REG - Finsbury Food Group - Preliminary Results <Origin Href="QuoteRef">FIF.L</Origin> - Part 2
21/09/2015 07:01
- Part 2: For the preceding part double click ID:nRSU5925Za
7 5.6 6.3
Adjusted earnings per ordinary shares
Basic 7 8.0 6.7
Diluted 7 7.7 6.3
The notes on pages 20 to 32 form an integral part of these Financial Statements
Consolidated Statement of Financial Position
at 27 June 2015 and 28 June 2014
Note 2015 2014
£000 £000
Non-current assets
Intangibles 8 80,071 52,968
Property, plant and equipment 46,038 21,541
Investments in equity accounted investees 1 225 -
Other financial assets 28 28
Deferred tax assets 4,446 1,350
130,808 75,887
Current assets
Deferred consideration receivable - 2,895
Inventories 11,268 4,530
Trade and other receivables 48,381 24,832
Cash and cash equivalents 61 592
Current tax asset 40 -
Other financial assets - fair value of foreign exchange contracts 117 -
59,867 32,849
Total assets 190,675 108,736
Current liabilities
Other interest-bearing loans and borrowings 9 (9,288) (5,718)
Trade and other payables (62,283) (30,736)
Provisions (252) (237)
Deferred purchase consideration (50) -
Other financial liabilities-fair value of interest rate swaps/foreign exchange (359) (451)
Current tax liabilities - (28)
(72,232) (37,170)
Non-current liabilities
Other interest-bearing loans and borrowings 9 (11,746) (3,612)
Provisions and other liabilities (161) (199)
Deferred tax liabilities (103) (422)
Pension fund liability (3,837) (3,630)
(15,847) (7,863)
Total liabilities (88,079) (45,033)
Net assets 102,596 63,703
Equity attributable to equity holders of the parent
Share capital 1,280 669
Share premium account 64,952 31,480
Capital redemption reserve 578 578
Retained earnings 34,580 29,849
101,390 62,576
Non-controlling interest 1,206 1,127
Total equity 102,596 63,703
These financial statements were approved by the Board of Directors on 18
September 2015 and were signed on its behalf by:
Stephen Boyd (Director)
Registered Number 00204368
The notes on pages 20 to 32 form an integral part of these Financial
Statements
Consolidated Statement of Changes in Equity
for the 52 weeks ended 27 June 2015 and 28 June 2014
ShareCapital Sharepremium Capital redemption reserve RetainedEarnings Non-controllinginterest Totalequity
£000 £000 £000 £000 £000 £000
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 income/(expense):
Remeasurement of defined benefit pension - - - (726) - (726)
Deferred tax movement on pension scheme remeasurement - - - 145 - 145
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
Balance at 29 June 2014 669 31,480 578 29,849 1,127 63,703
Profit for the financial year 6,179 441 6,620
Other comprehensive (expense)/ income:
Remeasurement on defined benefit pension - - - (153) - (153)
Deferred tax movement on pension scheme remeasurement - - - 31 - 31
Foreign exchange translation differences - - - - - -
Total other comprehensive expense - - - (122) - (122)
Total comprehensive income for the period - - - 6,057 441 6,498
Transactions with owners, recorded directly in equity:
Shares issued during the year 611 33,472 - - - 34,083
Impact of share based payments - - - (10) - (10)
Deferred tax on share options - - - 243 - 243
Dividend paid - - - (1,559) (362) (1,921)
Balance at 27 June 2015 1,280 64,952 578 34,580 1,206 102,596
The notes on pages 20 to 32 form an integral part of these Financial Statements.
