REG - Finsbury Food Group - Preliminary Results <Origin Href="QuoteRef">FIF.L</Origin> - Part 3
21/09/2015 07:01
- Part 3: For the preceding part double click ID:nRSU5925Zb
The brand and customer relationships recognised were purchased as part of the
acquisition of Fletchers Group of Bakeries in October 2014. They are
considered to have a finite useful lives and are amortised on a straight line
basis over their estimated useful lives of twenty years for brands and fifteen
years for customers. The intangibles were valued using an income approach,
using Multi-Period excess earnings Method approach for customer relationships
and Relief from Royalty Method for brand valuation.
Goodwill has arisen on acquisitions and reflects the future economic benefits
arising from assets that are not capable of being identified individually and
recognised as separate assets. The goodwill reflects the anticipated
profitability and synergistic benefits arising from the enlarged Group
structure. The goodwill is the balance of the total consideration less fair
value of assets acquired and identified. The carrying value of the goodwill is
reviewed annually for impairment.
The carrying amount of goodwill has been allocated to cash generating units or
groups of cash generating units as follows:
2015£000 2014£000
Nicholas & Harris 2,980 2,980
Lightbody of Hamilton 48,474 48,474
Memory Lane Cakes 1,514 1,514
Fletchers 18,364 -
Johnstone's Food Service 372 -
71,704 52,968
8. Intangibles (continued)
The Group tests goodwill for impairment on an annual basis, or more frequently
if there are indications that the goodwill may be impaired. The recoverable
amounts of the cash generating units are determined from value in use
calculations. The key assumptions for the value in use calculations are the
discount rate used for future cash flows and the anticipated future changes in
revenue, direct costs and indirect costs. The assumptions used reflect the
past experience of management and future expectations.
The Group prepares cash flow forecasts based on the most recent financial
budgets approved by management and extrapolates these forward for the next
five years with a residual value at the end of the five years. Changes in
revenue and direct costs are based on past experience and expectations of
future changes in the market.
The revenue growth rate used for impairment tests at 27 June 2015 was 3%
(2014: 3%) for all cash generating units. This inflation rate of 3% (2014: 3%)
has been applied to the 2016 budget and for the following 5 years on costs of
sales, variable costs and indirect costs. The five year cashflow is taken
along with a residual value at the end of the five year period.
A pre-tax discount rate of 10% (2014: 10%) has been used in these
calculations. The Group has considered the economic environment and higher
level of return expected by equity holders due to the perceived risk in equity
markets when selecting the discount rate.
The discount rate used for each cash generating unit has been kept constant as
the market risk is deemed not to be materially different between the different
segments of the bakery sector, nor over time.
Sensitivities have been carried out by the Directors and they are comfortable
that at reasonable discount levels there are no indications of impairment.
9. 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.
2015 Margin Frequency ofRepayments Year of maturity Facility£000 Drawn£000 Current£000 Non-Current£000
Invoice Discounting 1.50%/base On demand Revolving* 22,000 3,397 3,397 -
Term loan 2.00%/LIBOR Quarterly 2019 13,400 12,116 3,211 8,905
Revolving credit 2.00%/LIBOR varies 2019 8,000 2,000 2,000 -
Mortgage 1.75%/LIBOR quarterly 2022 3,470 3,287 461 2,826
Finance lease liabilities 1.76%/base Monthly various 2,000 474 284 190
Overdraft 2.00%/base On demand - 2,000 - - -
50,870 21,274 9,353 11,921
Unamortised transaction costs (240) (65) (175)
21,034 9,288 11,746
Secured bank loans and mortgages over one year 11,921
Unamortised transaction costs (175)
11,746
Repayments are as follows:
Between one and two years 3,006
Between two and five years 7,389
Between five and ten years 1,351
11,746
2014 Margin Frequency ofRepayments 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) 3,666
Unamortised transaction costs (54)
3,612
Repayments are as follows:
Between one and two years 630
Between two and five years 1,262
Between five and ten years 1,720
3,612
* 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 October 2019.
9. Other interest-bearing loans and borrowings (continued)
Finance lease liabilities are payable as follows:
2015 2014
Minimum lease payments Interest Principal Minimum lease payments Interest Principal
£000 £000 £000 £000 £000 £000
Less than one year 294 10 284 403 21 382
Between one and five years 194 4 190 486 14 472
488 14 474 889 35 854
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, HSBC Equipment Finance (UK) Ltd
and HSBC Corporate Trustee Company (UK) Limited 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 bank facilities (excluding overdraft) available for drawdown are £50.9m
(2014: £29.0m). At the period end date the facility utilised was £21.3m
(2014: £9.4m), giving £29.6m (2014: £19.6m) headroom.
10. Analysis of net debt
At year ended28 June 2014£000 Cash flow £000 At year ended27 June 2015£000
Cash at bank 592 (531) 61
Debt due within one year (2,399) (3,273) (5,672)
Debt due after one year (3,194) (8,537) (11,731)
Invoice discounting due within one year (2,959) (438) (3,397)
Hire purchase obligations due within one year (382) 98 (284)
Hire purchase obligations due after one year (472) 282 (190)
Total net bank debt (8,814) (12,399) (21,213)
Debt (9,330) (21,034)
Cash at bank 592 61
Unamortised transaction costs (76) (240)
Total net bank debt (8,814) (21,213)
Deferred consideration payable - (50)
Total net debt including deferred consideration payable (8,814) (21,263)
Cash at banks 592 61
Total debt including deferred consideration payable excluding cash (9,406) (21,324)
Deferred consideration receivable 2,895 -
Total debt including deferred consideration payable and receivable excluding cash (6,511) (21,324)
This information is provided by RNS
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