TIDMFIF
RNS Number : 5321A
Finsbury Food Group PLC
26 September 2022
Date: 26 September 2022
On behalf Finsbury Food Group Plc ('Finsbury', 'the Company'
of: or 'the Group')
Embargoed until: 0700hrs
Finsbury Food Group Plc
Preliminary Results
Summary
The full year figures reflect an evolving trading environment
with the ongoing post pandemic recovery being followed by
inflationary pressures impacting our operations and total supply
chain. The improvement in all figures is a reflection of the
robustness of our business model.
-- Group revenue up 13.9% to GBP357 million.
-- Gross margins 32.4% (2021: 32.9%).
-- Group EBITDA *(1) up 6.9% to GBP28.7 million.
-- Profit before tax *(1) up 12.1% to GBP17.0 million.
-- Adjusted Diluted EPS *(2) (pence per share) up 17% to 10.1p.
-- Net bank debt (excluding IFRS 16 debt), GBP20.6 million
(2021: GBP13.1 million), representing 0.7 x FY EBITDA.
Strategic Highlights
-- Revenue growth, a result of:
o Strong post Covid-19 recovery in UK foodservice, up 38%,
o UK retail up 7.1%; and
o Overseas division growth of 27%.
-- Taking our ownership to 85% in Lightbody-Stretz Limited
deepening our presence in France and Benelux.
-- 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 which is helping to manage inflationary
pressure in the short term.
-- Clear sustainability agenda driving continued improvement in energy and waste management.
-- Continued investment in development, engagement and the health and wellbeing of employees.
(*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.
Commenting on the results, John Duffy, Chief Executive of
Finsbury Food Group Plc, said:
"To have delivered a record revenue performance that is in line
with market expectations despite the numerous and complex
challenges faced in the year - initially the effects of the
Covid-19 crisis and more recently significant input cost inflation
and falling consumer confidence - demonstrates the resilience and
agility of the Group and the enduring appeal of our product range.
Throughout the period, our retail business continued to perform
well, we saw a bounce back in foodservice, and our overseas
division experienced further strong growth. The level of internal
response required to deliver these results cannot be understated,
and I am grateful to our teams for their considerable efforts.
Pleasingly, we were able to mitigate most of the impact of the
macro challenges through revised commercial arrangements,
operational improvements and other supply chain initiatives. We
will continue in the same vein in the new financial year, as these
pressures are expected to worsen.
While significant macro headwinds are set to persist, we have a
successful track record of navigating challenging market conditions
and are supported by a strong balance sheet. We will continue to
meet challenges head on, and I remain confident we will emerge a
stronger business well set to deliver on our long-term growth
ambitions."
For further information:
Finsbury Food Group
John Duffy (Chief
Executive)
Steve Boyd (Finance
Director) www.finsburyfoods.co.uk 029 20 357 500
Panmure Gordon (UK)
Limited
Oliver Cardigan (Corporate
Finance)
Atholl Tweedie
Erik Anderson (Corporate
Broking)
Edward Walsh 020 7886 2500
Alma PR
Sam Modlin
David Ison
Matthew Young finsbury@almapr.co.uk 020 3405 0205
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 2 July 2022 of GBP357 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;
-- 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 GBP1.031 billion (source: IRI 52 w/e
13th August 2022). The retail bread and morning goods market has a
value of GBP5.3 billion (source: Kantar Worldpanel 52 w/e 4th
September 2022). The retail Free From cake market is valued at
GBP58 million (source: Kantar Worldpanel 52 w/e 4th September
2022). The retail Free From bread and morning goods market is
valued at GBP166 million (source: Kantar Worldpanel 52 w/e 4th
September 2022).
-- 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 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 ywiec 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 2022 2021
GBP000 GBP000
--------------------------------------------------- -------- --------
Adjusted EBITDA 28,747 26,904
Significant non-recurring items - (see Note
4) (1,898) 958
Difference between Defined Benefit Pension Scheme
charges and cash cost 417 473
Movement in the fair value of foreign exchange
contracts (821) 696
--------------------------------------------------- -------- --------
Adjustments, significant non-recurring and other
items (2,302) 2,127
--------------------------------------------------- -------- --------
EBITDA 26,445 29,031
--------------------------------------------------- -------- --------
Adjusted Operating Profit 2022 2021
GBP000 GBP000
--------------------------------------------------- -------- ----------
Adjusted operating profit 17,807 16,100
Significant non-recurring items - (see Note
4) (1,898) 958
Difference between Defined Benefit Pension Scheme
charges and cash cost 417 473
Movement in the fair value of foreign exchange
contracts (821) 696
--------------------------------------------------- -------- ----------
Adjustments, significant non-recurring and other
items (2,302) 2,127
--------------------------------------------------- -------- ----------
Operating profit 15,505 18,227
--------------------------------------------------- -------- ----------
Adjusted Profit Before Tax 2022 2021
GBP000 GBP000
--------------------------------------------------- -------- --------
Adjusted profit before tax 16,956 15,126
Significant non-recurring items - (see Note
4) (1,898) 958
Difference between Defined Benefit Pension Scheme
charges and cash cost 132 249
Movement in the fair value of foreign exchange
contracts (821) 696
Discounting of deferred consideration (54) (105)
Movement in the fair value of interest rate
swaps (18) 89
--------------------------------------------------- -------- --------
Adjustments, significant non-recurring and other
items (2,659) 1,887
--------------------------------------------------- -------- --------
Profit before tax 14,297 17,013
--------------------------------------------------- -------- --------
Group Performance Statutory Measures
Measures
Group Revenue *(2)
GBP356.8m
up 13.9%
Adjusted EBITDA*1 EBITDA
GBP28.7m GBP26.4m
up 6.9%
Adjusted Operating Operating Profit
Profit(*1) GBP15.5m
GBP17.8m up 10.6%
Adjusted Profit(*1) Profit Before Tax
Before Tax GBP14.3m
GBP17.0m up 12.1%
Adjusted Diluted EPS Diluted EPS
10.1p up 17.4% 7.9p
Capital Investment *(2)
GBP12.5m up 103%
Net Debt (excl leases) Net Debt (incl leases)
GBP20.6m up 57.3% GBP29.6m
*(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
The Group delivered a record revenue figure for the full year
ended 2 July 2022; this was achieved during a period of exceptional
macroeconomic turbulence. The financial year was set against a
backdrop of further Covid-19 restrictions which helpfully eased as
the year progressed. There were, though, increasing and now
persistent ongoing pressures from input cost inflation, staff
shortages and other supply chain disruptions.
The period under review saw a number of testing obstacles for
the wider consumer sector and the manner in which Finsbury
successfully navigated these headwinds is testament to the
diligence and experience of our management team. Whilst these
various pressures are likely to persist in the near future, I am
confident that we have the best possible team in place to continue
executing on our strategy and to further strengthen our position in
the market as our business is aligned with long-term consumer
trends .
The challenges have been significant. Our commercial teams have
needed to be in constant dialogue with our customers and suppliers
to deliver the necessary revised commercial arrangements to address
this volatile situation. However, our focus on strategic execution
has not wavered and we have continued to make good progress against
our objectives, based around our three pillars of Excellence,
Growth and Responsibility and underpinned by our Operating
Principles.
