London / UK. (ffg) British Finsbury Food Group PLC, a leading manufacturer of cake, bread and gluten free bakery goods, announces its interim results for the six months ended 31 December 2011.
Financial Highlights
- Group revenue up 14 million GBP (16 percent) to 102 million GBP (H1/2011: 87,8 million GBP)
- Profit before tax up 0,3 million GBP to 2,2 million GBP (H1/2011: 1,9 million GBP)
- Sales in the Cake division up 19 percent to 76,4 million GBP (H1/2011: 64,2 million GBP)
- Sales in the Bread + Free From division up eight percent to 25,6 million GBP (H1/2011: 23,6 million GBP)
- Net debt down five percent to 34,8 million GBP (H1/2011: 36,8 million GBP)
Operational Highlights
- Navigated through significant raw material and cost inflation with minimal margin drop from 3,6 percent (H1/2011) to 3,4 percent
- Key licenses signed for Cake business
- Significant developments in Free From including new Genius products
- Continued development delivering growth in brands, such as Vogel´s
Commenting on the results, Chief Executive John Duffy said: «We are pleased to be reporting further growth across each of the Finsbury businesses. This is particularly noteworthy considering the pressure we are seeing from high commodity and input price inflation. With this in mind, we are focused on driving both efficiency and productivity to mitigate against the negative margin impact of these pressures, and believe that the measures we are taking will continue to bear fruit. Our priority is to further invest in the business to ensure that the growth momentum continues and look forward to both driving further shareholder value and reaching our next sales milestone».
Business Review
Total Group revenues at 102 million GBP passed the milestone of 100 million GBP in six months for the first time. This represents organic growth of just over 14 million GBP and an increase of 16 percent compared with the prior year, a strong performance in the markets we operate within.
The Group experienced growth across each of the Finsbury businesses. Both the UK «Cake» and «Bread + Free From» businesses saw strong growth of ten percent and eight percent respectively. The combination of these businesses accounted for just over half the total Group growth. Lightbody Europe (LBE), the Group´s 50 percent owned subsidiary export business, provided the balance with growth of 167 percent.
Sales in the Bread + Free From division of 25,6 million GBP represent an increase of eight percent on the comparable period last year. This was again driven by strong growth in the fresh gluten free market and the speciality bread market from the Genius / Retailer Brands and the Vogel´s brands respectively.
Sales in the larger Cake division (UK and LBE) were up 19 percent versus the corresponding period last year, with sales of 76,4 million GBP. The UK market and export sales have both shown growth although the former has continued to require increased promotional support to remain competitive and deliver growth in the current marketplace. The LBE growth was a combination of cake and third party brand distribution contract wins.
As communicated previously, the second half and consequently full year growth rates will not be as high as the first half as the Group has now reached the anniversary of last year´s new product launches, European contract gains and increased promotional activity levels.
The trading environment remains very tough, with the challenges of a financially squeezed shopper, and stubbornly high commodity and input price inflation. That said, Finsbury is continuing to invest in each of the businesses to further improve operating efficiencies and drive growth through innovation to mitigate against these headwinds. The high first half growth, delivered through both volume and price rises, has complemented the Group´s efficiency initiatives to largely offset year on year commodity inflation, although the operating margin percentage was slightly lower than prior year as a consequence.
Development Highlights
The Group has continued to consolidate its position as market leader in Free From bakery with new products ready to launch in the Genius range. Listings have been secured for own label fresh and long life free from products.
The development of brands continue with Vogel´s bread growing more than 10,3 percent and followers of its «Lovetotoastcommunity» Facebook page now exceeds 8’500.
In Cake we have consolidated our position as the leading licensed celebration cake maker with the signing of key licenses such as Fireman Sam, whilst extending our agreements with strong evergreen licenses such as Peppa Pig and Star Wars.
Trading Results
Group revenue for the 26 weeks to 31 December 2011 was 102,0 million GBP (26 weeks to 01 January 2011: 87,8 million GBP), an increase of 14,2 million GBP (16 percent) on the corresponding period last year.
Profit before tax and significant non-recurring and other items was 2,2 million GBP (2011: 1,9 million GBP). This was achieved after net finance expense of 1,2 million GBP (2011: 1,3 million GBP).
The tax charge for the period is based on the estimated effective tax rate on profits for the full year of 26 percent. Adjusted earnings per share were 2,5 GBPence (2011: 2,0 GBPence). The adjusted diluted earnings per share was 2,4 GBPence (2011: 2,0 GBPence).
Banking Facilities
The Group´s total net debt as at 31 December 2011 was 34,8 million GBP (01 January 2011: 36,8 million GBP) including net borrowings from HSBC Bank PLC and secured loan notes excluding deferred consideration. The total included cash of 63’000 GBP (2011: 1,3 million GBP). The net debt increased slightly from the year end position due to seasonality. The key features of the current facility, totalling 47,1 million GBP, are as follows:
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 31 December 2011, taking account of interest rate swaps in place and with the base rate at 0,5 percent, was 5,6 percent (2011: 5,4 percent).
Outlook
Group trading in the first eight weeks since the half year continues to be in line with our expectations. Sales in our Cake division were five percent ahead of the same period last year whilst the Bread + Free From division grew by 16 percent. Group growth in total was eight percent as a result. January is typically a weaker sales month following the Christmas period.
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.
As mentioned previously, we do not expect any respite in commodity or general cost inflation in the near term. We continue to plan our business appropriately in this context, working on internal efficiency and productivity initiatives to minimise the price rises required to offset inflation.
Whilst the consumer and inflationary environment remains difficult to predict, we continue to see new product growth opportunities within our businesses and the business´ expectations for the full year are in line with our previous guidance.
Our task remains to trade through these tough times, stay within banking covenants, retain shareholder value and maintain recent growth trends to reach the next milestone of annual sales of over 200 million GBP.
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