REG - Finsbury Food Group - Interim Results
21/02/2022 07:00
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RNS Number : 2032C Finsbury Food Group PLC 21 February 2022
Date: 21 February 2022
On behalf of: Finsbury Food Group Plc ('Finsbury', 'the Company' or 'the Group')
Embargoed until: 0700hrs+
Finsbury Food Group Plc
Interim Results
Record sales performance and continued operational excellence
Finsbury Food Group Plc (AIM: FIF), a leading UK speciality bakery
manufacturer of cake, bread and morning goods for the retail and foodservice
channels, is pleased to announce its unaudited interim results for the six
months ended 25 December 2021.
Financial highlights
The H1 2021 performance reflects strong revenue growth in Foodservice, Retail
and our Overseas business in a comparative period impacted by Covid-19 with
varying degrees of disruption and an environment of substantial inflationary
pressure. The Group's successful price recovery and mitigating actions will be
reflected in the second half's profitability.
· Group revenue up 9% to £166.5m (H1 2020: £152.9m), representing
a record half year sales performance.
· Group EBITDA*(1 )£11.9m (H1 2020: £13.1m).
· Profit before tax £5.7m (H1 2020: £7.4m), reflecting the impact
of inflationary pressures.
· Basic EPS (pence per share) 3.2p (H1 2020: 4.1p).
· Net bank debt reduced to £12.9m (excluding IFRS 16 debt),
representing 0.5 times annualised EBITDA of the Group (H1 2020: £21.5m).
· Reinstatement of dividend at 2.4p for the year ended 26 June
2021, paid in December 2021.
· 0.83p interim dividend proposed to be paid on 21 April 2022.
Strategic highlights
· Robust volumes drove revenue growth, up 9% against the
corresponding period in the prior year reflecting:
o a continuation of the strong recovery in UK foodservice, up 26%,
o UK retail up 1.5%, and
o 32% growth in our Overseas division.
· Innovation in Gluten Free recipes and product quality which is
driving organic growth in both the UK and in Europe.
· Operating Brilliance Programme continues to drive significant
operational efficiency helping, in the short term, to recover inflationary
pressure.
· Clear sustainability agenda backed by science based targets
driving continued improvement in energy and waste management.
· Continued investment in development, engagement and the health
and wellbeing of employees.
The Group uses certain Alternative Performance Measures (APMs) which are
non-IFRS measures to monitor performance of its operations and of the Group as
a whole. The reconciliation to IFRS measures is shown in the Consolidated
Statement of Comprehensive Income.
*(1 )EBITDA is before significant non-recurring, other items (Note 1) and
after including the impact of IFRS 16.
Commenting on the results, John Duffy, Chief Executive of Finsbury Food Group
Plc, said:
"We are pleased to have been able to deliver a record revenue performance in
the first half, a demonstration of Finsbury's resilience and strategic focus.
We are now a stronger and more united business than ever before and continue
to reap the benefits of our Operating Brilliance Programme which have been one
of the key drivers behind the positive performance.
We have not been immune to the challenges arising from sudden and unexpected
input cost inflation over the period. However, we have been able to mitigate
the impact of these pressures through commercial negotiation and operational
improvements and will see the benefit of these actions in our second half
profit performance. We have also been affected by staff shortages and supply
chain disruption and would have been able to supply extra demand for our
products and deliver further revenue growth had it not been for these external
factors; a positive sign for the future of our business as these issues begin
to ease. In the second half, we will continue to monitor closely and work
through ongoing pressures using the same strategies employed to date. While
headwinds are set to persist, we have a successful track record of navigating
challenging market conditions, and the steps we have taken to optimise the
business to date stand us in good stead.
With the recovery in foodservice, steady sales in retail and strong overseas
performance set to continue, and with the benefits of the decisive mitigation
actions taken in the first half set to largely benefit our bottom line in the
second, we expect to deliver a full year result in line with market
expectations. We continue to see opportunities for significant sales growth
through gaining market share in existing areas, and targeted acquisitions,
[both bolt on and transformational]. We apply strict acquisition criterion
including valuation as well as ensuring a clear strategic fit that will
typically either accelerate market consolidation in our core product areas or
further diversify the business through new product, category, customer,
channels by geography.
The announcement today of our increased holding of our French subsidiary to
85% reflects our continued desire to invest behind our European growth and is
underpinned by the Company's proven ability to create value through
acquisition. The Board is eager to grow the Group both in the UK and in
Europe and will look to meaningful acquisition to achieve its objectives."
