20th Sep 2005 07:00
Finsbury Food Group PLC20 September 2005 Date: 20 September 2005 On behalf of: Finsbury Food Group Plc ("Finsbury" or "the Group") Embargoed until: 0700hrs Finsbury Food Group Plc Year ended 30th June 2005 Finsbury Food Group plc, one of the UK's leading manufacturers of premiumadded-value cakes and speciality breads, today announced its preliminary resultsfor the year to 30th June 2005. The highlights were: • Profit before tax and exceptional items of £1.5m (2004: £0.2m) • Profit before tax £3.4m (2004: £0.2m) • Gross margin increased to 38% (2004: 33%) • Nestle sales progressing to plan • Normalised EPS of 4.9p per share (2004: 0.6p) (note 3) • Basic EPS 13.6p (2004: 0.6p) (note 3) • Dividend up 20% to 1.2p (2004: 1.0p per share) • No net debt at the year end Commenting on the results, Lord Saatchi, Chairman of Finsbury Food, said: "This has been a good year for the Group. Both of our trading companies; Cardiffbased Memory Lane Cakes Ltd, and Nicholas & Harris Ltd of Salisbury havedelivered strong performances. During the year the Board has undertaken a major review of the markets in orderto identify suitable acquisition targets. We have focused on businesses withinthe bread and cake sectors, where we already operate. A number of opportunitieshave now been identified, which we are actively pursuing. We have therefore made excellent progress towards our goal to grow a significantfood group, both organically and by acquisition and we look forward to thecoming year with confidence." For further information: Finsbury Food Group Plc www.finsburyfoods.co.ukDave Brooks (Chief Executive) 07831 787 382John Lomer (Finance Director) 0777 888 9977 Redleaf CommunicationsEmma Kane/Miranda Good 020 7955 1410 • Publication quality photographs are available via Redleaf Communications on the numbers shown above Chairman's Statement This year has been a good one for the Group. Both of our trading companiesCardiff based Memory Lane Cakes Ltd and Nicholas & Harris Ltd of Salisbury havedelivered strong performances. Memory Lane Cakes Ltd produced a solid and profitable result for the importantChristmas season and has continued to trade well in the second half of the year.The management team has been strengthened in key operational areas and themargins have been improved by a range review to raise prices or remove lowmargin lines. Profitability has also been driven by improved operationalperformance and plant utilisation. The company has consolidated its position andcontinues to enjoy strong trading relationships with nearly all of the majormultiples. The Group is now in the second year of its exclusive five-year contract to usethe Nestle confectionery brands for ambient cake in the UK. The spring of 2005saw the launch of twelve exciting new products under a number of the brands,which have been well received by the major multiple retailers. The Group is onschedule to create a £50m turnover business at retail prices for the Nestle cakebrand over the course of the five year contract. Nicholas & Harris Ltd also had a good year. The new product development program,which I referred to last year, has produced some exceptional products which haveconsolidated the company's position in the growing niche of high quality,speciality breads. The products are produced both under retailer brands andunder "The Village Bakery" brand. Nicholas & Harris Ltd has an exclusiveagreement for the use of The Village Bakery brand for premium organic breadwithin the multiple retailers. At the end of 2004, the Group sold a parcel of spare land at its Cardiff site.The proceeds from this sale along with a positive cash flow from trading havemeant that the Group completed the year with no net debt. Financial Results For the year ended 30th June 2005: • Turnover of £59.3m (2004: £59.9m) was achieved;• This yielded an operating profit of £1.8m (2004: £0.4m);• Profit before tax and exceptional items of £1.5m (2004: £0.2m);• Profit before tax of £3.4m (2004: £0.2m); and• Normalised EPS of 4.9p per share (2004: 0.6p). (note 3) Dividend The Directors propose to recommend an increased dividend distribution of 1.2pper share for the year (2004: 1.0p per share) in accordance with the Group'songoing progressive dividend policy. The Board and Staff On the 1st November, Mike Woods will join the Group as Managing Director ofMemory Lane Cakes Ltd. Mike was previously Managing Director of Avana BakeriesLtd and brings with him strong operational experience in the industry. He