REG - Finsbury Food Group - Preliminary Results <Origin Href="QuoteRef">FIF.L</Origin> - Part 1

Finsbury FoodAnnouncement

29/10/2014 13:19

RNS Number : 1887S
Finsbury Food Group PLC
22 September 2014
Date:
22 September 2014
On behalf of:
Finsbury Food Group plc ('Finsbury', 'the Company' or 'the Group')
Embargoed until: 0700hrs
Finsbury Food Group plc
Preliminary results
Finsbury Food Group plc (AIM: FIF), a leading manufacturer of cake and bread bakery goods, is pleased to announce its preliminary results for the financial year ended 28 June 2014.
Financial Highlights
 Adjusted* continuing profit before tax up 18% to 6.5 million (2013: 5.5 million)
 Continuing Group revenue was broadly flat at 175.7 million (2013: 176.6 million)
 Continuing adjusted* diluted EPS up 6% to 6.3p (2013: 5.9p)
 Capital investment spend up 48% to 6.2million (2013: 4.2 million)
 Total net debt including deferred consideration payable was 8.8 million (2013: 7.4 million)
 Proposed final dividend of 0.75 pence per share, taking the total dividend to 1.00 pence per share, (2013: 0.75 pence per share) a 33% increase Year on Year 

Operational Highlights
 UK Bakery Supplier of the Year 2013
 Investment in single serve Cake slice 'snap pack' successfully completed in the year as well as the largest Cake bites robotic picking installation in the world
 Commissioning of speciality bread facility expansion during the year delivering 60% additional space at Nicholas and Harris
 Peter Baker appointed Non-Executive Director Chairman
Commenting on the results, John Duffy, Chief Executive of Finsbury Food Group plc, said:
"At the end of another exacting year, it gives me great pleasure to report a further rise in bottom line growth. We have good momentum slightly disguised by a poor market, underlining yet again our ability to achieve consistent results under demanding conditions."
"In addition, we are pleased to welcome Peter Baker as Chairman which adds considerable expertise and capability to the Board. The Group is now focused on driving growth for the business and shareholders through appropriate M&A whilst not losing sight of driving growth in the core business." 
- ENDS -
For further information:



Finsbury Food Group plc 
www.finsburyfoods.co.uk
John Duffy (Chief Executive) 
029 20 357 500
Stephen Boyd (Finance Director) 



Cenkos Securities plc

Bobbie Hilliam (Corporate Finance)

Alex Aylen (Sales)



Redleaf Polhill
finsbury@redleafpr.com
Rebecca Sanders-Hewett 
020 7382 4730
Jenny Bahr

Publication quality photographs are available via Redleaf Polhill on the numbers shown above
Notes to Editors:
 Finsbury Food Group plc (AIM: FIF), is a leading manufacturer of cake and bread bakery goods. Within its Cake business, the Group's focus is premium and celebration cakes plus low fat cake slices. Its Bread business manufactures artisan and organic bread and also morning goods.
 Finsbury Food Group is the second largest manufacturer of Ambient Packaged Cake (excluding In Store Bakery) in the UK, a market valued at 924m (Source: Symphony IRI w/e 21 June 2014).
 The Group's strategy is to generate returns for shareholders by building a crafted bakery group focused on premium, celebration and well being that delivers for customers and consumers. Finsbury continues to develop its licensed brand portfolio to complement its core retailer brand relationships and improve its understanding of and response to changing consumer needs.
 Whilst the Group sees exciting organic growth opportunities in all its businesses and its short-term focus is on integrating and growing its existing businesses, the aim is to take advantage of the appropriate acquisitions to drive longer term value as opportunities and circumstance allow.
*These figures have been adjusted to eliminate the impact of the following charges required by IFRS and significant non-recurring items (see Note 4) for the 52 weeks ended 28 June 2014 and ended 29 June 2013:

Income/(Expenditure)
Restated

2014
000
2013
000
Adjusted profit on continuing operations before tax 
6,470
5,460
Significant non-recurring items (refer to Note 4 for detail)
(759)
(718)
Share options charge
(9)
(134)
Difference between defined benefit pension scheme charges and cash cost
(61)
775
Movement in the fair value of interest rate swaps
708
855
Movement in the fair value of foreign exchange contracts
81
(179)
Unwinding of the discount on deferred consideration payable
(4)
(32)
Unwinding of the discount on deferred consideration receivable
150
48
Profit on continuing operations before tax
6,576
6,075
*Refer to trading results section within the Strategic Report for further details on the adjusted profits.
The International Accounting Standards Board (IASB) has made a number of changes to IAS 19 Employee Benefits that came into force for accounting periods beginning on or after 1 January 2013. As this is the first year of accounting under this revised standard, the Company is also required to restate the accounts for the year ended 29 June 2013.

Chairman's Statement
Some Chairmanships are a sinecure. Others demand active involvement. Given my preference for the latter form of engagement, I am delighted to have assumed the role of Chairman at such a pivotal moment in the history of Finsbury Foods. 
A significant corner has been turned in recent years. The balance sheet is secured, investment in people and machinery has begun to bear fruit and scale benefits are being realised across the business. 
I am pleased to report that our results for the current financial year are comfortably in line with the expectations of the markets and our shareholders. 
We have achieved an encouraging degree of momentum in a difficult market against a backdrop of increasing commodity costs. There is a new Board, a fresh attitude and a sharpened appetite for progress. 
I have worked in the Food and (on and off) the Bakery Industry for almost four decades. Throughout that period, two constants have remained unchanged - people and products. If the product is effective, you have a powerful springboard. Add the right people and you are primed to succeed. 
Both those two elements are in place at Finsbury; we're producing great products on a consistent basis and have outstanding people in all spheres of the business. 
Even in my short time with the Company I have seen confidence growing across the business; confidence in our relationships, confidence in our approach and strategy, confidence in the direction we're taking. 
Travelling around our facilities provides further encouragement. The management team at Cardiff has exceptional talent and drive while the facility at Hamilton is equally well run. We have focused on doubling capacity at our platform at Nicholas and Harris, which has demanded internal focus and it is now fully commissioned. 
Corporate governance standards have moved on apace and our new Board will continue to make significant improvements in this important area. There is a lot of brainpower around the table with comprehensive sector experience and a smaller Board will help our decision making become more nimble and decisive. 
I would like to express my gratitude to our shareholders, to my fellow directors and to each and every one of our employees for all their hard work. I would also like to place on record our continued appreciation for the enduring support and assistance of our bankers.
Treading water is not an option. Over the next three to five years, my tenure will be judged by a number of criteria:
a. Improving shareholder value
b. Acting justly and fairly towards our employees 
c. And in a nutshell, growth.
It is a pivotal time for Finsbury Foods. We can bring about a degree of organic expansion but growth will primarily be realized through acquisition and mergers. There is a window of opportunity in the markets and the Board is actively exploring investment options. Scale will stimulate fresh routes to market, diversification of our customer base and a new perception of the Company among analysts and stakeholders.
Is it possible for a relatively small, listed group like Finsbury to double in size over a relatively short period? The management team believes that it is providing we can find the right opportunities.
We've done the hard yards. Finsbury has invested in the business when others played safe, invested in people when our competitors did not. We are focussed on helping retailers respond to changing consumer needs by offering solutions that work.
The next stage requires foresight, courage and pragmatism. It demands an ability to sustain the pace of internal transformation while remaining sensitive to external opportunities. Given the obstacles overcome by the business in recent years, I have every confidence we shall continue to advance. 
Peter Baker
Non-Executive Chairman


