REG - Finsbury Food Group - Preliminary Results <Origin Href="QuoteRef">FIF.L</Origin> - Part 2
18/09/2017 07:46
- Part 2: For the preceding part double click ID:nRSR9610Qa
covenants during the year.
Interest cover (based on adjusted earnings before interest, tax, depreciation
and amortisation - EBITDA) for the 52 weeks to 1 July 2017 was 28.4 (2016:
23.4). Net bank debt to EBITDA (based on adjusted EBITDA) for the year to 1
July 2017 was 0.7 (2016: 0.8).
Taxation
The Group taxation charge for the year was £3.0 million (2016: £3.3 million).
This represents an effective rate of 21.4% on profits before significant
non-recurring items (2016: 20.4%). Further details on the tax charge can be
found in Note 5 to the Group's Financial Statements.
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.
Environmental Matters
As part of the environmental activities, site wide LED replacement programs
are ongoing along with continued focus on energy usage such as oven burner
efficiencies and insulated traywash facilities. Trade effluent reduction
initiatives are ongoing with investment in a new effluent treatment plant
completed at one of our larger bakeries.
Employee Social and Community Issues
With the successful roll out of the Groups vision and values the Group holds
various family fun days as part of the employee engagement program. We have
links with employment agencies and continue to participate in employability
work placements that help provide work placements for individuals who find it
difficult to get back to full time employment. Various charities are supported
and in some instances the site's employee forum decides on the local charity.
In an attempt to promote health and wellbeing fitness and running clubs have
been established at a local basis.
Technical Matters
All sites hold grade A, or the highest AA rating under the British Retail
Consortium version 7 standard. As a Group, all technical functions have come
together to establish a Group Technical Strategy which is a dynamic three year
plan covering all aspects of people, food safety, legal compliance and the
establishment of a quality culture underpinned by consistent process control.
Major investment has also taken place in the form of upgrading team member
facilities to a best in standard and we have continued to invest in a strong
visual good manufacturing programme on site.
Health continues to be a major focus for the business. Dedicated resource
continues to work on sugar and salt reduction targets as part of the
Government Obesity Strategy and Public Health England recommendations. In
conjunction with a major brand owner the Group were first to market providing
a range of licensed products which were 18 months in development and which
exceed these requirements.
The Strategic Report was approved by the Board of Directors on 15 September
2017 and was signed on its behalf by:
Stephen Boyd (Director)
Financial Statements
Consolidated Statement of Profit and Loss and Other Comprehensive Income
for the 52 weeks ended 1 July 2017 and 53 weeks ended 2 July 2016
2017 2016
Note £000 £000
Revenue 1 314,296 319,680
Cost of sales (216,493) (217,092)
Gross profit 97,803 102,588
Administrative expenses 2 (84,239) (89,797)
Results from operating activities 13,564 12,791
Finance income 4 555 221
Finance cost 4 (1,081) (1,208)
Net finance cost (526) (987)
Profit before tax and share of losses of equity-accounted investees 13,038 11,804
Share of losses of equity accounted investees (22) (14)
Profit before tax 13,016 11,790
Taxation 5 (2,959) (3,286)
Profit for the financial year 10,057 8,504
Other comprehensive (expense)/income
Items that will not be reclassified to profit and loss
Remeasurement on defined benefit pension scheme (4,031) (2,595)
Movement in deferred taxation on pension scheme liability 621 390
Other comprehensive expense for the financial year, net of tax (3,410) (2,205)
Total comprehensive income for the financial year 6,647 6,299
Profit attributable to:
Equity holders of the parent 9,048 7,791
Non-controlling interest 1,009 713
Profit for the financial year 10,057 8,504
Total comprehensive income attributable to:
Equity holders of the parent 5,638 5,586
Non-controlling interest 1,009 713
Total comprehensive income for the financial year 6,647 6,299
Earnings per ordinary shares
Basic 6 7.1 6.1
Diluted 6 6.9 6.0
The Notes on pages 22 to 32 form an integral part of these Financial Statements
Consolidated Statement of Financial Position
at 1 July 2017 and 2 July 2016
Note 2017 2016
£000 £000
Non-current assets
Intangibles 7 80,302 77,596
Property, plant and equipment 48,857 50,501
Investments in equity accounted investees 269 211
