London / UK. (ffg) British Finsbury Food Group PLC, a leading manufacturer of cake, bread and gluten free bakery goods, announced its interim results for the six months ended 31 December 2012.
Highlights
- Group revenue up one percent to 103,3 million GBP (H1/2011: 102,0 million GBP)
- Profit before tax up 32,8 percent to 3,0 million GBP (H1/2011: 2,2 million GBP)
- Sales in the UK Cake division up two percent to 67,8 million GBP (H1/2011: 66,6 million GBP)
- Sales in the Bread division up seven percent to 27,4 million GBP (H1/2011: 25,6 million GBP)
- Net debt down 27 percent to 27,4 million GBP (H1/2011: 37,7 million GBP)
Operational Highlights
- New celebration cake venture in Australia
- Position as second largest manufacturer of ambient cake in the UK maintained
- Licensed cakes continue to perform well – strong performance from Spiderman and Moshi Monsters, plus addition of Me to You range
- Continued growth in Bread brands
- Placing to raise 3’779’300 GBP after expenses for capital investment projects in UK Cake business
Post period highlights
- Sale of Free From business for 21 million GBP
- Approved interim dividend of 0,25 GBPence per share
Chief Executive´s Commentary
«The Group has proved its resilience and continued to drive growth, productivity and efficiencies in what remains a difficult trading environment. The outlook for Finsbury is now stronger than ever. The sale of the Free From business has transformed the Group´s balance sheet, giving us the opportunity to catalyse our stated strategy and accelerate further growth through investment and market consolidation whilst reinstating the dividend. We will continue to build upon the foundations we have created and look forward to the next stages of the Company´s development with the ultimate goal of driving value for our shareholders».
Business Review
Total Group revenues at 103,3 million GBP represented organic growth of just over 1,3 million GBP and an increase of one percent on the comparable period last year.
The UK Cake and Bread + Free From businesses saw growth of two percent and seven percent respectively whilst Lightbody Europe (LBE), the Group´s 50 percent owned subsidiary export business, decreased by 17 percent due primarily to adverse exchange rate movements.
Sales in the Bread + Free From division of 27,4 million GBP continued to deliver strong growth, an increase of seven percent. This was again driven by growth in the speciality bread market and the fresh gluten free market from Vogel´s brand and the Genius / Retailer Brands respectively.
Sales of 75,9 million GBP in the larger Cake division (UK and LBE) were slightly down versus the corresponding period last year, driven by a decline in LBE.
Consumers remain under financial pressure and continue to be value conscious and deal focused. Key ingredients such as sugar, egg and flour are also inflationary as are more general costs such as energy. The Group´s focus on internal efficiency improvements as well as sales growth and recovery of commodity inflation via pricing has been successful in slightly improving first half year operating margins although they remain low.
Development Highlights
The Group has demonstrated resilient growth and efficiency improvements in the first half year and despite a challenging marketplace, we maintained our position as the second largest manufacturer of ambient cake in the UK. The Group´s seasonal ambient cakes showed growth helped by the success of the Thornton´s Christmas range in its first year. Overseas, the Group is now selling licensed cakes in Australia, which is adding to the total uplift.
We continued to add to our licenced portfolio to ensure an up to date and relevant consumer offer. Alongside the strongly performing Spiderman and Moshi Monsters celebration cakes we have added One Direction and will shortly be welcoming the much loved Me to You range to our portfolio.
Within our Bread + Free From sector, Vogel´s bread volume has grown by 5,2 percent, Cranks organic bread by 7,2 percent and Village Bakery rye bread by 13,2 percent. The Vogel´s´ Lovetoast community´ Facebook page now has over 22’000 followers. We have agreed to extend our License for Village Bakery Rye Bread for a further ten years. Livwell and United Central Bakery own label brands have shown growth of twelve percent year on year.
All sites continue to make good technical progress and maintain their BRC A grade status against an improved and tougher standard.
On 20 November 2012 the Company raised 3’779’300 GBP, after expenses through the placing and subscription of 10’364’277 new ordinary shares of one GBPence each at a price of 38 GBPence per share. The net proceeds of the placing will be invested in new additional capital investment projects within the Company´s UK Cake business.
Trading Results
Group revenue for the 26 weeks to 29 December 2012 was up 1,3 percent to 103,3 million GBP (26 weeks to 31 December 2011: 102,0 million GBP), an increase of 1,3 million GBP on the corresponding period last year.