Chief Executive's Report
Finsbury Foods had two very different halves during the financial year.
The first half maintained the hard-earned impetus of previous periods. Sales were marginally down but Profit Before Tax registered a 50% uplift, principally due to the decrease in interest charges following the sale of our Free From business.
The second period was more challenging. Commodity price inflation began edging back upwards with escalating costs in chocolate, butter, energy and labour. Our historical customer base was adjusting to meet the threat of value-oriented discounters and we found ourselves squeezed on all sides. 
Refocus was imperative. Around the turn of the year, the management team set about eliminating 1m in annualised overhead costs and implemented a dramatic increase in capital spend. Significant projects included the installation of leading edge robotics at the cake factory in Scotland and extending space at Nicholas and Harris by 60%. 
At the end of another exacting year, it gives me great pleasure to report a further rise in bottom line growth. We have good momentum slightly disguised by a poor market, underlining yet again our ability to achieve consistent results under demanding conditions.
Trading Performance
Results for the full 52-week period ending 28 June 2014 are described in greater depth in the Strategic Report but there are a number of areas I would like to take this opportunity to highlight:
 Group revenue from continuing operations 175.7 million (2013: 176.6 million) 
 Profit before tax up 18% to 6.5 million (2013: 5.5 million)
 Total net debt 8.8 million (2013: 7.4 million)
 Adjusted diluted EPS 6.3p (2013: 5.9p)
 Capital investment spend 6.2 million (2013: 4.2 million) 
 Investment in single serve cake slice 'snap pack' successfully completed during the year as well as the largest cake bites robotic picking installation in the world
 Commissioning of speciality bread facility expansion, delivering 60% additional space at Nicholas and Harris
Dividend
Proposed final dividend of 0.75p per share giving a total dividend per share of 1.00p (2013: 0.75p), an increase of 33%. Subject to shareholder approval, the final dividend will be paid on 10 December 2014 to all shareholders on the register at 14 December 2014 and will be recognised in the year ending 30 June 2015.
Beyond The Numbers
Consumer behaviour has changed, polarising the marketplace. Having spotted an opportunity on margin, Aldi, Lidl and Pound Shops are reporting up to 30% year-on-year growth. Premium retailers, hindered by low food inflation, are struggling to retain market share.
For Finsbury Foods, the situation is delicate. There are self-evident sensitivities between our historical customer base and the burgeoning new players. Ultimately, you have to follow the consumer but existing relationships must be safeguarded.
Given our recent track record, one area of relative disappointment is the speciality bread business which had been enjoying double-digit growth. A flat year was primarily caused by market dynamics, specifically the impact of the so-called 'Bread Wars'.
Organic growth will be harder to come by. Acquisitions signpost the route forward but not at any price. The Board has been working assiduously to uncover investment opportunities but is not prepared to meet unrealistic valuations. I am confident that value expectations will start to temper in the near future and we will be ready to step in. 
After years of dedicated service, Martin Lightbody has relinquished the role of Chairman. Having assumed the mantle under testing circumstances, Martin proved a steady figurehead during the turnaround phase, carrying out his duties with dedication and resilience. David Marshall and Crawford Currie have also stepped down from the Board after many years service and I would like to thank all three for the support and contribution.
As of 1 July, the baton passed to the suitably surnamed Peter Baker. Steeped in industry experience at RHM Consumer Brands, British Bakeries and Rank Hovis Mills, Peter is committed to taking a proactive role on behalf of Finsbury, acting as a conduit for change. 
It has taken a lot longer than I hoped or expected to get to this stage but recognition is spreading. In 2013, Finsbury Foods received the coveted Bakery Supplier of The Year Award while Martin Lightbody was voted Chairman of The Year at the Quoted Company Awards.
Finsbury Foods remains driven by a passion to meet consumer expectations for affordable quality food. We didn't install robots to keep pace with technology but to pass efficiencies down to our consumers, enhancing the appeal of our category and our cake. 
Our course is set. The business environment isn't going to get any easier but doing the right things is the only long-term solution. We must persevere with internal investment, keep scanning the horizon for acquisitions and the right opportunities will come. 
John Duffy
Chief Executive Officer


Strategic Report
Strategy
The Group will continue to invest in production capability and people, there will be an element of organic expansion but growth will primarily be realised through acquisition and mergers which will in turn help us respond to consumer needs through diversification of products and customer bases. Working with retailers to meet changing consumer needs is key, in addition to this the focus will be on growth, improving shareholder perception of value and investing in employees. 
Our Markets
The total annual UK ambient cake market (including pre-packed cake and in-store bakery) is valued at 1.08 billion (source:Kantar Worldpanel). The past 12 months has seen value sales decline by -1.0% and unit sales decline by -3.1%. We continue to be the second largest supplier of ambient cake to the UK's multiple grocers and have maintained our leading position in the niche areas on which we focus.
Annual bread and morning goods sales are in excess of 3.5 billion (source: Kantar Worldpanel), although the market remains flat. We are a niche player in this market, focusing on speciality breads and rolls. The retail environment remains challenging as consumers struggle to stretch household budgets, but Nicholas and Harris are trading with key customers that are outperforming the market and so are well placed when the economic climate improves for UK shoppers.
Our Business
The Group consists broadly of the following businesses:
UK Bakery
Lightbody of Hamilton Ltd ('Lightbody'), based in Hamilton, employs over 1,100 people and is the UK's largest supplier of Celebration Cakes with Disney, Nestle, WeightWatchers and Thorntons product within its Licenced Portfolio as well as Own Label Cake. It also produces a wide range of sweet snacking products, slices and in store bakery (ISB) bites, a number of which are under our licensed brands including Nestle, Thorntons, and WeightWatchers.
Memory Lane Cakes Ltd ('Memory Lane') is based in Cardiff and employs around 800 permanent staff as well as agency at high promotional and seasonal peak times. It is the leading manufacturer of the UK retailers premium own label cake ranges. It also produces under a number of brands including Nestle, Thornton's, Weightwatchers and its own Memory Lane brand.
 
