London / UK. (ffg) British Finsbury Food Group PLC, a leading UK speciality bakery manufacturer of cake, bread and morning goods for both the retail and foodservice channels, provides an update in light of Covid-19.
Trading
Following the strong results announced in February, trading in the first two months of the second half of our financial year was tracking in line with market expectations.
Since then, as the effects of Covid-19 on the UK and Europe have become more pronounced, and with the UK government taking the decision to close food outlets, schools and other public places where food is provided, our UK foodservice business, which accounted for approximately 20 percent of total Group revenue in FY19, has seen a significant reduction in demand.
While the performance of the largest part of the Group, retail, is proving resilient with overtrade in bread and pockets of weakness in cake, trading in our foodservice business is likely to continue to be significantly impacted in the immediate term as a consequence of the closures. We are in the very early stages of understanding the impact of the virus on our business and, with the situation being as fluid as it is, it is not currently possible to provide guidance on future earnings.
Response to Covid-19
As a manufacturer of a wide range of baked goods, we are committed to playing our part in ensuring the UK’s supermarkets have the food stocks needed at this time of unprecedented demand. The health and safety of our employees is our top priority, and we continue to adhere to the UK government’s rules and guidelines, with extensive procedures in place across our sites.
Considering the actual and anticipated change in demand across the business, the Board is taking actions to manage short-term costs, while ensuring the business remains on a sound footing to deliver on its longer-term growth ambitions. These include:
- Temporarily suspending production at our Kara site in Manchester whilst continuing to service customer sales from stock (Kara is solely focused on the foodservice channel) and reviewing shift patterns and production elsewhere as sales dictate;
- The freezing of all discretionary expenditure and capital investment; and
- Careful management of cash resources.
The Board has also taken the decision to withdraw its proposed interim dividend, as announced on 24 February 2020. While we remain committed to the payment of dividends, we believe it is prudent to conserve the Group’s cash at this time of heightened instability. The Board will assess the Group’s cash position and the outlook for the business at time of the full year results, and will adjust its approach to the final dividend accordingly.
Financial update
At the end of December 2019, the Group had net debt of GBP 32.5 million. The Group has extensive headroom in its facilities, with a GBP 55.0 million revolving credit facility and an accordion of GBP 35.0 million.
We have strong relationships with our three banks and have been in regular dialogue with them since the onset of Covid-19. They remain highly supportive and the Board is comfortable that it will be able to manage the situation from its current financial position.
Outlook
Until we have more visibility over the Covid-19 situation, we will continue to manage the business with a view to securing maximum stability in the short term for shareholders, employees, customers and suppliers and will provide the market with updated guidance on performance as and when appropriate.
While the virus will continue to have an impact on normal trading patterns in the near term, the fundamentals of the business remain sound, and the Board is confident in the Group’s ability to withstand the current situation and deliver on its long-term growth ambitions.
Chief Executive’s Commentary
John Duffy, CEO of Finsbury Food Group, said: «Despite the Group’s short-term performance being difficult to predict with any certainty until we have a clearer picture of how Covid-19 will develop, we are encouraged by the healthy demand we continue to see in the larger retail side of our business.
«While the coming weeks and months are likely to be some of the more turbulent we’ve seen, the fundamentals of the business remain sound and we see no reason to believe the virus will damage the longer-term value proposition of the business.
«Our employees across the Group have thus far risen superbly to the challenge, and I would like to take this opportunity to thank them all for their continued hard work and dedication at what is an extremely difficult time, and to reassure them that their well-being continues to be our priority.»