Other financial assets 28 28
Deferred tax assets 4,063 3,492
133,519 131,828
Current assets
Inventories 12,684 12,577
Trade and other receivables 50,018 50,332
Cash and cash equivalents 3,024 3,024
Other financial assets - fair value of derivatives 560 -
66,286 65,933
Total assets 199,805 197,761
Current liabilities
Other interest-bearing loans and borrowings 8 (14,586) (13,829)
Trade and other payables (60,461) (64,357)
Provisions (18) (247)
Other financial liabilities - fair value of derivatives (234) (157)
Current tax liabilities (1,650) (1,210)
(76,949) (79,800)
Non-current liabilities
Other interest-bearing loans and borrowings 8 (5,800) (8,740)
Provisions and other liabilities (221) (141)
Deferred tax liabilities (1,335) (1,547)
Pension fund liability (10,498) (6,463)
(17,854) (16,891)
Total liabilities (94,803) (96,691)
Net assets 105,002 101,070
Equity attributable to equity holders of the parent
Share capital 1,304 1,304
Share premium account 64,956 64,956
Capital redemption reserve 578 578
Employee share reserve (3,585) (3,920)
Retained earnings 39,862 36,569
103,115 99,487
Non-controlling interest 1,887 1,583
Total equity 105,002 101,070
These Financial Statements were approved by the Board of Directors on 15
September 2017 and were signed on its behalf by:
Stephen Boyd (Director)
Registered Number 00204368
The Notes on pages 22 to 32 form an integral part of these Financial
Statements
Consolidated Statement of Changes in Equity
for the 52 weeks ended 1 July 2017 and 53 weeks ended 2 July 2016
ShareCapital Sharepremium Capital redemption reserve Employee share reserve RetainedEarnings Non-controllinginterest Totalequity
£000 £000 £000 £000 £000 £000 £000
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
Balance at 2 July 2016 1,304 64,956 578 (3,920) 36,569 1,583 101,070
Profit for the financial year - - - - 9,048 1,009 10,057
Other comprehensive (expense)/ income:
Remeasurement on defined benefit pension - - - - (4,031) - (4,031)
Deferred tax movement on pension scheme remeasurement - - - - 621 - 621
Total other comprehensive expense - - - - (3,410) - (3,410)
Total comprehensive income for the period - - - - 5,638 1,009 6,647
Transactions with owners, recorded directly in equity:
Own shares acquired - - - 335 (158) - 177
Shares issued during the year - - - - - - -
Impact of share based payments - - - - 1,240 - 1,240
Deferred tax on share options - - - - 47 - 47
Foreign exchange translation differences - - - - 171 - -171
Dividend paid - - - - (3,645) (705) (4,350)
Balance at 1 July 2017 1,304 64,956 578 (3,585) 39,862 1,887 105,002
The notes on pages 22 to 32 form an integral part of these Financial Statements.
Consolidated Cash Flow Statement
for the 52 weeks ended 1 July 2017 and 53 weeks ended 2 July 2016
Note 2017 2016
£000 £000
Cash flows from operating activities
Profit for the financial year 10,057 8,504
Adjustments for:
Taxation 5 2,959 3,286
Net finance costs 4 526 987
Depreciation 6,948 7,090
Amortisation of intangibles 7 537 539
Non-cash Impairment of assets & goodwill 7 4,000 4,290
Share of losses of equity accounted investees after tax 22 14
Contributions by employer to pension scheme (200) (117)
Change in fair value of foreign exchange contracts 71 134
Operating profit before changes in working capital 24,920 24,727
Changes in working capital:
Decrease/(increase) in inventories (39) (1,091)
Decrease/(increase) in trade and other receivables 153 (2,253)
(Decrease)/Increase in trade and other payables (2,566) 1,711
Cash generated from operations 22,468 23,094
Interest paid (892) (1,180)
Tax paid (2,650) (1,603)
Net cash from operating activities 18,926 20,311
Cash flows from investing activities
Purchase of property, plant and equipment (12,542) (12,141)
Purchase of companies/investments (80) -
Deferred consideration paid - (50)
Net cash used in investing activities (12,622) (12,191)
Cash flows from financing activities
Net drawdown of invoice discounting 9 822 7,427
Repayment of revolving credit 9 - (2,000)
Repayment of mortgage and bank loans 9 (2,937) (3,672)
Repayment of asset finance liabilities 9 (133) (284)
Issue of ordinary share capital - 5
Options exercised/(purchase) of shares by employee benefit trust 177 (2,835)
Dividend paid to non-controlling interest (705) (336)
Dividend paid to shareholders (3,645) (3,305)
Net cash from financing activities (6,421) (5,000)
Net (decrease)/increase in cash and cash equivalents (117) 3,120
Opening cash and cash equivalents 3,024 61
Effect of exchange rate fluctuations on cash held 117 (157)
Cash and cash equivalents at end of period 3,024 3,024
The Notes on pages 22 to 32 form an integral part of these Financial Statements.