Contact:
Finsbury Food Group www.finsburyfoods.co.uk (http://www.finsburyfoods.co.uk) 029 20 357 500
John Duffy (Chief Executive)
Steve Boyd (Finance Director)
Panmure Gordon (UK) Limited 020 7886 2500
Oliver Cardigan (Corporate Finance)
Atholl Tweedie
Erik Anderson (Corporate Broking)
Edward Walsh
Alma finsbury@almapr.co.uk (mailto:finsbury@almapr.co.uk) 020 3405 0205
PR
Sam Modlin
Rebecca Sanders-Hewett
David Ison
Molly Gretton
Notes to editors:
· Finsbury Food Group Plc (AIM: FIF) is a leading UK manufacturer
of cake and bread bakery goods, supplying a broad range of blue chip customers
within both the grocery retail and 'out of home eating' foodservice sectors
including major multiples and leading foodservice providers.
· The Company is one of the largest speciality bakery groups in the
UK and, with its Overseas division, has sales in the financial year ending 26
June 2021 exceeding £313m.
· The Company's bakery product range is comprehensive and includes:
· Large premium and celebration cakes.
· Small snacking cake formats such as cake slices and bites.
· Artisan, healthy lifestyle and organic breads through to rolls,
muffins (sweet and savoury) and morning pastries, all of which are available
both fresh and frozen dependent on customer channel requirements.
· Gluten Free bread, morning goods and cake ranges.
· The Company is one of the largest ambient cake manufacturers in
the UK, a market valued at £1bn (source: IRI 52 w/e 1(st) January 2022).
The retail bread and morning goods market has a value of £5.2 billion
(source: Kantar Worldpanel 52 w/e 26th December 2021). The retail Free From
cake market is valued at £54 million (source: Kantar Worldpanel 52 w/e 26th
December 2021). The retail Free From bread & morning goods market is
valued at £153 million (source: Kantar Worldpanel 52 w/e 26th December 2021).
· The Company comprises a core UK Bakery division and an Overseas
division:
· The UK Bakery division has manufacturing sites in Cardiff, East
Kilbride, Hamilton, Salisbury, Sheffield, Manchester, and Pontypool.
· The Overseas division comprises the Company's 85% owned company,
Lightbody Stretz Ltd, which supplies and distributes the Group's
UK-manufactured products and third party products, primarily to Europe, and
the Company's manufacturing facilities in Rybarzowice and Zywiec in Poland.
STRATEGIC REVIEW
Our Group
We continue to create and supply high-quality bread and cakes through a
variety of brands and channels, supplying major retailers and the foodservice
channel across the UK, and in Europe, with proprietary, own brand and licensed
brand bread and cakes.
Our cake products are sold primarily in UK retail and are a combination of
both own label and licensed brands. Our bread products are sold in both the
retail and foodservice sectors, are both own label and branded with our Kara
foodservice brand representing a significant proportion of our total
foodservice business.
Our UK bakery segment supply supermarkets, discounters and convenience stores
within the retail sector and, either indirectly through the larger wholesalers
or directly, hotels, pubs, restaurants, high street chains, fast food outlets
and contract caterers within the UK foodservice sector.
Our overseas businesses supply the retail sector in France, Benelux,
Switzerland and now more recently Spain where in store bakery cake has seen
real growth over recent times. The Ultrapharm business has extended us into
the additional markets of Poland, Scandinavia and Italy.
Our Strategy & Objectives
Our strategic objective is to create sustainable value for our shareholders,
customers and other stakeholders by building the leading speciality bakery
group in UK and Europe.
We produce a broad range of high-quality bread, cake and bakery snacking
products targeted at growing channels and market niches. These offer growth
potential and differentiation for our major customers, while fulfilling the
changing needs and desires of end consumers.
To achieve this our strategy is to:
· Invest in our people and our manufacturing sites to form a strong
foundation for our strategy.
· Create innovative, high-quality bakery products that anticipate
key market trends.
· Ensure customer and consumer needs are at the heart of our
decision making.
· Develop a strong licensed brand portfolio to complement our core
retailer brand relationships.
· Aim to succeed in both the retail grocery and out-of-home
channels in the UK and in Europe.
· Grow through a combination of organic growth and targeted
acquisitions.
Over the past few years Finsbury has been focused on driving operational
excellence and achieving 'Baking Brilliance', guided by our Operating
Principles. In 2019 we rolled out the Finsbury Operating Principles, a set of
practical commitments and guidelines for how we run our business. They bring
our strategy to life in our day-to-day work. They are:
· Operating Excellence - we continually invest in our bakeries to
improve our efficiency and customer satisfaction.
· Sustainable Approach - we optimise our use of resources and focus
on reducing waste throughout our supply chain and in our bakeries.
· Quality and Innovations - our innovative, high-quality bakery
products reflect changing customer needs and anticipate key market trends.
· Cost Effectiveness - we maintain strict cost controls without
compromising quality, streamlining our processes from sourcing to delivery.
· Growth With Our Partners - through long-term relationships with
our customers and suppliers, and an understanding of their needs, we can all
enjoy profitable growth.
