets.

 
 Revenue                     UK bakery               Overseas              Total Group 
 53 weeks to 2 July         2022       2021       2022       2021         2022       2021 
  2022 and 52 weeks       GBP000     GBP000     GBP000     GBP000       GBP000     GBP000 
  to 26 June 2021. 
                       ---------  ---------  ---------  ---------  -----------  --------- 
 Total                   306,650   273 ,633     50,158     39,625      356,808    313,258 
                       ---------  ---------  ---------  ---------  -----------  --------- 
 
 
 
 Reportable Segments                      53 weeks to     52 weeks to 
                                          2 July 2022    26 June 2021 
                                               GBP000          GBP000 
--------------------------------------  -------------  -------------- 
 Revenue UK bakery                            306,650         273,633 
 Revenue overseas                              50,158          39,625 
--------------------------------------  -------------  -------------- 
 Total revenue                                356,808         313,258 
--------------------------------------  -------------  -------------- 
 Adjusted operating profit UK 
  bakery                                       14,897          13,609 
 Adjusted operating profit overseas             2,910           2,491 
 Total adjusted operating profit               17,807          16,100 
--------------------------------------  -------------  -------------- 
 Significant non-recurring impairment               -               - 
 Significant non-recurring other              (1,898)             958 
 Defined Benefit Pension Scheme                   417             473 
 Fair value foreign exchange 
  contracts                                     (821)             696 
--------------------------------------  -------------  -------------- 
 Operating profit                              15,505          18,227 
 Finance income                                     -              89 
 Finance expense                              (1,208)         (1,303) 
--------------------------------------  -------------  -------------- 
 Net finance cost                             (1,208)         (1,214) 
--------------------------------------  -------------  -------------- 
 Profit before taxation                        14,297          17,013 
--------------------------------------  -------------  -------------- 
 Taxation                                     (2,709)         (3,368) 
--------------------------------------  -------------  -------------- 
 Profit for the financial year                 11,588          13,645 
--------------------------------------  -------------  -------------- 
 

The Group has two customers (2021: three) which individually account for 10% or more of the Group's total revenue. These customers individually account for 24% and 12%. In the prior year three customers accounted for 23%, 12% and 10% of the revenue in the 52 weeks to 26 June 2021.

 
 Other Segment Information     53 weeks to     52 weeks to 
                               2 July 2022    26 June 2021 
                                    GBP000          GBP000 
---------------------------  -------------  -------------- 
 Assets UK bakery                  225,816         213,791 
 Assets overseas                    17,113          15,145 
 Liabilities UK bakery           (109,289)       (103,541) 
 Liabilities overseas             (14,786)        (12,124) 
 Depreciation UK bakery              8,486           8,060 
 Depreciation overseas                 907             927 
 Amortisation UK bakery              1,547           1,817 
 Amortisation overseas                   -               - 
---------------------------  -------------  -------------- 
 
   3.     Administrative Expenses and Auditors' Remuneration 

Included in profit are the following :

 
                                          2022    2021 
                                        GBP000  GBP000 
--------------------------------------  ------  ------ 
 
Amortisation of intangibles              1,547   1,817 
Depreciation of owned tangible assets    7,407   7,235 
Depreciation on right-of-use assets      1,986   1,752 
Impairment of fixed assets                   -     167 
Loss on disposal of property, plant 
 and equipment                             347     145 
Loss on foreign exchange                   213     235 
Variable lease payments                    267     203 
Expenses relating to short-term and 
 low-value leases                           23      51 
Movement on fair value of foreign 
 exchange contracts                        821   (696) 
Research and development                 1,566   2,124 
Share option charges                     1,524   1,001 
--------------------------------------  ------  ------ 
 
 
 

Auditors' remuneration:

 
                                                         2022      2021 
                                                       GBP000    GBP000 
---------------------------------------------------  --------  -------- 
Audit of these Financial Statements                        55        50 
Audit of the Financial Statements of 
 subsidiaries of the Company                              144       133 
Other services                                            181        41 
 
Other services relate to aborted acquisition advice and assistance 
 with non-UK VAT registrations. 
 
