REG - Finsbury Food Group - Preliminary Results <Origin Href="QuoteRef">FIF.L</Origin> - Part 2
19/09/2016 07:05
- Part 2: For the preceding part double click ID:nRSS1253Ka
(1,862)
Profit for the financial year 8,504 6,620
Other comprehensive (expense)/income
Items that will not be reclassified to profit and loss
Remeasurement on defined benefit pension scheme (2,595) (153)
Movement in deferred taxation on pension scheme liability 390 31
Other comprehensive expense for the financial year, net of tax (2,205) (122)
Total comprehensive income for the financial year 6,299 6,498
Profit attributable to:
Equity holders of the parent 7,791 6,179
Non-controlling interest 713 441
Profit for the financial year 8,504 6,620
Total comprehensive income attributable to:
Equity holders of the parent 5,586 6,057
Non-controlling interest 713 441
Total comprehensive income for the financial year 6,299 6,498
Earnings per ordinary shares
Basic 6 6.1 5.8
Diluted 6 6.0 5.6
The notes on pages 22 to 33 form an integral part of these Financial Statements
Consolidated Statement of Financial Position
at 2 July 2016 and 27 June 2015
Note 2016 2015
£000 £000
Non-current assets
Intangibles 7 77,596 80,071
Property, plant and equipment 50,501 46,038
Investments in equity accounted investees 211 225
Other financial assets 28 28
Deferred tax assets 3,492 4,446
131,828 130,808
Current assets
Inventories 12,577 11,268
Trade and other receivables 50,332 48,381
Cash and cash equivalents 3,024 61
Current tax asset - 40
Other financial assets - fair value of foreign exchange contracts - 117
65,933 59,867
Total assets 197,761 190,675
Current liabilities
Other interest-bearing loans and borrowings 8 (13,829) (9,288)
Trade and other payables (64,357) (62,283)
Provisions (247) (252)
Deferred purchase consideration - (50)
Other financial liabilities-fair value of interest rate swaps/foreign exchange (157) (359)
Current tax liabilities (1,210) -
(79,800) (72,232)
Non-current liabilities
Other interest-bearing loans and borrowings 8 (8,740) (11,746)
Provisions and other liabilities (141) (161)
Deferred tax liabilities (1,547) (103)
Pension fund liability (6,463) (3,837)
(16,891) (15,847)
Total liabilities (96,691) (88,079)
Net assets 101,070 102,596
Equity attributable to equity holders of the parent
Share capital 1,304 1,280
Share premium account 64,956 64,952
Capital redemption reserve 578 578
Employee share reserve (3,920) -
Retained earnings 36,569 34,580
99,487 101,390
Non-controlling interest 1,583 1,206
Total equity 101,070 102,596
These financial statements were approved by the Board of Directors on 16
September 2016 and were signed on its behalf by:
Stephen Boyd (Director)
Registered Number 00204368
The notes on pages 22 to 33 form an integral part of these Financial
Statements
Consolidated Statement of Changes in Equity
for the 53 weeks ended 2 July 2016 and 52 weeks ended 27 June 2015
ShareCapital Sharepremium Capital redemption reserve Employee share reserve RetainedEarnings Non-controllinginterest Totalequity
£000 £000 £000 £000 £000 £000 £000
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 income/(expense):
Remeasurement of defined benefit pension - - - - (153) - (153)
Deferred tax movement on pension scheme remeasurement - - - - 31 - 31
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
Balance at 28 June 2015 1,280 64,952 578 - 34,580 1,206 102,596
Profit for the financial year - - - - 7,791 713 8,504
Other comprehensive (expense)/ income:
Remeasurement on defined benefit pension - - - - (2,595) - (2,595)
Deferred tax movement on pension scheme remeasurement - - - - 390 - 390
Total other comprehensive expense - - - - (2,205) - (2,205)
Total comprehensive income for the period - - - - 5,586 713 6,299
Transactions with owners, recorded directly in equity:
Own shares acquired - - - (3,920) - - (3,920)
Shares issued during the year 24 4 - - (23) - 5
Impact of share based payments - - - - 306 - 306
Deferred tax on share options - - - - (575) - (575)
Dividend paid - - - - (3,305) (336) (3,641)
Balance at 2 July 2016 1,304 64,956 578 (3,920) 36,569 1,583 101,070
The notes on pages 22 to 33 form an integral part of these Financial Statements.