· People Who Care - we invest in our people, who take personal
pride in their contribution to our success and are strong advocates of our
business and products.
We are now at a more advanced stage in the delivery of our Operating
Brilliance Programme and continue to accelerate the development of initiatives
to enable Finsbury to operate as a single, efficient Group capable of scale
execution. Combined, these initiatives are designed to benefit the Group over
the long term, but we are already seeing tangible benefits.
We have continued to focus on operational efficiency which has, in the short
term, helped the Group to recover the inflationary pressures that we were
faced with in the first half. Our clear sustainability agenda, backed by
science-based targets, is pleasingly driving continued improvement in waste
and energy management. Our commitment to our people has not wavered and we
have continued to invest in the development, engagement and the health and
wellbeing of employees.
Our Markets & Opportunity
Market conditions in the last 24 months have unsurprisingly been entirely
shaped by the ongoing Covid-19 pandemic with overall demand for food and drink
(both in-home and out-of-home) fluctuating significantly, shaped by national,
regional and local lockdowns and restrictions. However, the record sales
performance in the period is a demonstration of Finsbury's resilience and its
ability to adapt, develop and strengthen no matter the circumstances.
As we reflect on lockdown sales patterns and study demand profiles as
restrictions have eased, the data shows the pandemic has mainly accelerated
existing consumer trends rather than triggered new ones. Pre-pandemic, online
grocery shopping, for example, had been growing in prevalence for some time
and whilst the nation is returning to bricks and mortar stores, online has
undoubtedly taken a sizeable share of the market that is unlikely to revert in
the near future. In response to this, we have been working with key retail
partners to share both our cake and celebration cake strategy initiatives in
order to ensure we are aligned with their post pandemic online strategies.
Momentum behind new consumer trends we have seen develop in recent years -
vegan, artisan and wellness, for example - has continued to build, and we
continue to work with our partners and customers to create new and innovative
products in response to them. Wellness is now a key part of our Cake
commercial strategy. BOSH vegan brand sales have almost doubled in the last
year with growth across celebration cake, whole cake and FTG slices. This
demonstrates the continued importance of a vegan offer to some cake shoppers.
From a brand portfolio perspective, we continued to go from strength to
strength. In the period we have grown our branded portfolio by 11.6% YoY,
ahead of the wider branded Cake market which has grown at 7.7%. Our brands
have grown within each of the 'big four' grocers. As a result of this
outperformance our branded market share has grown, and our brands now account
for 10.9% of total branded cake category sales.
In line with our strategic objective to create innovative, high-quality bakery
products that anticipate key market trends, we have continued to evolve our
strong licensed brand portfolio which we work actively to ensure is best in
class. Our Gaming products continue to be a big trend within cake - Xbox is
now the biggest selling branded Celebration cake product and our Super Mario
cake is also performing strongly.
We are continuously monitoring and exploring ways to address the emerging
opportunities presented by the changing consumer landscape. Our long-term
growth ambitions remain unchanged and our ability to capitalise on the
opportunities available to us within our market will be a key driver as we
look to continue to build a Group of scale.
POST PERIOD ACQUISITION
As separately announced today, the Company has increased its stake in
Lightbody-Stretz Limited, its European distribution subsidiary, from 50% to
85%, and entered into an option agreement to acquire the remaining 15% after
two years. Lightbody-Stretz is the holding company of the Group's European
distribution business operating primarily in the French and Benelux markets
and distributing products produced by the wider Finsbury group. The Company
considers that securing a majority stake in this business will enhance its
capacity to support the business and deliver growth outside of its primary UK
markets.
CURRENT TRADING AND OUTLOOK
On the back of a record first half sales performance, there are positive signs
of trading momentum continuing. With the industry-wide pressures experienced
in the first half set to persist through the second half and beyond, the Group
will remain vigilant, proactively addressing them internally and with its
customer base as it has done in recent months. Management has a strong track
record of successfully navigating challenging market conditions, and supported
by a robust, unified and agile organisational infrastructure, remains
confident in its ability to continue to do so.
We continue to prioritise product innovation in speciality product areas such
as nut free licenced celebration cakes, premium and vegan cakes as well as
artisanal, vegan and gluten free bread and morning goods. We are also
investing significantly in increasing our bread and morning goods production
capacity in parallel with the ongoing strong bounce back in foodservice as
pandemic-related restrictions ease. Our overseas operations saw considerable,
profitable growth in the first half, and we expect to see it continue to
progress in the second half.
As a result of this sales momentum, combined with the positive effect on
second half profitability of the decisive mitigation actions taken in the
first, the Board expects to deliver a full year performance in line with
market expectations.
The Board believes that there are further compelling opportunities to build on
the Group's strengths and use our experience, relationships and operating
knowhow to create value for shareholders and enhance the scale of the Group.