takesthe place of Phil Batchelor, who now moves up into a Group role as GroupCommercial Director and will take responsibility for managing the Group'scomplex and important relationships with our major multiple retail and other keycustomers. Acquisitions This year the Board has undertaken a major review of the markets with thepurpose of identifying acquisition targets. We are focusing on businesses withinthe bread and cake sectors, where we already operate. Suitable opportunities will have innovative niche products, which are sold tothe multiple retailers. They will have an existing management which can bedeveloped and incentivised to pursue Group interests. Most of all, they will fitwith our goal "to be best at what we do". We have now identified a number ofsuitable targets which we are actively pursuing and which we will fund withdebt. Outlook The cake market is continuing to grow in the UK. Most importantly, it is in thepremium and indulgent sectors of the market where most opportunities exist. Itis these areas where Memory Lane Cakes Ltd, with its expertise in innovation,high quality and service standards, is best placed to not only supply but alsolead category development. Similarly in the bread market, it is the speciality bread sector in which weexcel, where we are seeing sustained growth. Nicholas & Harris is positioned tosupply top quality, innovative products into this sector to an increasing rangeof multiple retailer customers. The Group has set out to be "the best at what we do". It is this over ridingprinciple that is driving the development of the businesses that we have andforms the basis of both the selection and development of the businesses that weseek to acquire. Trading in the current financial year is in line with expectations and we lookforward to the coming year with confidence. Lord SaatchiChairman Operating Review We have made great progress this year in our goal to grow a significant foodgroup. Our growth strategy is to pursue both organic growth and expansion byacquisition. We focus on niche opportunities where we can add value through ourexisting relationships, quality of service, flexibility and expertise. In shortwe operate in areas where we can be best at what we do. Access to a portfolio of brands such as Nestle and The Village Bakery hasenhanced our ability to develop and market innovative high quality products bothin the cake and bread markets. Financial Results Our two existing trading companies have both delivered strong performances inthe year ended 30th June 2005. • Group sales were £59.3m (2004: £59.9m). • Full year profit before tax and exceptional items was £1.5m (2004: £0.2m). • After including the profit from the sale of our surplus land, the group achieved a profit before tax of £3.4m (2004: ££0.2m). • Gross margins rose to 38% (2004 33%). The Group completed the year with a strong balance sheet. At the 30th June 2005,the Company had no net debt through a combination of the proceeds from the saleof our surplus land at Cardiff and a favourable cash flow from operatingactivities. Memory Lane Cakes Ltd Memory Lane Cakes Ltd is a manufacturer of premium whole cakes, celebrationcakes and other high quality cakes and indulgent snacks, which are largely soldto the major multiple retailers in the UK. As we reported at the half year, the business had a successful Christmas periodand it has continued to trade very well in the second half of the year, helpedby increased factory efficiency and utilisation. The business is also benefitingfrom the actions following the strategic review that was carried out in theSpring of 2004. • We have actively driven forward the gross margin by exiting low margin non core activities. • The operational management team has been strengthened to provide capacity for sustainable growth. • The group has a program of targeted capital expenditure to allow better use of our staff in value-added activities, and to widen our product range. Nestle Memory Lane Cakes Ltd is continuing to drive its Nestle branded business. Newproducts, launched in the spring, were well received and listings have beenobtained in the major multiple retailers. Behind the scenes, an ongoing newproduct development program is in full swing with launches of further new tastyand attractive products planned over the coming months. Sales are proceedingaccording to the Group's plan to build the Nestle branded cake business to £50mat retail over the course of the five year contract. Nicholas & Harris Ltd