Consolidated Cash Flow Statement
for the 53 weeks ended 2 July 2016 and 52 weeks ended 27 June 2015
Note 2016 2015
£000 £000
Cash flows from operating activities
Profit for the financial year 8,504 6,620
Adjustments for:
Taxation 5 3,286 1,862
Net finance costs 4 987 1,044
Depreciation 7,090 5,433
Amortisation of intangibles 7 539 403
Non-cash Impairment of goodwill 7 4,290 -
Share of losses of equity-accounted investees after tax 14 -
Share options charge/(credit) - (10)
Contributions by employer to pension scheme (117) (100)
Fair value charge/(credit) for foreign exchange contracts 134 (181)
Operating profit before changes in working capital 24,727 15,071
Changes in working capital:
Increase in inventories (1,091) (1,004)
Increase in trade and other receivables (2,253) (7,259)
Increase in trade and other payables 1,711 10,510
Cash generated from operations 23,094 17,318
Interest paid (1,180) (923)
Tax paid (1,603) (1,164)
Net cash from operating activities 20,311 15,231
Cash flows from investing activities
Purchase of property, plant and equipment (12,141) (7,354)
Purchase of subsidiary companies - (40,809)
Deferred consideration (paid)/received (50) 3,000
Settlement of acquired debt - (19,740)
Cash received with acquisition - 4,990
Net cash used in investing activities (12,191) (59,913)
Cash flows from financing activities
Drawdown of new facility - 24,028
Drawdown/(repayment) of invoice discounting 7,427 (8,159)
(Repayment)/drawdown of revolving credit (2,000) -
Repayment of mortgage and bank loans (3,672) (3,622)
Repayment of asset finance liabilities (284) (380)
Issue of ordinary share capital 5 34,083
Purchase of shares by employee benefit trust (2,835) -
Dividend paid to non-controlling interest (336) (362)
Dividend paid to shareholders (3,305) (1,559)
Net cash from financing activities (5,000) 44,029
Net increase/(decrease) in cash and cash equivalents 3,120 (653)
Opening cash and cash equivalents 61 592
Effect of exchange rate fluctuations on cash held (157) 122
Cash and cash equivalents at end of period 3,024 61
The notes on pages 22 to 33 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 53 week period ended 2 July 2016 or the 52 week
period ended 27 June 2015, but is derived from those accounts. Statutory
accounts for 2015 have been delivered to the registrar of companies, and those
for 2016 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 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 it is 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 products 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 spend 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 loss from continuing operations of £0.3m (2015: profit
£0.3m) being presented within the Group Operations segment.
The Group's finance income and expenses cannot be meaningfully allocated to
the individual operating segments.
1 Revenue and Segment Information (continued)
53 week period ended 2 July 2016 UK Bakery £000 Overseas £000 Group Operations£000 Total Group £000
Continuing
Revenue
External 291,196 28,484 - 319,680
Total underlying profit 15,887 1,511 (300) 17,098
Fair value foreign exchange contracts (134)
Share options charge -
Defined benefit pension scheme 117
Significant non-recurring items (4,290)
Results from operating activities 12,791
Finance income 221
Finance cost (1,208)
Net finance cost (987)
Share of losses of equity-accounted investees after tax (14)
Profit before taxation 11,790
Taxation (3,286)
Profit for the financial year 8,504
At 2 July 2016
Segment assets 187,827 6,337 292 194,456
Unallocated assets 3,305
Consolidated total assets 197,761
Segment liabilities (61,557) (5,355) (7,052) (73,964)
Unallocated liabilities (22,727)
Consolidated total liabilities (96,691)
Other segment information
Capital expenditure (12,115) (26) - (12,141)
Depreciation included in segment profit 7,063 27 - 7,090
Amortisation 539 - - 539
Impairment of goodwill 4,290 - - 4,290
Inter-segmental sale / (purchases) 8,488 (8,488) - -
Analysis of unallocated assets and liabilities:
Assets Liabilities
£000 £000
Investments 253 Loans and borrowings (22,570)
Financial instruments - Financial instruments (157)
Cash and cash equivalents 3,024 Cash and cash equivalents -
Taxation balances 28 Taxation balances -
Unallocated assets 3,305 Unallocated liabilities (22,727)
With regard to revenue, five customers with sales of £66m, £62m, £39m, £29m
and £24m account for 69% of revenue, which is attributable to the UK Bakery
and Overseas segments above.