The Group has an established track record of creating value from acquisitions
as demonstrated by its previous M&A transactions. We have significant
balance sheet capacity to fund infill acquisitions and furthermore would be
prepared to use equity for larger, transformative transactions provided that
they meet our strict returns criteria, including being enhancing to earnings
per share in the first full year post acquisition.
OPERATING REVIEW
Revenue and Operating Profit
Group revenue increased in H1 2021 by 8.9% year on year to £166.5 million (H1
2020: £152.9m). Profit before interest, tax and significant non-recurring and
other items decreased by £1.2 million to £6.5 million, against a backdrop of
a rapid and unforeseen onset of inflationary pressures as well as operational
and supply chain disruption caused by labour availability shortages and other
supply chain disruptions. Gross margin has decreased by 1.5% to 31.6%
reflecting the lag between the incidence of inflation and the mitigation
thereof, primarily through price recovery.
UK Bakery
H1 2021 £m H1 2020 £m Movement
Revenue 142.3 134.6 +5.7%
Operating profit 4.7 6.4 -27.0%
Operating margin 3.3% 4.8%
UK Bakery comprises the supply of cake, bread and morning goods in the Grocery
and Foodservice channels. Revenue in the period increased by 5.7% to £142.3
million largely driven by a stable performance in UK retail +1.5% and a
continuation of the robust recovery in foodservice up 25.9%.
The operating profit of £4.7 million and the reduced Operating Margin
reflects the impact of inflation and the lag in recovery thereof. The UK
Bakery operation also had to manage labour availability shortages driven by
both pandemic related factors and a broader shortage of labour in the UK as
well as other supply chain disruption such as packaging availability.
Overseas
H1 2021 £m H1 2020 £m Movement
Revenue 24.2 18.3 +32.3%
Operating profit 1.8 1.3 +40.9%
Operating margin 7.4% 6.9%
The Overseas business comprises Lightbody Europe in France and Ultraeuropa
based in Poland. Lightbody Europe specialises in the import and sale of
premium UK manufactured food products and is an important channel into Europe
for Group UK manufactured licensed celebration cake and bite style products.
Ultraeuropa manufactures and supplies gluten free products to Europe.
The operating margin increased by 0.5% due largely to the growth in revenues.
GROUP FINANCIAL REVIEW
Interest Payable
Interest payable (H1 2020: payable) on the Group's bank debt in H1 2021 and on
the related interest rate swaps was £250,000 (H1 2020: £347,000), a decrease
of £97,000. The decrease in charges is a consequence of the lower average
debt balance over the period.
Taxation
The Group's effective tax rate in H1 2021 was 17.5%, which compares to 19.5%
in H1 2020. The effective rates represent a blend of the UK, French and Polish
corporation tax rates. A decrease in the effective rate is driven by the
availability of capital allowance super deductions, partially offset by a
higher French tax rate and a higher proportion of overseas profits. The effect
of the capital allowances super deduction is made clear in the cash flow and
net debt paragraph below.
Earnings per share
The Group considers both adjusted and adjusted diluted earnings per share to
be the most appropriate EPS measure. The adjusted earnings per share were down
18.2% to 3.6p, (H1 2020: 4.4p) and adjusted diluted earnings per share were
down 19.0% to 3.4p, (H1 2020: 4.2p), the reduction being driven by lower
profits after tax. Further earnings per share information is given in Note
5.
Dividend
A dividend for the year to 26 June 2021 of 2.4p per share was paid on 21
December 2021 to shareholders on the register at the close of business on 26
November 2021.
The Board of Directors is announcing an interim dividend for the year ending 2
July 2022 of 0.8p per share (H1 2020: nil). The interim dividend will be paid
on 21 April 2022 to shareholders on the register at the close of business on
25 March 2022. The election deadline for participants in the Company's
Dividend Re-investment Plan will be 29 March 2022.
Cash flow and net debt
Net bank debt at 25 December 2021 was £12.9 million which compares to £21.5
million at H1 2020, a decrease of £8.6 million.
H1 2021 £m H1 2020 £m Movement
£m
Net debt 12.9 21.5 -8.6
Cash inflow from operating profit before changes in working capital 11.9 13.1 -1.2
Increase in working capital -2.6 -0.1 -2.5
Capital expenditure -1.9 -2.4 0.4
Lease payments -0.9 -1.4 0.5
Interest payments -0.4 -0.5 0.0
Corporation tax payments -1.3 -2.0 0.7
Free cashflow 4.7 6.7 -2.0
Dividend paid -4.1 -0.7 -3.3
Six month cash inflow from operating profit before changes in working capital
was £11.9 million. The free cash flow is £4.7 million before deferred
consideration payments of £0.5m and dividends of £4.1m. The Company paid a
final dividend for the year ending 26 June 2021 in the period of £3.0m, the
remaining £1.1m is paid to the 50% minority shareholder in Lightbody Stretz
Limited.