   4.     Significant Non-Recurring Items 

The Group presents certain items as significant and non-recurring. These relate to items which, in management's judgement, need to be disclosed by virtue of their size or incidence in order to obtain a more meaningful understanding of the financial information. 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 on page 12 of the Financial Review section are the following costs:

 
                                             2022    2021 
                                           GBP000  GBP000 
----------------------------------------  -------  ------ 
Acquisition costs                         (1,601)       - 
Litigation and legal costs                  (858)   (388) 
Disposal and impairment of fixed assets     (284)   (167) 
Release of site closure costs provision       795   1,340 
Other reorganisation people costs              50     173 
                                          (1,898)     958 
----------------------------------------  -------  ------ 
 

Acquisition costs are those associated with an aborted acquisition during the year. Litigation and legal costs of GBP0.9 million (2021: GBP0.4 million) are in relation to a dispute over the consideration paid for an earlier year acquisition and costs of GBP0.3 million (2021: GBP0.2 million) relating to fixed assets disposals in the current year and final impairment of assets at Cardiff in the prior year. The release of site closure provisions of GBP0.7 million (2021: GBP0.8 million) relating to lease costs that have been avoided due to successful re-letting of closed site units plus a release of GBP0.1 million (2021: GBP0.4 million) of related site closure costs and GBP0.1 million (2021 GBP0.2 million) of unused reorganisation provisions.

   5.     Finance Income and Cost 

Recognised in the Consolidated Statement of Comprehensive Income

 
                                               2022     2021 
                                             GBP000   GBP000 
------------------------------------------  -------  ------- 
Finance income 
Change in fair value of interest rate 
 swaps                                            -       89 
Total finance income                              -       89 
------------------------------------------  -------  ------- 
Finance cost 
Interest on net pension position              (285)    (224) 
Interest on interest rate swap agreements      (43)    (119) 
Bank interest payable                         (531)    (545) 
Unwinding of discount on deferred 
 consideration                                 (54)    (105) 
Interest on deferred consideration             (18)     (36) 
Change in fair value of interest rate 
 swaps                                         (18)        - 
Lease liabilities                             (259)    (274) 
Total finance cost                          (1,208)  (1,303) 
------------------------------------------  -------  ------- 
 
 
   6.     Taxation 

Recognised in the Consolidated Statement of Comprehensive Income

 
                                    2022      2021 
                                  GBP000    GBP000 
-----------------------------   --------  -------- 
 Current tax 
 Current year                      2,137     3,277 
 Adjustments for prior years       (148)     (263) 
------------------------------  --------  -------- 
 Total current tax                 1,989     3,014 
------------------------------  --------  -------- 
 
 Deferred tax 
 Origination and reversal of 
  temporary differences              646        95 
 Rate change                       (209)       252 
 Adjustments for prior years         283         7 
------------------------------  --------  -------- 
 Total deferred tax                  720       354 
------------------------------  --------  -------- 
 Total tax expense                 2,709     3,368 
------------------------------  --------  -------- 
 

Reconciliation of Effective Tax Rate

The weighted average hybrid rate of UK, Polish and French tax is 19.5% (2021: 20.5%). The tax assessed for the period is lower (2021: lower) than the hybrid rate of UK and French tax. The UK Corporation Tax rate for the period is 19.0% (2021: 19.0 %). The differences are explained below:

 
                                                   2022    2021 
                                                 GBP000  GBP000 
Profit before taxation                           14,297  17,013 
 
Tax using the UK Corporation Tax rate of 19%, 
 (2021: 19%)                                      2,716   3,232 
 
Overseas profits charged at different taxation 
 rate                                               265     151 
Non-deductible expenses and timing differences       88     480 
Restatement of opening net deferred tax due 
 to rate change and differences in rates             91     298 
R&D reclaim                                       (586)   (537) 
Adjustments to tax charge in respect of prior 
 periods                                            135   (256) 
-----------------------------------------------  ------  ------ 
Total tax expense                                 2,709   3,368 
-----------------------------------------------  ------  ------ 
 

The UK Corporation Tax rate increase from 19% to 25% from 1 April 2023 was substantively enacted in March 2021, this decision has been reversed at the mini-budget on 23 September 2022. The deferred tax assets and liabilities at 2 July 2022 have been calculated based on a rate at which they are expected to crystallise which is likely to be 19% or 25% (the rate at the time of preparation of these financial statements).