Notes to the Consolidated Financial Statements
(forming part of the Financial Statements)
Presentation of Financial Statements
Basis of Preparation
The financial information set out above does not constitute the company's
statutory accounts for the 52 week period ended 1 July 2017 or the 53 week
period ended 2 July 2016, but is derived from those accounts. Statutory
accounts for 2016 have been delivered to the registrar of companies, and those
for 2017 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 Significant non-recurring items
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 as they
share similar economic characteristics. The characteristics considered are:
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
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
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 £0.2m (2016: £0.3m
loss) 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)
52 week period ended 1 July 2017 UK Bakery £000 Overseas £000 Group Operations£000 Total Group £000
External revenue continuing 281,580 32,716 - 314,296
Adjusted operating profit 15,369 2,219 (153) 17,435
Fair value foreign exchange contracts (71)
Defined benefit pension scheme 200
Significant non-recurring items (4,000)
Results from operating activities 13,564
Finance income 555
Finance cost (1,081)
Net finance cost (526)
Share of losses of equity accounted investees after tax (22)
Profit before taxation 13,016
Taxation (2,959)
Profit for the financial year 10,057
At 1 July 2017
Segment assets 188,628 6,543 712 195,883
Unallocated assets 3,922
Consolidated total assets 199,805
Segment liabilities (62,483) (5,041) (6,564) (74,088)
Unallocated liabilities (20,715)
Consolidated total liabilities (94,803)
Other segment information
Capital expenditure 12,430 112 - 12,542
Depreciation included in segment profit 6,906 42 - 6,948
Amortisation 537 - - 537
Impairment of assets 4,000 - - 4,000
Inter-segmental sale / (purchases) 8,710 (8,710) - -
Analysis of unallocated assets and liabilities:
Assets Liabilities
£000 £000
Investments 297 Loans and borrowings (20,386)
Financial instruments 560 Financial instruments (234)
Cash and cash equivalents 3,024 Cash and cash equivalents -
Taxation balances 41 Taxation balances (95)
Unallocated assets 3,922 Unallocated liabilities (20,715)
With regard to revenue, five customers with sales of £64m, £39m, £31m, £22m
and £22m account for 57% of revenue, which is attributable to the UK Bakery
and Overseas segments above.
Impairment relates to the assets held in Grain D'Or, which fall under the UK
Bakery segment.
1. Revenue and Segment Information (continued)
53 week period ended 2 July 2016 UK Bakery £000 Overseas £000 Group Operations£000 Total Group £000
External revenue continuing 291,196 28,484 - 319,680
Adjusted operating profit 15,887 1,511 (300) 17,098
Fair value foreign exchange contracts (134)
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, £39m, £29m, £24m
and £23m account for 57% 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)
An analysis by geographical segment is shown below:
Geographical split of revenue by destination 2017 2016
£000 £000
Continuing:
United Kingdom 276,177 286,562
Europe 38,119 33,118
Rest of World - -
Total continuing 314,296 319,680
Capital expenditure on segment assets is detailed in Note 1.
Geographical split by country of origin United Kingdom Europe Total
£000 £000 £000
2017
Continuing Revenue 281,580 32,716 314,296
Operating profit 15,216 2,219 17,435
Total assets 193,262 6,543 199,805
Total liabilities (89,762) (5,041) (94,803)
Net assets 103,500 1,502 105,002
United Kingdom Europe Total
£000 £000 £000
2016
Continuing 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
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:
2017 2016
£000 £000
Amortisation of intangibles 537 539
Depreciation of owned tangible assets 6,715 6,770
Depreciation on assets under finance leases and hire purchase contracts 233 320
Impairment of assets & goodwill (note 3) 4,000 4,290
Loss on foreign exchange 1,360 326
Hire of plant and machinery - operating leases 1,006 810
Hire of other assets - operating leases 1,833 1,877
Movement on fair value of foreign exchange contracts 71 134
Research and development 2,328 2,287
Share option charges 1,240 739
Amortisation of intangibles for the year was £537,000 (2016: £539,000)
relating to the Fletchers acquisition in October 2014.
