REG - Finsbury Food Group - Preliminary Results
26/09/2023 07:00
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RNS Number : 6055N Finsbury Food Group PLC 26 September 2023
Date: 26 September 2023
On behalf of: Finsbury Food Group Plc ('Finsbury', 'the Company' or 'the Group')
Embargoed until: 0700hrs
Finsbury Food Group Plc
Preliminary Results
Preliminary unaudited results for the year ended 1 July 2023
Summary
Finsbury delivered an encouraging performance and the Company is seeing steady
demand for its product range whilst also continuing to make good progress on
the Group's three strategic pillars of Excellence, Growth and Responsibility.
· Group revenue up 16.0% to £413.7 million driven by price and
volume with:
o UK foodservice, up 25.1%;
o UK retail, which includes Lees Foods Limited ("Lees"), up 11.8%; and
o The Overseas businesses up 25.0%.
· Gross margins reduced by 2.4 percentage points to 30.0% (2022:
32.4%) as the Group continues to be impacted by significant cost inflation.
· Operating profit*(1) up 10.9% (£1.9 million) to £19.8 million
driven by:
o The acquisition of Lees within UK Bakery (£0.5 million), and
o Growth in the Overseas businesses (£1.4 million).
· Profit before tax*(1) up 4.2% to £17.7 million.
· Group EBITDA*(1) up 8.8% to £31.3 million.
· Adjusted Diluted EPS*(2) (pence per share) in line at 10.1p.
· Net bank debt*(3) (excluding IFRS 16 debt): £21.4 million (2022:
£20.6 million), representing 0.7 x FY23 EBITDA.
Strategic Highlights
· Acquisition of Lees on 27 January for a consideration of £5.7
million, earnings enhancing and performing in line with expectations.
· Successful recovery of cost inflation through pricing, purchasing
and cost out strategies, continued focus on and delivery of Operating
Brilliance Program.
· Continue to enhance product capability and capacity with a new
buns and rolls line in our Sheffield factory completed during the first half
of the year.
· Onboarding of strategic own label premium brioche contract.
· Commencement of our five-year automation strategy.
· Continued improvement in waste management and investment in
employee engagement.
(*)(1)The Group uses Alternative Performance Measures (APMs) which are
non-IFRS measures to monitor performance of its operations and of the Group as
a whole. These APMs along with their definitions are provided in the Adjusted
Earnings Before Interest, Tax, Depreciation and Amortisation ( EBITDA),
Operating Profit and Profit Before Tax tables on the following page and the
tables in the Financial Review Section. APMs are disclosed as, in the
opinion of the Board, this will allow shareholders to gain a clearer
understanding of the trading performance of the Group.
(*2) Adjusted EPS has been calculated using profit, excluding amortisation of
intangibles, significant non-recurring and other items as shown in the tables
in the Financial Review Section net of associated taxation. In the opinion of
the Board, the adjustments made will allow shareholders to gain a clearer
understanding of the trading performance of the Group.
(*3) Not including a new invoice financing facility of which £4.9 million was
drawn at year end.
Recommended Acquisition of Finsbury
On 20 September 2023, Finsbury announced the recommended offer by Frisbee
Bidco Limited, an entity ultimately owned by funds managed by DBAY Advisors
Limited, to acquire the entire issued and to be issued share capital of the
Company (the "Acquisition"), to be implemented by means of a Court-sanctioned
scheme of arrangement (the "Scheme"). The Company remains in an "offer period"
in accordance with the City Code on Takeovers and Mergers and it is expected
that a scheme document containing full details of the Scheme and containing
notices convening the requisite meetings of Finsbury shareholders to approve
the Scheme will be sent to shareholders shortly.
John Duffy, Chief Executive of Finsbury Food Group PLC, commented:
"To have delivered revenue performance, which is in line with market
expectations, in light of the significant macro-economic challenges that we
have had to overcome, is testament to our resilient business model, ability to
align ourselves with consumer trends and the dedication of our teams. Across
the Group, we have seen a stable performance in UK retail, ongoing recovery in
UK foodservice and continued growth in our Overseas division.
"The entire Group's relentless focus and commitment towards our strategic
objectives has not wavered and we have built on the strong foundations of our
Group scale platform with further progress made on our journey to Operating
Brilliance. We will continue this drive over the coming years as we commence
on five-year automation journey which will be a key enabler for the Group. We
were delighted to complete the acquisition of Lees which consolidated our
position in the sweet treats sector and has been performing in line with our
expectations.
"Looking ahead, whilst we are starting to see some of the inflationary
pressures ease, costs remain inflationary, and we expect to have to navigate
further macroeconomic challenges over the course of the current financial
year. We will continue to deliver for our customers through our diversified
product range and channels."
For further information:
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
Dominic Morley (Corporate Finance)
Atholl Tweedie
Rupert Dearden (Corporate Broking)
Alma finsbury@almapr.co.uk (mailto:finsbury@almapr.co.uk) 020 3405 0205
PR
Rebecca Sanders-Hewett
Sam Modlin
Matthew Young
Notes to Editors:
· Finsbury Food Group Plc (AIM: FIF) is a leading UK and European
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, together with its overseas division, has sales in the financial year
ending 1 July 2023 of £413 million.
· 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;
· Sweet treat products;
· 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; and
· 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 £1.4 billion (source: Kantar Worldpanel 52 w/e
06 August 2023). The retail bread and morning goods market has a value
of £6.3 billion (source: Kantar Worldpanel 52 w/e 03 September 2023). The
retail Free From cake market is valued at £69.6 million (source: Kantar
Worldpanel 52 w/e 06 August 2023). The retail Free From bread and morning
goods market is valued at £186.4 million (source: Kantar Worldpanel 52 w/e
03 September 2023).
· 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, Pontypool and now
Coatbridge.
· The overseas division comprises the Company's 85% owned company,
Lightbody-Stretz Limited, 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 Żywiec in Poland.
Adjusted EBITDA and Profit Reconciliation of Statutory to Adjusted
In order to set out the business performance, adjusted measures for the Group
are presented which exclude the impact of significant non-recurring items and
other items to present adjusted EBITDA, operating profit and profit before
tax. In the opinion of the Board the adjusted measure allows shareholders to
gain a clearer understanding of the trading performance of the Group. The
analysis below shows the movement from adjusted to statutory measures.
Adjusted EBITDA 2023 2022
£000 £000
Adjusted EBITDA 31,274 28,747
Significant non-recurring items - (see Note 5) (3,120) (1,898)
Difference between Defined Benefit Pension Scheme charges and cash cost 763 417
Movement in the fair value of foreign exchange contracts 121 (821)
Adjustments, significant non-recurring and other items (2,236) (2,302)
EBITDA 29,038 26,445
Adjusted Operating Profit 2023 2022
£000 £000
Adjusted operating profit 19,752 17,807
Significant non-recurring items - (see Note 5) (3,120) (1,898)
Difference between Defined Benefit Pension Scheme charges and cash cost 763 417
Movement in the fair value of foreign exchange contracts 121 (821)
Adjustments, significant non-recurring and other items (2,236) (2,302)
Operating profit 17,516 15,505
Adjusted Profit Before Tax 2023 2022
£000 £000
Adjusted profit before tax 17,663 16,956
Significant non-recurring items - (see Note 5) (3,120) (1,898)
Difference between Defined Benefit Pension Scheme charges and cash cost 524 132
Movement in the fair value of foreign exchange contracts 121 (821)
Discounting of deferred consideration (4) (54)
Movement in the fair value of interest rate swaps 1,030 (18)
Adjustments, significant non-recurring and other items (1,449) (2,659)
Profit before tax 16,214 14,297
Group Performance Measures Statutory Measures
Group Revenue *(2)
£413.7m
up 16.0%
Adjusted EBITDA(*1) EBITDA
£31.3m £29.0m
up 8.8%
Adjusted Operating Profit(*1) Operating Profit
£19.8m up 10.9% £17.5m
Adjusted Profit(*1) Before Tax Profit Before Tax
£17.7m up 4.2% £16.2m
Adjusted Diluted EPS Diluted EPS
In line at 10.1p 8.2p
Capital Investment *(2)
£8.8m down 30.2%
Net Debt (excl leases) Net Debt (incl leases)
£21.4m up 3.4% £33.6m
*(1)The Group uses Alternative Performance Measures (APMs) which are non-IFRS
measures to monitor performance of its operations and of the Group as a whole.
These APMs along with their definitions are provided in the Adjusted EBITDA,
Operating Profit and Profit Before Tax tables on the previous page and the
tables in the Financial Review Section. APMs are disclosed as, in the opinion
of the Board, this will allow shareholders to gain a clearer understanding of
the trading performance of the Group.
Adjusted EPS has been calculated using profit, excluding amortisation of
intangibles, significant non-recurring and other items as shown in the tables
above net of associated taxation. In the opinion of the Board, the adjustments
made will allow shareholders to gain a clearer understanding of the trading
performance of the Group.
*(2)Measures that do not vary are shown in the first column only.
Chairman's Statement
Overview
FY23 has been a tough but encouraging year as Finsbury continues to drive
growth and build momentum despite the unprecedented macroeconomic uncertainty.
Inevitably these external factors have impacted both the consumer sector and
wider market with persistent headwinds including input cost inflation, staff
shortages and other supply chain disruptions. However, the Group has shown the
resilience of its business model and expertise of its management team by
delivering another year of good revenue growth, alongside sustained progress
against our three key strategic pillars of Excellence, Growth and
Responsibility, underpinned by our Operating Principles.