The adjustment of GBP135,000 for the prior year includes ineligible capital spends 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 GBP239,000 (2021: GBP239,000) 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 124,265,000 (2021: 125,805,000).

Basic diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of all potential dilutive ordinary shares. At 2 July 2022, the diluted weighted average number of shares in issue was 132,352,000, (2021: 132,753,000).

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; 

-- IFRS 9 '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; and 
   --      Amortisation of intangible assets. 
 
                                               53 weeks to             52 weeks to 
                                               2 July 2022             26 June 2021 
                                                  GBP000                  GBP000 
---------------------------------------  ----------------------  ---------------------- 
 Profit 
 Profit attributable to equity holders 
  of the Company (basic)                         10,472                  12,347 
 Significant non-recurring and other 
  items                                           2,318                  (1,514) 
 Intangible amortisation net of 
  deferred tax                                     574                     574 
---------------------------------------  ----------------------  ---------------------- 
 Numerator for adjusted earnings 
  per share calculation (adjusted 
  basic)                                          13,364                  11,407 
---------------------------------------  ----------------------  ---------------------- 
 
 Shares                                       Basic     Diluted       Basic     Diluted 
                                               '000        '000        '000        '000 
---------------------------------------  ----------  ----------  ----------  ---------- 
 Weighted average number of ordinary 
  shares in issue during the period         124,265     124,265     125,805     125,805 
 Dilutive effect of share options                 -       8,087           -       6,948 
---------------------------------------  ----------  ----------  ----------  ---------- 
                                            124.265     132,352     125,805     132,753 
---------------------------------------  ----------  ----------  ----------  ---------- 
 
                                              Basic     Diluted       Basic     Diluted 
 Earnings per share                           pence       pence       pence       pence 
---------------------------------------  ----------  ----------  ----------  ---------- 
 Basic and diluted                              8.4         7.9         9.8         9.3 
 Adjusted basic and adjusted diluted           10.8        10.1         9.1         8.6 
---------------------------------------  ----------  ----------  ----------  ---------- 
 

Significant non-recurring and other items net of taxation are tabled on page 12 and comprise: significant non-recurring charge GBP1,700,000 (2021: income GBP776,000), Defined Benefit Pension Scheme income GBP99,000 (2021: GBP187,000), fair value of interest rate swaps, foreign exchange contracts charge GBP673,000 (2021: income GBP636,000), and the unwinding of deferred consideration discounting charge GBP44,000 (2021: GBP85,000).

   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 27 June 2020               85,004     10,177           3,683            7,630    106,494 
 Additions                               -      1,045               -                -      1,045 
 Transfers from tangible fixed 
  assets                                 -        165               -                -        165 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 Cost at 26 June 2021               85,004     11,387           3,683            7,630    107,704 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 Additions                               -        802               -                -        802 
 Transfers from tangible fixed 
  assets                                 -         81               -                -         81 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 Cost at 2 July 2022                85,004     12,270           3,683            7,630    108,587 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 
 Accumulated amortisation 
  at 27 June 2020                 (11,790)    (1,851)         (1,645)          (2,582)   (17,868) 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 Charge for the year                     -    (1,108)           (143)            (566)    (1,817) 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 Accumulated amortisation 
  at 26 June 2021                 (11,790)    (2,959)         (1,788)          (3,148)   (19,685) 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 Charge for the year                     -      (838)           (143)            (566)    (1,547) 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 Accumulated amortisation 
  at 2 July 2022                  (11,790)    (3,797)         (1,931)          (3,714)   (21,232) 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 
 Net book value at 27 June 
  2020                              73,214      8,326           2,038            5,048     88,626 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 Net book value at 26 June 
  2021                              73,214      8,428           1,895            4,482     88,019 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 Net book value at 2 July 
  2022                              73,214      8,473           1,752            3,916     87,355 
-------------------------------  ---------  ---------  --------------  ---------------  --------- 
 
 

The customer relationships, brands and licences recognised in the opening costs were purchased as part of the Ultrapharm acquisition in September 2018 and 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 Consolidated Statement of Comprehensive Income. 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.