Impairment loss relates to the Anthony Alan Foods Ltd acquisition in 2007
which falls under the UK Bakery segment.
1. 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 134
Finance cost (1,178)
Profit before taxation 8,482
Taxation (1,862)
Profit for the financial year 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 sales / (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 71 Taxation balances (184)
Unallocated assets 502 Unallocated liabilities (21,577)
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.
1. Revenue and Segment Information (continued)
An analysis by geographical segment is shown below:
Geographical split of revenue by destination 2016 2015
£000 £000
Continuing:
United Kingdom 286,562 230,299
Europe 33,118 25,856
Rest of World - 11
Total continuing 319,680 256,166
Capital expenditure on segment assets is detailed in note 3.
Geographical split by country of origin United Kingdom Europe Total
£000 £000 £000
2016
Revenue 291,196 28,484 319,680
Operating profit 15,587 1,511 17,098
Total assets 191,424 6,337 197,761
Total liabilities (91,336) (5,355) (96,691)
Net assets 100,088 982 101,070
United Kingdom Europe Total
£000 £000 £000
2015
Revenue 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
The net assets shown under Europe comprises Lightbody Stretz Ltd, being the 50% owned parent company of Lightbody Europe SAS, the French based selling and distribution business.
2. Expenses and Auditor's Remuneration
Included in profit are the following:
2016 2015
£000 £000
Amortisation of intangibles 539 403
Depreciation of owned tangible assets 6,770 5,096
Depreciation on assets under finance leases and hire purchase contracts 320 337
Loss on foreign exchange (326) (140)
Hire of plant and machinery - operating leases 810 679
Hire of other assets - operating leases 1,877 1,452
Movement on fair value of foreign exchange contracts 134 (181)
Research and development 2,287 1,737
Share option charges/(credits) 739 (10)
Amortisation of intangibles for the year was £539,000 (2015: £403,000)
relating to the Fletchers acquisition in October 2014.
Auditor's remuneration:
2016 2015
£000 £000
Audit of these Financial Statements 47 26
Amounts receivable by the auditor and its associates in respect of:
Audit of the Financial Statements of subsidiaries of the Company 122 116
Taxation compliance services 22 16
Services related to corporate finance transactions - 278
Other services 104 176
The auditor's remuneration is in respect of KPMG LLP. Fees for other services relates to pension advisory services, services relating to information technology and services relating to remuneration.
3. 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.
A charge of £4,290,000 relates to impairment of goodwill acquired in 2007,
(2015: £3,181,000 relates to acquisition transaction costs). These are
included in administrative expenses in the Consolidated Statement of Profit
and Loss and Other Comprehensive Income.
4. Finance Income and Cost
Recognised in the Consolidated Statement of Profit and Loss
2016 2015
£000 £000
Finance income
Change in fair value of interest rate swaps 219 28
Bank interest receivable 2 1
Unwinding of discount of deferred consideration receivable - 105
Total finance income 221 134
Finance cost
Interest on net pension position (148) (154)
Bank interest payable (787) (748)
Interest on interest rate swap agreements (273) (276)
Total finance cost (1,208) (1,178)
5. Taxation
Recognised in the Consolidated Statement of Profit and Loss
2016 2015
£000 £000
Current tax
Current year 2,745 1,221
Adjustments for prior years 82 (121)
Total current tax 2,827 1,100
Deferred tax
Origination and reversal of temporary differences 928 753
Retirement benefit deferred tax charge (6) (11)
Adjustments for prior years (463) 20
Total deferred tax 459 762
Total tax expense 3,286 1,862
Reconciliation of effective tax rate
The weighted average hybrid rate of UK and French tax is 21.8% (2015: 22.8%).
The tax assessed for the period is lower (2015: lower) than the hybrid rate of
UK and French tax. The UK corporation tax rate for the period is 20.00%,
(2015: 20.75 %). The differences are explained below:
2016 2015
£000 £000
Profit before taxation before losses from equity-accounted investees 11,804 8,482
Tax using the UK corporation tax rate of 20.00%, (2015: 20.75%) 2,361 1,760
Overseas profits charged at different taxation rate 207 173
Non-deductible expenses 99 239
Amortisation of intangible asset - 60
Temporary differences* 7 (143)
Restatement of opening net deferred tax due to rate change and differences in rates 275 (28)
R&D uplift current year (140) (98)
Adjustments to tax charge in respect of prior periods (381) (101)
Tax expense (excluding significant non-recurring item) 2,428 1,862
Tax rate for the period (excluding disallowable impairment) 20.6% 22.0%
Disallowable intangible impairment 858 -
Total tax expense 3,286 1,862
*Temporary differences relate to share based payments.