One such objective has been to bring the Group businesses closer
together to operate as a single cohesive unit. This is giving us
both uniformity and improved efficiency in our processes,
procurement, procedures and communication. In turn, this will make
us stronger, creating a platform that will enhance our future
performance.
The hard work and dedication of the whole Finsbury team has
enabled us to navigate these challenges and changes while still
achieving strategic progress and delivering a commercial
performance in line with market expectations. The clarity of our
strategy and the resilience of our business model means the Company
is well positioned for continued growth.
A Robust Performance
Our agile management of the evolving macroeconomic situation has
allowed us to deliver a robust performance for the period with the
Group posting record revenue figures, alongside notable operational
successes and continued investment. The full year figures do
reflect the beneficial impact of the relaxation of Covid-19
restrictions, compared with the previous 12 months trading.
Group revenue increased by 13.9% to GBP356.8 million, bolstered
by a particularly strong second half performance with revenue up
18.7%, against the corresponding period in the prior year. Adjusted
EBITDA increased by 6.9% to GBP28.7million (2021: GBP26.9 million),
adjusted profit before tax increased by 12.1% to GBP17.0 million
(2021: GBP15.1 million) and the Group delivered adjusted diluted
EPS of 10.1p. The Group's net bank debt position by year end was
GBP20.6 million (2021: GBP13.1 million) as the business increased
its stake in Lightbody-Stretz Limited, its European distribution
subsidiary, from 50% to 85% in February 2022.
It is pleasing and reassuring that the 13.9% increase in Group
revenues was driven by 8.7% of volume growth which indicates the
quality, relevance and innovation of the Group's products. The
Group's sales growth has been achieved through a good performance
in the Group's UK bakery, up 12.1%, which includes a continuation
of the recovery in foodservice (up 38.1%). There was also an
impressive 26.6% increase in the Group's overseas division. The
overseas performance is particularly pleasing and reflects the
management team's excellent execution and growth ambitions, along
with our continued desire to invest in the European
opportunity.
The Group also successfully negotiated a new four plus one year
GBP120 million credit facility (GBP60 million core plus GBP60
million accordion) effective as of 27 June 2022. Whilst the current
stock market conditions persist and lower ratings of food
manufacturers are weighing heavily on share prices, these new
credit facilities will provide financial flexibility for the Group
to pursue its significant growth ambitions. As communicated in the
February 2022 Interim Results announcement, the Board continues to
explore opportunities to accelerate the growth of the Group through
targeted acquisitions. The continued successful execution of the
Group's strategy positions us well to succeed in both the retail
grocery and out-of-home channels in the UK and Europe particularly
through the development of a strong licensed brand portfolio to
complement our core retailer brand relationships.
Dividend
Given the robust performance and sound financial position of the
Group, the Board will be recommending a final dividend of 1.67
pence per share at the forthcoming AGM, which will take the total
dividend for the year to 2.50 pence per share (2021: 2.4
pence).
Considerable Operational Progress Despite Macroeconomic
Headwinds
We have continued to invest and focus on the deployment of our
Operating Brilliance Programme ("OBP") which, facilitated by a
cloud-based, Group-wide IT system, has enabled us to recover this
inflation, whether it be through operating efficiency or price
increases.
We are progressively delivering a suite of best-in-class
business systems and increased efficiencies, to optimise our
business operations. This will help protect us in the short term
and be ready for when the market returns to more normal
conditions.
There is still a lot of work to be done, however, the progress
made this year has been significant. We have continued to
strengthen our category-leading new product development (NPD)
expertise and have further implemented best practice through our
Process Blueprint, a product design framework delivering quality
and efficiency. Steps like these should ultimately help us to
create long--term shareholder value, through share price
appreciation and attractive dividends.
A Responsible Business
At Finsbury we hold social responsibility at the very core of
our ethos and, as we challenge ourselves to be a more conscientious
and socially impactful business, accountability around our progress
is important.
As part of our ongoing social responsibility programme, we will
continue the journey to our target of reducing emissions in line
with the Science Based Targets initiative ("SBTi") methodology.
Alongside this, we will work with our supply and customer partners
to source raw materials in a sustainable and ethical way.
Investment and development of people is key to our success, and
we are committed to investing in our staff to help attract and
retain talent through exploring new recruitment channels, and
mechanisms to engage and retain our existing workforce. Alongside
this, we have invested in 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 to build awareness and
understanding.
Our People
Our people are the bedrock of our business and the culture that
pervades across Finsbury has helped us to endure difficult
conditions with great professionalism and calm. It is their focus
which has resulted in our year-on-year progression in quality
performance, with complaint numbers and rates continuing to reduce
on a yearly comparative basis.
Our teams have worked extremely hard to create the right working
conditions for Finsbury to succeed and, on behalf of the Board, I
would like to take this opportunity to thank all members of staff
for their dedication and commitment.
I would also like to extend my appreciation to the Board and
wider Executive team who have done an excellent job in navigating
the Group through what has been an exceptionally challenging
period. Through their leadership and expertise, Finsbury has not
deviated from its strategic ambitions and the robust set of results
reflects their success.
Outlook
The past year has been set against a backdrop of exceptional
macroeconomic headwinds. Finsbury has faced unprecedented
challenges as a result and, simply taken at face value, the in line
performance does not convey the monumental levels of hard work that
took place behind the scenes to deliver it. These results are a
great achievement. Management deserves a great deal of credit for
its stewardship and I am incredibly grateful to our colleagues who
have all played an important role in getting us to this point. FY22
was another year in which the agility and resilience of the
Finsbury model was put to the test, and again it was proven to be
more than fit for purpose even in the most volatile of trading
conditions.
Whilst we recognise that the future is difficult to predict with
any certainty as the true impact of the inflationary environment is
not yet known, we remain confident in our strategy. The past few
years have not been easy, but we continue to stand up well. Across
our Group, NPD continues at pace, we have diversification of
products, channels and markets which stand us in good stead and,
ultimately, we have a strong track record of moving forwards as a
business in difficult times. This gives the Board confidence that
the Group will continue to make progress and deliver profitable
growth.
Peter Baker
Non-Executive Chairman
23 September 2022
Chief Executive's Report
The period under review was a year in which Finsbury had to
navigate significant post-pandemic challenges impacting the
availability and cost of all inputs whether it be materials,
utilities, labour and, indeed, overheads in general. The impact and
scale of these additional inflationary pressures throughout the
year exceeded GBP27 million and the level of response required
across the business to address them and go on to deliver a record
sales performance cannot be overstated. For many years we have been
investing to reinforce and optimise the Group, making it as nimble,
adaptable and able to withstand adversity, as possible. FY22 was a
real test of how far we have come, and I am proud of how we
performed.
Within our markets, overall demand for food and drink has
remained resilient. Our retail business performed well, we
continued to see a bounce back in foodservice, and our overseas
division continued to see strong growth.
Record Revenue Performance Despite Challenging Environment
The Group delivered a very strong full year performance,
particularly given the environment in which we were operating in.
Total sales of GBP356.8 million represent a 13.9% increase of which
volume is 8.7% versus the corresponding period in the prior year.
The Group delivered a strong second half performance, with H2
revenues up 18.7% (of which volume is 10.0%) against the
corresponding period in the prior year.
This growth in sales has been driven by a stable performance in
the Group's core division, UK bakery, up 12.1%, which includes a
continuation of the robust recovery in foodservice, up 38.1%, and a
26.6% increase in the Group's overseas division.
