REG - Finsbury Food Group - Interim Results <Origin Href="QuoteRef">FIF.L</Origin> - Part 1
RNS Number : 1092IFinsbury Food Group PLC23 March 2015
Date:
23 March 2015
On behalf of:
Finsbury Food Group plc ('Finsbury', 'the Company' or 'the Group')
Embargoed until:0700hrs
Finsbury Food Group plc
Interim Results
Finsbury Food Group plc (AIM: FIF), a leading UK Speciality bakery manufacturer of cake, bread and morning goods for the retail and foodservice channels, is pleased to announce its unaudited interim results for the six months ended 27 December 2014. The interim results includes two months of trading from the Fletchers Group which was acquired on 30 October 2014.
Summary
Group revenue of 107.6m up 24.1% (H1 2013: 86.6m) and up 5.6% on a like-for-like basis
Operating profit of 4.5m up 74% (H1 2013: 2.6m) and up 57% on a like-for-like basis
Group operating profit margin of 4.2% (H1 2013: 3.0%)
Profit before tax of 4.1m up 95% (H1 2013: 2.1m) and up 77% on a like-for-like basis,
Strong growth in adjusted diluted EPS, up 78% to 3.2p per share (H1 2013: 1.8p per share)
Interim dividend per share of 0.83p (H1 2013: 0.25p per share)
Net debt of 25.0m equates to 1.3 times pro forma annualised EBITDA of the Group
Strategic highlights
Acquired the Fletchers Bakery Group for 56m in October 2014
The Group is now one of the largest speciality bakery groups in the UK with annualised revenues of approximately 270m
The acquisition of Fletchers Bakery Group gives Finsbury a broader spread of customers across food retail and food service channels in cake, bread and morning goods businesses
Successful delivery of targeted cost cutting initiatives through continuous improvement programmes
Operational highlights
Increase in operating profit margin showing the benefits of ongoing capex investment and overhead management
Organic sales growth of 5.6% versus prior year, driven by market share growth in the UK Cake business
Food service sales growth ahead of market growth with 12 new products launched across three ranges
Food Manufacturer's Bakery Manufacturing Company of the year award 2014 and winner of 1st, 2nd and 3rd place in the Q awards
Commenting on the results, John Duffy, Chief Executive of Finsbury Food Group plc, said:
"I am pleased to report the significant progress of the Group. Over the period we have seen a strategic shift, becoming more diversified in terms of products and customers, as well as evolving into one of the largest speciality bakery groups in the UK.
"We have seen notable growth, both organically and through the Fletchers acquisition, which is integrating well. We look forward to the remainder of the year with confidence and, despite a tough trading environment, we believe the Group is in a strong position to deliver on our growth strategy."
For further information:
Finsbury Food Group plc
John Duffy (Chief Executive)
029 20 357 500
Stephen Boyd (Finance Director)
Cenkos Securities plc
Bobbie Hilliam (Corporate Finance)
020 7397 8900
Oliver Baxendale (Sales)
Redleaf Communications
Rebecca Sanders-Hewett/
020 7382 4730
Jenny Bahr/ Rachael Brown
Publication quality photographs are available via Redleaf Polhill on the numbers shown above
STRATEGY
Finsbury's core strategy has remained consistent, being:
to build a speciality, craft bakery group focused on quality products and on relevant consumer trends such as premium, celebration and well-being;
to continue to develop a licensed brand portfolio to complement our core retailer and brand relationships;
to focus on delivering what customers and consumers want in both retail and out of home channels;
to improve efficiency and productivity via capital investment and continuous operational improvement; and
to generate returns for shareholders.
The success in the delivery of our core strategy is evidenced by the like-for-like revenue growth of 5.6% and by the like-for-like growth in operating profits of 57%, with operating profit margins growing to 4.2% from 3.0%. There are a number of varied factors behind this improvement which together have delivered a step change in performance. Factors include:
growth in our share of the Cake market on the back of our licensed brand portfolio (such as the Disney Frozen celebration cake) and through our own label round cake offering,
improvement in production efficiency, leading to lower cost of production and the ability to support customers through more effective promotional activity to the benefit of consumers, customers and ourselves,
the benefits of increased automation from capital investment.
This core strategy is complemented by a focus on driving the Group into its next phase of growth and key to this is taking part in industry consolidation and appropriate M&A. The acquisition of Fletchers Bakeries on 30 October 2014 was a significant step in this direction, increasing annualised Group revenues to approximately 270 million.
Net debt of 25 million at half year, equating to 1.3 times annualised EBITDA results in a healthy post acquisition balance sheet and the ability to continue in our efforts to take part in industry consolidation and appropriate M&A.