Profit before tax and significant non-recurring and other items was up 32,8 percent to 3,0 million GBP (2011: 2,2 million GBP). This was achieved after net finance expense of 1,1 million GBP (2011: 1,2 million GBP).
The tax charge for the period is based on the estimated effective tax rates on profits for the full year of 24 percent for UK, 33 percent for overseas. Adjusted earnings per share were 3,6 GBPence (2011: 2,5 GBPence). The adjusted diluted earnings per share was 3,3 GBPence (2011: 2,4 GBPence).The earnings per share does not take account of the full dilution of the share placing and subscription of 10’364’277 shares on 20 November 2012.
Debt and Bank Facilities
The Group´s total net debt including deferred consideration as at 29 December 2012 was 27,4 million GBP (31 December 2011: 37,7 million GBP) including net borrowings from HSBC Bank PLC, secured loan notes and deferred consideration. The total included cash of 1,93 million GBP (2011: 63’000 GBP). The key features of the current facility, totalling 47,1 million GBP, are as follows:
- overdraft (2,75 million GBP)
- confidential invoice discounting facility (17,5 million GBP flexible)
- term loans repayable over six years (14,2 million GBP)
- mortgage (8,2 million GBP)
- rolling asset finance facility (4,4 million GBP)
The term loan is linked to LIBOR whilst all other debt is linked to base rate. The effective rate of interest on the debt at 29 December 2012, taking account of interest rate swaps in place and with the base rate at 0,5 percent, was 6,0 percent (2011: 5,6 percent).
Sale of Free From
On 27 February 2013 the Group sold its Free From business for a total value of approximately 21 million GBP to focus on its core Cake and Bread businesses.
The Free From business consists of two subsidiaries, Livwell Limited and United Bakeries (Holdings) Limited (UBH) (the holding company of United Central Bakeries Limited (UCB)). These subsidiaries, which account for 14 percent of Group revenues, have been sold to Genius Foods Limited, on a debt-free, cash-free basis.
The sale will transform Finsbury´s balance sheet with a cash balance of approximately 17,7 million GBP paid to the Group on completion and a further three million GBP payable by the second anniversary of completion. This will allow Finsbury to focus on growing its cake and bread businesses, to further develop its licensed brand portfolio and to take advantage of the right bolt on acquisitions to drive longer term value as opportunities and circumstance allow. In addition to the investment in its current businesses, the Group will also continue to pay down its outstanding debts.
Dividend
On 19 March 2013, the Board approved an interim dividend for the six months to 31st December 2012 of 0,25 GBPence per share to be paid on 26th April 2013 to shareholders on the register at the close of business on 05th April 2013. It is the Company´s intention, to resume paying dividends at an affordable rate so that the Company can continue to invest in the business in order to grow profits.
Outlook
The Group will continue on its stated strategy of generating returns for shareholders by building a crafted bakery group focused on premium, celebration and well-being that delivers for its customers and the end consumer.
In line with previous years trends we expect our profitability to be higher in the second half, partly as a result of higher Easter seasonal sales. The Group remains confident of continuing to achieve growth and efficiency opportunities across its businesses and is trading comfortably in line with profit expectations. The Free From sale will allow the Group to step up capital investment, pay down debt and take advantage of additional opportunities including acquisitions that increase shareholder value.
Since the half year Group trading continues to be in line with our expectations. Like for like Group sales, excluding the Free From business were marginally ahead 0.3 percent of the same period last year. Sales in our UK Cake division were flat on the same period last year whilst the Lightbody Europe (LBE) export business declined 17 percent given continued adverse exchange rate pressures. January is typically a weaker sales month following the Christmas period.
Our outlook on the trading environment has stood us in good stead during the first half and remains unchanged for the second half. Finsbury will continue to focus on internal efficiency improvements as well as sales growth and recovery of commodity inflation via pricing.
The Group has navigated its way through a difficult period of constrained investment and paying down its debt, having undoubtedly proved its resilience. The sale of the Free From business has brought Finsbury to an inflection point where we are able to accelerate the strands of what has always been our core strategy. Even from an organic growth standpoint, the improved balance sheet gives the Group significant opportunities to increase investment, drive productivity and create further efficiencies. Importantly in addition, Finsbury is now able to play a part in industry consolidation and with this, alongside our organic growth strategy we look forward to truly building value for our shareholders.