Unprecedented pressure from input cost inflation, staff
shortages and other supply chain disruptions persisted throughout
the period. Pleasingly, the Group was able to mitigate much of the
impact through revised pricing and commercial arrangements,
operational improvements and supply chain initiatives. It will
continue in the same vein as further inflationary cost pressures
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
The implementation of our Operating Brilliance Programme (OBP),
centred around building people and process capability, continues to
deliver meaningful benefits to performance.
In light of the challenging landscape we have been operating in
for several years, we have focused on building resilience across
the Group and creating a platform for continually improving
performance. In FY22, our initiatives were responsible for a
combined GBP4.5 million of gross annual savings and we expect these
benefits to continue.
A major focus in FY22 has been the development of a suite of
best-in-class systems, all linked to our business intelligence
software, with a view to delivering Group-wide, high-quality data
which we can use to make more effective decisions.
FY22 systems investment included:
-- An integrated Group Supply Chain Planning System, which will
enable us to move to an integrated business planning model;
-- A Product Lifecycle Management System, which will transform
our development process, ensuring we have an effective product
design framework to deliver profitable growth; and
-- A Group-wide Computerised Maintenance Management System
(CMMS) roll out has commenced in all bakeries.
The final piece in the best-in-class systems jigsaw is a new HR
system, which will be implemented in FY23. Once in place, this
system will materially reduce administration workload and improve
areas like skills training and development effectiveness within the
business.
Moving forwards, we remain focused on extending, embedding and
sustaining our Operational Brilliance Programme at an increasingly
Group-wide level, including at interfaces with key customers and
suppliers to promote best practice both internally and
externally.
2. Growth
The Board is committed to driving growth through a combination
of organic growth and targeted acquisitions.
We are delighted to report continued growth across our portfolio
in the UK and Europe as we continue to work collaboratively with
our partners to drive growth in our key markets. We are
particularly focused on capitalising on the continued rapid growth
within 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.
As sales patterns have become more normalised throughout the
period following the impact of lockdowns, we have continued to
succeed in both the retail grocery and out-of-home channels in the
UK and Europe, working closely with our foodservice partners to
enable a strong recovery. We continued to embed our whole cake
strategy and accelerate our small cake performance, led by food to
go with our indulgent and plant based snacking offer outperforming
the market across both the grocery and convenience channels.
From a brand portfolio perspective, we continued to go from
strength to strength. We have invested in our gluten free business
in the UK and Poland, expanding capacity and capability and driving
double-digit growth. In Europe, we have extended our Free From
'Wiso' brand, which we will look to drive further scale in FY23,
leveraging our Lightbody Europe business model to deliver this.
Three of the top five celebration cake lines in the UK are
Finsbury's and our Xbox product is the fastest growing cake in the
market. We continue to hold the broadest license portfolio, which
we continually evolve to ensure that we are catering to the diverse
range of consumer needs.
To remain a leader in our key channels, we will implement
consumer-led growth strategies across cake product categories and
focus on targeted bread consumer-led growth in both retail and out
of home markets. Product development is also a key future focus as
we increase capacity and capability in two strategically important
category areas of buns and rolls and celebration cake. Further
development and implementation of our Group Free From strategy will
continue as we seek to drive further growth within this sector by
extending our reach wider into speciality bread, morning goods,
sweet treat and cake categories.
The Board continues to explore opportunities to accelerate the
growth of the Group through targeted acquisitions and strategic
investments. In February 2022 we acquired a further 35%
shareholding in Lightbody-Stretz Limited, taking our ownership from
50% to 85%, reflecting our continued belief in the opportunity in
Europe.
The Group's new credit facility provides financial flexibility
for the Group to pursue its significant growth ambitions, as and
when appropriate, potentially through further M&A.
3. Responsibility
Finsbury has always prided itself on being a responsible
business that acts with integrity and care, both for our people and
towards the planet.
A primary focus has been to further develop key skills, subject
matter expertise and capability in addition to investing in
graduate talent, apprenticeships and leadership development for the
future.
This year saw the launch of our Diversity and Inclusion strategy
through a series of policies, campaigns and training programmes to
develop awareness and understanding. We also progressed our Health
and Wellbeing and Community Engagement programmes, including
further developing our partnerships with UK charities Grocery Aid
and Fareshare at a Group level, whilst continuing to support team
member nominated charities at a local level. We will soon be
redeploying our Employee Engagement survey to assess the impact of
our Employee Engagement Programme with a view to driving continued
improvement in our workplace culture.
Sustainability is in our DNA, with metrics and goals embedded
within all our business strategies. As a result of our focus on
driving recycling rates, 85% of our waste is now recycled (up from
80% last year) with the balance being used to generate power. We
remain a certified zero land fill business and as part of our
commitment to the WRAP objectives on plastic usage, 91% of our
packaging is now recyclable. We will continue to increase the
recycling rate through the training and the application of
technology.
"Scope 1 and 2" emissions have been reduced by 20% against our
2016 base line, and we are creating a Supplier Partner
Sustainability Forum to work collaboratively on reducing the
Group's environmental impact. This will include the measurement of
our "Scope 3" emissions with our key suppliers.
We now have live data monitoring systems for electricity use for
all our key assets, helping teams to calculate the impact of action
in real-time and saving up to 10% of energy usage. The
implementation of these systems has allowed us to convert 90% of
our lighting to LED and we will achieve the complete 100%
transition later in the calendar year 2022, saving over 260 tonnes
of CO(2) per annum. Automated live usage monitoring will be
extended to gas and water to help teams to identify reduction
opportunities.
Raw materials continue to be sourced in line with a variety of
sustainable and ethical standards, including Fair Trade and the
Rainforest Alliance. Our palm oil adheres to the RSPO segregated
sustainability standard. Moving forward, we will persist in working
with our supply and customer partners to source raw materials in a
sustainable and ethical way.
I would like to take this opportunity to personally thank our
teams across the Group for their continued hard work, determination
and commitment. Without their efforts we would not have been able
to navigate the challenges we have faced and, in turn, deliver a
record performance.
Outlook
Finsbury has faced unprecedented challenges in recent years,
first triggered by the Covid-19 crisis and now by arguably the most
challenging input cost inflation in decades and falling consumer
confidence. Despite these, the resilience and swift response across
our business enabled us to deliver a record revenue performance in
the period under review.
Looking ahead, macro-economic and inflationary headwinds are set
to persist at levels in excess of that experienced in FY22.
However, Finsbury is no stranger to responding to difficult trading
conditions and uncertainty. Since long before the onset of
Covid-19, we have been focused on diversifying products, channels
and markets; unifying our businesses; identifying efficiencies; and
making the Group more resilient and able to respond quickly and
effectively to changing dynamics. The work our teams have put in
over the past several years continues to leave us in a strong
position relative to many.
The continuation of our Operating Brilliance Programme has
resulted in significant progress to date and there is encouraging
momentum as we move through the new financial year. FY22 saw
further expansion of our international footprint, continued
reinforcement of our best-in-class systems, and further advances in
refining and strengthening our product range, such as in gluten
free. In FY23, we aim to continue in a similar vein, making
incremental improvements to our operations, such as through the
launch of a new Group-wide HR system, that will stand us in good
stead as we navigate the challenges ahead.