Nicholas & Harris is a craft based bakery making premium organic and specialitybreads and morning goods for the multiple grocery retailers. Nicholas & Harrisdelivered a strong performance in the year to 30th June 2005. Capital plans toextend the buildings to facilitate growth with its key customers are nowcomplete and in operation. New product development is the life blood of the business and The Village Bakerylicense for organic bread has created an excellent platform for the developmentof a number of products. In addition we have developed a range of specialitybreads using regional ingredients. These products have been particularly wellreceived and are also attracting interest with multiple retailers where Nicholas& Harris does not have current trading relationships but has enjoyedintroductions from elsewhere in the Group. People The skill and experience of the people within our businesses is the key factorin our ability to grow and satisfy the market demands that we have identified. Simon Staddon joined us as the new Managing Director of Nicholas & Harris on the1st January 2005. He and his team are now well established and positioned todrive the business forward. Simon has a wealth of food experience and joined usfrom Greencore. Lisa Morgan was promoted to the Memory Lane Cakes Ltd Board as Finance Directorin February 2005. She was previously Commercial Accountant at Memory Lane CakesLtd and her appointment underlines our focus on operational and financialcontrol. In November this year, Mike Woods joins the Group as Managing Director of MemoryLane Cakes Ltd. Again Mike has a wealth of food manufacturing experience, andjoins from Avana Bakeries. Phil Batchelor, the current Managing Director of Memory Lane Cakes Ltd, takes upa new Group role to oversee our market strategy and our important customerrelationships with the multiple grocers and other key customers. Phil is to becongratulated on the excellent job that he and his team have performed indeveloping Memory Lane Cakes Ltd over the past three years since its acquisitionby the Group. Acquisitions In addition to our drive to grow the businesses organically, we have now startedto work hard on the second string of our growth strategy; to seek outacquisitions. The targets that we seek are innovative businesses which have niche productsthat are complementary to areas where the Group already operates. In addition welook for a willing and able management who bring new skills to the Group andwith whom we can work to develop the business. We have now identified a number of suitable opportunities which we are activelypursuing. We will fund these deals with debt. The market and business outlook The food market in the UK is, as ever, a challenging one with continued pricepressure from the multiple retailers. However, we operate in markets worth about£5bn at retail prices and with growth rates in excess of 3%. We are wellpositioned to satisfy the appetite amongst our customers for new innovativeproducts to drive their own business and satisfy their own customers' increasingdesire for good tasting, quality and indulgent products. For a developingbusiness such as ours this generates huge growth and development opportunities.Our businesses are becoming key trading partners with the multiple grocers.Moreover the skills and experience of our markets that has been built up withinthe businesses is helping to establish us as category leaders in many cases. The public is more and more interested in the content of the food they buy andeat and the market trend is towards products that not only taste nice but alsocontain quality ingredients. This is not just true of specialty organic breadbut also indulgent treats in the cake sector. Our positioning in both the existing businesses offers exciting opportunities towork with key customers to provide a variety of high quality products to supporttheir growth and development programs as well as delighting the consumer. David BrooksGroup Chief Executive Consolidated Profit and Loss Account Notes Year ended Year ended 30 June 30 June 2005 2004 £000 £000 Turnover 59,338 59,906 Cost of Sales (37,073) (40,236) Gross Profit 22,265 19,670 Distribution expenses (2,989) (3,101)Administrative expenses (17,540) (16,247)Other operating income 20 51 Operating profit 1,756 373 Exceptional items 1,865 - Profit on ordinary activities before interest 3,621 373and taxation Interest receivable 6 6Interest payable (225) (203) Profit on ordinary activities before taxation Pre