The Group's ability to remain aligned with market trends and the needs of its
customers has been a key factor in achieving this performance. The business
has consistently evidenced its agility in being able to adapt and achieve
sustainable growth in adverse market conditions. While the various challenges
are likely to persist in the near future, we can look forward with confidence
that we have the right team in place to continue on this trajectory, execute
on our strategy and further strengthen our position in the market.
Delivering growth in a difficult consumer environment
The Group's navigation of the various sector headwinds has allowed us to
achieve a robust performance for the year with record revenues, strong
operational progress and sustained investment in the business.
Group revenue increased to £413.7 million, including the acquisition of Lees
Foods Limited ("Lees") in January 2023, showing growth of 16.0% versus the
previous year, and 12.6% excluding Lees. This performance was bolstered by a
strong second half performance, with revenues for the six months increasing
17.1% year-on-year. This growth in sales was achieved primarily by price
increases and the incremental volume from Lees.
Adjusted EBITDA increased by 8.8% to £31.3 million (2022: £28.7 million),
adjusted profit before tax increased by 4.2% to £17.7 million (2022: £17.0
million) and the Group delivered adjusted diluted EPS of 10.1p. The Group's
net bank debt position by year end was £21.4 million (2022: £20.6 million),
which does not include a new invoice financing facility of which £4.9m was
drawn at year end.
Our strategy to have a diverse mix of product, channels and markets has been a
driving factor to our sustained success and it mitigates a lot of the risk
that impacts more focused businesses within our sector. The acquisition of
Lees is a prime example of this strategy, with Finsbury entering adjacent
markets and seeing the benefits on total Group sales immediately through being
earnings enhancing and performing in line with expectations.
Dividend
Given the pleasing performance and sound financial position of the Group, The
Directors expect to pay a further dividend of 1.73p per share by the end of
the calendar year, taking the full year dividend to 2.60p per share subject to
the terms and conditions set out in the announcement dated 20 September 2023
(relating to the recommended acquisition of Finsbury by DBAY).
Continued Strategic Execution and Drive for Operational Excellence
Continued investment in our operations remains a central focus for the Group
as we progress the Operating Brilliance Programme ("OBP"), which has allowed
us to improve internal efficiencies and ensure the necessary flexibility
required to navigate the challenging market conditions. The centralisation and
consolidation of management and services continued during the year and this
has provided a platform for improved communication, control and purpose at a
time when it is most needed. There is a positive restlessness within the Group
to achieve greater standards and to deliver continuous improvement. I have no
doubt that it is this culture that sets the Group apart from many.
I am pleased to note that through this programme, and having deployed industry
leading systems and strategies, Finsbury has finished the year with a new
level of operational maturity which will enable considerable scale benefits,
alongside increased ROI and greater resilience. However, whilst achievements
to date have been pleasing and there is no room for complacency and we will
not rest on our laurels as there is still much to do as we continue to drive
Finsbury further forward and position the business to most effectively
capitalise on the opportunities available to us within the market.
Our strategic acquisition of Lees has further consolidated our position in the
sweet treats sector and has grown our manufacturing presence in Scotland. Lees
has a well-established number one position in the UK meringue category and
strong relationships across a high quality and diverse customer base.
During the period we have continued to enhance product capability and capacity
with a new buns and rolls line in our Sheffield factory completed during the
first half of the year, alongside further innovation in gluten-free recipes
and product quality which is driving organic growth both in the UK and in
Europe.
A Responsible Business
Being a responsible and ethical business is a core part of our strategy. We
consistently strive to operate in an ethical and sustainable manner and to
help our people play a positive role in the communities in which we operate.
As part of our ongoing strategy, we are committed to reducing our emissions in
line with the Science Based Targets initiative ("SBTi") methodology and
continue to work with our supply and customer partners to source raw
materials in a sustainable and ethical way. I am pleased to report that our
sustainability forum is now fully established to aid the governance of our
Sustainable Approach, driving continued improvement in energy and waste
management which remains a central focus of our ESG strategy.
We are dedicated to making Finsbury an enjoyable, attractive, safe and
inclusive workplace for everyone. The progress made already has been
considerable and there is more to come. The relationship with our various
communities is important in order to ensure we remain a responsible local
business and to be viewed as an attractive and enjoyable workplace for both
current and future employees.
Investing in our people to drive growth
At the centre of our success is the brilliant team we have at Finsbury. We
will continue to invest in our various teams with dedicated training
programmes to develop skills and ensure we are up to date with best practice.
Specifically, during the year, we have continued to invest through graduate
talent, apprenticeships and leadership development for the future, as well as
launching our Diversity and Inclusion strategy through a series of policies,
campaigns and training programmes so as to build awareness and understanding.
We have continued to drive our ''HomeSafe'' safety programme and have
initiated a culture-based safety improvement programme to drive further
improvement in our safety performance. Moreover, we have further developed our
Diversity and Inclusion, Health and Wellbeing and Community Engagement
programmes.
I am pleased to report the seamless integration of Lees and I would like to
take this opportunity to welcome them into the Group as we continue to build
upon both businesses' existing retail relationships and unlock further
commercial opportunities, including out of home eating.
On behalf of the Board, I extend our sincere gratitude and thanks to all of
our staff for their ongoing diligence and commitment which has allowed
Finsbury to navigate the various challenges and to achieve such a resilient
performance during the period.
As mentioned, this has been a prolonged period of unprecedented macroeconomic
challenges for the Group and the progress made to date would not have been
possible without the expertise and hard work of our Board. Their dedication to
navigate the various challenges and to ensure that the Company is constantly
progressing has been excellent and I am sincerely grateful for their continued
support.
Confidence in outlook and well positioned to achieve growth in the medium term
FY23 has been yet another period set against a backdrop of exceptional
macroeconomic headwinds. Finsbury has consistently shown its ability to not
only navigate these challenges but to achieve sustained growth. These results
are a great achievement and whilst we recognise the ongoing turbulence in the
sector, I believe we are well positioned to demonstrate both the resilience
and agility of our business model driven by the expert management of our
senior leadership team.
The investments we have made over a prolonged period of time have laid the
necessary foundations to allow us to execute on our strategy and we have ended
the period as a financially and operationally stronger Company. As we look to
the future with a renewed focus on growth, we remain aligned with the consumer
trends within the sector and to ensure that our proposition is as competitive
as possible.
The Group continues to regularly monitor the wider macro environment and while
there remains a considerable amount of uncertainty surrounding the impact of
inflationary pressures, our performance during this period, and over the
course of the last few years, gives us confidence in the Group's ability to
continue on this trajectory.
Peter Baker
Non-Executive Chairman
25 September 2023
Chief Executive's Report
Throughout the period under review Finsbury has, once again, had to navigate
significant macro challenges that have impacted ourselves, our customers and
our suppliers. However, as previously, we have navigated those challenges
whilst also growing our business to a record £413.7m turnover. This is a
result of the entire Group's relentless focus and commitment towards our
strategic objectives. We have built on the strong foundations of our Group
scale platform with further progress made on our journey to Operating
Brilliance, we completed the acquisition of Lees which consolidated our
position in the sweet treats sector, and we have remained committed to our
responsibility goals.
For many years we have been investing in our people, systems and bakeries to
build a best-in-class speciality bakery Group of scale, one that is well
diversified, efficient and agile thereby increasingly resilient in the face of
adversity. Without these investments, Finsbury wouldn't have been able to
deliver the performance it has in this financial year.
Record Revenue Performance Despite Continued Challenges
The Group delivered a resilient full year performance despite the challenges
of persistent significant cost inflation and macroeconomic uncertainty. Total
Group sales of £413.7m, which includes the acquisition of Lees Foods Limited
("Lees"), increased by 16.0% versus the previous year, and 12.6% excluding
Lees. The Group delivered a strong second half performance, with H2 revenues
up 17.1% versus the corresponding period in the prior year. The growth in
sales has been driven primarily by price and the incremental volume from Lees.
The Group's core division, UK Bakery, which includes Lees, delivered a robust
performance with a 14.5% sales increase versus the prior year, this includes a
continuation of the recovery in foodservice, up 25.1%, whilst the Group's
Overseas division again performed strongly, delivering a 25.0% increase versus
the prior year.
We have continued to operate in an incredibly challenging environment as
significant cost inflation and macroeconomic uncertainly has persisted
throughout the period. As a consequence of a decline in like-for-like volumes,
ongoing cost inflation and the timing lag between cost inflation and price
recovery, the Group has experienced some margin pressure in FY23. However,
once again we have successfully focused on managing these challenges through
commercial terms, operational improvements and other supply chain and overhead
initiatives. This focus will remain as further challenges are expected in the
new financial year.
Strategic Review
Our strategy is central to the ongoing success of our business and is spread
over three key pillars: Excellence, Growth and Responsibility.
Excellence
We invest in our people and our operating sites to form a strong foundation to
underpin our strategy. We create innovative high-quality bakery products that
anticipate key market trends and ensure that customer and consumer needs are
at the heart of our decision making.
Growth
Our Group seeks to drive growth both organically and through acquisition,
targeting both the retail grocery and out-of-home channels in the UK and
Europe. We have developed a strong licensed brand portfolio to complement our
core retailer brand relationships.