Nicholas and Harris Ltd (N&H), based in Salisbury, employs around 280 people and produces a range of speciality breads to UK retailers. Its focus is on 'clean label' breads, rolls and buns. Within its brand portfolio, N&H has Vogel's seeded bread, Cranks Organic and Village Bakery Rye bread, all of which have outperformed the bread market. The past year has been one of significant change in the bakery, with a 60% increase in its footprint to allow more efficient distribution and space for future growth. Baking capacity has also been increased by 25%. The business is now in a strong position to benefit from improvements in trading conditions in the UK.
Brands and Licences
The Group remains primarily a retailer branded business with sales of retailer own label products accounting for around 60% of our total revenue. The balance represents the strength of the licensed brands under our control.
Weight Watchers
Weight Watchers remains one of the largest food brands in the UK and we hold the licence to manufacture and distribute low fat cake to the UK and Ireland's grocers under this brand. The Low Fat cake category continues to struggle in the face of recessionary pressures on household budgets. However, this year Weight Watchers has again successfully grown its share of this category. Since the summer of 2013 we have undertaken a number of significant innovation projects under the Weight Watcher brand. Initially moving the slices into a new individually wrapped snack pack format to broaden the appeal of the offering and open new usage occasions , then incorporating a new pack design onto the slices range in June 2014. This new pack design will be rolled out across the remaining products in the Weight Watchers Cake range later in 2014
Thorntons
The Group continues to develop its branded offering via its licensing arrangement with the Thorntons confectionery business. Thorntons is the 4th largest brand in the market place and continues to grow its unit sales, in so doing outperforming the market and all key competitors over the last 52 weeks (Source: Symphony IRI). Thorntons remains the dominant player within the Bites market holding a market share in excess of 40%, and 2014 has seen the introduction of 2 new products which will further enhance our position within this key segment.
Nestl Confectionery
We continue to manufacture and distribute Cake Products under the Nestle Confectionary Brands. In 2014 the brand outperformed the market and has returned to growth driven by products under the Smarties, Yorkie, Aero and Funtastic Brands.
Disney
Our successful range of Disney Celebration cakes continues to evolve and has grown by over 20% in the last 52 weeks. Properties within the portfolio include Disney Princess, Cars, Fairies, Avengers and Spiderman. The Disney portfolio is a core part of our overall Celebration cake business and plays an important role in retaining our position as the largest supplier of Celebration cake to the UK's multiple grocers. 
Other Celebration Cake Licences
These four major brands are complemented by a range of other licences which are particularly focused on driving celebration cake sales. Evergreen properties such as Peppa Pig, Hello Kitty, and Me To You, are complemented by more trend led licenses such as One Direction and, later this year the new Despicable Me offer, to provide a compelling offer across all key target markets. This portfolio of licenses has played a key role in growing our market share of the UK Celebration Cake market.
Speciality Bread Licences
Nicholas and Harris bakery has 3 brands which it continues to develop and market under the long term licence agreements, along with LivLife which was developed and launched by N&H. In what has been a volatile & turbulent year in the bread market with sales declining 3.4% in value and 2.3% volume, Vogel's, Crank's & The Village Bakery Rye breads have maintained their position. The repositioning of Vogel's from 'Experts in seeds & Grains' to 'Crammed to Bursting' have given additional traction to the PR activity, gaining new followers on facebook and now over 2,000 new twitter followers.Village Bakery continues to demonstrate a loyal customer following, with further interest being shown in the sector where the use of 'no added wheat' is a key part of the brand. Cranks is being relaunched this year with the main focus still being on 'real bread' but with the added addition of vegetables. This is being supported by PR & advertising campaigns later in the year. LivLife having been launched in July 2013, is showing continued interest in both people who wish to reduce carbs and people who have diabetes type 2.
Overseas
The Group's 50% owned Company Lightbody Stretz Ltd, supplies and distributes the Group's UK manufactured products and third party products primarily to Europe.


Principal Risks and Uncertainties
The Group operates in an environment which is continually changing and as a result the risks it faces will also change over time. The assessment of risks and the development of strategies for dealing with these risks are achieved on an ongoing basis through the way in which the Group is controlled and managed internally. A formal review of these risks is carried out by the Group on an annual basis. The review process involves the identification of risks, assessment to determine the relative likelihood of them impacting the business and the potential severity of the impact, and determination of what needs to be done to manage them effectively.
The Directors have identified the following as the principal risks and uncertainties that face the Group:
Competitive Environment and Customer Requirements
There is currently over capacity in the market place and competition is strong between manufacturers in the Bakery sector. The monitoring of key performance indicators at customer level such as service levels and customer complaints is part of the risk management process associated with this specific risk. Strong customer service, quality products, low costs and innovative new product development are areas of focus to satisfy customer needs and remain strong in a competitive environment. The Group has invested heavily in category management, new product development and marketing skills. This investment has helped create an insight into customers and consumer demands. Continual monitoring of customer KPI's and production quality measures take place to ensure customer requirements are being met and issues are identified in a timely manner to limit their impact.
Product quality
Product quality is a key strength of the Group and failure to maintain a high standard of food quality and safety would have a severe impact on service levels and customer relationships. The Group's quality assurance procedures, managed at site level, are reviewed continuously with improvements made as appropriate. The Group's Technical Director helps provide focus to ensure there is continuous improvement across all sites to meet the increasingly high expectations of our customers. The operating subsidiaries are subject to regular internal and independent food safety and quality control audits including those carried out by, or on behalf of, our customers. The Group maintains product recall insurance cover to mitigate the potential impact of such an occurrence.
Prices and Supply
Increases in the price and volatility of price of raw materials along with increasing utility costs can impact the core profitability of the business and any related shortage in supply of raw materials will impact the business' ability to maintain its service levels to customers - another of its key performance indicators. The prices of certain key commodities (e.g. sugar) are tied to the Euro - the relative strength of sterling and future volatility within the Eurozone will, therefore, have an impact on the cost of these commodities. 
Affordability for consumers is essential and the Group will focus on internal efficiencies and productivity initiatives to lessen the rising commodity price impact on consumers. The Group maintains a high level of expertise in its buying team and will consider long term contracts where appropriate to reduce uncertainty in input prices. The team also cultivates strong relationships with its major suppliers to ensure continuity of supply at competitive prices. Regular renovation and innovation in our product range can help to manage margin pressures in an effective manner as far as the competitive environment allows. The Group also purchases forward foreign currency in order to minimise the fluctuation of input costs linked to future currency conversion rates.
Economic Environment
The economic environment remains challenging, with consumer behaviour changing and a shift toward value-oriented discounters. The Group will continue to focus on quality and value for money in periods of reduced spending. The Group manages margins through investing in site capabilities such as leading edge robotics to increase efficiency and effectively manage capacity. Innovation and development of products that stand out from the crowd help maintain strong relationships with customers and licensors. We are driven by a passion to meet consumer expectations at affordable quality.
Trading Results
Continuing Group revenue for the 52 week period to 28 June 2014 was 175.7 million (2013: 176.6 million). 
Gross margin for the financial year was 27.4% (2013: 26.3%). Commodity price inflation began edging back upwards during the second half of the year with escalating costs in chocolate, butter, energy and labour. The outlook is that some volatility is expected in key ingredients driven by market risks. 
Administrative expenses on continuing activities have increased by 1.0 million year on year through increased marketing support, new product development and range support. Inflationary increases and employee pay rises have been offset largely by operational improvements and returns from capital investment.
The following analysis is included to show what the Directors consider to be the underlying performance of the Group and eliminates the impact of significant non-recurring items and certain charges required by IFRS

52 week period ended 28 June 2014
Operating performance

Non-recurring significant items

Share options charge

Defined benefit pension scheme

Fair value of interest rate swaps/ foreign exchange contracts

Unwinding of discount on deferred consideration

As per Consolidated Statement of Comp-rehensive Income 

000

000

000

000

000

000

000














Continuing Operations












Revenue
175,708

-

-

-

-

-

175,708
Cost of sales
(127,530)

-

-

-

-

-

(127,530)
Gross profit
48,178

-

-

-

-

-

48,178
Other costs excluding depreciation & amortisation
(37,471)

(759)

(9)

71

81

-

(38,087)
EBITDA
10,707

(759)

(9)

71

81



10,091
Depreciation & amortisation
(2,999)

-

-

-

-

-

(2,999)
Results from operating activities
7,708

(759)

(9)

71

81

-

7,092
Finance income
-

-

-

862

708

150

1,720
Finance costs
(1,238)

-

-

(994)

-

(4)

(2,236)
Profit before tax
6,470

(759)

(9)

(61)

789

146

6,576
Taxation
(1,519)

171

2

(73)

(195)

(37)

(1,651)
Profit after tax 
4,951

(588)

(7)

(134)

594

109

4,925
The taxation on IFRS charges includes an element of rate change on opening balances from 23% to 20%.