Our core strategy is centred around generating returns for shareholders. Adjusted diluted earnings per share are 78% higher at 3.2p per share, a result of the growth in operating profit.
A final dividend for the year to 28 June 2014 of 0.75p per share was paid on 10 December 2014 to shareholders on the register at the close of business on 24 October 2014. This brings the total dividend for the year to 28 June 2014 to 1.00p per share. The Board of Directors is announcing an interim dividend of 0.83p per share (H1 2013: 0.25p per share), an increase of 232%. This increase is in line with our progressive dividend policy which is predicated on strong cash generation from operations and a healthy balance sheet.
THE ACQUISITION OF FLETCHERS BAKERIES
The headline acquisition price for Fletchers Bakeries was 56 million, funded in part by an oversubscribed equity raise of 35 million. The remainder was funded through debt. Fletchers Bakeries is a UK-based business manufacturing, bread and morning good bakery products. The acquisition brings opportunities in new food service channels, retail customer diversification and complimentary product ranges. Fletchers Bakeries fits well within our UK bakery business and the Group is expecting significant operational and commercial synergies. Furthermore, the core strategy set out above remains appropriate and continues to apply to the enlarged Group.
OUTLOOK
The Group delivered a strong performance over the first half. This was due to the successful delivery of our twin organic growth and efficiency led capital investment strategy, which together resulted in improved operating margins. This strong core performance was complemented by two months of additional sales and profit growth from the acquisition of Fletchers.
Whilst the UK grocery market continues to be challenging, the wider economic environment is slowly improving. The broader channel, customer and product diversification achieved recently within the Group will continue to benefit us given the higher growth opportunity in some of these areas such as foodservice.
The Group has laid strong foundations and delivered a good first half performance, we expect this to continue into the second half of the financial year as we complete the integration of Fletchers into the Group and deliver the planned scale and efficiency synergy benefits. Our balance sheet remains strong and we will continue to invest to deliver our stated growth strategy.
OPERATING REVIEW
UK Bakery
H1 2014 m
H1 2013 m
Growth
Like for Like Growth
Revenue
96.3
75.4
28%
6.4%
Operating profit
3.8
2.0
94%
72%
Operating margin
3.9%
2.6%
+130bps
UK Bakery comprises the Cake business and the Bread and Morning Goods business. Revenue in the period has increased by 28% to 96.3 million. On a like-for-like basis revenue growth is 6.4%. Revenue growth arises primarily in the Cake business. Operating profit in the period has increased by 94% to 3.8 million. On a like-for-like basis, operating profit growth is 72%. Again, operating profit growth arises primarily in the Cake business. Operating profit margins of 3.9% are below expectation and the Group continues to invest through automation and through continuous operational improvement to improve these margins further.
Cake
The Cake business operates in a mature market with value decline of 1.4% and volume decline of 3% (Source: IRI Infoscan w/e 03 January 2015). Revenue growth has been driven by a successful Christmas trading period as well as the success of the Frozen Disney licensed celebration cake and our own label round cake offering. Operating profit margin growth arises from operational efficiency within our factories and includes the benefit of significant capital expenditure over the last two years. The intention is to continue investing in capital expenditure within the Cake business to improve margins further and also to increase product capability e.g. food service.
Bread and Morning Goods
The acquisition of Fletchers bakeries has significantly expanded our existing bread and morning goods business (Nicholas & Harris). The half year results include two months trading of the acquired business which totalled 16.0 million of revenue and 0.4 million of operating profit. It is still early in the integration process of Fletchers into the UK bakery business but early indications and expectations are positive. As is the case for the Cake business intention is to invest in capital expenditure to improve productivity and increase product capability.
Overseas
H1 2014 m
H1 2013 m
Growth
Revenue
11.3
11.2
0.4%
Operating profit
0.6
0.5
29%
Operating margin
5.3%
4.1%
+120bps
The Overseas business represents Lightbody Europe, trading primarily in France. The business specialises in the importing and sale of premium UK manufactured food products. It holds many of the licences held by the UK Bakery business for Europe and is an important channel for UK manufactured celebration cake and bite products.
The business is heavily exposed to the Euro and recent exchange rate performance. Within this context we are pleased with the operating profit performance of Overseas.
FINANCIAL REVIEW
Revenue and Operating Profit
Group revenue H1 2014 was up 24% to 107.6 million (H1 2013: 86.6 million), on a like-for-like organic growth was 5.6%, an increase of 4.9 million.