   8.   Intangibles (continued) 

The Group tests goodwill for impairment on an annual basis, or more frequently if there are indications that the goodwill may be impaired. The recoverable amounts of the cash generating units are determined from value in use calculations. The key assumptions for the value in use calculations are the discount, inflation 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.

In the current climate in which we navigate well-publicised macro challenges, relevant judgements and assumptions must be made. The Group continues to operate in a complex trading environment with pressure from inflation, supply chain disruptions, labour availability impacted by the pandemic, political, economic and legislative changes and economic factors linked to the ongoing conflict in Ukraine. The conflict between Russia and Ukraine continues to develop and is likely to have a broad impact on the global economy.

Forecasts have been built on a bottom-up basis and stress tested to prepare an approved budget used as a basis for considering testing for impairment. Risks and opportunities have been considered and, plausible downside scenarios have been assessed.

The forecasts have taken in consideration the following key factors:

   1.     Ongoing challenging macro environment. 

2. Latest market forecast and market research data has been considered when making commercial judgements.

   3.     Detailed SWOT analysis of all businesses with a strategic plan to respond to challenges. 
   4.     Plans to combat inflationary pressures particularly labour costs in the UK and Europe. 

5. Detailed plans supporting strategic initiatives and strategy into action with continued focus in the Operating Brilliance Programme, Process Blueprint, value engineering, asset management and care.

6. Organisational design and engagement activity to provide bakery teams to support our strategy.

The forecasts covering a three-year period are based on the detailed financial forecasts challenged and approved by management for the next three years. The cash flows beyond this forecast are extrapolated to perpetuity using a 1.63% (2021: 1.5%) growth rate for all of the cash generating units. 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 to the extent that can be anticipated.

The strategic forecast process commenced in November 2021 to review consumer and competitor insight to prepare the foundations for the financial forecasts. The revenue growth rate in the strategic forecast 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. External market data and trends are considered when predicting growth rates. Compound annual growth rates for revenues for the three-year forecast period averages at 7.4% reflecting the recovery from the lower-base year impacted by the pandemic, inflationary pressures impacting consumer demand, a challenging environment with staff shortages and supply chain disruption. The forecast periods include the annualisation of commercial negotiations, benefits of our ongoing Operating Brilliance Programme and organic growth.

A post-tax discount rate of 7.9% (2021: 8.2%) has been used in these calculations. The discount rate uses weighted average cost of capital which reflects the returns on government bonds and an equity risk premium adjusted specifically for Finsbury, plus further risk premiums that consider cash generating unit risk. 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 has decreased over the prior year rate as a result of a higher debt to equity ratio position and a decrease in the risk-free 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. When considering the Ultrapharm discount rate a further 0.5% has been added for the overseas risk element.

   8.      Intangibles (continued) 

The table below shows the carrying values of goodwill allocated to cash generating units or groups of cash generating units. When calculating the discount rate that would need to be applied for there to be zero headroom, the discounted cash flows were compared against the carrying amount of goodwill, property, plant and equipment and right-of-use assets. The discount rates are shown in the table below:

 
                         Carrying value     Post-tax discount     Pre-tax discount 
                            of goodwill         rate at which        rate at which 
                                              headroom is nil      headroom is nil 
                         2022      2021       2022       2021       2022      2021 
                       GBP000    GBP000          %          %          %         % 
------------------  ---------  --------  ---------  ---------  ---------  -------- 
 Lightbody of 
  Hamilton             45,698    45,698       22.5       17.2       29.9      22.9 
 Fletchers Bakery      20,118    20,118       16.0       12.9       21.4      17.2 
 Ultrapharm*            4,046     4,046       12.5        9.6       16.7      12.8 
 Nicholas and 
  Harris                2,980     2,980       37.2       44.3       49.6      59.1 
 Johnstone's Food 
  Service                 372       372      135.1      122.8      180.1     163.7 
                       73,214    73,214 
------------------  ---------  --------  ---------  ---------  ---------  -------- 
 

Impairment

The post-tax discount rate at which the headroom is nil for Fletchers Bakery is 16.0% (2021: 12.9%) an improvement over the previous year. There are key strategies and plans in place in order to improve the performance of Fletchers. With our development, technical and process knowledge we can enable them to become a leading player in the buns and rolls category and our scale, new product development and continued good relationships with our food service customers enables us to target growth. Unprecedented inflation and workforce availability have been key challenges to address, our improved efficiencies, our focus on realising Fletchers as a centre of excellence for buns and rolls, our continued success on our Operating Brilliance Program and our focus on our Strategic Pillar for Growth have enabled us to overcome the challenges. Development of our own Kara foodservice brand, new product development and investment in core product areas stands us in good stead to deliver our financial forecasts. Sensitivities have been carried out to exclude any growth, which, demonstrates that headroom still exists. It has been concluded that no impairment was necessary on the carrying value of goodwill relating to the Fletchers Bakery at 2 July 2022.