Net debt (excluding IFRS 16 leases) of £12.9 million at half year, equating
to 0.5 times annualised EBITDA; which results in low gearing alongside a
strong balance sheet. The Group has a £55.0 million revolving credit
facility and an accordion of £35.0 million available to it. The facility and
the potential for it to be increased further provides increased capacity for
the Group to explore future growth opportunities and support its long-term
investment strategy.
Pensions
The Group has one defined benefit pension scheme within its Memory Lane Cakes
business in Cardiff. All remaining Group companies have defined contribution
schemes. The Memory Lane Cakes pension scheme has been closed to future
accruals and new members since 31 May 2010. The net pension deficit (before
related deferred tax) was £14,529,000 at 26 June 2021, the next accounting
valuation update will be carried out at 2 July 2022. Cash contributions
(including the PPF levy) were £293,000 in the six months to 25 December 2021
(H1 2020: £332,000, a decrease driven by a fall in the risk-based PPF levy.
Principal risks and uncertainties
A number of risks and uncertainties have been identified that could
potentially have a material impact on the financial position of the Group.
These are set out in the Risk Report Section of the Annual Report for the year
to 26 June 2021 and the Board considers these remain applicable.
Forward looking statements
Throughout this report certain statements have been made which are forward
looking. These statements have been made based on latest knowledge and
expectations of the future. The Board considers the statements to be
reasonable. Inevitably there are risks associated with these forward-looking
statements which are usually outside the control of the Group. Actual results
or performance may therefore differ from the outcome implied by these
forward-looking statements.
Consolidated Statement of Comprehensive Income (unaudited)
Unaudited 26 weeks ended Unaudited 26 weeks ended
25 December 2021 26 December 2020
£000 £000
Significant non-recurring and other accounting items Significant non-recurring and other accounting items
(Note 1) (Note 1)
Consolidated Statement of Comprehensive Income Consolidated Statement of Comprehensive Income
Adjusted Operating Performance Adjusted Operating Performance
Revenue 166,525 - 166,525 152,945 - 152,945
Cost of sales (113,938) - (113,938) (102,345) - (102,345)
Gross profit 52,587 - 52,587 50,600 - 50,600
Administrative expenses (46,130) (422) (46,552) (42,930) 259 (42,671)
Results from operating activities
6,457 (422) 6,035 7,670 259 7,929
Finance expense (Note 4) (445) 67 (378) (452) (71) (523)
Profit before taxation 6,012 (355) 5,657 7,218 188 7,406
Taxation (1,057) 67 (990) (1,410) (36) (1,446)
Profit after tax and total comprehensive income
4,955 (288) 4,667 5,808 152 5,960
Profit attributable to:
Equity holders of the parent 4,148 (151) 3,997 5,244 (58) 5,186
Non-controlling interest 807 (137) 670 564 210 774
Profit and total comprehensive income for the period
4,955 (288) 4,667 5,808 152 5,960
Earnings per share (pence)
Basic 3.6 3.2 4.4 4.1
Diluted basic 3.4 3.0 4.2 3.9
Consolidated Statement of Financial Position (unaudited)
Unaudited Unaudited Audited
25 December 26 December 26
June
2021 2020 2021
Note £000 £000 £000
Non-current assets
Intangibles 87,502 87,673 88,019
Property, plant and equipment 57,261 61,178 59,015
Deferred tax assets 5,951 4,577 5,961
150,714 153,428 152,995
Current assets
Inventories 19,405 17,061 15,027
Trade and other receivables 52,748 50,477 50,986
Cash and cash equivalents 6 8,697 9,563 9,523
Other financial assets - fair value of foreign exchange contracts - - 405
80,850 77,101 75,941
Total assets 231,564 230,529 228,936
Current liabilities
Other interest-bearing loans and borrowings 6 (2,452) (2,665) (2,039)
Trade and other payables (65,870) (61,723) (62,490)
Provisions (159) (451) (222)
Deferred consideration (977) (977) (976)
Other financial liabilities - interest rate swaps/ fair value of foreign
exchange contracts
(39) (256) (121)
Current tax liabilities (513) (815) (689)
(70,010) (66,887) (66,537)
Non-current liabilities
Other interest-bearing loans and borrowings 6 (30,207) (40,375) (31,029)
Provisions and other liabilities (160) (507) (160)
Deferred consideration - (918) (466)
Deferred tax liabilities (2,791) (2,040) (2,944)
Pension fund liability (14,529) (15,174) (14,529)
(47,687) (59,014) (49,128)
Total liabilities (117,697) (125,901) (115,665)
Net assets 113,867 104,628 113,271
Equity attributable to equity holders of the parent
Share capital 7 1,304 1,304 1,304
Share premium account 64,956 64,956 64,956
Capital redemption reserve 578 578 578
Employee share reserve (5,196) (4,376) (5,374)