52 week period ended 29 June 2013 (restated)

Operating performance

Non-recurring significant items

Share options charge

Restated* Defined benefit pension scheme

Fair value of interest rate swaps/ foreign exchange contracts

Unwinding of discount on deferred consideration

As per Consolidated Statement of Comp-rehensive Income 

000

000

000

000

000

000

000














Continuing Operations












Revenue
176,595

-

-

-

-

-

176,595
Cost of sales
(130,150)

-

-

-

-

-

(130,150)
Gross profit
46,445

-

-

-

-

-

46,445
Other costs excluding depreciation & amortisation
(36,511)

(718)

(134)

915

(179)

-

(36,627)
EBITDA
9,934

(718)

(134)

915

(179)

-

9,818
Depreciation & amortisation
(2,495)

-

-

-

-

-

(2,495)
Results from operating activities
7,439

(718)

(134)

915

(179)

-

7,323
Finance income
1

-

-

826

855

48

1,730
Finance costs
(1,980)

-

-

(966)

-

(32)

(2,978)
Profit before tax
5,460

(718)

(134)

775

676

16

6,075
Taxation
(1,110)

165

31

(209)

(174)

(3)

(1,300)
Profit after tax
4,350

(553)

(103)

566

502

13

4,775














Discontinued operations












Profit after tax - discontinued
1,850

1,184

-

-

-

-

3,034
Profit after tax
6,200

631

(103)

566

502

13

7,809
The taxation on IFRS charges includes an element of rate change on opening balances from 24% to 23%.
*The International Accounting Standards Board (IASB) has made a number of changes to IAS 19 Employee Benefits that came into force for accounting periods beginning on or after 1 January 2013. As this is the first year of accounting under this revised standard, the Company is also required to restate the accounts for the year ended 29 June 2013. Details are given in the accounting policies note. 


Earnings per Share (EPS)
EPS comparatives to the prior year can be distorted by significant non-recurring items and IFRS adjustments. The Board is focused on growing adjusted diluted EPS, which is calculated by eliminating the impact of the items highlighted above and incorporates the dilutive effect of share options. Continuing adjusted diluted EPS is 6.3p for the 52 week period (2013: 5.9p). 

Continuing

Continuing (restated)
Discontinued***

2014

2013
2013
Basic EPS
6.7p

7.2p
5.1p
Adjusted* basic EPS
6.7p

6.5p
3.1p
Diluted** basic EPS
6.3p

6.6p
4.6p
Adjusted* diluted** EPS 
6.3p

5.9p
2.8p
* Adjusted EPS measures are calculated by eliminating the impact of significant non-recurring items and IFRS adjustments. Further details can be found in Note 7
** Diluted EPS takes basic EPS and incorporates the dilution effect of share options. 
***Discontinued basic and diluted basic includes the profit on the sale of the discontinued business
Financial Key Performance 
KPI
2014
2013
2012
2011
2010
Revenue - continuing
175.7m
176.6m
178.9m


Revenue - discontinued

19.7m
28.5m


Revenue

196.3m
207.4m
189.6m
168.3m
Adjusted EBITDA -continuing
10.7m
9.9m
9.6m


Adjusted EBITDA -discontinued

2.6m
2.8m


Adjusted EBITDA

12.5m
12.4m
11.5m
11.0m
Net bank debt
8.8m
7.2m
32.6m
32.7m
36.5m
Net debt including deferred consideration payable
8.8m
7.4m
33.9m
37.1m
42.6m
Net debt including deferred consideration payable and receivable
5.9m

4.7m
33.9m
37.1m
42.6m
EBITDA is calculated as earnings before interest, taxation, depreciation and amortisation.
Net bank debt is calculated as overdrafts, bank loans, asset finance and mortgages less cash balances and before unamortised bank fees.
Non-Financial Key Performance Indicators 
A range of non-financial key performance indicators are monitored at site level covering, amongst others, customer service, quality and health and safety. The Group board receives an overview of these on a regular basis.
Disposals
In the prior year comparatives on 27 February 2013 the Group sold its Free From business for a total value of approximately 21 million of which 3 million is deferred to 27 February 2015.
The Free From business consisted of two subsidiaries, Livwell Limited ("Livwell") and United Bakeries (Holdings) Limited ("UBH") (the holding company of United Central Bakeries Limited ("UCB")). These subsidiaries, which accounted for approximately 14% of prior year Group revenues, were sold to Genius Foods Limited ("Genius"), on a debt-free, cash-free basis
Cash Flow
There was an increase in our working capital requirement of 2.2 million compared to the last financial year. Corporation tax payments made in the financial year totalled 1.7 million (2013: 1.8 million), the payments in the current year took account of the research and development tax relief due to the Group. Capital expenditure in the year amounted to 6.2 million (2013: 4.2 million). 
Debt & Bank Facilities
The Group's total net debt including deferred consideration payable is 8.8 million (2013: 7.4 million) up 1.4 million from prior year. 
The Group's total net bank debt excluding deferred consideration after deducting cash balances as at 28 June 2014 was 8.8 million (2013: 7.2 million). Within this total net bank debt, 5.1 million is due within one year, including cash at bank and invoice finance (2013: 2.8 million). 
The Group's debt facility with HSBC Bank Plc totals 32.0m, the key features of the facility are as follows:
 overdraft (3.0m)
 confidential invoice discounting facility (15.0m)
 mortgage facility (4.0m)
 rolling asset finance facility (2.0m)
 revolving credit facility (8.0m)
Note 8 gives details of the drawn amounts and maturity dates.
The Group is able to offer strong asset backing to secure its borrowings. The Group owns freehold sites at Memory Lane in Cardiff, and at Lightbody and Campbells in Scotland. In addition, the Group has a strong trade debtor book to support the invoice discounting facility, made up primarily of UK's major multiple retailers. This debtor book stood at 22.4 million (2013: 21.9 million) at the period end date.
The Group recognises the inherent risk from interest rate rises. To mitigate these risks, the Group has three interest rate swaps in place with a total coverage of 14.0 million (2013: 18.0 million) equivalent to 159% (2013: 250%) of year end net bank at a weighted average rate of 2.5% (2013: 4.0%). 
The effective interest rate for the Group at the year end, taking account of the interest rate swaps in place and deferred consideration with base rate at 0.5% and LIBOR at 0.69%, was 4.27% (2013: 5.97%). 
Financial Covenants
The Board reviews the Group's cash flow forecasts and key covenants on a regular basis to ensure that it has adequate facilities to cover its trading and banking requirements with an appropriate level of headroom. The forecasts are based on management's best estimates of future trading. There has been no breach of covenants during the year. 
Interest cover (based on adjusted EBITDA) for the 52 weeks to 28 June 2014 was 8.6 (2013: 6.3). Net bank debt to EBITDA (based on adjusted EBITDA) for the year to 28 June 2014 was 0.8 (2013: 0.6). 