Responsibility
Our commitment to building a sustainable operating model is built on a
holistic framework that puts our people's development, engagement and health
and wellbeing at the heart of our business. We strive to continually reduce
our impact on the planet by investing in technology, expertise and driving
shared ownership across our growth partners.
1. Excellence
Our continued investment in our Operating Brilliance Programme (OBP),
underpinned by systems investment and centred around building stronger people
and process capability, has enabled us to reach a more mature level of
operational excellence.
Across the Group, we are committed to accelerating our operational maturity
even further, deploying best in breed systems and strategies to deliver scale
benefits, and building the business skills and process capability to deliver a
strong return on investment and resilience. In FY23, our OBP initiatives were
responsible for a combined £3.4 million of gross annual savings, and we
expect these benefits to continue.
Throughout FY23 we have invested in the following key areas:
· The implementation and full commissioning of a new Buns and Rolls line in
Sheffield to support our category growth strategy aspirations within this
area. This is already delivering benefits in terms of our ability to service
more demand as demonstrated in H2.
· Commencement of our five-year automation capex strategy across multiple
locations (c.50% of the manufacturing estate), with both light and more
integrated automation solutions being implemented across Sheffield and
Hamilton. This automation programme is expected to be a critical enabler of
our strategic resourcing strategy.
· Continuation of our Systems Excellence strategy, with Optimity (Supply
Planning Software) embedded across the business in FY23, Point 74 (Recipe
Management System) introduced and the commencement of our People system
implementation which is called Dayforce. This creates ongoing strength and
depth capability for us to leverage business scale and deliver efficiency.
Moving forwards, in FY24, we will commence the deployment of phase two of our
Operating Brilliance Programme which will focus on delivering end to end value
chain improvement, benchmarking ourselves against businesses that have
excelled in building world class operating excellence. This will allow us to
broaden the brilliance programme scope whilst also building on our existing
internal capabilities. In addition, we will continue our five-year automation
journey which we see as the next stage of our capital investment following our
significant historical investment in systems and growth capacity.
2. Growth
We are pleased to have delivered continued growth through a combination of
organic growth and targeted acquisitions in FY23. During the year, we focused
organic growth through category strategies that have put consumer insight at
the heart of our UK growth initiatives, continued to deliver growth in Europe
through our market leading cake and free from product formats and acquired
Lees Foods Limited in January 2023.
Building best-in class customer relationships across all our customer channels
is a key driver of growth, and we have continued to build on our already
excellent relationships. Within Grocery, our best practice customer
relationship management has driven organic growth, in categories such as
artisan bread and premium buns and rolls, with our strategic customers. In
Foodservice, we have utilised our longstanding customer relationships to grow
in the out of home channel and notable successes have been with key partners
such as KFC and JD Wetherspoon. We have also grown our share of the
Celebration cake category using category management and consumer insight to
launch best in class Licensed brand Celebration cakes.
Looking ahead, we will continue to work collaboratively with our partners to
drive sales growth in our key markets, leveraging our category marketing
expertise, capitalise on continued rapid growth across our Lightbody Europe
subsidiary aligned to our celebration, small cake and free from category
strategies, accelerating progress through our licensed brand portfolio and a
strong innovation pipeline. We will also seek to deliver sustainable
celebration and sharing cake growth across tiered price points through
quality, cost and innovation, moving quickly to introduce new product trends
and formats whilst continuing to leverage strengths across the small cake
product range and both branded and own label formats, to establish Finsbury as
the category supplier of choice.
In order to further leverage our scale, through the course of this year we
combined our historical UK Cake and Bread divisional commercial structure to
form a new group structure. The evolution of our sales functions saw the
creation of two teams, a Grocery sales team and a Foodservice sales team. In
addition, we also created a Group Category and Insight team and simultaneously
invested in more extensive bakery market sales data. These structural changes
have led to a much more customer and consumer centric way of working across
Finsbury and will enable us to further understand market and category
performance, how shoppers are interacting with our products, and categories.
From a team perspective, this has allowed us to be more efficient and
effective as experts across bakery, providing one face to our valued retail
partners. We believe this group commercial strategy gives us the best platform
to deliver continued growth.
Acquisition has always been a key pillar of the Finsbury growth strategy and
we were delighted to welcome the Lees business into the Group this year.
Over the last 90 years, Lees has evolved it's manufacturing and product
capabilities from being a very Scotland centric based business to now
supplying the whole of the UK market. Lees is best known for its manufacturing
expertise of meringues (largest supplier in the UK), snowballs and tea cakes
under retailer own brand and its very own Lees' brand, and supplying all major
retailers, the convenience channel and food service markets.
Over the last six months, we have been working alongside our new Lees
colleagues to integrate both businesses together and based on our approach and
thanks to the leadership teams within both businesses, the transition has
progressed well. Our target is to have Lees fully integrated into the Finsbury
group by the end of 2023. We are excited about the prospects the acquisition
brings and we remain confident that we will be able to leverage the scale and
breadth of the Finsbury commercial team and licensed brand portfolio to drive
incremental growth for Lees more efficiently utilising our scale.
The Board continues to explore opportunities to accelerate the growth of the
Group through targeted acquisitions and strategic investments. Our strong long
term credit facilities provide financial flexibility for the Group to pursue
bolt on acquisitions as they arise, however, our low equity rating makes it
difficult to deliver on our significant growth ambitions via larger
transformational deals even when these opportunities meet our returns
criteria.
3. Responsibility
Acting with integrity and care, both for our people and towards the planet,
has always, and will continue, to be one of our primary focuses.
Our people are the heart of our business, and we are always striving to ensure
that Finsbury is a recognised as a great place to work in order to attract and
retain the right skills. In line with this, we have continued to invest in
developing key skills and capability as a source of competitive advantage,
including graduate talent, apprenticeships and leadership development. We also
deployed our Employee Engagement survey to assess the impact of our Employee
Engagement programme so that we can drive further improvement in our workplace
culture.
Last year we launched our Diversity and Inclusion strategy through a series of
policies, campaigns and training programmes to develop awareness and
understanding, and throughout this year we further developed this strategy as
well as our Health and Wellbeing and Community Engagement programmes including
actively supporting colleagues during the cost-of-living crisis.
Sustainability is in our DNA, with metrics and goals embedded within all our
business strategies and in order to ensure that this is embraced fully we have
increased the number of internal communications to make our team members aware
of our sustainability performance across sites and the Group as a whole. We
have also further expanded our utilities metering and monitoring and
introduced clear metrics around energy, water and waste that are discussed
monthly at all sites and are also included in our PLC Board reports,
increasing the transparency of our performance internally. Pleasingly, we have
reduced our like for like gas and electricity usage by 8.6% and 3.4%
respectively vs FY22 data.
We have reduced our ''Scope 1 and 2'' emissions against our 2016 base line by
43%. We continue to source raw materials to a variety of sustainable and
ethical standards, including Fair Trade and Rainforest Alliance. Our palm oil
adheres to RSPO segregated sustainability standard. We have introduced
SugaTrack at all sites which allows us to identify and measure food waste and
drive reduction at a production line level and will mature the use of this
through FY24. We have strengthened our partnership with FareShare throughout
the year which has resulted in 15% more food being redistributed to local
charities to support the national cost of living crisis compared to FY22.
I would like to take this opportunity to thank our teams across the Group for
their continued hard work, determination and commitment. They have been faced
with numerous external challenges, but their effort has not wavered at all,
and this has allowed us to navigate the challenges we have faced and deliver a
record performance.
Outlook
Over the past six years our Group has faced a series of unprecedented
challenges from the impact of Brexit, the pandemic and most recently dramatic
input cost inflation and falling consumer confidence. Notwithstanding the
scale of these challenges, we have been able to deliver strong growth and
continued financial progress. . This is possible due to the resilience and
agility achieved on the back of consistent investment strategies over many
years, which we are starting to realise the benefits of.
We now have best-in class systems, a rapidly maturing Operating Brilliance
Programme and an operating structure that is much more customer and consumer
centric. The next step on our journey is the commencement of our five-year
automation strategy across multiple locations, with both light automation and
more integrated solutions being implemented initially at Sheffield and
Hamilton. This will be a critical enabler of our strategic resourcing strategy
and will deliver strong financial paybacks over the medium term.
Looking ahead, whilst we are starting to see some of the inflationary
pressures ease, costs remain inflationary, and we expect to have to navigate
further challenges over the course of the current financial year. However, we
believe that Finsbury is now a stronger Group able to leverage our scale, our
diversified product range and channels in order to continue to deliver for our
customers and our shareholders.
During the first two months of the new financial year, the Group has
progressed in line with expectations amidst the incredibly challenging macro
environment as significant cost inflation and macroeconomic uncertainty
persist into FY24. The pressure on margins that the Group experienced in FY23
continues into FY24. However, we continue to carefully monitor the wider
sector and have already embarked on mitigating this margin pressure through
the usual tools of operational efficiency improvement, capital investment and
product re-engineering.
John Duffy
Chief Executive Officer
25 September 2023
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018.
Financial Review
Group revenue to 1 July 2023 is £413.7 million, 16.0% higher than last year.
The growth in revenue is the result of volume uplift of 1.7% including the
Lees acquisition in the second half of the year and price uplift of 14.3%. The
recovery of foodservice is driving much of this growth with a 25.1% revenue
increase year-on-year, with UK retail revenues up 11.8%. Sales from our
overseas division increased by 25.0% driven by a strong cake performance in
France.