Retained earnings 49,854 39,904 49,021
Total shareholders' equity 111,496 102,366 110,485
Non-controlling interest 2,371 2,262 2,786
Total equity 113,867 104,628 113,271
Consolidated Statement of Changes in Equity (unaudited)
Capital Employee Non-controlling
Share Share redemption share Retained interest Total
capital premium reserve reserve earnings £000 equity
£000 £000 £000 £000 £000 £000
Balance as at 27 June 2020 1,304 64,956 578 (3,378) 34,918 2,210 100,588
Profit for the 26 weeks ended 26 December 2020
- - - - 5,186 774 5,960
Other comprehensive income - - - - - - -
Total comprehensive income for the period
- - - - 5,186 774 5,960
Transactions with owners, recorded directly in equity:
Own shares issued/(acquired) - - - (998) - - (998)
Foreign exchange differences - - - - (200) - (200)
Dividends paid - - - - - (722) (722)
Balance as at 26 December 2020 1,304 64,956 578 (4,376) 39,904 2,262 104,628
Profit for the 26 weeks ended 26 June 2021
- - - - 7,161 524 7,685
Other comprehensive income/(expense):
Remeasurement on defined benefit pension
- - - - 396 - 396
Deferred tax movement on pension scheme remeasurement
- - - - 811 - 811
Other comprehensive income - - - - 1,207 - 1,207
Total comprehensive income for the period
- - - - 8,368 524 8,892
Transactions with owners, recorded directly in equity:
Shares acquired during the period - - - (998) - - (998)
Impact of share-based payments - - - - 1,001 - 1,001
Deferred tax on share options - - - - 89 - 89
Foreign exchange differences
- - - - (341) - (341)
Dividends paid - - - - - - -
Balance as at 26 June 2021 1,304 64,956 578 (5,374) 49,021 2,786 113,271
Profit for the 26 weeks ended 25 December 2021
- - - - 3,997 670 4,667
Other comprehensive income - - - - - - -
Total comprehensive income for the period
- - - - 3,997 670 4,667
Transactions with owners, recorded directly in equity:
Own shares issued/(acquired) - - - 178 - - 178
Foreign exchange differences - - - - (179) - (179)
Dividends paid - - - - (2,985) (1,085) (4,070)
Balance as at 25 December 2021 1,304 64,956 578 (5,196) 49,854 2,371 113,867
Consolidated Cash Flow Statement (unaudited)
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
25 26 26
December December June
2021 2020 2021
Note £000 £000 £000
Cash flows from operating activities
Profit after taxation for the period 4,667 5,960 13,645
Adjustments for:
Taxation 990 1,446 3,368
Net finance costs 4 378 523 1,214
Amortisation of intangibles 674 796 1,817
Depreciation 3,786 3,790 7,235
Depreciation right of use assets 998 861 1,752
Impairment of fixed assets - - 167
Significant non-recurring expenses - - (1,125)
Movement in fair value foreign exchange contracts 422 (259) (696)
Contributions by employer to pension scheme - - (473)
Operating profit before changes in working capital 11,915 13,117 26,904
Changes in working capital
Increase in inventories (4,451) (2,463) (568)
Increase in trade and other receivables (1,878) (10,474) (11,274)
Increase/(decrease) in trade and other payables 3,708 12,832 14,749
Cash generated from operations 9,294 13,012 29,811
Costs associated with closure of operations and acquisitions
(61) (62) (364)
Lease payments (910) (1,445) (2,789)
Interest paid (447) (459) (715)
Corporation taxes paid (1,319) (2,035) (3,926)
Net cash generated from operating activities 6,557 9,011 22,017
Cash flows from investing activities
Purchase of property, plant & equipment (1,908) (2,375) (6,190)
Purchase of subsidiary companies (500) - (500)
Net cash used in investing activities (2,408) (2,375) (6,690)
Cash flows from financing activities
(Repayment)/drawdown of revolving credit (1,020) (5,474) (13,753)
Purchase of shares by employee trust - (998) (1,996)
Non-controlling interest dividend paid (1,085) (722) (722)
Dividend paid (2,985) - -
Net cash in/(out) from financing activities (5,090) (7,194) (16,471)
Net (decrease)/ increase in cash and cash equivalents (941) (558) (1,144)
Opening cash and cash equivalents 9,523 10,173 10,173
Effect of exchange rate fluctuation 115 (52) 494
Cash and cash equivalents at end of the period 8,697 9,563 9,523
NOTES TO THE FINANCIAL STATEMENTS
BASIS OF PREPARATION
This interim report, which is unaudited, does not constitute statutory
accounts within the meaning of section 434(3) of the Companies Act 2006. The
comparative figures for the financial year ended 26 June 2021 have been
extracted from the statutory accounts for that year. Those accounts, which
were prepared in accordance with International Financial Reporting Standards
as adopted by the EU ("adopted IFRSs"), have been reported on by the company's
auditor and delivered to the registrar of companies. The report of the auditor
was (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.
