Interim Results

Date:

25 March 2013

On behalf of:

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

Embargoed until: 0700hrs

For further information:

Finsbury Food Group plc

www.finsburyfoods.co.uk

John Duffy (Chief Executive)

029 20 357 500

Stephen Boyd (Finance Director)

Cenkos Securities plc

Bobbie Hilliam (Corporate Finance)

Alex Aylen (Sales)

Redleaf Polhill

[email protected]

Rebecca Sanders-Hewett

0207 382 4730

Jenny Bahr

Unaudited

26 weeks ended

 29 December 2012

Unaudited

26 weeks

ended

31 December 2011

Audited

52 weeks

ended

 30 June

2012

£'000

£'000

£'000

Notes

Revenue

103,327

102,014

207,360

Cost of sales

(76,449)

(75,959)

(152,461)

Gross profit

26,878

26,055

54,899 

Administrative expenses

(22,838)

(22,612)

(45,754)

Results from operating activities

4,040

3,443

9,145

Net financing expense

5

(1,088)

(1,220)

(2,630)

Profit before taxation

2,952

2,223

6,515

Taxation

(754)

(579)

(1,610)

Profit after tax before significant non-recurring and other items

2,198

1,644

4,905

Significant non-recurring and other items:

Administrative expenses

3

(260)

-

-

Share option charge

4

(68)

(306)

(573)

Defined benefit pension scheme -administration costs

-

-

65

Defined benefit pension scheme - financial income net of expenses

5

-

-

389

Movement in fair value swaps

5

292

(35)

84

Movement in fair value foreign exchange contracts

89

141

152

Fair value adjustments relating to acquisitions

5

(23)

(83)

(103)

Taxation relating to above items

(7)

74

(68)

Total significant non-recurring and other items

23

(209)

(54)

Profit after taxation

2,221

1,435

4,851

Other comprehensive income

Actuarial loss on defined benefit pension scheme net of deferred taxation

-

-

(1,791)

Foreign exchange translation differences

27

(152)

(187)

Other comprehensive income, net of income tax

27

(152)

(1,978)

Total comprehensive income

2,248

1,283

2,873

Profit attributable to:

Equity holders of the parent

2,028

1,129

4,277

Non-controlling interest

193

306

574

Profit for the financial period

2,221

1,435

4,851

Total comprehensive income attributable to:

Equity holders of the parent

2,055

977

2,299

Non-controlling interest

193

306

574

Total comprehensive income for the financial period

2,248

1,283

2,873

Unaudited

Unaudited

Audited

29 December

31 December

30 June

2012

2011

2012

Notes

£000

£000

£000

Non-current assets

Goodwill

61,728

61,892

61,728

Property, plant & equipment

24,987

25,561

25,540

Other financial assets

28

28

28

Deferred tax assets

1,198

852

1,269

87,941

88,333

88,565

Current assets

Inventories

6,694

6,453

5,380

Trade and other receivables

33,467

30,355

30,715

Cash and cash equivalents

7

1,930

63

3,793

Other financial assets - fair value of foreign exchange contracts

124

24

35

42,215

36,895

39,923

Total assets

130,156

125,228

128,488

Current liabilities

Other interest bearing loans and borrowings

7

(11,767)

(14,631)

(17,458)

Trade and other payables

(39,308)

(35,232)

(35,119)

Dividend

-

(499)

-

Provisions

(399)

(448)

(410)

Deferred purchase consideration

8

(388)

(2,677)

(1,036)

Other financial liabilities - interest rate swaps

(1,658)

(2,069)

(1,950)

Current tax liabilities

(569)

(314)

(738)

(54,089)

(55,870)

(56,711)

Non-current liabilities

Other interest-bearing loans and borrowings

7

(16,804)

(19,652)

(18,459)

Provisions and other liabilities

(227)

(228)

(218)

Deferred purchase consideration

8

(19)

(209)

(203)

Deferred tax liabilities

(1,397)

(1,534)

(1,382)

Pension fund liability

(3,075)

(1,172)

(3,075)

(21,522)

(22,795)

(23,337)

Total liabilities

(75,611)

(78,665)

(80,048)

Net assets

54,545

46,563

48,440

Equity attributable to equity holders of the parent

Share capital

9

639

534

535

Share premium account

30,737

27,033

27,052

Capital redemption reserve

578

578

578

Retained earnings

21,512

17,800

19,389

Total shareholders' equity

53,466

45,945

47,554

Non-controlling interest

1,079

618

886

Total equity

54,545

46,563

48,440

Note

Share

Capital

Share

premium

Capital redemption reserve

Retained

earnings

Non-controlling

interest

Total

equity

£000

£000

£000

£000

£000

£000

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

Foreign exchange translation differences

-

-

-

(152)

-

(152)

Total other comprehensive expense

-

-

-

(152)

-

(152)

Total comprehensive income for the period

-

-

-

977

306

1,283

Transactions with owners, recorded directly in equity:

Shares issued during the period

9

6

115

-

-

-

121

Impact of share based payments

4

-

-

-

306

-

306

Dividend paid

-

-

-

-

(499)

(499)

Balance at 31 December 2011

534

27,033

578

17,800

618

46,563

Balance at 1 January 2012

534

27,033

578

17,800

618

46,563

Profit for the 26 weeks ended 30 June 2012

-

-

-

3,148

268

3,416

Other comprehensive income/(expense):