While we now have two months of trading under our belt in the
new financial year, the complexity of the pressures we are facing
and the uncertain outlook around the phasing and extent of the
impact of rising inflation and energy prices on consumer demand
means it is difficult to predict how the rest of the year will
unfold. The effectiveness of government policy to tackle the cost
of living crisis, with energy price inflation sitting at the centre
and affecting both consumers and companies, is another important
variable that muddies the picture. However, we are experienced in
dealing with adversity; our business is aligned with long-term
consumer trends; we have a proven, agile model; and we continue to
execute a strategy that we believe will continue to improve the
business irrespective of external turbulence.
These factors combined give us confidence that, whilst we can't
control the headwinds we are facing, we will be well positioned
once the macro-economic situation stabilises.
John Duffy
Chief Executive Officer
23 September 2022
Financial Review
Group revenue to 2 July 2022 is GBP356.8 million, 13.9% higher
than last year. The growth in revenue is the result of volume
uplift of 8.7% and price uplift of 5.2%. The recovery of
foodservice is driving much of this growth with a 38% increase
year-on-year uplift, while retail revenues remain positive. Sales
from our overseas division increased by 27% year on year driven by
a strong cake performance in the large French retailers. Group
adjusted operating profit at GBP17.8 million is up 10.6% on last
year. Despite the unprecedented inflationary pressures and
challenging macro environment, the Group has increased both revenue
and operating profit. Adjusted operating profit margins are 5.0%
(2021: 5.1%), a consequence of the continuing success of our
Operating Brilliance Programme partially mitigating the
extraordinary challenges.
Dividend
The dividend was reinstated during the year. For the full year
to 26 June 2021, a dividend of 2.40p per share was paid on 21
December 2021 to shareholders on the register at the close of
business on 26 November 2021.
An interim dividend for the year ending 2 July 2022 of 0.83p per
share (2021: nil) was paid on 21 April 2022 to shareholders on the
register at the close of business on 25 March 2022.
The Board of Directors is recommending a final dividend for the
year ending 2 July 2022 of 1.67p per share, taking the full year
dividend to 2.50p per share (2021: 2.40p). The final dividend will
be paid on 21 December 2022 to shareholders on the register at the
close of business on 25 November 2022. The election deadline for
participants in the Company's Dividend Re-investment Plan will be
30 November 2022.
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.
53 week period ended 2 July 2022
Movement
in the
Fair value
Significant of interest As per
non-recurring- Defined rate Consolidated
items Benefit swaps/foreign Discounting Statement
Operating Note Pension exchange of deferred of Comprehensive
performance 4 Scheme contracts consideration Income
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ------------- ---------------- --------- ----------------- --------------- ------------------
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 before tax 16,956 (1,898) 132 (839) (54) 14,297
------------------ ------------- ---------------- --------- ----------------- --------------- ------------------
Taxation (3,050) 198 (33) 166 10 (2,709)
------------------ ------------- ---------------- --------- ----------------- --------------- ------------------
Profit for the
year 13,906 (1,700) 99 (673) (44) 11,588
------------------ ------------- ---------------- --------- ----------------- --------------- ------------------
52 week period ended 26 June 2021
Movement
in the
Fair value
Significant of interest As per
non-recurring- Defined rate swaps/ Consolidated
items Benefit foreign Discounting Statement
Operating Note Pension exchange of deferred of Comprehensive
performance 4 Scheme contracts consideration Income
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ------------- ---------------- --------- ------------- --------------- ------------------
Revenue 313,258 - - - - 313,258
Cost of sales (210,273) - - - - (210,273)
---------------------- ------------- ---------------- --------- ------------- --------------- ------------------
Gross profit 102,985 - - - - 102,985
Other costs excluding
depreciation and
amortisation (76,081) 958 473 696 - (73,954)
EBITDA 26,904 958 473 696 - 29,031
Depreciation and
amortisation (10,804) - - - - (10,804)
---------------------- ------------- ---------------- --------- ------------- --------------- ------------------
Operating profit 16,100 958 473 696 - 18,227
---------------------- ------------- ---------------- --------- ------------- --------------- ------------------
Finance income - - - 89 - 89
Finance costs (974) - (224) - (105) (1,303)
---------------------- ------------- ---------------- --------- ------------- --------------- ------------------
Profit before tax 15,126 958 249 785 (105) 17,013
---------------------- ------------- ---------------- --------- ------------- --------------- ------------------
Taxation (2,995) (182) (62) (149) 20 (3,368)
---------------------- ------------- ---------------- --------- ------------- --------------- ------------------
Profit for the year 12,131 776 187 636 (85) 13,645
---------------------- ------------- ---------------- --------- ------------- --------------- ------------------
Other Significant and Non-Recurring Items
Significant non-recurring cost (SNR) of GBP1.9 million relates
to acquisition costs for aborted transactions of GBP1.6 million,
litigation and legal fees of GBP0.9 million, asset disposals of
GBP0.2 million offset by the release of provisions for onerous
leases and factory closure costs of GBP0.8 million. All items have
been excluded from operating profit in the table below 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
(2021: 8.6p).
2022 2021
------------------------- ------ -----
Basic EPS 8.4p 9.8p
Adjusted basic EPS 10.8p 9.1p
Diluted** basic EPS 7.9p 9.3p
Adjusted* diluted** EPS 10.1p 8.6p
* Further details on adjustments can be found in Note 7.
** Diluted EPS takes basic EPS and incorporates the dilutive
effect of share options.
Cash Flow
Cash generated from operating activities increased to GBP28.7m.
Increased working capital of GBP2.5m driven by the growth in the
business reduced this to GBP26.2m. Interest paid totals GBP0.7m.
Taxation at GBP2.0m (2021 GBP3.9m) is lower than 2021 attributable
to the benefit of capital super allowances. Cash out flows relating
to SNRs (note 4) cost GBP2.3m and should be considered as one off
in nature.
The resulting net cash from operating activities is GBP21.3m
which finances a doubling of spend on capital investment (GBP12.5
million) and an acquisition outflow of GBP6.1m as the Company
increased its stake in Lightbody-Stretz Limited by 35% to 85%. The
cash flows associated with dividend are GBP4m relating to the
2.4pps 2021 full and final dividend paid in December 2021, GBP3.0m
and GBP1.0m for the interim dividend for 2022 paid April 2022
(0.83pps).
Debt and Bank Facilities
The Group's total net debt is GBP20.6 million (2021: GBP13.1
million), up GBP7.5 million from the prior year, for the reasons
given above.
The Group recognises the inherent risk from interest rate rises
and uses interest rate swaps to mitigate these risks. During the
year the Group had two swaps: one for GBP20.0 million for five
years from 3 July 2017 (fixed) at 0.455% and one for GBP5.0 million
for three years from 28 March 2019 (fixed) at 1.002%. The Group
entered into a forward dating swap commencing 3 July 2022 to 10
June 2027 with a coverage of GBP10.0 million fixed at a rate of
2.589%. At the year end date the total balance of swaps was GBP20.0
million (2021: GBP25.0 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 base
rate at 0.60% and LIBOR at 0.263%, was 1.7% (2021: base rate 0.10%
and LIBOR at 0.052%, was 2.0%).