GOING CONCERN AND IMPACT OF COVID-19
The Group has delivered a robust trading performance against a continued
challenging backdrop. The Group has faced persistent pressure from input cost
inflation, labour availability and other supply chain disruptions including
the impact of Omicron on foodservice consumer demand. Forecasts have been
built on a bottom-up basis and stress tested to prepare a forecast to be used
as a basis for reviewing going concern. The Board, having reviewed the Group's
short and medium-term plans and available financial facilities, has reasonable
expectations that the Group has adequate resources to continue in operational
existence for the foreseeable future. The Group has stayed comfortably within
its banking facilities during the period, meeting covenant requirements. The
Group has a £55m revolving credit facility plus scope for the facility to be
increased by up to a further £35m, which are committed until February 2023.
In addition, the Group has a strong trade debtor book and strong asset
backing. Accordingly, the Board continues to adopt the going concern basis in
preparing the Financial Statements.
1) SIGNIFICANT NON-RECURRING ITEMS AND OTHER ACCOUNTING
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.
The amounts shown within significant non-recurring and other accounting items
on the face of the Consolidated Statement of Comprehensive Income are shown in
the table below:
Unaudited Unaudited
26 weeks ended 26 weeks ended
25 December 2021 26 December 2020
£000 £000
Movement in fair value of foreign exchange contracts (422) 259
Shown under Administrative expenses (422) 259
Unwinding of discount on deferred consideration (33) (57)
Movement in fair value of swaps 100 (14)
Shown under Finance expense 67 (71)
2) SEGMENT INFORMATION
Operating segments are identified on the basis of the internal reporting and
decision making. The Group's Chief Operating Decision Maker is deemed 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 assesses
profit performance principally through adjusted profit measures consistent
with those disclosed in the Annual Report and Accounts.
The UK Bakery segment manufactures and sells bakery products to UK grocery and
food service sectors. It comprises six subsidiaries all of which manufacture
and supply food products through the channels described above. These
subsidiaries have been aggregated into one reportable segment as they share
similar economic characteristics. The economic indicators considered are the
nature of the products and production process, the type and class of customer,
the method of distribution and the regulatory environment.
The Overseas segment procures and sells bakery products to European grocery
and food service sectors. The Ultraeuropa business manufactures Free From
bakery products in Poland and sells into the European markets.
UK Bakery Overseas Total Group
Revenue H1 2021 £000 H1 2020 £000 H1 2021 £000 H1 2020 £000 H1 2021 £000 H1 2020 £000
Total 142,274 134,621 24,251 18,324 166,525 152,945
Reportable Segments 26 weeks to 26 weeks to
25 December 2021 26 December 2020
£000 £000
Total Total
Revenue UK Bakery 142,274 134,621
Revenue Overseas 24,251 18,324
Total revenue 166,525 152,945
Adjusted operating profit UK Bakery 4,673 6,404
Adjusted operating profit Overseas 1,784 1,266
Total adjusted operating profit 6,457 7,670
Significant non-recurring and other items (Note 1) (422) 259
Finance expense (Note 4) (378) (523)
Profit before taxation 5,657 7,406
The Group has two customers (2020: three) which individually account for more
than 10 per cent of the Group's total revenue. These customers account for 23
per cent, and 12 per cent. In the prior year one customer accounted for 23 per
cent and two at 12 per cent of the revenue in the six months to 26 December
2020. In addition to the Europe sales disclosed in Reportable Segments, the
Group also made sales to European markets through UK based organisations.
3) SHARE BASED PAYMENTS
The Group operates both approved and unapproved share option schemes.
Following the adoption of IFRS2 'Share-based payments' charges have been made
to the Income Statement to reflect the calculated fair value of employee share
options. The cost is calculated at the date of grant and is charged equally
over the vesting period. The fair value is based on the best available
estimate of the number of options expected to vest. The corresponding
adjustment is made to reserves.
During the 26 weeks to 25 December 2021 1,636,005 options were granted (H1
2020: 2,192,275 options). Administration costs include a charge of £113,000
(H1 2020: £118,000) in relation to the fair value of the newly awarded share
options during that period.