Consolidated Cash Flow Statement
for the 52 weeks ended 27 June 2015 and 28 June 2014
2015 2014
£000 £000
Cash flows from operating activities
Profit for the financial year 6,620 4,925
Adjustments for:
Taxation 1,862 1,651
Net finance costs 1,044 516
Depreciation 5,433 2,834
Amortisation of intangibles 403 165
Share options (credit)/charge (10) 9
Contributions by employer to pension scheme (100) (71)
Fair value charge/(credit) for foreign exchange contracts (181) (81)
Operating profit before changes in working capital 15,071 9,948
Changes in working capital:
Increase in inventories (1,004) (197)
Increase in trade and other receivables (7,259) (6)
Increase/(decrease) in trade and other payables 10,510 (2,032)
Cash generated from operations 17,318 7,713
Interest paid (923) (1,084)
Tax paid (1,164) (1,700)
Net cash from operating activities 15,231 4,929
Cash flows from investing activities
Purchase of property, plant and equipment (7,354) (6,167)
Purchase of subsidiary companies (40,809) (217)
Deferred consideration received 3,000 -
Settlement of acquired debt (19,740) -
Cash received with acquisition 4,990 -
Net cash used in investing activities (59,913) (6,384)
Cash flows from financing activities
Drawdown of new facility 24,028 -
Repayment of invoice discounting (8,159) (300)
Drawdown of revolving credit - 2,000
Repayment of bank loans (3,622) (338)
Repayment of asset finance liabilities (380) (478)
Issue of ordinary share capital 34,083 728
Dividend paid to non-controlling interest (362) (417)
Dividend paid to shareholders (1,559) (494)
Net cash from financing activities 44,029 701
Net decrease in cash and cash equivalents (653) (754)
Opening cash and cash equivalents 592 1,310
Effect of exchange rate fluctuations on cash held 122 36
Cash and cash equivalents at end of period 61 592
The notes on pages 20 to 32 form an integral part of these Financial Statements.
Notes to the Consolidated Financial Statements
(Forming part of the Financial Statements)
The financial information set out above does not constitute the company's
statutory accounts for the 52 week periods ended 27 June 2015 or 28 June 2014,
but is derived from those accounts. Statutory accounts for 2014 have been
delivered to the registrar of companies, and those for 2015 will be delivered
in due course. The auditor has reported on those accounts; their reports were
(i) unqualified (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
1. Acquisitions
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 foodservice channels, retail customer diversification, the
benefits of significant capital investment within Fletchers manufacturing and
a multi-channel platform for further acquisitions in due course. In the period
between acquisition date and 27 June 2015, the acquired Group contributed a
profit before tax of £3,144,000.
The cash outflow under 'investing activities' on the face of the Consolidated
Cash Flow Statement 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:
Fair value carrying amount£000
Acquiree's net assets at acquisition date:
Property, plant and equipment 21,094
Stock 5,387
Trade and other receivables 16,852
Deferred tax asset 3,903
Trade and other payables (20,536)
Working capital adjustment 2,598
Net identifiable assets 29,298
Intangibles 8,770
Goodwill 18,364
56,432
Further information on intangible assets is provided in note 8 to the
financial statements.
1 Acquisitions (continued)
On 16 June 2015 the Group acquired the business, production assets, stock and
customer list of Johnstone's Just Desserts from administrators FRP Advisory
for £1.6 million. A new legal entity Johnstone's Food Service Limited was
formed and trading commenced under this legal entity from the acquisition
date. In the period between acquisition date and 27 June 2015, the new
subsidiary contributed a profit before tax of £23,000.
Fair value carrying amount£000
Acquiree's net assets at acquisition date:
Property, plant and equipment 1,489
Stock 496
Trade and other receivables 22
Trade and other payables (829)
Working capital adjustment 40
Net identifiable assets 1,218
Goodwill 372
1,590
Consideration paid net of working capital adjustment 1,550
Investment in Associate
On 26 May 2015 the Group acquired 25% of the ordinary share capital of Dr
Zak's Ltd for a consideration of £225,000 of which £50,000 has been deferred
and is payable within one year of the acquisition date.
2015£000 2014£000
Carrying amount of immaterial associates 225 -
The Group has not recognised the results relating to the Investment in Dr
Zak's as post acquisition results are less than £1,000 and deemed not material
to the Group.
The total costs associated with the acquisitions amounted to £3,181,000 and
are shown as a non-recurring significant item under administration costs.
Share placing costs of £1,484,000 relating to an equity raise to part fund the
acquisition of Fletchers have been written off against the share premium
account.
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:
Ø net financing expense
Ø share option charges
Ø significant non-recurring items
Ø fair value adjustments relating to acquisitions
Ø pension charges or credits in relation to the net pension position
Ø revaluation of interest rate swaps and forward foreign currency contracts.