Group adjusted operating profit at £19.8 million is up 10.9% on last year.
This growth is driven by the acquisition of Lees, growth in overseas markets
and the continuing success of our Operating Brilliance Programme here in the
UK. The challenges of persistent and significant cost inflation have
adversely affected our adjusted operating profit margins which at 4.8% is
slightly down on last year (2022: 5.0%).
The net assets of the Group as at 1 July 2023 was £126.6 million (2 July
2022: £118.9 million).
Dividend
A final dividend for the year ending 2 July 2022 of 1.67p per share was paid
on 21 December 2022 taking the full year dividend to 2.5p per share. An
interim dividend for the year ending 1 July 2023 of 0.87p per share (2022:
0.83p) was paid on 20 April 2023 to shareholders on the register at the close
of business on 24 March 2023.
The Directors expect to pay a further dividend of 1.73p per share by the end
of the calendar year, taking the full year dividend to 2.60p per share (2022:
2.50p) subject to the terms and conditions set out in the announcement dated
20 September 2023 (relating to the recommended acquisition of Finsbury by
DBAY).
The tables below show what the Directors consider to be the trading
performance of the Group. The adjusted measures eliminate the impact of
significant and non-recurring items and other accounting items, that are not
deemed to reflect the continuing performance of the Group.
52 week period ended 1 July 2023
Operating performance Significant non-recurring- Defined Benefit Pension Scheme Movement in the Fair value of interest rate swaps/ foreign exchange contracts Discounting of deferred consideration As per Consolidated Statement of Comprehensive Income
items
Note 5
£000 £000 £000 £000 £000 £000
Revenue 413,738 - - - - 413,738
Cost of sales (289,418) - - - - (289,418)
Gross profit 124,320 - - - - 124,320
Other costs excluding depreciation and amortisation (93,046) (3,120) 763 121 - (95,282)
EBITDA 31,274 (3,120) 763 121 - 29,038
Depreciation and amortisation (11,522) - - - - (11,522)
Operating profit 19,752 (3,120) 763 121 - 17,516
Finance income 58 - - 1,030 - 1,088
Finance costs (2,147) - (239) - (4) (2,390)
Profit/(loss) before tax 17,663 (3,120) 524 1,151 (4) 16,214
Taxation (4,323) (99) (131) (261) 1 (4,813)
Profit/(loss) for the year 13,340 (3,219) 393 890 (3) 11,401
53 week period ended 2 July 2022
Operating performance Significant non-recurring- Defined Benefit Pension Scheme Movement in the Fair value of interest rate swaps/ foreign exchange contracts Discounting of deferred consideration As per Consolidated Statement of Comprehensive Income
items
Note 5
£000 £000 £000 £000 £000 £000
Revenue 356,808 - - - - 356,808
Cost of sales (241,183) - - - - (241,183)
Gross profit 115,625 - - - - 115,625
Other costs excluding depreciation and amortisation (86,878) (1,898) 417 (821) - (89,180)
EBITDA 28,747 (1,898) 417 (821) - 26,445
Depreciation and amortisation (10,940) - - - - (10,940)
Operating profit 17,807 (1,898) 417 (821) - 15,505
Finance income - - - - - -
Finance costs (851) - (285) (18) (54) (1,208)
Profit/(loss) before tax 16,956 (1,898) 132 (839) (54) 14,297
Taxation (3,050) 198 (33) 166 10 (2,709)
Profit/(loss) for the year 13,906 (1,700) 99 (673) (44) 11,588
Other Significant and Non-Recurring Items
Significant non-recurring cost of £3.1 million relates to litigation and
legal fees of £2.0 million, acquisition costs of £0.6 million, other
restructuring costs £0.5 million. All items have been excluded from operating
profit in the table above to better reflect the ongoing trading position.
Earnings per Share (EPS)
EPS comparatives to the prior year can be distorted by significant
non-recurring items and other items highlighted above. The Board is focused on
growing adjusted diluted EPS which is calculated by eliminating the impact of
the items highlighted above as well as amortisation of intangibles and
incorporates the dilutive effect of share options. Adjusted diluted EPS is
10.1p (2022: 10.1p).
2023 2022
Basic EPS 8.7p 8.4p
Adjusted basic EPS 10.7p 10.8p
Diluted** basic EPS 8.2p 7.9p
Adjusted* diluted** EPS 10.1p 10.1p
*Further details on adjustments can be found in Note 8.
**Diluted EPS takes basic EPS and incorporates the dilutive effect of share
options.
Cash Flow
Cash generated from operating activities increased to £31.3m. Increased
working capital of £3.3m driven by the growth in the business reduced this to
£28.0m. Interest paid totals £2.1m. Taxation at £3.9m (2022 £2.0m) is
higher than 2022 driven by higher taxable profits with a tax impact of
+£0.5m, higher effective tax rates +£0.9m and phasing of instalments
+£0.5m. Cash out flow relating to SNRs costs (note 5) was £1.6m and should
be considered as one off in nature.
The resulting net cash from operating activities is £20.3m which finances
spend on capital investment (£8.8 million) and payment of acquisition of
subsidiary, net of cash received of £5.7m as the Company acquired 100% of the
share capital of Lees Foods Limited ("Lees") in January 2023. The cash flows
associated with the dividend are £3.2m relating to the final dividend of
£2.1m paid in December 2022 (1.67pps) and an interim dividend of £1.1m for
2023 paid April 2022 (0.87pps).
Debt and Bank Facilities
The Group's total net debt is £21.4 million (2022: £20.6 million), up £0.7
million from the prior year. The Group secured selective receivables finance
(SRF) facility with effect from June 2023.
The Group recognises the inherent risk from interest rate rises, and uses
interest rate swaps to mitigate these risks. The Group has one swap to 10 June
2027 with a coverage of £10.0 million fixed at a rate of 2.589%. At the year
end date the total balance of swaps was £10.0 million (2022: £20.0 million).
The counterparty to these transactions is HSBC Bank Plc.
The effective interest rate for the Group during the year, taking account of
the interest rate swap in place with average combined SONIA and EURIBOR rate
at 2.69%, was 4.61% (2022: base rate 0.60% and LIBOR at 0.263%, was 1.8%).
Financial Covenants
The Board reviews the Group's cash flow forecasts and key covenants regularly,
to ensure it has adequate facilities to cover its trading and banking
requirements with an appropriate level of headroom. The forecasts are based on
management's best estimates of future trading. There has been no breach of
covenants during the year and the Board do not expect any in the forecast
periods.
Interest cover (based on adjusted earnings before interest, tax, depreciation
and amortisation - EBITDA) for the 52 weeks to 1 July 2023 was 14.7 (2022:
48.6); minimum cover required is 4.0 times. Net bank debt to EBITDA (based on
adjusted EBITDA) for the 52 weeks to 1 July 2023 was 0.7 (2022: 0.7) maximum
level required under our new banking facility is 3.0 times.
Taxation
The Group taxation charge for the year was £4.8 million (2022: £2.7
million). The effective rate of tax on profits before significant and
non-recurring and other items are shown in the table showing trading
performance on page 12, is 24.5% (2022: 18.0%). This uplift is driven by an
increase in UK tax rates from 19% to 25%, overseas profits charged at
different tax rates and prior year adjustments. You can find further details
on the tax charge in Note 7.
Financial and Non-Financial Key Performance Indicators
We monitor a range of financial and non-financial KPIs at site level covering,
amongst others, productivity, quality and health and safety.
The Group Board receives a regular overview of all KPIs.
John Duffy
Director
25 September 2023
Financial Statements
Consolidated Statement of Comprehensive Income (unaudited)
for the 52 weeks ended 1 July 2023
Unaudited Audited
2023 2022
Note £000 £000
Revenue 3 413,738 356,808
Cost of sales (289,418) (241,183)
Gross profit 124,320 115,625
Administrative expenses 4 (103,684) (98,222)
Administrative items - significant and non-recurring 5 (3,120) (1,898)
Operating profit 17,516 15,505
Finance income 6 1,088 -
Finance cost 6 (2,390) (1,208)
Net finance cost (1,302) (1,208)
Profit before tax 16,214 14,297
Taxation 7 (4,813) (2,709)
Profit for the financial year 11,401 11,588
Other comprehensive income
Items that will not be reclassified to profit and loss
Remeasurement on Defined Benefit Pension Scheme (460) 7,815
Movement in deferred taxation on Pension Scheme liability 115 (1,954)
Other comprehensive (expense)/income for the financial year, net of tax (345) 5,861
Total comprehensive income for the financial year 11,056 17,449
Profit attributable to:
Equity holders of the Parent 10,769 10,472
Non-controlling interest 632 1,116
Profit for the financial year 11,401 11,588
Total comprehensive income attributable to:
Equity holders of the Parent 10,424 16,333
Non-controlling interest 632 1,116
Total comprehensive income for the financial year 11,056 17,449
Earnings pence per ordinary share
Basic 8 8.7 8.4
Diluted 8 8.2 7.9
The Notes on pages 20 to 30 form an integral part of these Financial
Statements.