4) FINANCE INCOME AND EXPENSES
Unaudited Unaudited Audited
26 weeks ended 25 December 26 weeks ended 26 December 52 weeks ended
2021 2020 26 June
2021
Note £000 £000 £000
Change in fair value of interest rate swaps 1 100 - 89
Finance income 100 - 89
Net interest on net pension position - - (224)
Net bank interest payable (190) (289) (545)
Charge on interest rate swaps (60) (58) (119)
Lease Interest IFRS 16 (183) (105) (274)
Unwinding of discount on deferred consideration 1 (33) (57) (105)
Change in fair value of interest rate swaps 1 - (14) -
Interest on deferred consideration (12) - (36)
Finance expense (478) (523) (1303)
Net finance expense (378) (523) (1,214)
The Group has two interest rate swap arrangements, £20.0 million for five
years from 3 July 2017 at 0.455% maturing 3 July 2022 and £5.0 million for
three years from 28 March 2019 at 1.002% maturing 28 March 2022 to hedge its
risks associated with interest rate fluctuations.
These arrangements do not meet the conditions necessary for hedge accounting
to be applied and, therefore, changes in their fair value are recognised
immediately in the income statement resulting in an income of £100,000 (H1
2020: charge £14,000).
5) EARNINGS PER ORDINARY SHARE (EPS)
Basic earnings per share for the period is calculated on the basis of profit
for the period after tax, divided by the weighted average number of shares in
issue of 124,252,000 (26 December 2020: 126,605,000).
Basic diluted earnings per share for the period is calculated by adjusting the
weighted average number of shares in issue to assume conversion of all
potential dilutive ordinary shares, which for 25 December 2021 is 132,183,000
(26 December 2020: 132,393,000).
An adjusted earnings per share has 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.
The adjusted earnings per share exclude amounts shown under significant and
non-recurring items in the Consolidated Statement of Comprehensive Income and
exclude amortisation of intangibles.
26 weeks to 26 weeks to
25 Dec 2021 26 Dec 2020
Profit
Profit/(loss) attributable to equity holders of the Company (basic)
£000 3,997 5,186
Significant non-recurring and other items £000 151 58
Amortisation of intangibles £000 287 287
Numerator for adjusted earnings per share calculation (adjusted basic)
£000 4,435 5,531
Shares Basic Diluted Basic Diluted
Weighted average number of ordinary shares in issue during the period
'000 124,252 124,252 126,605 126,605
Dilutive effect of share options '000 - 7,931 - 5,788
124,252 132,183 126,605 132,393
Earnings per share
Basic / basic and diluted Pence 3.2 3.0 4.1 3.9
Adjusted basic/ adjusted basic and diluted Pence 3.6 3.4 4.4 4.2
6) ANALYSIS OF NET DEBT
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
25 December 26 December 26 June
2021 2020 2021
£000 £000 £000
Net cash at bank 8,697 9,563 9,523
Loans after more than one year (21,411) (30,711) (22,431)
Hire purchase obligations due within one year (103) (170) (128)
Hire purchase obligations due after one year (73) (158) (92)
Bank debt (21,587) (31,039) (22,651)
Unamortised transaction costs 73 141 108
Bank debt net of unamortised transaction costs within one year (103) (170) (128)
Bank debt net of unamortised transaction costs more than one year (21,411) (30,728) (22,415)
Bank debt net of unamortised transaction costs excluding IFRS 16 lease
liabilities
(21,514) (30,898) (22,543)
Bank debt (before IFRS 16 debt) net of cash at bank (12,890) (21,476) (13,128)
Lease liabilities IFRS 16 within one year (2,349) (2,495) (1,911)
Lease liabilities IFRS 16 after more than one year (8,796) (9,647) (8,614)
Lease liabilities IFRS 16 (11,145) (12,142) (10,525)
Total Debt including IFRS 16 lease liabilities (23,962) (33,477) (23,545)
7) SHARE CAPITAL
No shares were issued during the period or the comparative prior year period.
At 25 December 2021 5,988,987 shares (H1 2020: 5,046,554) were held by the
Finsbury Food Group Plc Employee Benefit Trust.
Advisers
Secretary Auditor
ONE Advisory Limited PricewaterhouseCoopers LLP
201 Temple Chambers 1 Kingsway
3-7 Temple Avenue Cardiff
London CF10 3PW
EC4Y 0DT
Tel: 0207 583 8304
Registered Office Registrars
Maes-y-coed Road Capita Registrars
Cardiff 34 Beckenham Road
CF14 4XR Beckenham
Tel: 029 2035 7500 Kent
BR3 4TU
Nominated Adviser & Broker Solicitors
Panmure Gordon (UK) Limited CMS Cameron McKenna Nabarro Olswang LLPCannon Place
1 New Change, 78 Cannon Street
London London
EC4M 9AF EC4N 6AF
Remuneration Committee Advisor
Deloitte LLP
Four Brindleyplace,
Birmingham,
B1 2HZ
Registered Number
00204368
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