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. As noted earlier, 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 53 weeks to 2 July
2022 was 48.6 (2021: 27.2) minimum cover required is 4.0 times. Net
bank debt to EBITDA (based on adjusted EBITDA) for the 53 weeks to
2 July 2022 was 0.7 (2021: 0.5); maximum level required under our
new banking facility is 3.0 times.
Taxation
The Group taxation charge for the year was GBP2.7 million (2021:
GBP3.4 million). The effective rate of tax on profits before
significant and non-recurring and other items is 18.9% (2021:
19.8%). You can find further details on the tax charge in Note
6.
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.
The Strategic Report was approved by the Board of Directors on
23 September 2022 and was signed on its behalf by:
Stephen Boyd
Director
Financial Statements
Consolidated Statement of Comprehensive Income
for the 53 weeks ended 2 July 2022
2022 2021
Note GBP000 GBP000
------------------------------------------------ ----- --------- ---------
Revenue 2 356,808 313,258
Cost of sales (241,183) (210,273)
------------------------------------------------- ----- --------- ---------
Gross profit 115,625 102,985
------------------------------------------------- ----- --------- ---------
Administrative expenses 3 (98,222) (85,716)
Administrative items - significant and
non-recurring 4 (1,898) 958
------------------------------------------------- ----- --------- ---------
Operating profit 15,505 18,227
------------------------------------------------- ----- --------- ---------
Finance income 5 - 89
Finance cost 5 (1,208) (1,303)
------------------------------------------------- ----- --------- ---------
Net finance cost (1,208) (1,214)
------------------------------------------------- ----- --------- ---------
Profit before tax 14,297 17,013
------------------------------------------------- ----- --------- ---------
Taxation 6 (2,709) (3,368)
------------------------------------------------- ----- --------- ---------
Profit for the financial year 11,588 13,645
------------------------------------------------- ----- --------- ---------
Other comprehensive income
Items that will not be reclassified to
profit and loss
Remeasurement on Defined Benefit Pension
Scheme 7,815 396
Movement in deferred taxation on Pension
Scheme liability (1,954) 811
------------------------------------------------- ----- --------- ---------
Other comprehensive income for the financial
year, net of tax 5,861 1,207
------------------------------------------------- ----- --------- ---------
Total comprehensive income for the financial
year 17,449 14,852
------------------------------------------------- ----- --------- ---------
Profit attributable to:
Equity holders of the Parent 10,472 12,347
Non-controlling interest 1,116 1,298
------------------------------------------------- ----- --------- ---------
Profit for the financial year 11,588 13,645
------------------------------------------------- ----- --------- ---------
Total comprehensive income attributable
to:
Equity holders of the Parent 16,333 13,554
Non-controlling interest 1,116 1,298
------------------------------------------------- ----- --------- ---------
Total comprehensive income for the financial
year 17,449 14,852
------------------------------------------------- ----- --------- ---------
Earnings pence per ordinary share
Basic 7 8.4 9.8
Diluted 7 7.9 9.3
The Notes on pages 19 to 27 form an integral part of these Financial
Statements.
Financial Statements
Consolidated Statement of Financial Position
at 2 July 2022
2022 2021
Note GBP000 GBP000
--------------------------------------- ---- --------- ---------
Non-current assets
Intangibles 8 87,355 88,019
Property, plant and equipment 62,672 59,015
Deferred tax assets 4,072 5,961
--------------------------------------- ---- --------- ---------
154,099 152,995
Current assets
Inventories 23,281 15,027
Trade and other receivables 58,148 50,986
Cash and cash equivalents 7,381 9,523
Other financial assets - fair value
of derivatives 20 405
--------------------------------------- ---- --------- ---------
88,830 75,941
--------------------------------------- ---- --------- ---------
Total assets 242,929 228,936
--------------------------------------- ---- --------- ---------
Current liabilities
Other interest-bearing loans and
borrowings 9 (1,605) (2,039)
Trade and other payables (74,284) (62,490)
Provisions (697) (222)
Other financial liabilities - fair
value of derivatives (575) (121)
Deferred consideration (496) (976)
Current tax liabilities (731) (689)
--------------------------------------- ---- --------- ---------
(78,388) (66,537)
--------------------------------------- ---- --------- ---------
Non-current liabilities
Other interest-bearing loans and
borrowings 9 (35,388) (31,029)
Provisions (18) (160)
Deferred consideration - (466)
Deferred tax liabilities (3,699) (2,944)
Pension fund liability (6,582) (14,529)
--------------------------------------- ---- --------- ---------
(45,687) (49,128)
--------------------------------------- ---- --------- ---------
Total liabilities (124,075) (115,665)
--------------------------------------- ---- --------- ---------
Net assets 118,854 113,271
--------------------------------------- ---- --------- ---------
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 (5,696) (5,374)
Retained earnings 57,456 49,021
--------------------------------------- ---- --------- ---------
118,598 110,485
Non-controlling interest 256 2,786
--------------------------------------- ---- --------- ---------
Total equity 118,854 113,271
--------------------------------------- ---- --------- ---------
The Financial Statements on pages 13 to 16 were approved by the
Board of Directors on 23 September 2022 and were signed on its
behalf by:
Stephen Boyd (Director)
Registered Number 00204368
The Notes on pages 17 to 27 form an integral part of these
Financial Statements.
Financial Statements
Consolidated Statement of Changes in Equity
for the 53 weeks ended 2 July 2022
Capital Employee
Share Share redemption share Retained Non-controlling Total
capital premium reserve reserve earnings interest equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- -------- -------- ----------- -------- --------- --------------- ----------
Balance at 28 June
2020 1,304 64,956 578 (3,378) 34,918 2,210 100,588
Profit for the financial
year - - - - 12,347 1,298 13,645
Other comprehensive:
Remeasurement on Defined
Benefit Pension - - - - 396 - 396
Deferred tax movement
on Pension Scheme
remeasurement - - - - 811 - 811
-------------------------------- -------- -------- ----------- -------- --------- --------------- ----------
Total other comprehensive
income - - - - 1,207 - 1,207
-------------------------------- -------- -------- ----------- -------- --------- --------------- ----------
Total comprehensive
income for the period - - - - 13,554 1,298 14,852
-------------------------------- -------- -------- ----------- -------- --------- --------------- ----------
Transactions with
owners, recorded directly
in equity:
Shares acquired during
the year - - - (1,996) - - (1,996)
Impact of share-based
payments - - - - 1,001 - 1,001
Deferred tax on share
options - - - - 89 - 89
Foreign exchange translation
differences - - - - (541) - (541)
Dividend paid - - - - - (722) (722)
-------------------------------- -------- -------- ----------- -------- --------- --------------- ----------
Balance at 26 June
2021 1,304 64,956 578 (5,374) 49,021 2,786 113,271
-------------------------------- -------- -------- ----------- -------- --------- --------------- ----------
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:
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
-------------------------------- -------- -------- ----------- -------- --------- --------------- ----------
Financial Statements
Consolidated Cash Flow Statement
for the 53 weeks ended 2 July 2022
2022 2021
Note GBP000 GBP000
--------------------------------------------------- ---- -------- --------
Cash flows from operating activities
Profit for the financial year 11,588 13,645
Adjustments for:
Depreciation 3 7,407 7,235
Depreciation right-of-use assets 3 1,986 1,752
Significant non-recurring items 4 1,898 (1,125)
Significant non-recurring items - impairment
of fixed assets 4 - 167
Net finance costs 5 1,208 1,214
Taxation 6 2,709 3,368
Amortisation of intangibles 8 1,547 1,817
Change in fair value of foreign exchange
contracts 821 (696)
Contributions by employer to Pension
Scheme (417) (473)
Operating profit before changes in working
capital 28,747 26,904
Changes in working capital:
Increase in inventories (8,254) (568)
Increase in trade and other receivables (7,847) (11,274)
Increase in trade and other payables 13,589 14,749
--------------------------------------------------- ---- -------- --------
Cash generated from operations before
costs of disposals and acquisitions 26,235 29,811
Significant non-recurring costs (2,254) (364)
Interest paid (678) (715)
Tax paid (2,018) (3,926)
--------------------------------------------------- ---- -------- --------
Net cash generated from operating activities 21,285 24,806
--------------------------------------------------- ---- -------- --------
Cash flows from investing activities
Purchase of property, plant and equipment
and intangibles (12,545) (6,190)
Purchase of companies 11 (1,000) (500)
--------------------------------------------------- ---- -------- --------
Net cash used in investing activities (13,545) (6,690)
--------------------------------------------------- ---- -------- --------
Cash flows from financing activities
Lease payments (2,275) (2,789)
Drawdown/(repayment) of revolving credit 5,444 (13,753)
Purchase of shares by Employee Benefit
Trust (500) (1,996)
Transactions with non-controlling interest 11 (6,083) -
Dividend paid to non-controlling interest (2,525) (722)
Dividend paid to shareholders (4,018) -
--------------------------------------------------- ---- -------- --------
Net cash generated used in financing
activities (9,957) (19,260)
--------------------------------------------------- ---- -------- --------
Net decrease in cash and cash equivalents (2,217) (1,144)
Opening cash and cash equivalents 9,523 10,173
Effect of exchange rate fluctuations
on cash held 75 494
--------------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of
period 7,381 9,523
--------------------------------------------------- ---- -------- --------
The Notes on pages 17 to 27 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 15 to 18 is extracted from
the Group's consolidated Financial Statements for the 53 week
period ended 2 July 2022, which were approved by the Board of
Directors on 23 September 2022.
