Interim Results

Date:

26 March 2012

On behalf of:

Finsbury Food Group plc ('Finsbury' or the 'Group')

Embargoed for 0700hrs

For further information:

Finsbury Food Group plc

www.finsburyfoods.co.uk

John Duffy (Chief Executive)

029 20 357 500

Stephen Boyd (Finance Director)

Panmure Gordon

020 7459 3600

Katherine Roe

Callum Stewart

Redleaf Polhill

[email protected]

Rebecca Sanders-Hewett

020 7566 6720

Jenny Bahr

26 weeks ended

 31 December 2011

26 weeks ended

1 January 2011

52 weeks

ended

 2 July

2011

Unaudited

Unaudited

Audited

£'000

£'000

£'000

Notes

Revenue

102,014

87,822

189,575

Cost of sales

(75,959)

(63,917)

(138,478)

Gross profit

26,055

23,905

51,097 

Administrative expenses

(22,612)

(20,745)

(42,581)

Results from operating activities

3,443

3,160

8,516

Net financing expense

4

(1,220)

(1,298)

(2,677)

Profit before taxation

2,223

1,862

5,839

Taxation

(579)

(521)

(1,465)

Profit after tax before significant non-recurring and other items

1,644

1,341

4,374

Significant non-recurring and other items:

Administrative expenses

-

(32)

-

Financial expense

4

-

-

(42)

Share option charge

3

(306)

(69)

(73)

Defined benefit pension scheme -administration costs

-

-

11

Defined benefit pension scheme - financial income net of expenses

4

-

-

222

Movement in fair value swaps

4

(35)

570

564

Movement in fair value foreign exchange contracts

141

(111)

(316)

Fair value adjustments relating to acquisitions

4

(83)

(146)

(252)

Taxation relating to above items

74

(80)

48

Total significant non-recurring and other items

(209)

132

162

Profit after taxation

1,435

1,473

4,536

Other comprehensive income

Actuarial loss on defined benefit pension scheme net of deferred taxation

-

-

1,646

Foreign exchange translation differences

(152)

-

207

Other comprehensive income, net of income tax

(152)

-

1,853

Total comprehensive income

1,283

1,473

6,389

Profit attributable to:

Equity holders of the parent

1,129

1,190

4,001

Non-controlling interest

306

283

535

Profit for the financial period

1,435

1,473

4,536

Total comprehensive income attributable to:

Equity holders of the parent

977

1,190

5,854

Non-controlling interest

306

283

535

Profit for the financial period

1,283

1,473

6,389

Unaudited

Unaudited

Audited

31 December

1 January

2 July

2011

2011

2011

Notes

£000

£000

£000

Non-current assets

Goodwill

61,892

62,057

61,892

Property, plant & equipment

25,561

25,743

25,349

Other financial assets

28

25

28

Deferred tax assets

852

1,593

874

88,333

89,418

88,143

Current assets

Inventories

6,453

5,334

5,844

Trade and other receivables

30,355

26,786

29,929

Cash and cash equivalents

6

63

1,265

4,545

Other financial assets - fair value of foreign exchange contracts

24

88

-

36,895

33,473

40,318

Total assets

125,228

122,891

128,461

Current liabilities

Other interest bearing loans and borrowings

6

(14,631)

(16,992)

(15,627)

Trade and other payables

(35,232)

(31,353)

(35,163)

Dividend

(499)

-

-

Provisions

(448)

(436)

(532)

Deferred purchase consideration

7

(2,677)

(1,693)

(4,117)

Other financial liabilities - interest rate swaps

(2,069)

(2,027)

(2,151)

Current tax liabilities

(314)

(910)

(1,287)

(55,870)

(53,411)

(58,877)

Non-current liabilities

Other interest-bearing loans and borrowings

6

(19,652)

(20,364)

(21,064)

Provisions and other liabilities

(228)

(491)

(242)

Deferred purchase consideration

7

(209)

(2,742)

(204)

Deferred tax liabilities

(1,534)

(1,606)

(1,550)

Pension fund liability

(1,172)

(3,629)

(1,172)

(22,795)

(28,832)

(24,232)

Total liabilities

(78,665)

(82,243)

(83,109)

Net assets

46,563

40,648

45,352

Equity attributable to equity holders of the parent

Share capital

8

534

528

528

Share premium account

27,033

26,918

26,918

Capital redemption reserve

578

578

578

Retained earnings

17,800

11,849

16,517

Total shareholders' equity

45,945

39,873

44,541

Minority interest

618

775

811

Total equity

46,563

40,648

45,352

Note

Share

Capital

Share

premium

Capital redemption reserve

Retained

earnings

Non-controlling

interest

Total

equity

£000

£000

£000

£000

£000

£000

Balance at 4 July 2010

527

26,918

578

10,590

492

39,105

Profit for the 26 weeks ended 1 Jan 2011

-

-

-

1,190

283

1,473

Total comprehensive income for the period

-

-

-

1,190

283

1,473

Transactions with owners, recorded directly in equity:

Shares issued during the period

1

-

-

-

-

1

Impact of share based payments

-

-

-

69

-

69

Balance at 1 January 2011

528

26,918

578

11,849

775

40,648

Balance at 2 January 2011

528

26,918

578

11,849

775

40,648

Profit for the 26 weeks ended 2 July 2011

-

-

-

2,811

252

3,063

Other comprehensive income/(expense):

Actuarial gain on defined benefit pension plan

-

-

-

2,224

-

2,224

Deferred tax movement on pension scheme actuarial gain

-

-

-

(578)

-

(578)

Foreign exchange translation differences

-

-

-

207

-

207

Other comprehensive expense

-

-

-

1,853

-

1,853

Total comprehensive income for the period

-

-

-

4,664

252

4,916

Transactions with owners, recorded directly in equity:

Shares issued during the period

-

-

-

-

-

-

Impact of share based payments

-

-

-

4

-

4

Dividend paid

-

-

-

-

(216)

(216)

Balance at 2 July 2011

528

26,918

578

16,517

811

45,352

Balance at 3 July 2011

528

26,918

578

16,517

811

45,352

Profit for the 26 weeks ended 31 December 2011

-

-

-

1,129

306

1,435

Total comprehensive income for the period

-

-

-

1,129

306

1,435

Transactions with owners, recorded directly in equity:

Shares issued during the period

8

6

115

-

-

-

121

Impact of share based payments

3

-

-

-

306

-

306

Foreign exchange translation differences

-

-

-

(152)

-

(152)

Dividend declared

9

-

-

-

-

(499)

(499)

Balance at 31 December 2011

534

27,033

578

17,800

618

46,563

Unaudited

26 weeks

ended

Unaudited 26 weeks ended

Audited

52 weeks

ended

31 December

2011

1 January

2011

2 July

2011

Note

£000

£000

£'000

Cash flows from operating activities

Profit for the period

1,435

1,473

4,536

Adjustments for:

Taxation

505

601

1,417

Finance expenses

4

1,338

874

2,185

Depreciation

1,487

1,447

2,848

Amortisation of intangibles

-

-

165

Loss on disposal of plant and equipment

-

-

8

Movement in fair value foreign exchange contracts

(141)

111

316

Share options charge

3

306

69

73

Current service cost element of pension scheme

-

104

-

Contributions by employer to pension scheme

-

(104)

(11)

Operating profit before changes in working capital

4,930

4,575

11,537

Changes in working capital

Increase in inventories

(692)

(803)

(1,232)

Increase in trade and other receivables

(845)

(2,799)

(5,648)

Increase in trade and other payables

328

3,740

7,030

Cash generated from operations

3,721

4,713

11,687

Interest paid

(1,190)

(1,338)

(2,505)

Corporation taxes paid

(1,469)

(671)

(1,043)

Net cash generated from operating activities

1,062

2,704

8,139

Cash flows from investing activities

Purchase of property, plant & equipment

(1,699)

(1,209)

(2,224)

Purchase of subsidiary companies

(1,520)

(1,740)

(1,960)

Increase in investment

-

-

(3)

Net cash used in investing activities

(3,219)

(2,949)

(4,187)

Cash flows from financing activities

Drawdown/(repayment) of invoice discounting

(1,442)

1,050

1,490

Repayment of current bank loans

(702)

(1,874)

(3,065)

Repayment of loan notes

-

-

(33)

(Repayment)/drawdown of asset finance facilities

(240)

(470)

(459)

Issue of ordinary share capital

121

1

1

Minority interest dividend paid

-

-

(216)

Net cash used by financing activities

(2,263)

(1,293)

(2,282)

Net (decrease)/increase in cash and cash equivalents

(4,420)

(1,538)

1,670

Opening cash and cash equivalents

4,545

2,803

2,803

Effect of exchange rate fluctuation

(62)

-

72

Cash and cash equivalents at end of the period

63

1,265

4,545

1) BASIS OF PREPARATION

The interim report, which is unaudited, does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006. The comparative figures for the financial year ended 2 July 2011 have been extracted from the statutory accounts for that year. Those accounts, which were prepared in accordance with International Financial Reporting Standards as adopted by the EU ("adopted IFRSs"), have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

It should be noted that current liabilities continue to exceed current assets. Having reviewed the Group's plans the Board has reasonable expectations that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group has strong asset backing and strong debtor book. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.

2) SEGMENT INFORMATION

IFRS 8 'Operating Segments' requires that operating segments be identified on the basis of internal reporting and decision making. The Group's Chief Operating Decision Maker is considered to be the Board of Directors as they are primarily responsible for the allocation of resources to segments and the assessment of performance by segment.

The Board uses operating profit, reviewed on a regular basis, as the key measure of the segments' performance. Operating profit in this instance is defined as profit before the following:

Ø net financing expense

Ø share option charges

Ø non-recurring significant items

Ø fair value adjustments relating to acquisitions

Ø pension charges or credits in relation to the difference between the expected return on pension assets and interest cost on pension liabilities and

Ø revaluation of interest rate swaps and forward foreign currency contracts.