The post-tax discount rate at which the headroom is nil for Ultrapharm Limited is 12.5% (2021: 9.6%). There are key strategies in place in order to improve the performance of Ultrapharm. There has been successful new product development during the year, the proven innovation delivery in the current year provides a solid springboard for growth throughout the strategic periods as we benefit from the annualisation of those launches. Targeted new product development and a better understanding of intellectual property will continue with new products being launched in the year to 1 July 2023. Avian flu and the Ukraine conflict have had an adverse impact on input prices, however commercial negotiations, value engineering projects, continued drive in our Operating Brilliance Programme and cost saving activities have been successful in minimising the impact of these pressures. For our overseas subsidiary, home market growth is targeted along with newly formed branded relationships which will help leverage our available capacity. Sensitivities have been carried out. It has been concluded that no impairment was necessary on the carrying value of goodwill relating to Ultrapharm Limited at 2 July 2022.

Sensitivity analyses have been carried out by the Directors on the carrying value of all remaining goodwill using post-tax discount rates up to 12.5%, which would not result in an impairment.

Further sensitivity analysis has been carried out using a range of factors such as growth rate and cost increases, which would not result in an impairment. These include:

   --      If future growth rate assumption of 1% was replaced with zero growth rate; and 
   --      If future growth rate assumption of 1% was replaced with a decline of 1%. 

Whilst the period under review has been set against the backdrop of exceptional macroeconomic and inflationary headwinds, the Group has been faced with unprecedented challenges first triggered by the Covid-19 crisis and now by significant input cost inflation and falling consumer confidence. Despite this, the overall demand for food and drink has remained resilient. Our retail business has performed well, we continue to see a bounce back in foodservice, our overseas division continued to see strong growth and our proven resilience and performance enables us to remain confident in our strategic plans.

   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 
  2022 Statutory           Margin   repayments    maturity      GBP000    GBP000     GBP000 
-----------------  --------------  -----------  ----------  ----------  --------  ---------  ----------- 
 
Revolving credit      1.95%/SONIA       Varies        2027      60,000   27,875           -       27,875 
Leases*                   Various      Monthly     Various               9,917        1,805        8,112 
Unamortised transaction 
 costs                                                                     (799)      (200)        (599) 
---------------------------------  -----------  ----------  ----------  --------  ---------  ----------- 
                                                                          36,993      1,605       35,388 
 --------------------------------  -----------  ----------  ----------  --------  ---------  ----------- 
 
*Leases include all leases recognised as lease liabilities under 
 IFRS 16. Lease liabilities are shown separately in the table 
 below to show total bank debt as defined by our banking facility 
 agreement, which only recognises leases as defined as finance 
 leases under IAS 17 as part of bank debt. 
                                     Frequency                                               Non-current 
                                            of     Year of    Facility     Drawn    Current       GBP000 
  2022                     Margin   repayments    maturity      GBP000    GBP000     GBP000 
-----------------  --------------  -----------  ----------  ----------  --------  ---------  ----------- 
 
Revolving credit      1.95%/SONIA       Varies        2027      60,000   27,875           -       27,875 
Finance lease 
 (under IAS 17)           Various      Monthly     Various                151            76           75 
Unamortised transaction 
 costs                                                                     (799)      (200)        (599) 
---------------------------------  -----------  ----------  ----------  --------  ---------  ----------- 
Total bank debt                                                           27,227      (124)       27,351 
---------------------------------  -----------  ----------  ----------  --------  ---------  ----------- 
Operating leases 
 (under IAS 17)              2.2%       Varies                             9,766      1,729        8,037 
----------------------  ---------  -----------  ----------  ----------  --------  ---------  ----------- 
Total debt                                                                36,993      1,605       35,388 
 