The financial information 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
The Company's auditors, PricewaterhouseCoopers LLP, have given
an unqualified report on the consolidated Financial Statements for
the 53 week period ended 2 July 2022. The Auditors' Report did not
include reference to any matters to which the auditors drew
attention without qualifying their report and did not contain any
statement under section 498 of the Companies Act 2006. The
consolidated Financial Statements will be filed with the Registrar
of Companies, subject to their approval by the Company's
shareholders on 17 November 2022 at the Company's Annual General
Meeting.
Basis of Accounting
The Group's consolidated Financial Statements for the year ended
2 July 2022 have been prepared and approved 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 2022 Annual Report.
Going Concern
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, supply chain disruptions, labour
availability impacted by the pandemic, political, economic and
legislative changes and economic factors linked to the ongoing
conflict in Ukraine. The conflict between Russia and Ukraine
continues to develop and is likely to have a broad impact on the
global economy. Whilst navigating these challenges the health and
safety of our employees is a top priority.
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 2027. Committed banking facilities are GBP60.0 million with a
further accordion available of GBP60.0 million, net bank debt at
the year end was GBP20.6 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.
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.
We have delivered record revenue performance, a demonstration of
the Group's resilience and strategic focus. We continue to reap the
benefits of our Operating Brilliance Programme which has been one
of the key drivers behind our 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 have seen the
benefit of these actions in our second half profit performance. We
have also been affected by staff shortages and supply chain
disruption. 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.
We have seen recovery in foodservice, steady sales in retail and
strong overseas performance and have the benefits of the decisive
mitigation actions throughout the year. We continue to see
opportunities for significant sales growth through gaining market
share in existing areas, and targeted acquisitions, with our
increased holding of our French subsidiary to 85% in February
reflecting our continued desire to invest behind our European
growth.
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 2 July 2022.
-- Amendments to IFRS 7, IFRS 4, and IFRS 16 - Interest rate
benchmark reform - Phase 2 (effective 1 January 2021);
-- Amendments to IFRS 4 Insurance Contracts - Deferral of IFRS 9
(effective 1 January 2021); and
-- Amendment to IFRS 16, 'Leases' - Covid-19 related rent
concessions extension of the practical expedient (effective 1 April
2021).
No ne 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.
-- Amendments to IAS 1 - Presentation of Financial Statements on
Classification of Liabilities (effective 1 January 2023).
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. 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 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 foodservice sectors. It comprises Lightbody
Europe and Ultraeuropa. 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
53 weeks to 2 July 2022 2021 2022 2021 2022 2021
2022 and 52 weeks GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
to 26 June 2021.
--------- --------- --------- --------- ----------- ---------
Total 306,650 273 ,633 50,158 39,625 356,808 313,258
--------- --------- --------- --------- ----------- ---------
Reportable Segments 53 weeks to 52 weeks to
2 July 2022 26 June 2021
GBP000 GBP000
-------------------------------------- ------------- --------------
Revenue UK bakery 306,650 273,633
Revenue overseas 50,158 39,625
-------------------------------------- ------------- --------------
Total revenue 356,808 313,258
-------------------------------------- ------------- --------------
Adjusted operating profit UK
bakery 14,897 13,609
Adjusted operating profit overseas 2,910 2,491
Total adjusted operating profit 17,807 16,100
-------------------------------------- ------------- --------------
Significant non-recurring impairment - -
Significant non-recurring other (1,898) 958
Defined Benefit Pension Scheme 417 473
Fair value foreign exchange
contracts (821) 696
-------------------------------------- ------------- --------------
Operating profit 15,505 18,227
Finance income - 89
Finance expense (1,208) (1,303)
-------------------------------------- ------------- --------------
Net finance cost (1,208) (1,214)
-------------------------------------- ------------- --------------
Profit before taxation 14,297 17,013
-------------------------------------- ------------- --------------
Taxation (2,709) (3,368)
-------------------------------------- ------------- --------------
Profit for the financial year 11,588 13,645
-------------------------------------- ------------- --------------
The Group has two customers (2021: three) which individually
account for 10% or more of the Group's total revenue. These
customers individually account for 24% and 12%. In the prior year
three customers accounted for 23%, 12% and 10% of the revenue in
the 52 weeks to 26 June 2021.
Other Segment Information 53 weeks to 52 weeks to
2 July 2022 26 June 2021
GBP000 GBP000
--------------------------- ------------- --------------
Assets UK bakery 225,816 213,791
Assets overseas 17,113 15,145
Liabilities UK bakery (109,289) (103,541)
Liabilities overseas (14,786) (12,124)
Depreciation UK bakery 8,486 8,060
Depreciation overseas 907 927
Amortisation UK bakery 1,547 1,817
Amortisation overseas - -
--------------------------- ------------- --------------
3. Administrative Expenses and Auditors' Remuneration
Included in profit are the following :
2022 2021
GBP000 GBP000
-------------------------------------- ------ ------
Amortisation of intangibles 1,547 1,817
Depreciation of owned tangible assets 7,407 7,235
Depreciation on right-of-use assets 1,986 1,752
Impairment of fixed assets - 167
Loss on disposal of property, plant
and equipment 347 145
Loss on foreign exchange 213 235
Variable lease payments 267 203
Expenses relating to short-term and
low-value leases 23 51
Movement on fair value of foreign
exchange contracts 821 (696)
Research and development 1,566 2,124
Share option charges 1,524 1,001
-------------------------------------- ------ ------
Auditors' remuneration:
2022 2021
GBP000 GBP000
--------------------------------------------------- -------- --------
Audit of these Financial Statements 55 50
Audit of the Financial Statements of
subsidiaries of the Company 144 133
Other services 181 41
Other services relate to aborted acquisition advice and assistance
with non-UK VAT registrations.