Profit from operations before interest, tax and significant non-recurring and other items was up by 74% or 1.9 million to 4.5 million. On a like-for-like basis profit from operations was up 57% to 4.1 million (H1 2013: 2.6 million).
Interest Payable
Interest payable and charges on related interest rate swaps on the group's bank debt in H1 2014 is 447,000 (H1 2013: 509,000), a decrease of 62,000. The reduction in charges on interest rate swaps of 173,000 is a consequence of the expiry of an expensive 4 year interest rate swap of 10 million (fixed) at 4.9% this reduction has been partially offset by an increase in interest payable of 111,000 resulting primarily from the additional debt arising on the acquisition of Fletchers.
Taxation
The Group's effective tax rate in H1 2014 is 23.1%, which compares to 26.5% in H1 2013. The effective rates represents a blend of the UK and French corporation tax rates. The reduction in the effective rates when comparing half years arises from a 1.75% reduction in the annual hybrid UK corporation tax rates and from a lower blend of profits charged at the higher French corporation tax rate
Significant non-recurring and other items
The Group incurred costs of 1,328,000 in the acquisition of Fletchers Bakeries. Related taxation relief is 276,000.
Earnings per share.
The Group considers adjusted diluted earnings per share to be the most appropriate EPS measure. The adjusted diluted earnings per share were 3.2p, which includes earnings from the acquired Fletchers business and compares to 1.8p H1 2013.
Cash flow and net debt.
Cash inflow from operating profit before changes in working capital is 5.3 million, which compares with 3.6 million in H1 2013. The increase arises from the growth in revenue as well as the growth in operating margins.
Net debt at 27 December 2014 is 25.0 million which compares to 11.8 million at H1 2013, an increase of 13.2 million. The increase in net debt as a result of the Fletchers acquisition is 14.8 million.
Capital expenditure of 1.7 million was incurred in H1 2014 which is 2 million lower than H1 2013. This reduction is down to phasing with the level of capital expenditure in the full-year expected to be similar to the year to June 2014.
Pensions
The group has one defined benefit pension scheme within its Memory Lane Cake business in Cardiff. All remaining group companies have defined contribution schemes.
The Memory Lane Cake pension scheme has been closed to future accruals and new members since 31 May 2010. The net pension deficit (before related deferred tax) is 3,630,000 at 28 June 2014, which is an increase of 787,000 since 29 June 2013. The net pension deficit after related deferred tax was 2,904,000, an increase of 715,000 from 29 June 2013.
The fair value of total plan assets relating to the Memory Lane Pension scheme is 19,741,000 at 28 June 2014, which compares to 18,728,000 at 29 June 2013. The present value of the defined benefit obligations relating to the Memory Lane Pension scheme is 23,371,000 at 28 June 2014, which compares to 21,571,000 at 29 June 2013.
Principal risks and uncertainties
A number of risks and uncertainties have been identified that would potentially have a material impact on the financial position of the Group. These are set out on pages 10 and 13 of the Annual Report for the year to 28 June 2014 and which the Board considers to remain applicable.
Forward looking statements
Throughout this report certain statements have been made which are forward looking. These statements have been made based on latest knowledge and expectations of the future. The Board considers the statements to be reasonable. Inevitably there are risks associated with these forward looking statements which are usually outside the control of Group. Actual results or performance may therefore differ from the outcome implied by these forward looking statements.