The UK Bakery segment manufactures and sells bakery products to the UK's
multiple grocers and foodservice sectors. This segment primarily comprises the
operations of Memory Lane Cakes Ltd, Lightbody Group Ltd, Campbells Cake
Company Ltd, Johnstone's Food Service Ltd, Fletchers Bakeries Ltd and Nicholas
& Harris Ltd. These subsidiaries are aggregated into a single segment after
considering the following criteria:
Ø the nature of the products - products are similar in nature and are classed
as manufactured bakery products
Ø the production process - the production processes have the same or similar
characteristics
Ø the economic characteristics - the average gross margins are expected to be
similar
The core operation of the Overseas segment is the distribution of the Group's
UK manufactured 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 £0.3m (2014:
£0.5m) 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 27 June 2015 UK Bakery £000 Overseas £000 Group Operations£000 Total Group £000
Continuing
Revenue
External pre acquisition 164,255 22,186 - 186,441
External acquired 69,725 - - 69,725
Total Revenue 233,980 22,186 - 256,166
Profit pre acquisition 7,748 1,154 347 9,249
Profit from acquired businesses 3,167 - - 3,167
Total underlying profit 10,915 1,154 347 12,416
Fair value foreign exchange contracts 181
Share options charge 10
Defined benefit pension scheme 100
Significant non-recurring items (3,181)
Results from operating activities 9,526
Finance income 969
Finance cost (2,013)
Profit before taxation 8,482
Taxation (1,862)
Profit after taxation 6,620
At 27 June 2015
Segment assets 183,623 5,042 1,508 190,173
Unallocated assets 502
Consolidated total assets 190,675
Segment liabilities (53,660) (4,056) (8,786) (66,502)
Unallocated liabilities (21,577)
Consolidated total liabilities (88,079)
Other segment information
Capital expenditure 7,320 34 - 7,354
Depreciation included in segment profit 5,414 19 - 5,433
Amortisation 403 - - 403
Inter-segmental sale / (purchases) 6,072 (6,072) - -
Analysis of unallocated assets and liabilities:
Assets Liabilities
£'000 £'000
Investments 253 Loans and borrowings (21,034)
Financial instruments 117 Financial instruments (359)
Cash and cash equivalents 61 Cash and cash equivalents -
Taxation balances 79 Taxation balances (192)
Unallocated assets 510 Unallocated liabilities (21,585)
With regard to revenue, five customers with sales of £53m, £36m, £27m, £24m
and £20m account for 62% of revenue, which is attributable to the UK Bakery
and Overseas segments above.
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 sales / (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)
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)
An analysis by geographical segment is shown below:
Geographical split of turnover by destination 2015 2014
£000 £000
Continuing:
United Kingdom 230,299 151,587
Europe 25,856 23,832
Rest of World 11 289
Total continuing 256,166 175,708
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
2015
Turnover 233,980 22,186 256,166
Operating profit 11,262 1,154 12,416
Total assets 185,633 5,042 190,675
Total liabilities (84,023) (4,056) (88,079)
Net assets 101,610 986 102,596
United Kingdom Europe Total
£000 £000 £000
2014
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
3. Expenses and auditor's remuneration
Included in profit are the following:
2015 2014
£000 £000
Depreciation of owned tangible assets 5,096 2,498
Depreciation on assets under finance leases and hire purchase contracts 337 336
Difference on foreign exchange (140) (132)
Hire of plant and machinery - operating leases 679 480
Hire of other assets - operating leases 1,452 803
Share option charges (10) 9
Movement on fair value of interest rate swaps (29) (708)
Movement on fair value of foreign exchange contracts (180) (81)
Research and development 1,737 1,759
Amortisation of intangibles 403 165
Amortisation of intangibles for the year was £403,000 (2014: £165,000)
relating to the Fletchers acquisition October 2014, (2014: Goswell Enterprises
Ltd acquisition during June 2009).
Auditor's remuneration:
2015 2014
£000 £000
Audit of these financial statements 26 25
Amounts receivable by auditors and their associates in respect of:
Audit of the financial statements of subsidiaries of the Company 116 57
Taxation compliance services 16 13
Services related to corporate finance transactions 278 -
Other services in relation to taxation - 11
Other services 176 137
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 £3,181,000 relate to acquisition transaction costs during the year,
(2014: £643,000 relate to redundancy and restructuring and £116,000 relate to
due diligence and consultancy expenses associated with an aborted
acquisition).