Auditor's remuneration:
2017 2016
£000 £000
Audit of these Financial Statements 50 47
Amounts receivable by the auditor and its associates in respect of:
Audit of the Financial Statements of subsidiaries of the Company 123 122
Taxation compliance services 35 22
Other tax advisory 7 -
Other services 100 104
The auditor's remuneration is in respect of KPMG LLP. Fees for other services relates to pension advisory services and services relating to information technology.
3. Significant Non-Recurring Items
The Group presents certain items as significant and non-recurring. These
relates 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.
The Grain D'Or business has been historically loss making and despite the
implementation of a range of initiatives to improve the business including
strict cost control and new working practices the site remained loss making in
the year to 1 July 2017. The Company now proposes to close the site. A formal
consultation with representatives of the workforce commenced on 1 September
2017. The consultation is expected to conclude mid October 2017. Until this
consultation period concludes uncertainty remains over the use of the assets.
In light of this, a decision has been taken to impair the assets used in the
business by £4.0 million in the year to 1 July 2017.
A charge of £4.3 million in the previous year relates to impairment of
goodwill acquired in 2007. This is 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
2017 2016
£000 £000
Finance income
Change in fair value of interest rate swaps 555 219
Bank interest receivable - 2
Total finance income 555 221
Finance cost
Interest on net pension position (204) (148)
Bank interest payable (752) (787)
Interest on interest rate swap agreements (125) (273)
Total finance cost (1,081) (1,208)
5. Taxation
Recognised in the Consolidated Statement of Profit and Loss
2017£000 2016£000
Current tax
Current year 3,270 2,745
Adjustments for prior years (196) 82
Total current tax 3,074 2,827
Deferred tax
Origination and reversal of temporary differences (222) 928
Retirement benefit deferred tax charge 1 (6)
Adjustments for prior years 106 (463)
Total deferred tax (115) 459
Total tax expense 2,959 3,286
Reconciliation of effective tax rate
The weighted average hybrid rate of UK and French tax is 22.2% (2016: 21.8%).
The tax assessed for the period is lower (2016: lower) than the hybrid rate of
UK and French tax. The UK corporation tax rate for the period is 20% reducing
to 19% from 1 April 2017, (2016: 20.00 %). The differences are explained
below:
2017 2016
£000 £000
Profit before taxation before losses from equity accounted investees 13,038 11,804
Tax using the UK corporation tax rate of 19.76%, (2016: 20.00%) 2,577 2,361
Overseas profits charged at different taxation rate 344 207
Non-deductible expenses 160 99
Temporary differences - 7
Restatement of opening net deferred tax due to rate change and differences in rates 68 275
R&D uplift current year (100) (140)
Adjustments to tax charge in respect of prior periods (90) (381)
Tax expense (excluding prior year disallowable impairment) 2,959 2,428
Tax rate for the period (excluding prior year disallowable impairment) 21.4% 20.6%
Disallowable intangible impairment - 858
Total tax expense 2,959 3,286
The UK corporation tax rate reductions from 20% to 19% from 1 April 2017 and
18% from 1 April 2020 were substantively enacted on 26 October 2015. An
additional reduction to 17% from 1 April 2020 was substantively enacted on 6
September 2016. The deferred tax assets and liabilities at 1 July 2017 have
been calculated based on these rates.
The adjustment of £90,000 for prior year includes, ineligible capital spends
offset partially by additional tax relief on qualifying R&D expenditure for
prior periods.
The Company has an unrecognised deferred tax asset of £162,605 (2016:
£172,170) relating to capital losses carried forward. This asset has not been
recognised in the financial statements as it is not expected that suitable
gains will arise in the future in order to utilise the underlying capital
losses.
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 126,979,000 (2016: 126,938,000).
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 1 July 2017, the diluted weighted
average number of shares in issue was 130,992,000, (2016: 129,206,000).
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
· The taxation effect at the appropriate rate on adjustments
· Amortisation of intangible assets
52 weeks to1 Jul 2017 53 weeks to2 Jul 2016 52 weeks to2 Jul 2016
Profit £000 £000 £000
Profit attributable to equity holders of Company (basic) 9,048 7,791 7,528
Significant non-recurring and other items as per strategic Report 2,901 4,250 4,250
Intangible amortisation net of deferred tax 446 442 442
Numerator for adjusted earnings per share calculation (adjusted basic) 12,395 12,483 12,220
Shares Basic Diluted Basic Diluted Basic Diluted
Weighted average number of ordinary shares in issue during the period '000126,979 '000126,979 '000126,938 '000126,938 '000126,938 '000126,938
Dilutive effect of share options - 4,013 - 2,268 - 2,268
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