Financial Statements
Consolidated Statement of Financial Position (unaudited)
at 1 July 2023
Unaudited Audited
2023 2022
Note £000 £000
Non-current assets
Intangibles 9 88,152 87,355
Property, plant and equipment 69,305 62,672
Deferred tax assets 3,675 4,072
161,132 154,099
Current assets
Inventories 23,258 23,281
Trade and other receivables 65,204 58,148
Cash and cash equivalents 11,188 7,381
Other financial assets - fair value of derivatives 891 20
100,541 88,830
Total assets 261,673 242,929
Current liabilities
Other interest-bearing loans and borrowings 10 (1,895) (1,605)
Trade and other payables (75,664) (74,284)
Provisions (2,037) (697)
Other financial liabilities - fair value of derivatives (295) (575)
Deferred consideration - (496)
Current tax liabilities - (731)
(79,891) (78,388)
Non-current liabilities
Other interest-bearing loans and borrowings 10 (42,928) (35,388)
Provisions - (18)
Deferred tax liabilities (5,768) (3,699)
Pension fund liability (6,518) (6,582)
(55,214) (45,687)
Total liabilities (135,105) (124,075)
Net assets 126,568 118,854
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 (5,291) (5,696)
Retained earnings 64,564 57,456
126,111 118,598
Non-controlling interest 457 256
Total equity 126,568 118,854
Registered Number 00204368
The Notes on pages 20 to 30 form an integral part of these Financial
Statements.
Financial Statements
Consolidated Statement of Changes in Equity (unaudited)
for the 52 weeks ended 1 July 2023
Share Share Capital redemption reserve Employee share reserve Retained Non-controlling Total
capital premium earnings interest equity
£000 £000 £000 £000 £000 £000 £000
Balance at 27 June 2021 1,304 64,956 578 (5,374) 49,021 2,786 113,271
Profit for the financial year - - - - 10,472 1,116 11,588
Other comprehensive income:
Remeasurement on Defined Benefit Pension
- - - - 7,815 - 7,815
Deferred tax movement on Pension Scheme remeasurement
- - - - (1,954) - (1,954)
Total other comprehensive income - - - - 5,861 - 5,861
Total comprehensive income for the period
- - - - 16,333 1,116 17,449
Transactions with owners, recorded directly in equity:
Shares acquired during the year - - - (500) - - (500)
Shares issued during the year - - - 178 - - 178
Impact of share-based payments - - - - 1,524 - 1,524
Transactions with non-controlling interests -
- - - - (4,962) (1,121) (6,083)
Costs associated with transactions with non-controlling interests
- - - - (375) - (375)
Foreign exchange translation differences
- - - - (67) - (67)
Dividend paid - - - - (4,018) (2,525) (6,543)
Balance at 2 July 2022 1,304 64,956 578 (5,696) 57,456 256 118,854
Balance at 3 July 2022 1,304 64,956 578 (5,696) 57,456 256 118,854
Profit for the financial year - - - - 10,769 632 11,401
Other comprehensive income:
Remeasurement on Defined Benefit Pension
- - - - (460) - (460)
Deferred tax movement on Pension Scheme remeasurement
- - - - 115 - 115
Total other comprehensive expense - - - - (345) - (345)
Total comprehensive income for the period
- - - - 10,424 632 11,056
Transactions with owners, recorded directly in equity:
Shares acquired during the year - - - (499) - - (499)
Shares issued during the year - - - 904 - - 904
Impact of share-based payments - - - - (128) - (128)
Foreign exchange translation differences
- - - - 46 - 46
Dividend paid - - - - (3,234) (431) (3,665)
Balance at 1 July 2023 1,304 64,956 578 (5,291) 64,564 457 126,568
The Notes on pages 20 to 30 form an integral part of these Financial
Statements.
Financial Statements
Consolidated Cash Flow Statement (unaudited)
for the 52 weeks ended 1 July 2023
Unaudited Audited
2023 2022
Note £000 £000
Cash flows from operating activities
Profit for the financial year 11,401 11,588
Adjustments for:
Depreciation 4 7,003 7,407
Depreciation right-of-use assets 4 2,487 1,986
Significant non-recurring items 5 3,120 1,898
Net finance costs 6 1,302 1,208
Taxation 7 4,813 2,709
Amortisation of intangibles 9 2,032 1,547
Change in fair value of foreign exchange contracts (121) 821
Contributions by employer to Pension Scheme (763) (417)
Operating profit before changes in working capital 31,274 28,747
Changes in working capital:
Decrease/(increase) in inventories 1,590 (8,254)
Increase in trade and other receivables (3,435) (7,847)
Decrease/(increase) in trade and other payables (1,436) 13,589
Cash generated from operations before costs of disposals and acquisitions 27,993 26,235
Significant non-recurring costs (1,643) (2,254)
Interest paid (2,141) (678)
Tax paid (3,874) (2,018)
Net cash generated from operating activities 20,335 21,285
Cash flows from investing activities
Purchase of property, plant and equipment and intangibles (8,751) (12,545)
Payment of acquisition of subsidiary, net of cash received 2 (5,704) (1,000)
Net cash used in investing activities (14,455) (13,545)
Cash flows from financing activities
Lease payments (2,127) (2,275)
Drawdown of revolving credit 10 4,593 5,444
Purchase of shares by Employee Benefit Trust (500) (500)
Transactions with non-controlling interests - (6,083)
Dividend paid to non-controlling interest (431) (2,525)
Dividend paid to shareholders (3,234) (4,018)
Net cash used in financing activities (1,699) (9,957)
Net increase/(decrease) in cash and cash equivalents 4,181 (2,217)
Opening cash and cash equivalents 7,381 9,523
Effect of exchange rate fluctuations on cash held (374) 75
Cash and cash equivalents at end of period 11,188 7,381
The Notes on pages 20 to 30 form an integral part of these Financial
Statements.
Notes to the Consolidated Financial Statements
Presentation of Financial Statements
Basis of Preparation
The financial information on pages 16 to 19 is extracted from the Group's
consolidated Financial Statements for the 52 week period ended 1 July 2023.
The unaudited financial information included in this preliminary results
announcement for the 52 week ended 1 July 2023 and audited financial
information for the 53 week ended 2 July 2022 does not constitute statutory
accounts within the meaning of sections 434(3) and 435(3) of the Companies Act
2006 or contain sufficient information to comply with the disclosure
requirements in accordance with UK-adopted International Accounting Standards
in conformity with the requirements of the Companies Act 2006. The
"requirements of the Companies Act 2006" here means accounts in accordance
with "International Accounting Standards" as defined in section 474(1) of that
Act, as it applied immediately before Implementation Period ("IP") completion
day (end of transition period), including where the Group also makes use of
standards which have been adopted for use within the United Kingdom in
accordance with regulation 1(5) of the International Accounting Standards and
the European Public Limited Liability Company (Amendment etc.) (EU Exit)
Regulations 2019
Statutory financial statements for the 53 week ended 2 July 2022 were approved
by the Board of directors on 23 September 2022 and have been delivered to the
Registrar of Companies. The report of the auditors on these financial
statements was unqualified
Basis of Accounting
The Group's consolidated Financial Statements for the year ended 1 July 2023
have been prepared by the Directors in accordance with UK-adopted
International Accounting Standards in conformity with the requirements of the
Companies Act 2006. The Directors are satisfied that the Group has adequate
resources to continue to operate for a period of not less than 12 months from
the date of approval of the Financial Statements and that there are no
material uncertainties around their assessment. Accordingly, the Directors
continue to adopt the going concern basis of accounting.
The Group's principal accounting policies have been consistently applied
throughout the year and will be set out in the notes to the Group's 2023
Annual Report.
Going Concern
When considering going concern, judgement must be made as to the impact of the
ongoing macro challenges. Forecasts have been built on a bottom-up basis and
stress tested to prepare an approved budget used as a basis for reviewing
going concern. Risks and opportunities have been considered, and plausible
downside risks have been assessed. Having reviewed the Group's short and
medium-term plans and available financial facilities, the Board has reasonable
expectations that the Group has adequate resources to continue in operational
existence for the next 12 months and the foreseeable future.
The Group meets its funding requirements through internal cash generation and
bank credit facilities, which are committed until June 2026. Committed banking
facilities are £60.0 million with a further accordion available of £60.0
million, net bank debt at the year end was £21.4 million. The Group's
forecasts and projections, taking account of possible changes in trading
performance, show that the Group will be able to operate comfortably within
its current bank facilities. The Group has a relatively conservative level of
debt to earnings with a debt to adjusted EBITDA ratio of below one.
The Board reviews the Group's covenants on a regular basis to ensure that it
has adequate facilities to cover its trading and banking requirements with an
appropriate level of headroom. The forecasts are based on management's best
estimates of future trading. There has been no breach of covenants during the
year and none expected during the next 12 months. All covenant tests were
passed at the year end.
While it is difficult to predict exactly how macro challenges will develop
during the next 12 months, the Group's approach to responding to them will
remain unchanged, with a consistent focus on commercial terms, operational
improvements and other supply chain and overhead initiatives. Our robust
performance to date is a further validation of the Group's range of quality
products, the viability of our operational strategy and the long-term
prospects of our selected markets. We will continue to monitor closely and
work through ongoing pressures using the same strategies employed to date.
The Board is encouraged by the continuation of the Group's sales momentum and
the progress made against the three strategic pillars of Excellence, Growth
and Responsibility. While a level of uncertainty is likely to persist, the
Board believes that steady ongoing demand and the Group's market position,
diverse product range (including the fully commissioned new buns and rolls
capacity) and track record of successfully navigating challenges as they arise
stand the Company in good stead for the rest of the year.