4. 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:
2022 2021
GBP000 GBP000
---------------------------------------- ------- ------
Acquisition costs (1,601) -
Litigation and legal costs (858) (388)
Disposal and impairment of fixed assets (284) (167)
Release of site closure costs provision 795 1,340
Other reorganisation people costs 50 173
(1,898) 958
---------------------------------------- ------- ------
Acquisition costs are those associated with an aborted
acquisition during the year. Litigation and legal costs of GBP0.9
million (2021: GBP0.4 million) are in relation to a dispute over
the consideration paid for an earlier year acquisition and costs of
GBP0.3 million (2021: GBP0.2 million) relating to fixed assets
disposals in the current year and final impairment of assets at
Cardiff in the prior year. The release of site closure provisions
of GBP0.7 million (2021: GBP0.8 million) relating to lease costs
that have been avoided due to successful re-letting of closed site
units plus a release of GBP0.1 million (2021: GBP0.4 million) of
related site closure costs and GBP0.1 million (2021 GBP0.2 million)
of unused reorganisation provisions.
5. Finance Income and Cost
Recognised in the Consolidated Statement of Comprehensive
Income
2022 2021
GBP000 GBP000
------------------------------------------ ------- -------
Finance income
Change in fair value of interest rate
swaps - 89
Total finance income - 89
------------------------------------------ ------- -------
Finance cost
Interest on net pension position (285) (224)
Interest on interest rate swap agreements (43) (119)
Bank interest payable (531) (545)
Unwinding of discount on deferred
consideration (54) (105)
Interest on deferred consideration (18) (36)
Change in fair value of interest rate
swaps (18) -
Lease liabilities (259) (274)
Total finance cost (1,208) (1,303)
------------------------------------------ ------- -------
6. Taxation
Recognised in the Consolidated Statement of Comprehensive
Income
2022 2021
GBP000 GBP000
----------------------------- -------- --------
Current tax
Current year 2,137 3,277
Adjustments for prior years (148) (263)
------------------------------ -------- --------
Total current tax 1,989 3,014
------------------------------ -------- --------
Deferred tax
Origination and reversal of
temporary differences 646 95
Rate change (209) 252
Adjustments for prior years 283 7
------------------------------ -------- --------
Total deferred tax 720 354
------------------------------ -------- --------
Total tax expense 2,709 3,368
------------------------------ -------- --------
Reconciliation of Effective Tax Rate
The weighted average hybrid rate of UK, Polish and French tax is
19.5% (2021: 20.5%). The tax assessed for the period is lower
(2021: lower) than the hybrid rate of UK and French tax. The UK
Corporation Tax rate for the period is 19.0% (2021: 19.0 %). The
differences are explained below:
2022 2021
GBP000 GBP000
Profit before taxation 14,297 17,013
Tax using the UK Corporation Tax rate of 19%,
(2021: 19%) 2,716 3,232
Overseas profits charged at different taxation
rate 265 151
Non-deductible expenses and timing differences 88 480
Restatement of opening net deferred tax due
to rate change and differences in rates 91 298
R&D reclaim (586) (537)
Adjustments to tax charge in respect of prior
periods 135 (256)
----------------------------------------------- ------ ------
Total tax expense 2,709 3,368
----------------------------------------------- ------ ------
The UK Corporation Tax rate increase from 19% to 25% from 1
April 2023 was substantively enacted in March 2021, this decision
has been reversed at the mini-budget on 23 September 2022. The
deferred tax assets and liabilities at 2 July 2022 have been
calculated based on a rate at which they are expected to
crystallise which is likely to be 19% or 25% (the rate at the time
of preparation of these financial statements).
The adjustment of GBP135,000 for the prior year includes
ineligible capital spends and disallowable expenses being different
to the assumed levels at the time of preparation of the Annual
Report.
The Company has an unrecognised deferred tax asset of GBP239,000
(2021: GBP239,000) 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.
7. 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 124,265,000 (2021:
125,805,000).
Basic diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares in issue to assume
conversion of all potential dilutive ordinary shares. At 2 July
2022, the diluted weighted average number of shares in issue was
132,352,000, (2021: 132,753,000).
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.
53 weeks to 52 weeks to
2 July 2022 26 June 2021
GBP000 GBP000
--------------------------------------- ---------------------- ----------------------
Profit
Profit attributable to equity holders
of the Company (basic) 10,472 12,347
Significant non-recurring and other
items 2,318 (1,514)
Intangible amortisation net of
deferred tax 574 574
--------------------------------------- ---------------------- ----------------------
Numerator for adjusted earnings
per share calculation (adjusted
basic) 13,364 11,407
--------------------------------------- ---------------------- ----------------------
Shares Basic Diluted Basic Diluted
'000 '000 '000 '000
--------------------------------------- ---------- ---------- ---------- ----------
Weighted average number of ordinary
shares in issue during the period 124,265 124,265 125,805 125,805
Dilutive effect of share options - 8,087 - 6,948
--------------------------------------- ---------- ---------- ---------- ----------
124.265 132,352 125,805 132,753
--------------------------------------- ---------- ---------- ---------- ----------
Basic Diluted Basic Diluted
Earnings per share pence pence pence pence
--------------------------------------- ---------- ---------- ---------- ----------
Basic and diluted 8.4 7.9 9.8 9.3
Adjusted basic and adjusted diluted 10.8 10.1 9.1 8.6
--------------------------------------- ---------- ---------- ---------- ----------
Significant non-recurring and other items net of taxation are
tabled on page 12 and comprise: significant non-recurring charge
GBP1,700,000 (2021: income GBP776,000), Defined Benefit Pension
Scheme income GBP99,000 (2021: GBP187,000), fair value of interest
rate swaps, foreign exchange contracts charge GBP673,000 (2021:
income GBP636,000), and the unwinding of deferred consideration
discounting charge GBP44,000 (2021: GBP85,000).
8. Intangibles
Intangible assets comprise customer relationships, brands and
goodwill.
Goodwill Business Brands Customer Total
systems and licences relationships
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- --------- --------- -------------- --------------- ---------
Cost at 27 June 2020 85,004 10,177 3,683 7,630 106,494
Additions - 1,045 - - 1,045
Transfers from tangible fixed
assets - 165 - - 165
------------------------------- --------- --------- -------------- --------------- ---------
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
------------------------------- --------- --------- -------------- --------------- ---------
Accumulated amortisation
at 27 June 2020 (11,790) (1,851) (1,645) (2,582) (17,868)
------------------------------- --------- --------- -------------- --------------- ---------
Charge for the year - (1,108) (143) (566) (1,817)
------------------------------- --------- --------- -------------- --------------- ---------
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)
------------------------------- --------- --------- -------------- --------------- ---------
Net book value at 27 June
2020 73,214 8,326 2,038 5,048 88,626
------------------------------- --------- --------- -------------- --------------- ---------
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
------------------------------- --------- --------- -------------- --------------- ---------
The customer relationships, brands and licences recognised in
the opening costs were purchased as part of the Ultrapharm
acquisition in September 2018 and the acquisition of 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.
