Finsbury: Closure of Grain D’Or and Trading Update

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 ‘out of home eating’ foodservice channels, announces that a decision has been made to close the Grain D’Or factory.

The closure, which is anticipated to be completed by 02 December 2017, means that the Company will benefit from not supporting the losses associated with the factory. This fits with the Company’s strategy of focusing investment behind profitable product niches to drive long term market growth and value within specialty bakery.

Grain D’Or has been historically loss making and for the 12 months ended 30 June 2017 it reported an operating loss of 3.33 million GBP on revenues of 28.5 million GBP. Due to the products it produces, Grain D’Or trades in a particularly competitive environment which creates strong competition for contracts and loss-leading pricing. With this in mind, and together with the cost issues being experienced across the industry, Grain D’Or has lost two large contracts since the year end, impacting its financial performance further. The Company believes the exceptional cash costs associated with the closure of Grain D’Or could reach up to 10 million GBP, spread over a period of up to seven years, but expects it more likely to be in the region of 6 million GBP. The Company will benefit from the cancellation of planned capital investment programmes in Grain D’Or, which were significant.

The Board’s expectations in relation to its financial performance for the year ended 30 June 2018 remain consistent with the guidance previously delivered to the market, albeit that the adjusted profit performance(*) will be achieved from a lower revenue base. This can be attributed to the temporary increase in butter prices which the Board believes is likely to recede in subsequent financial years. Finsbury’s recent statements for the full year to June 2017 demonstrated its resilience in a challenging market. This robust result was achieved thanks to the significant investment it has delivered over the past four years. Following the closure, the Company’s lower cost base and greater focus on profitable markets means that it is well positioned for future growth, despite current market conditions, and to benefit from any future upturn in the market. The Company will continue to invest in support of its strategy to drive efficiency and profitable scale and is confident that it is well-placed to maintain its leading position in the market.

(*)adjusted profit relates to profits reported after the exceptional costs of closing the Grain D’Or factory.

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