We continue to see opportunities for significant sales growth through gaining
market share in existing areas, and targeted acquisitions. On 27 January 2023
the Company acquired 100% of the share capital of Lees Foods Limited ("Lees"),
a leading manufacturer of meringues, teacakes and snowballs. Lees has a broad
customer base and holds strong supply relationships with the
leading UK supermarkets in addition to foodservice and export customers. The
Finsbury Board believes that it will be able to leverage the scale and breadth
of the Finsbury commercial team and licensed brand portfolio to drive
incremental growth for Lees. In addition, there will be scale cost synergies
over time. This complements our increased holding of our French subsidiary
from 50% to 85% in February 2022 reflecting our continued desire to invest
behind our European growth.
On 20 September 2023, Finsbury announced the recommended offer by Frisbee
Bidco Limited, an entity ultimately owned by funds managed by DBAY Advisors
Limited, to acquire the entire issued and to be issued share capital of the
Company, to be implemented by means of a Court-sanctioned scheme of
arrangement. The Board is confident that Finsbury will continue to operate
successfully under DBAY's stewardship in the private market, with access to
DBAY's investment and operational support to pursue the current strategy of
scaling Finsbury's buy and build M&A in the future.
The cash consideration payable to the Finsbury Shareholders under the terms of
the Cash Offer will be financed by a combination of equity to be invested by
funds managed by DBAY and debt to be provided under a new facilities agreement
entered into with the Bidco Group. The Directors have considered the terms of
the financing arrangements against the board approved budget, including
plausible downsides. Based on this assessment, should the acquisition
proceed, the Board has reasonable expectations that the Group has adequate
resources to continue in operational existence for the next 12 months.
After making enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the Board continues to
adopt the going concern basis in preparing the Financial Statements for both
the Group and the Parent Company.
1. Significant Accounting Policies
New and Upcoming Standards
The following new standards, new interpretations and amendments to standards
and interpretations are applicable for the first time for the financial year
ended 1 July 2023.
Amendment Summary Effective date
Annual Improvements to IFRS Standards 2018-2020 Cycle Minor amendments to IFRS 1 First-time Adoption of Financial Reporting Annual periods beginning on or after 1 January 2022
Standards, IFRS 9 Financial Instruments and IAS 41 Agriculture. Amendment to
Illustrative Examples accompanying IFRS 16.
Amendments to IFRS 3 - Reference to the Conceptual Framework Updates certain references to the Conceptual Framework for Financial Reporting Annual periods beginning on or after 1 January 2022
without changing the accounting requirements for business combinations.
Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before intended Requires amounts received from selling items produced while the company is Annual periods beginning on or after 1 January 2022
use preparing the asset for its intended use to be recognised in profit or loss,
and not as an adjustment to the cost of the asset.
Amendment to IAS 37 - Onerous Contracts: Cost of Fulfilling a Contract Specifies which costs to include when assessing whether a contract will be Annual periods beginning on or after 1 January 2022
loss-making.
None of the amendments to the above standards had a material impact on the
Financial Statements.
There are a number of new standards, interpretations and amendments to
existing standards that are not yet effective and have not been adopted early
by the Group. The future introduction of these standards is not expected to
have a material impact on the Financial Statements of the Group.
Amendment Summary Effective date
IFRS 17, 'Insurance contracts' IFRS 17 will fundamentally change the accounting by all entities that issue Annual periods beginning on or after 1 April 2023
insurance contracts and investment contracts with discretionary participation
features.
Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8 The amendments aim to improve accounting policy disclosures and to help users Annual periods beginning on or after 1 January 2023 early adoption.
of the financial statements to distinguish between changes in accounting
estimates and changes in accounting policies.
Amendment to IAS 12- deferred tax related to assets and liabilities arising These amendments require companies to recognise deferred tax on transactions Annual periods beginning on or after 1 January 2023 early adoption.
from a single transaction that, on initial recognition give rise to equal amounts of taxable and
deductible temporary differences.
Endorsed Amendment to IAS 1 - Non current liabilities with covenants These amendments clarify how conditions with which an entity must comply Annual periods beginning on or after 1 January 2023 early adoption.
within twelve months after the reporting period affect the classification of a
liability. The amendments also aim to improve information an entity provides
related to liabilities subject to these
Amendment to IFRS 16 - Leases on sale and leaseback These amendments include requirements for sale and leaseback transactions in Annual periods beginning on or after 1 January 2023 early adoption.
IFRS 16 to explain how an entity accounts for a sale and leaseback after the
date of the transaction.
Work will continue in the new financial year to assess the impact of the new
standards and interpretations on the Group's Financial Statements.
2. Acquisitions
On 27 January 2023 the Group acquired the entire share capital of Lees Foods
Limited ("Lees") for £5.7 million. Lees has a UK market-leading position in
the manufacture of meringues and has significant capability in the sweet
treats category, adjacent to Finsbury's existing markets. The acquisition is
in line with Finsbury's strategy to diversify its product capability into
areas with high growth potential.
Details of the purchase consideration, the net assets acquired and the
goodwill are as follows:
Purchase consideration:
£000
Initial consideration 5,700
Net cash acquired 1,668
Cash consideration (excluding acquisition costs) 7,368
Working capital adjustment (496)
Total consideration including working capital adjustment 6,872
The cash outflow under 'payment of acquisition of subsidiary, net of cash
received' of £5,704,000 on the face of the Consolidated Cash Flow Statement
in the 52 weeks ended 1 July 2023 relates to the following:
Total consideration for Lees including working capital adjustment 6,872
Net cash acquired with Lees acquisition (1,668)
Lees consideration excluding cash 5,204
Deferred consideration relating to the Ultrapharm acquisition 500
Cash consideration (excluding acquisition costs) 5,704
The acquisition had the following effect on the Group's assets and
liabilities:
Fair value of assets and liabilities
£000
Fixed assets 6,317
Intangible assets systems 3
Intangible assets brands 1,678
Trade and other receivables 3,183
Stock 1,480
Trade and other payables (7,272)
Deferred tax liability (757)
Net assets acquired 4,632
Cash consideration 6,872
Less cash acquired (1,668)
Total cash consideration (excluding acquisition costs) 5,204
Goodwill on acquisition 572
The goodwill is attributable to deferred tax liability £430,000 relating to
the taxable temporary differences arising from the recognition of an
intangible asset and goodwill of £172,000 attributable to the workforce and
profitability of the acquired business.
This is an estimate, the valuation will be concluded at our interim reporting
on 30 December 2023 .
The acquired business revenue included within these financial results amounts
to £11,936,000, profit after tax of £481,000 for the period 27 January 2023
to 1 July 2023 .If the acquisition had occurred on 2 July 2022 revenue and
profit after tax for the period 2 July 2022 to 1 July 2023 would have been
£24,023,000 and £288,000 respectively.
The fair value of acquired trade receivables is £2,777,000, the gross
contractual amount for trade receivables due is £2,784,000, with a loss
allowance of £7,000 recognised on acquisition.
Deferred consideration of £0.5 million paid during the year relates to the
final quarterly instalment for the acquisition of Ultrapharm Limited. Amounts
charged to finance expenses during the year for the unwinding of the
discounting is £4,000 (2022: £54,000).
3. Revenue and 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 Financial Statements.
The UK bakery segment manufactures and sells bakery products to UK grocery and
foodservice sectors. It comprises seven 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 foodservice sectors. It comprises Lightbody Europe SAS and Ultraeuropa
SP.z.o.o., Ultraeuropa has manufacturing facilities in Poland where it
manufactures and sells Free From bakery products into the European markets.
The UK bakery segment also made sales directly to overseas markets.
Revenue UK bakery Overseas Total Group
52 weeks to 1 July 2023 and 53 weeks to 2 July 2022. 2023 2022 2023 2022 2023 2022
£000 £000 £000 £000 £000 £000
Total 351,077 306,650 62,661 50,158 413,738 356,808
Reportable Segments 52 weeks to 53 weeks to
1 July 2023 2 July 2022
£000 £000
Revenue UK bakery 351,077 306,650
Revenue overseas 62,661 50,158
Total revenue 413,738 356,808
Adjusted operating profit UK bakery 15,446 14,897
Adjusted operating profit overseas 4,306 2,910
Total adjusted operating profit 19,752 17,807
Significant non-recurring other (3,120) (1,898)
Defined Benefit Pension Scheme 763 417
Fair value foreign exchange contracts 121 (821)
Operating profit 17,516 15,505
Finance income 1,088 -
Finance expense (2,390) (1,208)
Net finance cost (1,302) (1,208)
Profit before taxation 16,214 14,297
Taxation (4,813) (2,709)
Profit for the financial year 11,401 11,588
The Group has one customer (2022: two) which individually account for 10% or
more of the Group's total revenue. This customer individually accounts for
23%. In the prior year two customers accounted for 24% and 12% of the revenue
in the 53 weeks to 02 July 2022
Other Segment Information 52 weeks to 53 weeks to
1 July 2023 2 July 2022
£000 £000
Assets UK bakery 243,962 225,816
Assets overseas 17,711 17,113
Liabilities UK bakery (118,268) (109,289)
Liabilities overseas (16,837) (14,786)
Depreciation UK bakery 8,589 8,486
Depreciation overseas 901 907
Amortisation UK bakery 2,032 1,547
Amortisation overseas - -
4. Administrative Expenses and Auditors' Remuneration
Included in profit are the following:
2023 2022
£000 £000
Amortisation of intangibles 2,032 1,547
Depreciation of owned tangible assets 7,003 7,407
Depreciation on right-of-use assets 2,487 1,986
(profit)/Loss on disposal of plant, property and equipment (1) 347
Loss on foreign exchange 135 213
Variable lease payments 178 267
Expenses relating to short-term and low-value leases 6 23
Movement on fair value of foreign exchange contracts 121 821
Research and development 3,289 1,566
Share option charges 1,155 1,524
Auditors' remuneration:
2023 2022
£000 £000
Audit of these Financial Statements 64 55
Audit of the Financial Statements of subsidiaries of the Company 166 144
Other services 39 181
Other services relate to non-UK VAT support.