Taxation
The Group taxation charge on continuing operations for the year was 1.7 million (2013: 1.3 million). This represents an effective rate of 25.1% (2013: 21.4%). The current year contains a revaluation of net opening deferred tax asset balances from 23% to 20% amounting to a charge in the year of 197,000. The effective rate excluding this revaluation would be 22.1%.
Further details on the tax charge can be found in Note 6 to the Group's financial statements.
Environmental Matters
The Group continues to focus on packaging reduction through innovation and has delivered further reductions across the business. The Group continues to take the key learning and successes from the Cake Category and applying them across other areas of the business to deliver category leading innovative solutions. 
Mandatory participation in the CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment) focuses the Group to reduce its carbon emissions. New production capability, which is in the process of being commissioned in Hamilton, will further reduce the consumption of cardboard and reduce food waste. Work with local universities on shelf life of product will lead to waste reduction of the coming years. We are also presently formulating our Environmental Sustainability Strategy within Cake.
Nicholas and Harris remains a 'landfill-free' site and all waste materials are recycled.
Employee Social and Community Issues
All manufacturing sites are active within their local community supporting local community initiatives. The Group also supports local and national government initiatives such as the New Work programme.
We donate regularly to local and national charities in terms of both product and fund raising activities at all sites.
We work closely with local universities business projects and placements and plan to continue this partnership work further in several areas of training, development and project work. They continue to invest in training and development of the workforce supporting a programme of vocational qualifications.
8 Bakers have qualified from the Nicholas and Harris bakers' apprenticeship scheme this year, with City and Guilds' qualifications, adding to the 13 that qualified in 2013. Nicholas and Harris have continued in their support of the local community, including sponsorship of the internationally renowned Salisbury Arts Festival.
Technical Matters
The focus in 2014 has been improving the strength of the teams to be able to deliver the challenging strategic objectives for the next three years. In particular this has focussed on strong Process and Compliance resource to drive root cause analysis and embed a continuous improvement culture. 
Retail customers have placed a much stronger focus on unannounced audits across the whole supply base in the wake of 'Horsegate'. All Finsbury sites have performed well against these requirements and end the year maintaining strong BRC A and A* grades.
Strengthening the Development teams and processes at the front end of the business has started to improve the quality of products launched which in turn is driving down complaints. The Development teams have made significant progress in translating the category priorities into innovation and new products and this has been key to cementing customer relationships.
The Strategic Report was approved by the Board of Directors on 19 September 2014 and was signed on its behalf by:
Stephen Boyd (Director)


Consolidated Statement of Profit and Loss and Other Comprehensive Income
for the 52 weeks ended 28 June 2014 and 29 June 2013
Restated
2014
2013
Note
000
000

Continuing Operations
Revenue
2
175,708
176,595
Cost of sales
(127,530)
(130,150)
Gross profit
48,178
46,445
Administrative expenses
3
(41,086)
(39,122)
Results from operating activities
7,092
7,323
Finance income
5
1,720
1,730
Finance cost
5
(2,236)
(2,978)
Net finance cost
(516)
(1,248)
Profit before tax from continuing operations
6,576
6,075
Taxation
6
(1,651)
(1,300)
Profit from continuing operations
4,925
4,775
Profit from discontinued operations net of tax
1
-
1,850
Profit from sale of business
1
-
1,184
Profit for the year
4,925
7,809
Other comprehensive (expense)/income
Items that will not be reclassified to profit and loss
Remeasurement on defined benefit pension scheme
(726)
(543)
Movement in deferred taxation on pension scheme liability
145
125
Total items that will not be reclassified to profit and loss
(581)
(418)
Items that are or maybe reclassified to profit and loss
Foreign exchange translation differences
-
69
Other comprehensive expense for the financial year, net of tax
(581)
(349)
Total comprehensive income for the financial year
4,344
7,460
Profit attributable to:
Equity holders of the parent
4,400
7,345
Non-controlling interest
525
464
Profit for the financial year
4,925
7,809
Total comprehensive income attributable to:
Equity holders of the parent
3,819
6,996
Non-controlling interest
525
464
Total comprehensive income for the financial year
4,344
7,460
Earnings per ordinary shares
Basic
7
6.7
12.3
Diluted
7
6.3
11.2
Adjusted earnings per ordinary shares
Basic
7
6.7
6.5
Diluted
7
6.3
5.9
Continuing
Basic
7
6.7
7.2
Diluted
7
6.3
6.6
Discontinued*
Basic
7
-
5.1
Diluted
7
-
4.6


Consolidated Statement of Financial Position
at 28 June 2014 and 29 June 2013 
Note
2014
2013
000
000
Non-current assets
Intangibles
52,968
53,133
Property, plant and equipment
21,541
18,209
Other financial assets - investments
28
28
Deferred tax assets
1,350
1,917
Deferred consideration receivable
-
2,745
75,887
76,032
Current assets
Deferred consideration receivable
2,895
-
Inventories
4,530
4,400
Trade and other receivables
24,832
25,337
Cash and cash equivalents
592
1,310
32,849
31,047
Total assets
108,736
107,079
Current liabilities
Other interest-bearing loans and borrowings
8
(5,718)
(3,921)
Trade and other payables
(30,736)
(33,054)
Provisions
(237)
(501)
Deferred purchase consideration
-
(216)
Other financial liabilities-fair value of interest rate swaps/foreign exchange
(451)
(1,240)
Current tax liabilities
(28)
(456)
(37,170)
(39,388)
Non-current liabilities
Other interest-bearing loans and borrowings
8
(3,612)
(4,342)
Provisions and other liabilities
(199)
(218)
Deferred tax liabilities
(422)
(405)
Pension fund liability
(3,630)
(2,843)
(7,863)
(7,808)
Total liabilities
(45,033)
(47,196)
Net assets
63,703
59,883
Equity attributable to equity holders of the parent
Share capital
669
642
Share premium account
31,480
30,779
Capital redemption reserve
578
578
Retained earnings
29,849
26,865
62,576
58,864
Non-controllinginterest
1,127
1,019
Total equity
63,703
59,883
These financial statements were approved by the Board of Directors on 19 September 2014 and were signed on its behalf by:
Stephen Boyd (Director) 
Registered Number 204368 