Consolidated Statement of Comprehensive Income (unaudited)
Note
Unaudited
26 weeks
ended
27 December 2014
Unaudited
26 weeks
ended
28 December 2013
Audited
52 weeks
ended
28 June
2014
'000
'000
'000
Continuing operations
Revenue
107,565
86,643
175,708
Cost of sales
(75,126)
(64,426)
(127,530)
Gross profit
32,439
22,217
48,178
Administrative expenses
(27,934)
(19,621)
(40,470)
Results from operating activities
4,505
2,596
7,708
Finance expense
6
(447)
(512)
(1,238)
Profit before taxation
4,058
2,084
6,470
Taxation
(939)
(553)
(1,519)
Profit from continuing operations after tax before significant non-recurring and other items
3,119
1,531
4,951
Significant non-recurring and other items:
Administrative expenses
4
(1,328)
(297)
(759)
Share option charge
5
(11)
(11)
(9)
Defined benefit pension scheme -administration costs
-
-
71
Defined benefit pension scheme - financial income net of expenses
6
-
-
(132)
Movement in fair value swaps
6
(94)
396
708
Movement in fair value foreign exchange contracts
61
75
81
Fair value adjustments relating to acquisitions
6
77
70
146
Taxation relating to above items
268
(77)
(132)
Total significant non-recurring and other items
(1,027)
156
(26)
Profit after taxation
2,092
1,687
4,925
Other comprehensive income
Actuarial loss on defined benefit pension scheme net of deferred taxation
-
-
(581)
Foreign exchange translation differences
-
(40)
-
Other comprehensive income, net of income tax
-
(40)
(581)
Total comprehensive income
2,092
1,647
4,344
Profit attributable to:
Equity holders of the parent
1,848
1,454
4,400
Non-controlling interest
244
233
525
Profit for the financial period
2,092
1,687
4,925
Total comprehensive income attributable to:
Equity holders of the parent
1,848
1,414
3,819
Non-controlling interest
244
233
525
Total comprehensive income for the financial period
2,092
1,647
4,344
Consolidated Statement of Financial Position (unaudited)
Unaudited
Unaudited
Audited
27 December
28 December
28 June
2014
2013
2014
Note
000
000
000
Non-current assets
Goodwill
78,679
53,133
52,968
Property, plant and equipment
43,046
20,602
21,541
Other financial assets
28
28
28
Deferred tax assets
5,926
1,774
1,350
Deferred consideration receivable
-
2,819
-
127,679
78,356
75,887
Current assets
Deferred consideration receivable
2,973
-
2,895
Inventories
10,513
5,692
4,530
Trade and other receivables
47,956
28,567
24,832
Cash and cash equivalents
8
1,305
700
592
62,747
34,959
32,849
Total assets
190,426
113,315
108,736
Current liabilities
Other interest bearing loans and borrowings
8
(11,998)
(8,334)
(5,718)
Trade and other payables
(59,356)
(34,791)
(30,736)
Provisions
(974)
(238)
(237)
Deferred purchase consideration
-
(20)
-
Other financial liabilities - interest rate swaps/ fair value of foreign exchange contracts
(484)
(769)
(451)
Current tax liabilities
(301)
(113)
(28)
(73,113)
(44,265)
(37,170)
Non-current liabilities
Other interest-bearing loans and borrowings
8
(14,031)
(3,975)
(3,612)
Provisions and other liabilities
(189)
(209)
(199)
Deferred tax liabilities
(496)
(405)
(422)
Pension fund liability
(3,630)
(2,843)
(3,630)
(18,346)
(7,432)
(7,863)
Total liabilities
(91,459)
(51,697)
(45,033)
Net assets
98,967
61,618
63,703
Equity attributable to equity holders of the parent
Share capital
9
1,265
656
669
Share premium account
64,544
31,170
31,480
Capital redemption reserve
578
578
578
Retained earnings
31,209
27,962
29,849
Total shareholders' equity
97,596
60,366
62,576
Non-controlling interest
1,371
1,252
1,127
Total equity
98,967
61,618
63,703
Consolidated Statement of Changes in Equity (unaudited)
Note
Share
Capital
Share
premium
Capital redemption reserve
Retained
earnings
Non-controlling
interest
Total
equity
000
000
000
000
000
000
Balance at 30 June 2013
642
30,779
578
26,865
1,019
59,883
Profit for the 26 weeks ended 28 December 2013
-
-
-
1,454
233
1,687
Foreign exchange translation differences
-
-
-
(40)
-
(40)
Total other comprehensive expense
-
-
-
(40)
-
(40)
Total comprehensive income for the period
-
-
-
1,414
233
1,647
Transactions with owners, recorded directly in equity:
Shares issued during the period
9
14
391
-
-
-
405
Impact of share based payments
5
-
-
-
11
-
11
Dividend paid
-
-
-
(328)
-
(328)
Balance at 28 December 2013
656
31,170
578
27,962
1,252
61,618
Balance at 29 December 2013
656
31,170
578
27,962
1,252
61,618
Profit for the 26 weeks ended 28 June 2014
-
-
-
2,946
292
3,238
Other comprehensive income/(expense):
Actuarial loss on defined benefit pension plan
-
-
-
(726)
-
(726)
Deferred tax movement on pension scheme actuarial loss
-
-
-
145
-
145
Foreign exchange translation differences
-
-
-
40
-
40
Total other comprehensive expense
-
-
-
(541)
-
(541)
Total comprehensive income for the period
-
-
-
2,405
292
2,697
Transactions with owners, recorded directly in equity:
Shares issued during the period
9
13
310
-
-
-
323
Impact of share based payments
5
-
-
-
(2)
-
(2)
Deferred tax on share options
-
-
-
(350)
-
(350)