5. Significant Non-Recurring Items
The Group presents certain items as significant and non-recurring. 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. They reflect costs that will not
be repeated and therefore do not reflect ongoing trading of business which is
most meaningful to users.
Included within significant non-recurring items shown in the table on page 12
of the Financial Review section are the following costs:
2023 2022
£000 £000
Acquisition costs (566) (1,601)
Litigation and legal costs (2,019) (858)
Reorganisation people costs (535) 50
Disposal and impairment of fixed assets - (284)
Release of site closure costs provision - 795
(3,120) (1,898)
Acquisition costs are those associated with the acquisition of Lees (2022
costs related to an aborted acquisition during the year). Litigation and legal
costs of £2.0 million (2022: £0.9 million) are in relation to a dispute over
the consideration paid for an earlier year acquisition. Reorganisation costs
of £0.5m relate to organisation design changes during the year to align the
Group structure across all functions, there was a release of unused provision
in the prior year.
Costs in the prior year of £0.3 million related to fixed assets disposals.
The release of site closure provisions of £0.8 million in the prior year
related to lease costs that had been avoided due to successful re-letting of
closed site units.
6. Finance Income and Cost
Recognised in the Consolidated Statement of Comprehensive Income
2023 2022
£000 £000
Finance income
Change in fair value of interest rate swaps 1,030 -
Interest on interest rate swap agreements 58 -
Total finance income 1,088 -
Finance cost
Interest on net pension position (239) (285)
Interest on interest rate swap agreements - (43)
Bank interest payable (1,862) (531)
Unwinding of discount on deferred consideration (4) (54)
Interest on deferred consideration (1) (18)
Change in fair value of interest rate swaps - (18)
Lease liabilities (284) (259)
Total finance cost (2,390) (1,208)
Finance costs have increased as a result of higher average debt during the
year and increases in SONIA and Euribor rates.
7. Taxation
Recognised in the Consolidated Statement of Comprehensive Income
2023 2022
£000 £000
Current tax
Current year 2,496 2,137
Adjustments for prior years 230 (148)
Total current tax 2,726 1,989
Deferred tax
Origination and reversal of temporary differences 1,611 646
Rate change 386 (209)
Adjustments for prior years 90 283
Total deferred tax 2,087 720
Total tax expense 4,813 2,709
Reconciliation of Effective Tax Rate
The weighted average hybrid rate of UK, Polish and French tax is 22.2% (2022:
19.5%). The tax assessed for the period is higher (2022: lower) than the
hybrid rate of UK, French and Polish tax. The UK Corporation Tax rate for the
period is 20.5% (2022: 19%). The differences are explained below:
2023 2022
£000 £000
Profit before taxation 16,214 14,297
Tax using the UK Corporation Tax rate of 20.5%, (2022: 19%) 3,324 2,716
Overseas profits charged at different taxation rate 561 265
Non-deductible expenses and timing differences 403 88
Restatement of opening net deferred tax due to rate change and differences in 351 91
rates
R&D reclaim (146) (586)
Adjustments to tax charge in respect of prior periods 320 135
Total tax expense 4,813 2,709
The UK Corporation Tax rate increase from 19% to 25% from 1 April 2023 was
substantively enacted in March 2021. The deferred tax assets and liabilities
at 1 July 2023 have been calculated based on a rate of 25%.
The adjustment of £320,000 for the prior year includes disallowable expenses
relating to acquisition costs, capital allowances and research and development
expenditure credits being different to the assumed levels at the time of
preparation of the Annual Report.
The Company has an unrecognised deferred tax asset of £239,000 (2022:
£239,000) 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.
8. 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 123,667,000 (2022: 124,265,000).
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 2023, the diluted weighted
average number of shares in issue was 131,764,000, (2022: 132,352,000).
An adjusted earnings per share has been calculated to show the trading
performance of the Group. These adjusted earnings per share exclude:
· Reorganisation and other significant non-recurring items;
· IFRS 9 '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; and
· Amortisation of intangible assets.
52 weeks to 53 weeks to
1 July 2023 2 July 2022
£000 £000
Profit
Profit attributable to equity holders of the Company (basic) 10,769 10,472
Significant non-recurring and other items 1,939 2,318
Intangible amortisation net of deferred tax 547 574
Numerator for adjusted earnings per share calculation (adjusted basic)
13,255 13,364
Shares Basic Diluted Basic Diluted
'000 '000 '000 '000
Weighted average number of ordinary shares in issue during the period
123,667 123,667 124,265 124,265
Dilutive effect of share options - 8,097 - 8,087
123,667 131,764 124.265 132,352
Basic Diluted Basic Diluted
Earnings per share Pence pence pence pence
Basic and diluted 8.7 8.2 8.4 7.9
Adjusted basic and adjusted diluted 10.7 10.1 10.8 10.1
Significant non-recurring and other items net of taxation are tabled in the
Strategic Report on page 12 and comprise: significant non-recurring charge
£3,219,000 (2022: charge £1,700,000), Defined Benefit Pension Scheme income
£393,000 (2022: £99,000), fair value of interest rate swaps, foreign
exchange contracts income £890,000 (2022: charge £673,000), and the
unwinding of deferred consideration discounting charge £3,000 (2022:
£44,000).
9. Intangibles
Intangible assets comprise customer relationships, brands and goodwill.
Goodwill Business Brands and licences Customer relationships Total
systems
£000 £000 £000 £000 £000
Cost at 26 June 2021 85,004 11,387 3,683 7,630 107,704
Additions - 802 - - 802
Transfers from tangible fixed assets - 81 - - 81
Cost at 2 July 2022 85,004 12,270 3,683 7,630 108,587
Additions - 860 - - 860
Acquisitions 572 - 1,678 - 2,250
Transfers to tangible fixed assets - (281) - - (281)
Cost at 1 July 2023 85,576 12,849 5,361 7,630 111,416
Accumulated amortisation at 26 June 2021 (11,790) (2,959) (1,788) (3,148) (19,685)
Charge for the year - (838) (143) (566) (1,547)
Accumulated amortisation at 2 July 2022 (11,790) (3,797) (1,931) (3,714) (21,232)
Charge for the year - (1,303) (163) (566) (2,032)
Accumulated amortisation at 1 July 2023 (11,790) (5,100) (2,094) (4,280) (23,264)
Net book value at 26 June 2021 73,214 8,428 1,895 4,482 88,019
Net book value at 2 July 2022 73,214 8,473 1,752 3,916 87,355
Net book value at 1 July 2023 73,786 7,749 3,267 3,350 88,152
The customer relationships, brands and licences recognised in the opening
costs were purchased as part of the acquisitions of Lees in January 2023,
Ultrapharm in September 2018 and Fletchers Group of Bakeries in October 2014.
They are considered to have finite useful lives and are amortised on a
straight-line basis over their estimated useful lives of twenty years for
brands and between ten and fifteen years for customer relationships. The
intangibles were valued using an income approach, using multi-period excess
earnings method for customer relationships and Relief from Royalty Method for
brand valuation. The amortisation of intangibles has been charged to
administrative expenses in the Consolidated Statement of Comprehensive Income.
The business systems are considered to have finite useful lives and are
amortised on a straight-line basis over their estimated useful lives of ten
years.
The values attributed to goodwill and brands relating to the acquisition of
Lees in January 2023 are provisional and will be confirmed at our interim
reporting date of 30 December 2023.
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 value of all goodwill has been
assessed during the year.
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, inflation and growth rates 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.
In the current climate in which we navigate well-publicised macro challenges,
relevant judgements and assumptions must be made. The Group continues to
operate in a complex trading environment with pressure from inflation, global
supply chain disruptions, labour availability, political, economic and
legislative changes.
Forecasts have been built on a bottom-up basis and stress tested to prepare an
approved budget used as a basis for considering testing for impairment. Risks
and opportunities have been considered and, plausible downside scenarios have
been assessed.
The forecasts have taken in consideration the following key factors:
1. Ongoing challenging macro environment.
2. Latest market forecast and market research data has been considered
when making commercial judgements.
3. Detailed SWOT analysis of all businesses with a strategic plan to
respond to challenges.
4. Plans to combat inflationary pressures particularly labour costs in
the UK and Europe with a five-year automation strategy.
5. Detailed plans supporting strategic initiatives and strategy into
action with continued focus in the Operating Brilliance Programme, Process
Blueprint, value engineering, asset management and care.
6. Organisational design and engagement activity to provide bakery
teams to support our strategy.