Consolidated Statement of Changes in Equity
for the 52 weeks ended 28 June 2014 and 29 June 2013
Share
Capital
Share
premium
Capital redemption reserve
Retained
Earnings
Non-controlling
interest
Total
equity
000
000
000
000
000
000
Balance at 1 July 2012
535
27,052
578
19,389
886
48,440
Profit for the financial year
-
-
-
7,788
464
8,252
Effect of change in accounting policy on adoption of IAS19 (Revised)
-
-
-
(443)
-
(443)
Profit for the financial year (restated)
-
-
-
7,345
464
7,809
Other comprehensive income/(expense):
Remeasurement of defined benefit pension
-
-
-
(1,118)
-
(1,118)
Deferred tax movement on pension scheme remeasurement
-
-
-
257
-
257
Foreign exchange translation differences
-
-
-
69
-
69
Total other comprehensive expense
-
-
-
(792)
-
(792)
Effect of change in accounting policy on adoption of IAS19 (Revised)
-
-
-
443
-
443
Total other comprehensive expense (restated)
-
-
-
(349)
-
(349)
Total comprehensive income for the period
-
-
-
6,996
464
7,460
Transactions with owners, recorded directly in equity:
Shares issued during the year
107
3,727
-
-
-
3,834
Impact of share based payments
-
-
-
134
-
134
Deferred tax on share options
-
-
-
506
-
506
Dividend paid
-
-
-
(160)
(331)
(491)
Balance at 29 June 2013
642
30,779
578
26,865
1,019
59,883
Balance at 30 June 2013
642
30,779
578
26,865
1,019
59,883
Profit for the financial year
4,400
525
4,925
Other comprehensive (expense)/ income:
Remeasurement on defined benefit pension
-
-
-
(726)
-
(726)
Deferred tax movement on pension scheme remeasurement
-
-
-
145
-
145
Foreign exchange translation differences
-
-
-
-
-
-
Total other comprehensive expense
-
-
-
(581)
-
(581)
Total comprehensive income for the period
-
-
-
3,819
525
4,344
Transactions with owners, recorded directly in equity:
Shares issued during the year
27
701
-
-
-
728
Impact of share based payments
-
-
-
9
-
9
Deferred tax on share options
-
-
-
(350)
-
(350)
Dividend paid
-
-
-
(494)
(417)
(911)
Balance at 28 June 2014
669
31,480
578
29,849
1,127
63,703
Consolidated Cash Flow Statement
for the 52 weeks ended 28 June 2014 and 29 June 2013 
Restated
2014
2013
000
000
Cash flows from operating activities
Profit for the financial year
4,925
7,809
Adjustments for:
Taxation
1,651
1,523
Net finance costs
516
1,248
Depreciation
2,834
2,888
Amortisation of intangibles
165
164
Share options charge
9
134
Contributions by employer to pension scheme
(71)
(65)
Pension scheme past service costs
-
(850)
Fair value charge/(credit) for foreign exchange contracts
(81)
179
Profit on disposal of business
-
(1,184)
Operating profit before changes in working capital
9,948
11,846
Changes in working capital:
(Increase)/decrease in inventories
(197)
51
(Increase)/decrease in trade and other receivables
(6)
1,243
(Decrease)/increase in trade and other payables
(2,032)
884
Cash generated from operations
7,713
14,024
Interest paid
(1,084)
(2,022)
Tax paid
(1,700)
(1,776)
Net cash from operating activities
4,929
10,226
Cash flows from investing activities
Purchase of property, plant and equipment
(6,167)
(4,204)
Purchase of subsidiary companies
(217)
(1,055)
Disposal of operation
-
17,072
Net cash (used in)/from investing activities
(6,384)
11,813
Cash flows from financing activities
(Repayment)/drawdown of invoice discounting
(300)
(10,828)
Drawdown of revolving credit
2,000
-
Repayment of bank loans
(338)
(15,503)
Repayment of loan notes
-
(3)
Drawdown of asset finance facilities
-
326
Repayment of asset finance liabilities
(478)
(1,928)
Issue of ordinary share capital
728
3,834
Dividend paid to non-controlling interest 
(417)
(331)
Dividend paid to shareholder
(494)
(160)
Net cash from/(used in) financing activities
701
(24,593)
Net decrease in cash and cash equivalents
(754)
(2,554)
Opening cash and cash equivalents
1,310
3,793
Effect of exchange rate fluctuations on cash held
36
71
Cash and cash equivalents at end of period
592
1,310
Notes (forming part of the Financial Statements)
The financial information set out in this preliminary announcement does not constitute Finsbury Food Group Plc's statutory accounts for the 52 week periods ended 28 June 2014 and 29 June 2013. Statutory accounts for the 52 weeks ended 28 June 2014 will be delivered to the Registrar of companies following the Company's Annual General Meeting. Statutory accounts for the 52 weeks ended 29 June 2013 have been delivered to the Registrar of Companies. The Company's auditor has reported on those statutory accounts; their reports were unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
This preliminary announcement has been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) and its interpretations as adopted by the International Accounting Standards Board (IASB) and by the EU (Adopted IFRS).
Change in accounting policy

The Group adopted IAS 19 (revised) Employee Benefits from January 2013. As a result of IAS 19 (revised), the key change to these Statements is the "finance cost" which was previously the difference between the interest on liabilities and expected return on assets, the expected return on assets is effectively based on the discount rate with no allowances made for any outperformance expected from the Scheme's actual asset holding.
As a result of these amendments, the comparative financial information in the Consolidated Statement of Profit and Loss and Other Comprehensive Income (OCI) have been restated for the year ending 29 June 2013. The effect of the above was to decrease finance income in the Consolidated Statement of Profit and Loss by 575,000 from 1,401,000 to 826,000 and decrease the remeasurements of the net defined benefit pension liability in OCI by 575,000 from 1,118,000 to 543,000.
As a result of the above, the tax expense in the Consolidated Statement of Profit and Loss has decreased by 132,000 for the year ending 29 June 2013 and the deferred tax credit in the OCI has decreased by 132,000. The effect on the cashflow statement of the amended standard was an adjustment to profit before tax and the operating reconciling items. There was no effect on the net cash from operating activities. The effect on the statement of changes in equity of the amended standard was an adjustment to retained earnings, as explained above.
1 Discontinued operations
In the prior year comparatives on 27 February 2013 the Group sold its Free From business for a total undiscounted value 21,257,000 and a pre-tax gain of 1,184,000 was recorded. 
The Free From business consisted of two subsidiaries, Livwell Limited ("Livwell") and United Bakeries (Holdings) Limited ("UBH") (the holding company of United Central Bakeries Limited ("UCB")).


2013




000


Results of the discontinued operation




Revenue

19,749


Expenses

(17,676)


Profit before tax

2,073


Gain recognised on disposal

1,184


Profit before tax

3,257


Tax on profit *

(223)


Profit for the year

3,034







Cash flows from (used in) discontinued operations




Net cash used in operating activities

884


Net cash used in investing activities

(141)


Net cash from financing activities

(1,089)


Net cash from (used in) discontinued operations

(346)







Effect of the disposals on individual assets and liabilities




Intangibles

(8,431)


Property, plant and equipment

(8,648)


Inventories

(984)


Trade receivables

(4,345)


Other receivables

(538)


Trade payables

4,378


Other payables

(17)


Net identifiable assets and liabilities

(18,585)







Consideration:




Cash consideration

18,257


Settlement of inter-company debt

(401)


Disposal costs

(583)


Cash and cash equivalents at completion date

(201)


Cashflow on disposal of operation

17,072


Deferred consideration (discounted)

2,697


Net consideration

19,769


Profit on disposal

1,184












* Tax on profit relates to tax on discontinued operations.




2 Revenue and segment information 
Operating segments are identified on the basis of internal reporting and decision making. The Group's Chief Operating Decision Maker is considered to be the Board as 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
 non-recurring significant 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 Board regularly reviews along with operating profit, the segmental revenue from the sale of bakery products, direct and indirect costs, ebitda, and return on capital employed.
The UK cake and bread business is viewed as one segment - UK Bakery, whilst the 50% owned business Lightbody Stretz Limited is viewed as a separate segment - Overseas.
The UK Bakery segment manufactures and sells bakery products to the UK's multiple grocers. This segment primarily comprises the operations of Memory Lane Cakes Ltd, Lightbody Group Ltd, Campbells Cake Company Ltd and Nicholas & Harris Ltd. These subsidiaries were 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 products sit side by side in the retailers' bakery aisles
 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 customers - five customers account for approximately 70-75% of total revenue, these customers are common throughout the subsidiaries
 the distribution methods - the same methods of distribution apply to all subsidiaries.
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 0.5m (2013: 0.8m) being presented within the Group Operations segment.
The Group's finance income and expenses cannot be meaningfully allocated to the individual operating segments.
2 Revenue and segment information (continued)
52 week period ended 28 June 2014
UK Bakery
000
Overseas
000
Group Operations
000
Total Group
000
Continuing




Revenue




External
153,740
21,968
-
175,708
Underlying operating profit
6,094
1,139
475
7,708
Fair value foreign exchange contracts