Dividend paid
-
-
-
(166)
(417)
(583)
Balance at 28 June 2014
669
31,480
578
29,849
1,127
63,703
Balance at 29 June 2014
669
31,480
578
29,849
1,127
63,703
Profit for the 26 weeks ended 27 December 2014
-
-
-
1,848
244
2,092
Foreign exchange translation differences
-
-
-
-
-
-
Total other comprehensive expense
-
-
-
-
-
-
Total comprehensive income for the period
-
-
-
1,848
244
2,092
Transactions with owners, recorded directly in equity:
Shares issued during the period
9
596
33,064
-
-
-
33,660
Impact of share based payments
5
-
-
-
11
-
11
Dividend paid
-
-
-
(499)
-
(499)
Balance at 27 December 2014
1,265
64,544
578
31,209
1,371
98,967
Consolidated Cash Flow Statement (unaudited)
Unaudited
26 weeks
ended
Unaudited
26 weeks
ended
Audited
52 weeks
ended
27 December
2014
28 December
2013
28 June
2014
Note
000
000
'000
Cash flows from operating activities
Profit after taxation for the period
2,092
1,687
4,925
Adjustments for:
Taxation
671
630
1,651
Finance expenses
6
464
46
516
Depreciation
2,136
1,347
2,834
Amortisation of intangibles
-
-
165
Movement in fair value foreign exchange contracts
(61)
(75)
(81)
Share options charge
5
11
11
9
Contributions by employer to pension scheme
-
-
(71)
Operating profit before changes in working capital
5,313
3,646
9,948
Changes in working capital
Increase in inventories
(619)
(1,319)
(197)
Increase in trade and other receivables
(6,544)
(3,476)
(6)
Increase in trade and other payables
8,781
1,795
(2,032)
Cash generated from operations
6,931
646
7,713
Interest paid
(346)
(492)
(1,084)
Corporation taxes paid
(387)
(826)
(1,700)
Net cash generated from operating activities
6,198
(672)
4,929
Cash flows from investing activities
Purchase of property, plant & equipment
(1,734)
(3,740)
(6,167)
Purchase of subsidiary companies
2
(53,834)
(200)
(217)
Net cash used in investing activities
(55,568)
(3,940)
(6,384)
Cash flows from financing activities
(Repayment) / drawdown of invoice discounting
(2,189)
370
(300)
Drawdown of loans
19,278
3,846
1,662
Repayment of asset finance facilities
(194)
(274)
(478)
Issue of ordinary share capital
33,660
405
728
Non-controlling interest dividend paid
-
-
(417)
Dividend paid to shareholder
(499)
(328)
(494)
Net cash from financing activities
50,056
4,019
701
Net increase/(decrease) in cash and cash equivalents
686
(593)
(754)
Opening cash and cash equivalents
592
1,310
1,310
Effect of exchange rate fluctuation
27
(17)
36
Cash and cash equivalents at end of the period
1,305
700
592
NOTES TO THE FINANCIAL STATEMENTS
1) BASIS OF PREPARATION
The interim report, which is unaudited, does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006. The comparative figures for the financial year ended 28 June 2014 have been extracted from the statutory accounts for that year. Those accounts, which were prepared in accordance with International Financial Reporting Standards as adopted by the EU ("adopted IFRSs"), have been reported on by the company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
It should be noted that current liabilities continue to exceed current assets. Having reviewed the Group's plans the Board has reasonable expectations that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group has strong asset backing and strong debtor book. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.
2) ACQUISITION
On 30 October 2014 the Group acquired the entire share capital of the Fletchers Group (Fletchers) for 56.4 million less 2.6 million working capital adjustment. Fletchers produces morning goods and specialist bread products for leading UK grocery retailers and foodservice customers. Strategic and financial benefits of the acquisition include, complementary product ranges and new food service channels, retail customer diversification, the benefits of significant capital investment within Fletchers manufacturing and a multi-channel platform for further acquisitions in due course.
The cash outflow under 'purchase of a subsidiary' of 53,834,000 on the face of the Consolidated Cash Flow Statement in the 26 weeks to 27 December 2014 relates to the following:
000
Initial consideration
39,084
Debt settled
19,740
Cash acquired
(4,990)
Cash consideration (excluding acquisition costs)
53,834
Working capital adjustment
2,598
Total consideration
56,432
The acquisition had the following effect on the Group's assets and liabilities:
Pre fair value acquisition carrying amount
000
Acquiree's net assets at acquisition date:
Property, plant and equipment
21,907
Stock
5,387
Trade and other receivables
16,851
Deferred tax asset
4,512
Trade and other payables
(20,535)
Working capital adjustment
2,598
Net identifiable assets
30,720
Goodwill / Intangibles
25,712
56,432
The Group is in the process of establishing fair values for the acquired identifiable assets. Goodwill and intangibles are shown as one amount in the table above as the Group is working through an exercise to correctly identify and value any intangible assets acquired.