Actuarial loss on defined benefit pension plan

-

-

-

(2,357)

-

(2,357)

Deferred tax movement on pension scheme actuarial loss

-

-

-

566

-

566

Foreign exchange translation differences

-

-

-

(35)

-

(35)

Total other comprehensive expense

-

-

-

(1,826)

-

(1,826)

Total comprehensive income for the period

-

-

-

1,322

268

1,590

Transactions with owners, recorded directly in equity:

Shares issued during the period

1

19

-

-

-

20

Impact of share based payments

-

-

-

267

-

267

Dividend paid

-

-

-

-

-

-

Balance at 30 June 2012

535

27,052

578

19,389

886

48,440

Balance at 1 July 2012

535

27,052

578

19,389

886

48,440

Profit for the 26 weeks ended 29 December 2012

-

-

-

2,028

193

2,221

Foreign exchange translation differences

-

-

-

27

-

27

Total other comprehensive expense

-

-

-

27

-

27

Total comprehensive income for the period

-

-

-

2,055

193

2,248

Transactions with owners, recorded directly in equity:

Shares issued during the period

9

104

3,685

-

-

-

3,789

Impact of share based payments

4

-

-

-

68

-

68

Balance at 29 December 2012

639

30,737

578

21,512

1,079

54,545

Unaudited

26 weeks

ended

Unaudited

26 weeks

ended

Audited

52 weeks

ended

29 December

2012

31 December

2011

30 June

2012

Note

£000

£000

£'000

Cash flows from operating activities

Profit for the period

2,221

1,435

4,851

Adjustments for:

Taxation

761

505

1,678

Finance expenses

5

819

1,338

2,260

Depreciation

1,602

1,487

3,047

Amortisation of intangibles

-

-

164

Movement in fair value foreign exchange contracts

(89)

(141)

(152)

Share options charge

4

68

306

573

Contributions by employer to pension scheme

-

-

(65)

Operating profit before changes in working capital

5,382

4,930

12,356

Changes in working capital

(Increase)/decrease in inventories

(1,298)

(692)

403

Increase in trade and other receivables

(2,518)

(845)

(1,251)

Increase in trade and other payables

3,937

328

105

Cash generated from operations

5,503

3,721

11,613

Interest paid

(941)

(1,190)

(2,391)

Corporation taxes paid

(845)

(1,469)

(2,201)

Net cash generated from operating activities

3,717

1,062

7,021

Cash flows from investing activities

Purchase of property, plant & equipment

(1,050)

(1,699)

(3,238)

Purchase of subsidiary companies

(855)

(1,520)

(3,185)

Net cash used in investing activities

(1,905)

(3,219)

(6,423)

Cash flows from financing activities

(Repayment)/drawdown of invoice discounting

(6,061)

(1,442)

1,192

Repayment of current bank loans

(751)

(702)

(1,624)

Repayment of loan notes

(3)

-

-

Repayment of asset finance facilities

(664)

(240)

(407)

Issue of ordinary share capital

3,789

121

141

Non-controlling interest dividend paid

-

-

(499)

Net cash used by financing activities

(3,690)

(2,263)

(1,197)

Net decrease in cash and cash equivalents

(1,878)

(4,420)

(599)

Opening cash and cash equivalents

3,793

4,545

4,545

Effect of exchange rate fluctuation

15

(62)

(153)

Cash and cash equivalents at end of the period

1,930

63

3,793

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 30 June 2012 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 significant non-recurring 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 30 June 2012 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 £0.8m (2011: £0.9m) 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.

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.

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.

Five customers with sales of £46m, £41m, £26m, £23m and £19m account for 75% of revenue, which is attributable to the 'Cake' and 'Bread & Free From' segments above.

NOTES TO THE FINANCIAL STATEMENTS continued

3) SIGNIFICANT NON RECURRING ITEMSSignificant non-recurring administration expenses relate to merger and acquisition transaction costs.

4) SHARE BASED PAYMENTS

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

During the 26 weeks to 29 December 2012, 250,000 options were granted (2011: 7,001,349). The fair value of options granted during the period was £14,000. The comparative estimated fair values of options granted for the 26 weeks to 31 December 2011 and for the year ended 30 June 2012 were £589,000 and £588,000 respectively.

Significant non-recurring and other items include a charge of £68,000 in relation to the fair value of share options for the 26 weeks ended 29 December 2012. The comparative charges for the 26 weeks to 31 December 2011 and for the year ended 30 June 2012 were £306,000 and £573,000 respectively.

.

5) FINANCE INCOME AND EXPENSES

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

£5.0m for five years from 1 May 2008 (fixed) at 5.5% maturing 30 April 2013

£10.0m for four years from 1 June 2010 (fixed) at 4.9% maturing 31 May 2014

£5.0m for five years from 1 July 2011 (fixed) at 3.6% maturing 30 June 2016

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

£3.0m for four years from 22 May 2013 at 1.7% maturing 24 May 2017

£4.0m for three years from 2 June 2014 at 1.9% maturing 1 June 2017

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 credit of £292,000 (2011: charge £35,000).

NOTES TO THE FINANCIAL STATEMENTS continued

6) 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 55,747,000 (31 December 2011: 53,341,000 and 30 June 2012: 53,374,000).

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 significant non-recurring items, 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.