exceptional 1,537 176 2 Exceptional 1,865 - 3,402 176 Tax on ordinary activities (495) (51) Profit on ordinary activities after taxation Pre exceptional 1,042 125 Exceptional 1,865 - 2,907 125 (267) Proposed dividend (211) Profit/(Loss) retained for the financial 2,640 (86)period Normalised EPS 3 4.9p 0.6pBasic earnings per share 13.6p 0.6pDiluted earnings per share 12.0p 0.5pDividend per share 1.2p 1.0p There is no difference in either period between the above results and theresults on an historical cost basis as the financial statements have beenprepared on the historical cost basis. All activities in the year ended 30 June 2005 arise from continuing activities. There are no other recognised gains and losses other than those shown in the above profit and loss account. Consolidated Balance Sheet Year ended Year ended 30 June 30 June 2005 2004 £000 £000 Fixed assets Intangible assetsGoodwill 2,041 2,157Negative goodwill (523) (553) Total net goodwill 1,518 1,604Tangible assets 9,422 8,095 10,940 9,699 Current assetsStock 1,588 1,551Debtors 8,591 9,622Cash at bank and in hand 4,202 5 14,381 11,178 Creditors: amounts falling due within one year (13,076) (12,453) Net current assets / (liabilities) 1,305 (1,275) Total assets less current liabilities 12,245 8,424 Creditors: amounts falling due after more than one year (2,550) (1,600) Provision for liabilities and chargesPension scheme (498) (498) Total net assets 9,197 6,326 Capital and reservesCalled up share capital 223 211Share Premium Account 6,658 6,440Capital Redemption Reserve 578 578Profit and Loss Account 1,738 (903) Equity shareholders' funds 9,197 6,326 D G BrooksGroup Chief Executive J A LomerFinance Director Consolidated Cash Flow Statement Year ended 30th June 2005 2005 2005 2004 2004 £000 £000 £000 £000 Net cash inflow from operating activities 4,786 32 Returns on investments and servicing of financeInterest received 6 6Interest paid on bank loans, overdrafts and loan (225) (203)stock Net cash (outflow)/inflow from returns oninvestments and servicing of finance (219) (197) Taxation (paid) / recovered 138 (254) Capital expenditurePurchase of tangible fixed assets (2,671) (1,226)Proceeds on disposal of tangible fixed assets 2,350Proceeds on disposal of fixed asset investments Net cash (outflow) from capital expenditure (321) (1,226) Equity dividend paid (211) (210) Net cash inflow before use of liquid resources andFinancing 4,173 (1,855) FinancingDrawdown / (Repayment) of bank loans 450 (800)Issue of ordinary share capital 230 52 Net cash inflow / (outflow) from financing 680 (748) Increase in cash in the period 4,853 (2,603) Notes 1. The preliminary statement, which is unaudited, does not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985 (asamended). The comparative figures for the year ended 30th June 2004 are not thecompany's statutory accounts for that period but are derived from them. Thoseaccounts have been reported on by the company's auditors and delivered to theregistrar of companies. The report of the auditors was unqualified and did notcontain a statement under section 237(2) or (3) of the Companies Act 1985. Thereis no difference between the profits reported and the profits on an historicalcost basis. The preliminary report has been prepared on the basis of theaccounting policies consistent with those set out in the report and accounts ofthe company for the financial year ended 30th June 2004. 2. The exceptional items were £1,815,000 from the profit arising on the sale ofsurplus land at the Group's Cardiff site plus the release of a prior yearexceptional provision of £50,000, which is no longer required. 3. The earnings per share for the period are calculated on the profit after taxover the weighted average number of shares in issue, 21,435,207 (2004:21,051,766). Diluted earnings per share are based on profit after tax over24,204,177 (2004: 24,176,878). Normalised earnings per share are calculated asper basic earnings per share but after excluding the exceptional items. 4. Goodwill amortisation is assessed for each acquisition. In the cases ofMemory Lane Cakes Ltd and Nicholas & Harris Ltd it is amortised over 20 years. 5. At the balance sheet date the Group had a term loan of £2,850,000outstanding. 6. Copies of this preliminary announcement are available from the Companysecretaries, City Group Plc at the registered office at 30 City Road London ECY2AG. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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