81
Share options charge



(9)
Defined benefit pension scheme



71
Significant non-recurring items



(759)
Results from operating activities



7,092
Finance income



1,720
Finance cost



(2,236)
Profit before taxation



6,576
Taxation



(1,651)
Profit after taxation



4,925





At 28 June 2014




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 / (purchases)
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)
Certain operating costs have been incurred centrally, these costs have been allocated to the reporting segments on an appropriate basis. 
With regard to continuing revenue, 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. 
2 Revenue and segment information (continued)
52 week period ended 29 June 2013 Restated
UK Bakery
000
Overseas
000
Group Operations
000
Total Group
000
Continuing




Revenue




External
154,364
22,231
-
176,595
Underlying operating profit
5,642
1,001
796
7,439
Fair value foreign exchange contracts



(179)
Share options charge



(134)
Defined benefit pension scheme



915
Significant non-recurring items



(718)
Results from operating activities



7,323
Finance income



1,730
Finance cost



(2,978)
Profit before taxation



6,075
Profit on sale of business



1,184
Results from discontinued operations



2,073
Taxation



(1,523)
Profit after taxation



7,809
At 29 June 2013




Segment assets
96,170
4,987
4,299
105,456
Unallocated assets



1,623
Consolidated total assets



107,079





Segment liabilities
(31,230)
(3,864)
(2,599)
(37,693)
Unallocated liabilities



(9,503)
Consolidated total liabilities



(47,196)





Other segment information




Capital expenditure
4,201
3
-
4,204
Depreciation included in segment profit
2,872
16
-
2,888
Amortisation
164
-
-
164
Inter-segmental sales / (purchases)
5,999
(5,999)
-
-
Analysis of unallocated assets and liabilities:

Assets

Liabilities

'000

'000
Investments
28
Loans and borrowings
(8,263)
Financial instruments
-
Financial instruments
(1,240)
Cash and cash equivalents
1,310
Cash and cash equivalents
-
Taxation balances
285
Taxation balances
-
Unallocated assets
1,623
Unallocated liabilities
(9,503)
Certain operating costs have been incurred centrally, these costs have been allocated to the reporting segments on an appropriate basis. 
With regard to continuing revenue, five customers with sales of 36m, 34m, 24m, 18m and 16m account for 73% of revenue, which is attributable to the UK Bakery and Overseas segments above.
2 Revenue and segment information (continued)
An analysis by geographical segment is shown below:
Geographical split of turnover by destination
2014
2013
000
000
Continuing:
United Kingdom
151,587
152,105
Europe
23,832
24,118
Rest of World
289
372
Total continuing
175,708
176,595
Discontinued
-
19,749

Net asset and margin geographical split would not provide meaningful information owing to the necessity to allocate costs, assets and liabilities. Capital expenditure on segment assets is detailed in Note 2. 
Geographical split by country of origin
United Kingdom
Europe
Total
000
000
000
2014
Continuing
Turnover
153,740
21,968
175,708
Operating profit
6,569
1,139
7,708
Total assets
104,214
4,522
108,736
Total liabilities
(41,721)
(3,312)
(45,033)
Net assets
62,493
1,210
63,703
United Kingdom
Europe
Total
000
000
000
2013
Continuing
Turnover
154,364
22,231
176,595
Operating profit
6,438
1,001
7,439
Discontinued
Turnover
19,749
-
19,749
Operating profit
2,073
-
2,073
Total assets
102,092
4,987
107,079
Total liabilities
(43,332)
(3,864)
(47,196)
Net assets
58,760
1,123
59,883
3 Expenses and auditor's remuneration
Included in profit are the following:
2014
2013
000
000
Depreciation of owned tangible assets
2,498
2,310
Depreciation on assets under finance leases and hire purchase contracts
336
578
Difference on foreign exchange
(132)
(30)
Hire of plant and machinery - operating leases
480
473
Hire of other assets - operating leases
803
718
Share option charges
9
134
Movement on fair value of interest rate swaps
(708)
(855)
Movement on fair value of foreign exchange contracts
(81)
179
Research and development
1,759
1,793
Amortisation of intangibles
165
164
Amortisation of intangibles for the year was 165,000 (2013: 164,000) relating to the Goswell Enterprises Ltd acquisition during June 2009.
Auditor's remuneration:
2014
2013
000
000
Audit of these financial statements
25
24
Amounts receivable by auditors and their associates in respect of:
Audit of the financial statements of subsidiaries of the Company
57
59
Taxation compliance services
13
15
Services related to corporate finance transactions
-
121
Other services in relation to taxation
11
14
Other services
137
10
The auditor's remuneration is in respect of KPMG LLP. Fee for other services relates to pension advisory services, services relating to information technology and services relating to remuneration.
4 Non-recurring significant items
The Group presents certain items as non-recurring and significant. These relate to items which, in management's judgement, need to be disclosed by virtue of their size or incidence in order to obtain a more meaningful understanding of the financial information. 
Costs of 643,000 relate to redundancy and restructuring (2013: 247,000) and 116,000 relates to due diligence and consultancy expenses associated with an aborted acquisition. A further 471,000 in 2013 related to costs associated with the cancellation of unapproved share options and the issue of ordinary shares in exchange for this cancellation. 
A pre-tax gain of 1,184,000 was recorded as non-recurring significant income under discontinued operations, this gain relates to the sale of the Free From business on 27 February 2013.


5 Finance income and cost
Recognised in the Consolidated Statement of Profit and Loss
Restated
2014
2013
000
000
Finance income
Expected net return on defined benefit pension plan
862
826
Change in fair value of interest rate swaps
708
855
Tax related
-
1
Unwinding of discount of deferred consideration receivable
150
48
Total finance income
1,720
1,730
Finance cost
Interest on defined benefit plan obligations
(994)
(966)
Bank interest payable
(643)
(1,115)
Interest on interest rate swap agreements
(595)
(812)
Interest on deferred consideration
-
(53)
Unwinding of discount on deferred consideration payable
(4)
(32)
Total finance cost
(2,236)
(2,978)
6 Taxation
Recognised in the Consolidated Statement of Profit and Loss
Restated
Continuing
Continuing
Discontinued
Discontinued
2014
2013
2014
2013
000
000
000
000
Current tax
Current year
1,254
1,513
-
239
Adjustments for prior years
22
(217)
-
(16)
Total current tax
1,276
1,296
-
223
Deferred tax
Origination and reversal of temporary differences
309
(233)
-
-
Retirement benefit deferred tax charge
73
209
-
-
Adjustments for prior years
(7)
28
-
-
Total deferred tax
375
4
-
-
Total tax expense
1,651
1,300
-
223
Reconciliation of effective tax rate
The tax assessed for the period is higher (2013: lower) than the standard rate of corporation tax in the UK of 21%, (2013: 23%). The hybrid corporation tax rate is 22.50% (2013: 23.75%). The differences are explained below:
2014
2013
000
000
Profit before taxation from continuing operations
6,576
6,075
Tax using the UK corporation tax rate of 22.50% (2013: 23.75%)
1,480
1,443
Non-deductible expenses
36
10
Amortisation of intangible asset
34
34
Temporary differences*
(179)
(338)
Adjustment to restate opening deferred tax and differences in rates
107
(25)
Differences on depreciation on IBA's and allowances claimed
49
45
R&D uplift current year
(97)
(87)
Adjustments to tax charge in respect of prior periods
15
(189)
Overseas profits charged at different taxation rate
206
132
Group relief from discontinued
-
275
Total tax expense
1,651
1,300
*Temporary differences in the current year relate to share based payments. 
6 Taxation (continued)
Reductions in the corporation tax rate from 24% to 23% (effective from 1 April 2013) and to 21% (effective 1 April 2014) were substantially enacted on 3 July 2012 and 2 July 2013 respectively. Further reduction to 20% (effective from 1 April 2015) was substantially enacted on 2 July 2013. This will reduce the company's future current tax charge accordingly. The deferred tax asset at 28 June 2014 has been calculated based on the 20% rate.
The impact of the reduction in the UK corporation tax rate from 23% to 21% from April 2014 amounts to 82,000 lower charge in the financial year to 28 June 2014. The rate change on deferred tax has had an adverse impact on the current year tax charge amounting to 197,000. The adjustment for prior year in 2013 relates to additional tax relief on qualifying R&D expenditure for prior periods.
The parent company has an unrecognised deferred tax asset of 191,300 (2013: 219,995). This asset has not been recognised in these Financial Statements as suitable profits to utilise the underlying losses are not expected to arise in the future. 