3) SEGMENT INFORMATION
Operating segments are identified on the basis of internal reporting and decision making. The Group's Chief Operating Decision Maker is considered to be the Board as they are primarily responsible for the allocation of resources to segments and the assessment of performance by segment.
The Board uses adjusted operating profit, reviewed on a regular basis, as the key measure of the segments' performance. Operating profit in this instance is defined as profit before the following:
net financing expense
share option charges
significant non-recurring items
fair value adjustments relating to acquisitions
pension charges or credits in relation to the difference between the expected return on pension assets and interest cost on pension liabilities and
revaluation of interest rate swaps and forward foreign currency contracts.
The UK Bakery segment manufactures and sells bakery products to the UK's multiple grocers and food service sectors. This segment primarily comprises the operations of Memory Lane Cakes Ltd, Lightbody Group Ltd, Campbells Cake Company Ltd, Fletchers Group and Nicholas & Harris Ltd. These subsidiaries are aggregated into a single segment after considering the following criteria:
the nature of the products - products are similar in nature and are classed as manufactured bakery products
the production process - the production processes have the same or similar characteristics
the economic characteristics - the average gross margins are expected to be similar
The core operation of the Overseas segment is the distribution of the Group's UK manufactured product along with the sale of third party products primarily to Europe.
Costs of Group operations plus a 10% premium have been allocated across the segments on the basis of their operating profit. The premium has been charged to reflect the synergies achieved from obtaining resources centrally giving benefits across the operating segments. Operating profit levels have been chosen as the basis, as this reflects the underlying performance of the segment and is also the return the Group expects from those segments.
A purchasing premium of 2% is charged from Group operations, and is calculated on materials and packaging spends at segmental level. This charge is based on the rationale that Group operations, through its Group buyers, optimises the Group's procurement spend through leveraging its purchasing power.
This has resulted in a profit from continuing operations of 0.1 million (H1 2013: 0.2 million) being presented within the Group operations segment.
The Group's finance income and costs cannot be meaningfully allocated to the individual operating segments.
3) SEGMENT INFORMATION (continued)
26 week period ended 27 December 2014
UK Bakery
000
Overseas
000
Group Operations
000
Total Group
000
Revenue
External pre acquisition
80,258
11,279
-
91,537
Acquired
16,028
-
-
16,028
Total revenue
96,286
11,279
-
107,565
Profit pre acquisition
3,363
595
127
4,085
Profit from acquired business
420
420
Total underlying operating profit
3,783
595
127
4,505
Significant non-recurring items
(1,328)
Fair value foreign exchange contracts
61
Share options charge
(11)
Results from operating activities
3,227
Net financing expense
(464)
Profit before taxation
2,763
Taxation
(671)
Profit after taxation
2,092
Segment assets pre acquisition
105,312
5,141
3,958
114,411
Segment assets acquired business
74,571
74,571
Unallocated assets
1,444
Consolidated total assets
190,426
Segment liabilities pre acquisition
(36,644)
(3,668)
(2,200)
(42,512)
Segment liabilities acquired business
(22,265)
(22,265)
Unallocated liabilities
(26,682)
Consolidated total liabilities
(91,459)
Other segment information
Capital expenditure
1,705
29
-
1,734
Depreciation included in segment profit
2,126
10
-
2,136
Inter-segmental sale/(purchase)
3,026
(3,026)
-
-
Analysis of unallocated assets and liabilities:
Assets
Liabilities
'000
'000
Investments
28
Loans and borrowings
(26,029)
Financial instruments
-
Financial instruments
(484)
Cash and cash equivalents
1,305
Cash and cash equivalents
-
Taxation balances
111
Taxation balances
(169)
Unallocated assets
1,444
Unallocated liabilities
(26,682)
Certain operating costs have been incurred centrally, these costs have been allocated to the reporting segments on an appropriate basis.