The Group's operating segments remain unchanged from the financial year ended 2 July 2011 and consist of 'Cake', 'Bread & Free From' and 'Group Operations'.

Group Operation costs plus a 10% premium have been allocated across the segments on the basis of their operating profit. The premium has been charged to reflect the synergies achieved from obtaining resources centrally giving benefits across the operating segments. Operating profit levels have been chosen as the basis, as this reflects the underlying performance of the segment and is also the return the Group expects from those segments.

A purchasing premium of 2% is charged from Group Operations and is calculated on materials and packaging spend at segmental level. This charge is based on the rationale that Group Operations, through its Group buyers, optimises the Group's procurement spend through leveraging its purchasing power.

This has resulted in a profit of £0.9m (2011: £0.8m) being presented within Group Operations segment.

The Group's finance income and expenses cannot be meaningfully allocated to the individual operating segments.

NOTES TO THE FINANCIAL STATEMENTS continued

2) SEGMENT INFORMATION continued

Analysis of unallocated assets and liabilities:

There are no inter-segmental sales. Certain operating costs have been incurred centrally, these costs have been allocated to the reporting segments on an appropriate basis.

Group Operations profit comprises the central costs premium and a purchasing premium charged to the manufacturing operations.

NOTES TO THE FINANCIAL STATEMENTS continued

2) SEGMENT INFORMATION continued

Analysis of unallocated assets and liabilities:

There are no inter-segmental sales. Certain operating costs have been incurred centrally, these costs have been allocated to the reporting segments on an appropriate basis.

Group Operations profit comprises the central costs premium and a purchasing premium charged to the manufacturing operations.

NOTES TO THE FINANCIAL STATEMENTS continued

2) SEGMENT INFORMATION continued

Analysis of unallocated assets and liabilities:

There are no inter-segmental sales. Certain operating costs have been incurred centrally, these costs have been allocated to the reporting segments on an appropriate basis.

Four customers with sales of £43m, £41m, £25m, £20m and £20m account for 79% of revenue, which is attributable to the 'Cake' and 'Bread & Free From' segments above.

Group Operations profit comprises the central costs premium and a purchasing premium charged to the manufacturing operations.

NOTES TO THE FINANCIAL STATEMENTS continued

3) SHARE BASED PAYMENTS

The Company operates both approved and unapproved share option schemes. Following the adoption of IFRS2 'Share-based payments' charges have been made to the Income Statement to reflect the calculated fair value of employee share options. The cost is calculated at the date of grant and is charged equally over the vesting period. The corresponding adjustment is made to reserves.

During the 26 weeks to 31 December 2011 7,001,349 options were granted. The fair value of options granted during the period was £589,000. The comparative estimated fair values of options granted for the 26 weeks to 1 January 2011 and for the year ended 2 July 2011 were £316,000 and £193,000.

Significant non-recurring and other items include a charge of £306,000 in relation to the fair value of share options for the 26 weeks ended 1 January 2011. The comparative charges for the 26 weeks to 1 January 2011 and for the year ended 2 July 2011 were £69,000 and £73,000 respectively.

.

4) FINANCE INCOME AND EXPENSES

The Group has entered into four interest rate swap arrangements to hedge its risks associated with interest rate fluctuations:

£11.0m (reducing to £3.5m) over five years from 23 February 2007 at 5.8%

£5.0m for five years from 1 May 2008 (fixed) at 5.5%

£10.0m for four years from 1 June 2010 (fixed) at 4.9%

£5.0m for five years from 1 July 2011 (fixed) at 3.6%

On 21 February 2012 the Group entered into two forward dated swaps:

£3.0m for four years from 25 May 2013 at 1.65%

£6.0m for three years from 2 June 2014 at 1.89%

These arrangements do not meet the conditions necessary for hedge accounting to be applied and, therefore, changes in their fair value are recognised immediately in the income statement resulting in a charge of £35,000 (2011: credit £570,000).

NOTES TO THE FINANCIAL STATEMENTS continued

5) EARNINGS PER ORDINARY SHARE

Basic earnings per share for the period is calculated on the basis of profit for the period after tax, divided by the weighted average number of shares in issue 53,341,056 (1 January 2011: 52,704,400 and 2 July 2011: 52,746,000).

An adjusted earnings per share has also been calculated as, in the opinion of the Board, this will allow shareholders to gain a clearer understanding of the trading performance of the Group. These adjusted earnings per share exclude reorganisation and other exceptional costs, IAS 39 "Financial Instruments: Recognition and Measurement" fair value adjustment relating to the Group's interest rate swaps and IFRS 3 "Business Combinations" discount charge relating to the deferred consideration payable for Livwell Ltd, Anthony Alan Foods Ltd and Yorkshire Farm Bakery and A&P Foods. The effect of taxation at the appropriate rate is shown as a separate adjustment.