The forecasts covering a three-year period are based on the detailed financial
forecasts challenged and approved by management for the next three years. The
cash flows beyond this forecast are extrapolated to perpetuity using a 1.78%
(2022: 1.63%) growth rate for all of the CGUs. Changes in revenue and direct
costs in the detailed three-year plan are based on past experience and
expectations of future changes in the market to the extent that can be
anticipated.
The strategic forecast process commenced in November 2022 to review consumer
and competitor insight to prepare the foundations for the financial forecasts.
The revenue growth rate in the strategic forecast combines volume, mix and
price of products. An inflation factor has been applied to costs of sales,
variable costs and indirect costs and takes into consideration the general
rate of inflation, movements in commodities, improvement in efficiencies from
capital investment and operations and purchasing initiatives. External market
data and trends are considered when predicting growth rates. Compound annual
growth rates for revenues for the three-year forecast period averages at 5.8%
excluding the acquisition of Lees in January 2023. The growth is reflecting
the recovery from the lower-base year impacted by the inflationary pressures
impacting consumer demand, a challenging environment with high interest rates
and an uncertain economic environment. The forecast periods include the
annualisation of commercial negotiations, benefits of our ongoing Operating
Brilliance Programme and organic growth.
A post-tax discount rate of 7.9% (2022: 7.9%) has been used in these
calculations. The discount rate uses weighted average cost of capital which
reflects the returns on government bonds and an equity risk premium adjusted
specifically for Finsbury, plus further risk premiums that consider cash
generating unit risk. 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 has
remained in line with the prior year. 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. When considering the Ultrapharm discount rate a further 0.5% has
been added for the overseas risk element.
The table below shows the carrying values of goodwill allocated to cash
generating units or groups of cash generating units. When calculating the
discount rate that would need to be applied for there to be zero headroom, the
discounted cash flows were compared against the carrying amount of goodwill,
property, plant and equipment and right-of-use assets. The discount rates are
shown in the table below:
Carrying value of goodwill Post-tax discount rate at which headroom is nil Pre-tax discount rate at which headroom is nil
2023 2022 2023 2022 2023 2022
£000 £000 % % % %
Lightbody of Hamilton 45,698 45,698 16.1 22.5 21.4 29.9
Fletchers Bakery 20,118 20,118 20.5 16.0 27.5 21.4
Ultrapharm 4,046 4,046 12.1 12.5 16.2 16.7
Nicholas and Harris 2,980 2,980 25.4 37.2 33.8 49.6
Johnstone's Food Service 372 372 117.2 135.1 156.2 180.1
Lees 572 - 25.9 - 34.5 -
73,786 73,214
Impairment
The post-tax discount rate at which the headroom is nil for Fletchers Bakery
is 20.5% (2022: 16.0%) an improvement over the previous year. There are key
strategies and plans in place in order to improve the performance of
Fletchers. With our development, technical and process knowledge we can enable
them to become a leading player in the buns and rolls category and our scale,
new product development and continued good relationships with our food service
customers enables us to target growth. Unprecedented inflation and falling
consumer confidence have been key challenges to address, our improved
efficiencies, our focus on realising Fletchers as a centre of excellence for
the buns and rolls, our continued success on our Operating Brilliance Program
and our focus on our Strategic Pillar for Growth has enabled us to overcome
the challenges. Development of our own Kara foodservice brand, new product
development and investment in core product areas stands us in good stead to
deliver our financial forecasts. Sensitivities have been carried out to
exclude any growth, which, demonstrates that headroom still exists. It has
been concluded that no impairment was necessary on the carrying value of
goodwill relating to the Fletchers Bakery at 1 July 2023.
The post-tax discount rate at which the headroom is nil for Ultrapharm is
12.1% ( 2022: 12.5%). There are key strategies in place in order to improve
the performance of Ultrapharm. Focus throughout the year has been on operating
brilliance with improvements in efficiency and waste. The successful new
product development and focus on operating brilliance in the current year
provides a solid springboard for growth throughout the strategic periods.
Significant inflation persists however commercial negotiations, value
engineering projects, continued drive in our Operating Brilliance Programme
and cost saving activities have been successful in minimising the impact of
these pressures. For our overseas subsidiary home market growth is targeted,
investment in systems, along with newly formed branded relationships, which
will help leverage our available capacity. Sensitivities have been carried
out. It has been concluded that no impairment was necessary on the carrying
value of goodwill relating to Ultrapharm at 1 July 2023.
Sensitivity analyses have been carried out by the Directors on the carrying
value of all remaining goodwill using post-tax discount rates up to 12.5%,
which would not result in an impairment.
Further sensitivity analysis has been carried out using a range of factors
such as growth rate and cost increases, which would not result in an
impairment. These include:
· If future growth rate assumption of 1% was replaced with zero
growth rate; and
· If future growth rate assumption of 1% was replaced with a
decline of 1%.
The period under review has been set against the backdrop of significant and
persistent inflationary headwinds, macroeconomic uncertainty and falling
consumer confidence. Despite this, the overall demand for food and drink has
remained resilient. Our foodservice and overseas businesses have performed
well, and we have successfully integrated the acquired Lees business, our
resilience and performance enable us to remain confident in our strategic
plans.
10. 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.
Frequency of Non-current
repayments Year of maturity Facility Drawn Current £000
2023 Statutory Margin £000 £000 £000
Revolving credit 1.95%/SONIA Varies 2026 60,000 32,468 - 32,468
Leases* Various Monthly Various 13,238 2,095 11,143
Unamortised transaction costs (883) (200) (683)
44,823 1,895 42,928
*Leases include all leases recognised as lease liabilities under IFRS 16.
Lease liabilities are shown separately in the table below to show total bank
debt as defined by our banking facility agreement, which only recognises
leases as defined as finance leases under IAS 17 as part of bank debt.
Frequency of Non-current
repayments Year of maturity Facility Drawn Current £000
2023 Margin £000 £000 £000
Revolving credit 1.95%/SONIA Varies 2026 60,000 32,468 - 32,468
Finance lease (under IAS 17) Various Monthly Various 76 11 65
Unamortised transaction costs (883) (200) (683)
Total bank debt 31,661 (189) 31,850
Operating leases (under IAS 17) 2.2% Varies 13,162 2,084 11,078
Total debt 44,823 1,895 42,928
Frequency of Non-current
repayments Year of maturity Facility Drawn Current £000
2022 Statutory Margin £000 £000 £000
Revolving credit 1.95%/SONIA Varies 2027 60,000 27,875 - 27,875
Leases* Various Monthly Various 9,917 1,805 8,112
Unamortised transaction costs (799) (200) (599)
36,993 1,605 35,388
*Leases include all leases recognised as lease liabilities under IFRS 16.
Lease liabilities are shown separately in the table below to show total bank
debt as defined by our banking facility agreement, which only recognises
leases as defined as finance leases under IAS 17 as part of bank debt.
Frequency of Non-current
repayments Year of maturity Facility Drawn Current £000
2022 Margin £000 £000 £000
Revolving credit 1.95%/SONIA Varies 2027 60,000 27,875 - 27,875
Finance lease (under IAS 17) Various Monthly Various 151 76 75
Unamortised transaction costs (799) (200) (599)
Total bank debt 27,227 (124) 27,351
Operating leases (under IAS 17) 2.2% Varies 9,766 1,729 8,037
Total debt 36,993 1,605 35,388
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.
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 net bank debt: EBITDA and interest
cover.
The revolving credit bank facility available for drawdown is £60.0 million
plus a further £60.0 million accordion facility (2022: £60.0 million plus a
further £60.0 million accordion). At the period end date, the facility
utilised was £32.5 million (2022: £27.9 million), giving £27.5 million
(2022: £32.1 million) headroom plus a further £60.0 million (2022: £60.0
million) accordion.
11. Analysis of Net Bank Debt
The table below is presented to demonstrate total debt as defined by our
banking facility agreement. This excludes the lease liabilities created on
transition to IFRS 16 for leases treated as operating leases under IAS 17.
At year ended 2 July 2022 At year ended 1 July 2023
£000 Cash flow £000
£000
Cash and cash equivalents 7,381 3,807 11,188
Debt due after one year (27,875) (4,593) (32,468)
Hire purchase obligations due within one year (76) 65 (11)
Hire purchase obligations due after one year (75) 10 (65)
Total net bank debt (20,645) (711) (21,356)
12. Post Balance Sheet Events
On 20 September 2023, the Board announced that it had reached agreement on the
terms of a recommended offer for the entire issued and to be issued ordinary
share capital of Finsbury by Frisbee Bidco Limited ("Bidco"), a company
controlled by funds managed by DBAY Advisors Limited ("DBAY") (the
"Acquisition"). The Acquisition is to be effected by means of a scheme of
arrangement under Part 26 of the Companies Act between Finsbury and Finsbury
Shareholders.
In summary, under the terms of the Acquisition:
· Finsbury shareholders will be entitled to receive 110 pence in
cash for each Finsbury share (the "Cash Offer");
· As an alternative to (or in combination with) the Cash Offer,
eligible Finsbury Shareholders may elect to receive one non-voting B ordinary
share in Bidco for each Finsbury Share held (the "Alternative Offer").
The Board was unanimous in recommending that Finsbury shareholders vote or
procure votes in favour of the Scheme. At the time of preparing this report,
the Acquisition remains conditional on, amongst other thing, the approval of
Finsbury Shareholders, the approval of the Court and regulatory clearance.
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