3) SEGMENT INFORMATION (continued)
26 week period ended 28 December 2013
UK Bakery
000
Overseas
000
Group Operations
000
Total Group
000
Revenue
External
75,408
11,235
-
86,643
Underlying operating profit
1,951
462
183
2,596
Significant non-recurring items
(297)
Fair value foreign exchange contracts
75
Share options charge
(11)
Results from operating activities
2,363
Net financing expense
(46)
Profit before taxation
2,317
Taxation
(630)
Profit after taxation
1,687
Segment assets
102,406
6,109
3,910
112,425
Unallocated assets
890
Consolidated total assets
113,315
Segment liabilities
(32,799)
(4,229)
(1,591)
(38,619)
Unallocated liabilities
(13,078)
Consolidated total liabilities
(51,697)
Other segment information
Capital expenditure
3,709
31
-
3,740
Depreciation included in segment profit
1,336
11
-
1,347
Inter-segmental sale/(purchase)
3,029
(3,029)
-
-
Analysis of unallocated assets and liabilities:
Assets
Liabilities
'000
'000
Investments
28
Loans and borrowings
(12,309)
Financial instruments
-
Financial instruments
(769)
Cash and cash equivalents
700
Cash and cash equivalents
-
Taxation balances
162
Taxation balances
-
Unallocated assets
890
Unallocated liabilities
(13,078)
Certain operating costs have been incurred centrally, these costs have been allocated to the reporting segments on an appropriate basis.
3) SEGMENT INFORMATION (continued)
52 week period ended 28 June 2014
UK Bakery
000
Overseas
000
Group Operations
000
Total Group
000
Revenue
External
153,740
21,968
-
175,708
Underlying operating profit
6,094
1,139
475
7,708
Significant non-recurring items
(759)
Fair value foreign exchange contracts
81
Share options charge
(9)
Defined benefit pension scheme
71
Results from operating activities
7,092
Net financing expense
(516)
Profit before taxation
6,576
Taxation
(1,651)
Profit after taxation
4,925
Segment assets
99,891
4,522
3,613
108,026
Unallocated assets
710
Consolidated total assets
108,736
Segment liabilities
(30,588)
(3,312)
(1,352)
(35,252)
Unallocated liabilities
(9,781)
Consolidated total liabilities
(45,033)
Other segment information
Capital expenditure
6,121
46
-
6,167
Depreciation included in segment profit
2,813
21
-
2,834
Amortisation
165
-
-
165
Inter-segmental sale/(purchase)
6,039
(6,039)
-
-
Analysis of unallocated assets and liabilities:
Assets
Liabilities
'000
'000
Investments
28
Loans and borrowings
(9,330)
Financial instruments
-
Financial instruments
(451)
Cash and cash equivalents
592
Cash and cash equivalents
-
Taxation balances
90
Taxation balances
-
Unallocated assets
710
Unallocated liabilities
(9,781)
Five customers with sales of 35m, 35m, 26m, 17m and 16m account for 73% of revenue, which is attributable to the 'UK Bakery' and 'Overseas' segments above.
4) SIGNIFICANT NON-RECURRING ITEMS
The Group presents certain items as non-recurring and significant. These relate to items which, in management's judgement, need to be disclosed by virtue of their size or incidence in order to obtain a more meaningful understanding of the financial information.Costs of 1,328,000 relate to acquisition transaction costs during the period. In the 26 weeks to 28 December 2013 297,000 relate to restructuring and reorganisation costs.
In the 52 weeks to 28 June 2014 643,000 relate to restructuring and reorganisation costs and 116,000 relate to due diligence and consultancy expenses associated with an aborted acquisition.
5) SHARE BASED PAYMENTS
The Group operates both approved and unapproved share option schemes. Following the adoption of IFRS2 'Share-based payments' charges have been made to the Income Statement to reflect the calculated fair value of employee share options. The cost is calculated at the date of grant and is charged equally over the vesting period. The corresponding adjustment is made to reserves.
During the 26 weeks to 27 December 2014 155,172 options were granted (H1 2013: nil). The estimated fair values of options granted for the 26 weeks to 27 December 2014 was 13,000 (H1 2013: nil).
Significant non-recurring and other items include a charge of 11,000 in relation to the fair value of share options for the 26 weeks ended 27 December 2014. The comparative charges for the 26 weeks to 28 December 2013 and for the year ended 28 June 2014 were 11,000 and 9,000 respectively.
6) FINANCE INCOME AND EXPENSES
Unaudited
26 weeks ended 27 December
2014
Unaudited
26 weeks ended 28 December
2013
Audited
52 weeks ended
28 June
2014
'000
'000
'000
Expected return on defined benefit pension plan assets
-
-
862
Change in fair value of interest rate swaps
-
396
708
Unwinding of discount of deferred consideration receivable
77
74
150
Finance income
77
470
1,720
Interest on defined benefit pension plan liabilities
-
-
(994)
Net bank interest payable
(305)
(194)
(643)
Charge on interest rate swaps
(142)
(315)
(595)
Change in fair value of interest rate swaps
(94)
-
-
Interest on deferred consideration
-
(3)
-
Unwinding of discount on deferred consideration
-
(4)
(4)
Finance expense
(541)
(516)
(2,236)
Net finance expense
(464)
(46)
(516)
The Group has entered into three interest rate swap arrangements to hedge its risks associated with interest rate fluctuations:
5.0 million for five years from 1 July 2011 (fixed) at 3.6% maturing 30 June 2016
3.0 million for four years from 22 May 2013 at 1.7% maturing 24 May 2017
6.0 million for three years from 2 June 2014 at 1.9% maturing 1 June 2017
One four year interest rate swap of 10.0 million (fixed) at 4.9% matured 31 May 2014.