Reductions in the corporation tax rate from 21% to 20% (effective from 1 April
2014) were substantively enacted on 2 July 2013. Legislation has been
introduced in the Summer Finance Bill 2015 to reduce the main rate of
corporation tax from 20% to 19% from 1 April 2017 and 18% from 1 April
2020.The deferred tax asset at 2 July 2016 has been calculated based on the
rate of 18% substantively enacted at the balance sheet date. The impact
through the profit and loss of reduction from 20% to 18% on recognised net
deferred tax asset is £275,000 charge.
A further reduction in the UK corporation tax rate to 17% from 1 April 2020
was announced in the Budget on 16 March 2016. This rate will not affect the
measurement of deferred tax until it has been substantively enacted.
The adjustment of £381,000 for prior year includes deferred tax on
amortisation of intangibles (see note 7 for further details), ineligible
capital spend and additional tax relief on qualifying R&D expenditure for
prior periods.
The Company has an unrecognised deferred tax asset of £172,170 (2015:
£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.
6. Earnings Per Ordinary Share
Basic earnings per share for the period is calculated on the basis of profit
for the year after tax, divided by the weighted average number of shares in
issue being 126,938,000 (2015: 106,759,000).
Basic diluted earnings per share is calculated by adjusting the weighted
average number of ordinary shares in issue to assume conversion of all
potential dilutive ordinary shares. At 2 July 2016, the diluted weighted
average number of shares in issue was 129,206,000, (2015: 110,507,000).
An adjusted earnings per share and an adjusted diluted earnings per share have
also been calculated for a 52 week period as in the opinion of the Board this
will allow shareholders to gain a clearer understanding of the trading
performance of the Group and year on year comparisons. These adjusted earnings
per share exclude:
· Reorganisation and other significant non-recurring items
· IAS 39 'Financial Instruments: Recognition and Measurement' fair value
adjustment relating to the Group's interest rate swaps and foreign exchange
contracts
· IAS 19 (revised) 'Accounting for retirement benefits' relating to net
income
· IFRS 3 'Business Combinations' discount charge relating to deferred
consideration payable and receivable.
· The taxation effect at the appropriate rate on adjustments
· Amortisation of intangible assets
Significant non-recurring items are tabled in the Strategic Report on page
13.
53 weeks to2 Jul 2016 52 weeks to2 Jul 2016 52 weeks to27 Jun 2015
Profit
Profit attributable to equity holders of Company (basic) £000 7,791 7,528 6,179
Significant non-recurring, amortisation of intangibles and other items £000 4,692 4,692 2,643
Numerator for adjusted earnings per share calculation (adjusted basic) £000 12,483 12,220 8,822
Shares '000 Basic Diluted Basic Diluted Basic Diluted
Weighted average number of ordinary shares in issue during the period '000 126,938 126,938 126,938 126,938 106,759 106,759
Dilutive effect of share options '000 - 2,268 - 2,268 - 3,748
126,938 129,206 126,938 129,206 106,759 110,507
Earnings per share
Basic and diluted Pence 6.1 6.0 5.9 5.8 5.8 5.6
Adjusted basic and adjusted diluted Pence 9.8 9.7 9.6 9.5 8.3 8.0
7. Intangibles
Intangible assets comprise customer relationships, brands and goodwill.
Goodwill Software Brands and licences Customer relationships Total
£000 £000 £000 £000 £000
Cost at 28 June 2014 52,968 - 822 - 53,790
Cost at 27 June 2015 71,704 - 3,683 5,909 81,296
Adjustment in respect of prior year acquisition (see note below) 1,754 - - - 1,754
Additions - 600 - - 600
Cost at 2 July 2016 73,458 600 3,683 5,909 83,650
Amortisation at 28 June 2014 - - (822) - (822)
Charge for the year 27 June 2015 - - (107) (296) (403)
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