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.
8. Intangibles (continued)
The Group tests goodwill for impairment on an annual basis, or
more frequently if there are indications that the goodwill may be
impaired. The recoverable amounts of the cash generating units are
determined from value in use calculations. The key assumptions for
the value in use calculations are the discount, 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, supply chain disruptions, labour
availability impacted by the pandemic, political, economic and
legislative changes and economic factors linked to the ongoing
conflict in Ukraine. The conflict between Russia and Ukraine
continues to develop and is likely to have a broad impact on the
global economy.
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.
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 1.63% (2021: 1.5%) growth rate
for all of the cash generating units. 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 2021 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 7.4% reflecting the recovery
from the lower-base year impacted by the pandemic, inflationary
pressures impacting consumer demand, a challenging environment with
staff shortages and supply chain disruption. 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% (2021: 8.2%) 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 decreased over the prior year rate as a result of a higher debt
to equity ratio position and a decrease in the risk-free rate. The
discount rate used for each cash generating unit has been kept
constant as the market risk is deemed not to be materially
different between the different segments of the bakery sector, nor
over time. When considering the Ultrapharm discount rate a further
0.5% has been added for the overseas risk element.
8. Intangibles (continued)
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 Post-tax discount Pre-tax discount
of goodwill rate at which rate at which
headroom is nil headroom is nil
2022 2021 2022 2021 2022 2021
GBP000 GBP000 % % % %
------------------ --------- -------- --------- --------- --------- --------
Lightbody of
Hamilton 45,698 45,698 22.5 17.2 29.9 22.9
Fletchers Bakery 20,118 20,118 16.0 12.9 21.4 17.2
Ultrapharm* 4,046 4,046 12.5 9.6 16.7 12.8
Nicholas and
Harris 2,980 2,980 37.2 44.3 49.6 59.1
Johnstone's Food
Service 372 372 135.1 122.8 180.1 163.7
73,214 73,214
------------------ --------- -------- --------- --------- --------- --------
Impairment
The post-tax discount rate at which the headroom is nil for
Fletchers Bakery is 16.0% (2021: 12.9%) 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 workforce availability have been key challenges to
address, our improved efficiencies, our focus on realising
Fletchers as a centre of excellence for buns and rolls, our
continued success on our Operating Brilliance Program and our focus
on our Strategic Pillar for Growth have 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 2 July 2022.
The post-tax discount rate at which the headroom is nil for
Ultrapharm Limited is 12.5% (2021: 9.6%). There are key strategies
in place in order to improve the performance of Ultrapharm. There
has been successful new product development during the year, the
proven innovation delivery in the current year provides a solid
springboard for growth throughout the strategic periods as we
benefit from the annualisation of those launches. Targeted new
product development and a better understanding of intellectual
property will continue with new products being launched in the year
to 1 July 2023. Avian flu and the Ukraine conflict have had an
adverse impact on input prices, 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 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 Limited at 2 July
2022.
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%.
Whilst the period under review has been set against the backdrop
of exceptional macroeconomic and inflationary headwinds, the Group
has been faced with unprecedented challenges first triggered by the
Covid-19 crisis and now by significant input cost inflation and
falling consumer confidence. Despite this, the overall demand for
food and drink has remained resilient. Our retail business has
performed well, we continue to see a bounce back in foodservice,
our overseas division continued to see strong growth and our proven
resilience and performance enables us to remain confident in our
strategic plans.
9. Other Interest-Bearing Loans and Borrowings
This Note provides information about the contractual terms and
repayment terms of the Group's interest-bearing loans and
borrowings, which are measured at amortised cost, using the
effective interest rate method.
Frequency Non-current
of Year of Facility Drawn Current GBP000
2022 Statutory Margin repayments maturity GBP000 GBP000 GBP000
----------------- -------------- ----------- ---------- ---------- -------- --------- -----------
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 Non-current
of Year of Facility Drawn Current GBP000
2022 Margin repayments maturity GBP000 GBP000 GBP000
----------------- -------------- ----------- ---------- ---------- -------- --------- -----------
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
Frequency Non-current
of Year of Facility Drawn Current GBP000
2021 Statutory Margin repayments maturity GBP000 GBP000 GBP000
----------------- -------------- ----------- ---------- ---------- -------- --------- -----------
Revolving credit 1.50%/LIBOR Varies 2023 55,000 22,431 - 22,431
Leases* Various Monthly Various 10,745 2,039 8,706
Unamortised transaction
costs (108) - (108)
--------------------------------- ----------- ---------- ---------- -------- --------- -----------
33,068 2,039 31,029
-------------------------------- ----------- ---------- ---------- -------- --------- -----------
*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 Non-current
of Year of Facility Drawn Current GBP000
2021 Margin repayments maturity GBP000 GBP000 GBP000
----------------- -------------- ----------- ---------- ---------- -------- --------- -----------
Revolving credit 1.50%/LIBOR Varies 2023 55,000 22,431 - 22,431
Finance lease
(under IAS 17) Various Monthly Various 220 128 92
Unamortised transaction
costs (108) - (108)
--------------------------------- ----------- ---------- ---------- -------- --------- -----------
Total bank debt 22,543 128 22,415
--------------------------------- ----------- ---------- ---------- -------- --------- -----------
Operating leases
(under IAS 17) 2.2% Varies 10,525 1,911 8,614
---------------------- --------- ----------- ---------- ---------- -------- --------- -----------
Total debt 33,068 2,039 31,029
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
GBP60.0 million plus a further GBP60.0 million accordion facility
(2021: GBP55.0 million plus a further GBP35.0 million accordion).
At the period end date, the facility utilised was GBP27.9 million
(2021: GBP22.4 million), giving GBP32.1 million (2021: GBP32.6
million) headroom plus a further GBP60.0 million (2021: GBP35.0
million) accordion.
10. 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 At year
ended 27 Cash ended 2
June 2021 flow July 2022
Cash and cash equivalents 9,523 (2,142) 7,381
Debt due after one year (22,431) (5,444) (27,875)
Hire purchase obligations
due within one year (128) 52 (76)
Hire purchase obligations
due after one year (92) 17 (75)
------------------------------------- -------------- ---------- --------------
Total net bank debt (13,128) (7,517) (20,645)
------------------------------------- -------------- ---------- --------------
11. Acquisitions
The Company acquired a further 35% of the issued share capital
of Lightbody-Stretz Limited from Phaste S.a.r.l. in February 2022
for a consideration of GBP6.1 million, bringing its holding up from
50% to 85%.
Deferred consideration of GBP1.0 million paid relates to the
acquisition of Ultrapharm Limited (Ultrapharm) for GBP16.9 million
plus up to GBP3.0 million, GBP0.5 million of which is outstanding
at 2 July 2022 with the final quarterly instalment payable in
October 2022.
Discounted amounts payable within one year of the Consolidated
Statement of Financial Position date is GBP496,000 (2021:
GBP976,000) and amounts due beyond one year is GBPnil (2021:
GBP466,000). Amounts charged to finance expenses during the year
for the unwinding of the discounting is GBP54,000 (2021:
GBP105,000).
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