                                     Frequency                                               Non-current 
                                            of     Year of    Facility     Drawn    Current       GBP000 
  2021 Statutory           Margin   repayments    maturity      GBP000    GBP000     GBP000 
-----------------  --------------  -----------  ----------  ----------  --------  ---------  ----------- 
 
Revolving credit      1.50%/LIBOR       Varies        2023      55,000   22,431           -       22,431 
Leases*                   Various      Monthly     Various               10,745       2,039        8,706 
Unamortised transaction 
 costs                                                                     (108)          -        (108) 
---------------------------------  -----------  ----------  ----------  --------  ---------  ----------- 
                                                                          33,068      2,039       31,029 
 --------------------------------  -----------  ----------  ----------  --------  ---------  ----------- 
 
*Leases include all leases recognised as lease liabilities under 
 IFRS 16. Lease liabilities are shown separately in the table 
 below to show total bank debt as defined by our banking facility 
 agreement, which only recognises leases as defined as finance 
 leases under IAS 17 as part of bank debt. 
                                     Frequency                                               Non-current 
                                            of     Year of    Facility     Drawn    Current       GBP000 
  2021                     Margin   repayments    maturity      GBP000    GBP000     GBP000 
-----------------  --------------  -----------  ----------  ----------  --------  ---------  ----------- 
 
Revolving credit      1.50%/LIBOR       Varies        2023      55,000   22,431           -       22,431 
Finance lease 
 (under IAS 17)           Various      Monthly     Various                220           128           92 
Unamortised transaction 
 costs                                                                     (108)          -        (108) 
---------------------------------  -----------  ----------  ----------  --------  ---------  ----------- 
Total bank debt                                                           22,543        128       22,415 
---------------------------------  -----------  ----------  ----------  --------  ---------  ----------- 
Operating leases 
 (under IAS 17)              2.2%       Varies                            10,525      1,911        8,614 
----------------------  ---------  -----------  ----------  ----------  --------  ---------  ----------- 
Total debt                                                                33,068      2,039       31,029 
 
 
 

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 and interest cover.

The revolving credit bank facility available for drawdown is GBP60.0 million plus a further GBP60.0 million accordion facility (2021: GBP55.0 million plus a further GBP35.0 million accordion). At the period end date, the facility utilised was GBP27.9 million (2021: GBP22.4 million), giving GBP32.1 million (2021: GBP32.6 million) headroom plus a further GBP60.0 million (2021: GBP35.0 million) accordion.

   10.   Analysis of Net Bank Debt 
 
 The table below is presented to demonstrate total debt as defined 
  by our banking facility agreement. This excludes the lease liabilities 
  created on transition to IFRS 16 for leases treated as operating 
  leases under IAS 17. 
 
                                              At year                     At year 
                                             ended 27        Cash         ended 2 
                                            June 2021        flow       July 2022 
 Cash and cash equivalents                      9,523     (2,142)           7,381 
 Debt due after one year                     (22,431)     (5,444)        (27,875) 
 Hire purchase obligations 
  due within one year                           (128)          52            (76) 
 Hire purchase obligations 
  due after one year                             (92)          17            (75) 
-------------------------------------  --------------  ----------  -------------- 
 Total net bank debt                         (13,128)     (7,517)        (20,645) 
-------------------------------------  --------------  ----------  -------------- 
 
   11.   Acquisitions 

The Company acquired a further 35% of the issued share capital of Lightbody-Stretz Limited from Phaste S.a.r.l. in February 2022 for a consideration of GBP6.1 million, bringing its holding up from 50% to 85%.

Deferred consideration of GBP1.0 million paid relates to the acquisition of Ultrapharm Limited (Ultrapharm) for GBP16.9 million plus up to GBP3.0 million, GBP0.5 million of which is outstanding at 2 July 2022 with the final quarterly instalment payable in October 2022.

Discounted amounts payable within one year of the Consolidated Statement of Financial Position date is GBP496,000 (2021: GBP976,000) and amounts due beyond one year is GBPnil (2021: GBP466,000). Amounts charged to finance expenses during the year for the unwinding of the discounting is GBP54,000 (2021: GBP105,000).

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