These arrangements do not meet the conditions necessary for hedge accounting to be applied and, therefore, changes in their fair value are recognised immediately in the income statement resulting in a charge of 94,000 (H1 2013: credit 396,000).
7) EARNINGS PER ORDINARY SHARE
Basic earnings per share for the period is calculated on the basis of profit for the period after tax, divided by the weighted average number of shares in issue 86,149,000 (28 December 2013: 64,967,000).
Basic diluted earnings per share for the period is calculated by adjusting the weighted average number of shares in issue to assume conversion of all potential dilutive ordinary shares, which for 27 December 2014 is 90,606,000 (28 December 2013: 70,688,000).
An adjusted earnings per share has also been calculated as, in the opinion of the Board, this will allow shareholders to gain a clearer understanding of the trading performance of the Group. These adjusted earnings per share exclude amounts shown under significant and non-recurring items in the Consolidated Statement of Comprehensive Income.
26 weeks to
27 Dec 2014
26 weeks to
28 Dec 2013
Profit
Profit attributable to equity holders of the Company (basic)
000
1,848
1,454
Significant non-recurring and other items
000
1,027
(156)
Numerator for adjusted earnings per share calculation (adjusted basic)
000
2,875
1,298
Shares
Basic
Diluted
Basic
Diluted
Weighted average number of ordinary shares in issue during the period
'000
86,149
86,149
64,967
64,967
Dilutive effect of share options
'000
-
4,457
-
5,721
86,149
90,606
64,967
70,688
Earnings per share
Basic and diluted earnings per share
Pence
2.1
2.0
2.2
2.1
Adjusted basic and adjusted diluted earnings per share
Pence
3.3
3.2
2.0
1.8
8) ANALYSIS OF NET DEBT
Unaudited
26 weeks
ended
27 December
2014
Unaudited
26 weeks
ended
28 December
2013
Audited
52 weeks
ended
28 June
2014
'000
'000
'000
Net cash at bank
1,305
700
592
Loans within one year
(10,938)
(4,399)
(2,399)
Loans after more than one year
(13,934)
(3,379)
(3,194)
Invoice discounting within one year
(770)
(3,614)
(2,959)
Asset finance within one year
(355)
(396)
(382)
Asset finance after more than one year
(305)
(662)
(472)
Net bank debt excluding unamortised transaction costs
(24,997)
(11,750)
(8,814)
Unamortised transaction costs:
within one year
65
75
22
more than one year
208
66
54
Total unamortised transaction costs
273
141
76
Bank debt net of unamortised transaction costs within one year
(10,693)
(7,634)
(5,126)
Bank debt net of unamortised transaction costs more than one year
(14,031)
(3,975)
(3,612)
Bank debt net of unamortised transaction costs
(24,724)
(11,609)
(8,738)
Total net debt including deferred consideration
Net bank debt
(24,997)
(11,750)
(8,814)
Discounted deferred consideration payable
-
(20)
-
(24,997)
(11,770)
(8,814)
Deferred consideration receivable of 3 million was received on 27 February 2015 relating to the sale of the Free From business on 27 February 2013.
9) SHARE CAPITAL
There were 59,561,584 shares issued during the period (2013: 1,428,626 shares). Share capital increased by 596,000 (2013: 14,000) and share premium increased by 33,064,000 (2013: 391,000). The consideration (excluding costs) of 53.8 million for the Fletchers acquisition was partially funded by the issue of 59,322,034 ordinary shares.
Advisers
Secretaries
Auditor
CityGroupPlc
KPMG LLP
6MiddleStreet
Chartered Accountants
London
EC1A 7JA
3 Assembly Square
Britannia Quay
Cardiff Bay
CF10 4AX
Registered Office
Maes-y-coed
RoadCardiff
CF14 4XR
Tel:02920357500
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
NominatedAdviser&Broker
Registered Number
CenkosSecuritiesPlc
204368
6.7.8 Tokenhouse Yard
London
EC2R 7AS
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR LLFITVTIIFIE
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