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 65,635,000 (2013: 59,904,000). 
Basic diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares; which for 28 June 2014 the diluted weighted average number is 70,169,000 shares, (2013: 65,653,000). 
An adjusted earnings per share and an adjusted diluted earnings per share have 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:
 Reorganisation and other significant non-recurring costs 
 IAS 39 'Financial Instruments: Recognition and Measurement' fair value adjustment relating to the Group's interest rate swaps and foreign exchange contracts
 IAS 19 (revised) 'Accounting for retirement benefits' relating to the net income
 IFRS 3 'Business Combinations' discount charge relating to the deferred consideration payable and receivable 
 The taxation effect at the appropriate rate on the adjustments

Year ending
28 June 2014
Year ending
29 June 2013

Earnings
Weighted average number of shares 
Per share amount
Earnings
Weighted average number of shares 
Per share amount

000
000's
Pence
000
000's
Pence
Continued
4,400
-
6.7
4,311
-
7.2
Discontinued
-
-
-
3,034
-
5.1
Basic earnings 
4,400
65,635
6.7
7,345
59,904
12.3
Significant non-recurring and other items
26
-
-
(1,629)
-
(2.7)
Adjusted earnings 
4,426
65,635
6.7
5,716
59,904
9.6
Profit on discontinued operations
-
-
-
(2,073)
-
(3.5)
Taxation on discontinued operations
-
-
-
223
-
0.4
Discontinued earnings
 -
-
-
(1,850)
-
(3.1)
Continuing Adjusted earnings 
4,426
65,635
6.7
3,866
59,904
6.5







Dilutive effect of options
-
4,534
-
-
5,749
-

-
70,169
-
-
65,653
-
Continued
4,400
-
6.3
4,311
-
6.6
Discontinued
-
-
-
3,034
-
4.6
Basic diluted earnings 
4,400
-
6.3
7,345
-
11.2

Adjusted diluted earnings
4,426
-
6.3
5,716
-
8.7
Discontinued diluted earnings
-
-
-
(1,850)
-
(2.8)
Continuing adjusted diluted earnings
4,426
70,169
6.3
3,866
65,653
5.9


8 Other interest-bearing loans and borrowings
This note provides information about the contractual terms and repayment terms of the Group's interest-bearing loans and borrowings, which are measured at amortised cost, using the effective interest rate method. 
2014
Margin
Frequency of
Repayments
Year of maturity
Facility
000
Drawn
000
Current
000
Non-Current
000
Invoice Discounting
1.50%/base
On demand
Revolving*
15,000
2,959
2,959
-
Revolving credit
2.00%/LIBOR
Monthly
2017
8,000
2,000
2,000
-
Mortgage
1.75%/base
Monthly
2023
4,000
3,593
399
3,194
Finance lease liabilities
1.76%/base
Monthly
various
2,000
854
382
472
Overdraft
2.00%/base
On demand
-
3,000
-
-
-
32,000
9,406
5,740
3,666
Unamortised transaction costs
(76)
(22)
(54)
9,330
5,718
3,612
Secured bank loans and mortgages over one year (included above)
3,194
Unamortised transaction costs
(54)
3,140
Repayments are as follows:
Between one and two years
347
Between two and five years
1,073
Between five and ten years
1,720
Between ten and fifteen years
-
3,140
2013
Margin
Frequency of
Repayments
Year of maturity
Facility
000
Drawn
000
Current
000
Non-Current
000
Invoice Discounting
1.50%/base
On demand
Revolving*
15,000
3,259
3,259
-
Revolving credit
2.00%/LIBOR
Monthly
2017
8,000
-
-
-
Mortgage
1.75%/base
Monthly
2023
4,000
3,932
369
3,563
Finance lease liabilities
1.83%/base
Monthly
various
2,000
1,332
476
856
Overdraft
2.00%/base
On demand
-
3,000
-
-
-
32,000
8,523
4,104
4,419
Unamortised transaction costs
(260)
(183)
(77)
8,263
3,921
4,342
Secured bank loans and mortgages over one year (included above)
3,563
Unamortised transaction costs
(77)
3,486
Repayments are as follows:
Between one and two years
347
Between two and five years
1,051
Between five and ten years
1,842
Between ten and fifteen years
246
3,486
* Revolving maturity above relates to the payment terms on the invoice discounting which is up to 90 days from the date of invoice. The invoice discounting facility renewal date is December 2017.


8 Other interest-bearing loans and borrowings (continued)
Finance lease liabilities are payable as follows:
2014
2013
Minimum lease payments
Interest
Principal
Minimum lease payments
Interest
Principal
000
000
000
000
000
000
Less than one year
403
21
382
509
33
476
Between one and five years
486
14
472
891
35
856
889
35
854
1,400
68
1,332
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. 
HSBC Bank Plc, HSBC Asset Finance (UK) Ltd and HSBC Equipment Finance (UK) Ltd have debentures incorporating fixed and floating charges over the undertaking and all property and assets including goodwill, book debts, uncalled capital, buildings, fixtures, fixed plant and machinery
As part of the bank borrowing facility the Group needs to meet certain covenants every six months. There were no breaches of covenants during the year. The covenant tests required are as follows:
Net bank debt : EBITDA 
Interest cover 
Debt service cover
The HSBC facilities (excluding overdraft) available for drawdown are 29.0m (2013: 29.0m). At the period end date the facility utilised was 9.4m (2013: 8.5m), giving 19.6m (2013: 20.5m) headroom.
9 Analysis of net debt
Note
At year ended
29 June
2013
000
Cash flow 000
At year ended
28 June
2014
000
Cash at bank
1,310
(718)
592
Loan notes
-
-
-
1,310
(718)
592
Debt due within one year
(369)
(2,030)
(2,399)
Debt due after one year
(3,563)
369
(3,194)
Invoice discounting due within one year
(3,259)
300
(2,959)
Hire purchase obligations due within one year
(476)
94
(382)
Hire purchase obligations due after one year
(856)
384
(472)
Total net bank debt
(7,213)
(1,601)
(8,814)
Debt
8
(8,263)
(9,330)
Cash at bank
1,310
592
Unamortised transaction costs
(260)
(76)
Total net bank debt
(7,213)
(8,814)
Deferred consideration payable
(216)
-
Total net debt including deferred consideration payable
(7,429)
(8,814)
Cash at banks
1,310
592
Total debt including deferred consideration payable excluding cash
(8,739)
(9,406)
Deferred consideration receivable
2,745
2,895
Total debt including deferred consideration payable and receivable excluding cash
(5,994)
(6,511)

This information is provided by RNS
The company news service from the London Stock Exchange
  END
FR GGUMPBUPCGQB