5. Finance income and cost
Recognised in the Consolidated Statement of Profit and Loss
2014 2014
£000 £000
Finance income
Change in fair value of interest rate swaps 28 708
Bank interest receivable 1 -
Unwinding of discount of deferred consideration receivable 105 150
Total finance income 134 858
Finance cost
Net interest on net pension position (154) (132)
Bank interest payable (748) (643)
Interest on interest rate swap agreements (276) (595)
Unwinding of discount on deferred consideration payable - (4)
Total finance cost (1,178) (1,374)
6. Taxation
Recognised in the Consolidated Statement of Profit and Loss
2015 2014
£000 £000
Current tax
Current year 1,221 1,254
Adjustments for prior years (121) 22
Total current tax 1,100 1,276
Deferred tax
Origination and reversal of temporary differences 753 309
Retirement benefit deferred tax charge (11) 73
Adjustments for prior years 20 (7)
Total deferred tax 762 375
Total tax expense 1,862 1,651
Reconciliation of effective tax rate
The weighted average hybrid rate of UK and French tax is 22.8% (2014: 25.6%).
The tax assessed for the period is lower (2014: lower) that the hybrid rate of
UK and French tax. The hybrid UK corporation tax rate for the period is 20.75%
(2014: 22.50%). The differences are explained below:
2015 2014
£000 £000
Profit before taxation from continuing operations 8,482 6,576
Tax using the UK corporation tax rate of 20.75%, (2014: 22.50%) 1,760 1,480
Overseas profits charged at different taxation rate 173 206
Non-deductible expenses 239 85
Amortisation of intangible asset 60 34
Temporary differences* (143) (179)
Adjustment to restate opening deferred tax and differences in rates (28) 107
R&D uplift current year (98) (97)
Adjustments to tax charge in respect of prior periods (101) 15
Total tax expense 1,862 1,651
*Temporary differences relate to share based payments.
Reductions in the corporation tax rate from 23% to 21% (effective from 1 April
2014) and to 20% (effective 1 April 2015) were substantially enacted on 2 July
2013. In the Budget on 8 July 2015, the Chancellor announced additional
planned reductions to 18% by 2020. This will reduce the company's future
current tax charge accordingly. The deferred tax asset at 27 June 2015 has
been calculated based on the rate of 20% substantively enacted at the balance
sheet date.
The impact of the reduction in the UK corporation tax rate from 21% to 20%
from April 2015 amounts to £74,000 lower charge in the financial year to 27
June 2015. The adjustment for prior year in 2014 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 (2014:
£191,300). This asset has not been recognised in these Financial Statements as
suitable profits to utilise the underlying capital losses are not expected to
arise in the future.
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 106,759,000 (2014: 65,635,000).
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 27 June 2015 the diluted
weighted average number is 110,507,000 shares, (2014: 70,169,000).
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.
Significant and non-recurring items are tabled in the Strategic Report on page
11.
52 weeks to27 Jun 2015 52 weeks to28 Jun 2014
Profit
Profit attributable to equity holders of the Company (basic) £000 6,179 4,400
Significant non-recurring and other items £000 2,321 26
Numerator for adjusted earnings per share calculation (adjusted basic) £000 8,500 4,426
Shares Basic Diluted Basic Diluted
Weighted average number of ordinary shares in issue during the period '000 106,759 106,759 65,635 65,635
Dilutive effect of share options '000 - 3,748 - 4,534
106,759 110,507 65,635 70,169
Earnings per share
Basic and diluted earnings per share Pence 5.8 5.6 6.7 6.3
Adjusted basic and adjusted diluted earnings per share Pence 8.0 7.7 6.7 6.3
8. Intangibles
Intangible assets comprise customer relationships, brands and goodwill.
Goodwill Brands and licences Customer relationships Total
£000 £000 £000 £000
Cost at 29 June 2013 and 28 June 2014 52,968 822 - 53,790
On acquisition of subsidiary (note 1) 18,736 2,861 5,909 27,506
Cost at 27 June 2015 71,704 3,683 5,909 81,296
Amortisation at 29 June 2013 - (657) - (657)
Charge for the year 28 June 2014 - (165) - (165)
Amortisation at 28 June 2014 - (822) - (822)
Charge for the year 27 June 2015 - (107) (296) (403)
Amortisation at 27 June 2015 - (929) (296) (1,225)
NBV at 29 June 2013 52,968 165 - 53,133
NBV at 28 June 2014 52,968 - - 52,968
NBV at 27 June 2015 71,704 2,754 5,613 80,071
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