London / UK. (ffg) British Finsbury Food Group PLC, a leading manufacturer of cake and speciality bread, is pleased to announce its interim results for the six months ended 28 December 2013. Commenting on the results, Chief Executive John Duffy said: «I am pleased with the progress made in what has been a transitional year for the Group. The sale of the Free From division, consequent group restructuring and capital investment have transformed the balance sheet and provided the Group with the strong foundation on which it is operating».
«Whilst the trading environment remains tough in the short term, our low level of debt and interest costs allow us to make significant investment in our factories and businesses for the future, in line with our stated strategy. We believe that although the consumer markets remain challenging, an improvement in consumer behaviour lies ahead, and the Group is in a strong position to mitigate against these wider market challenges and focus on its strategy for growth».
Summary:
- Operating profit up five percent to 2,6 million GBP (H1/2012: 2,5 million GBP)
- Group revenue from continuing operations down 1,8 percent to 86,6 million GBP (H1/2012: 88,2 million GBP)
- Profit before tax from continuing operations up 50,6 percent to 2,1 million GBP (H1/2012: 1,4 million GBP)
- Net debt down 57 percent to 11,8 million GBP (H1/2012: 27,4 million GBP)
- Proposed interim dividend of 0,25 Pence per share (H1/2012: 0,25 Pence per share)
Operational highlights
- New cake slice «snap pack» packaging format launched
- Snacking cake automation investment program on track for year end completion
- Nicholas + Harris bread facility expansion has been commissioned in January
- New Livlife Low Carb Bread progressing well
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.
We continued to add to our licenced portfolio to ensure an up to date and relevant consumer offer. Alongside the strongly performing Spiderman, Moshi Monsters and One Direction celebration cakes, the much loved Me to You range recently added to our portfolio is performing strongly. Nicholas + Harris launched Livlife seriously seeded low-carb bread in June 2013. Livlife has half the carbohydrate content of regular bread, and accesses the market of the 40 percent of adults trying to reduce carbohydrate content. Nicholas + Harris is focused on growing distribution and further development of the brand in 2014.
Within our UK Bakery sector the planned capital investment programme is progressing well with the new cake slice «snap pack» packaging format was launched and further snacking cake automation investment on track for year end completion. Similarly the Nicolas and Harris bread facility expansion was commissioned in January 2014. These and future capital investments will underpin further internal efficiency and capacity improvements to support sales growth in the coming years.
All sites continue to make good technical progress and maintain their BRC A grade status against an improved and tougher standard.
Trading Results
The Group sold its Free From business in the prior financial year, on 27 February 2013 for a total value of approximately 21 million GBP to focus on its core bakery business. The prior year comparatives have been restated to report on continuing operations.
Group revenue for the 26 weeks to 28 December 2013 was down 1,8 percent to 86,6 million GBP (26 weeks to 29 December 2012: 88,2 million GBP), a decrease of 1,6 million GBP on the corresponding period last year.
The UK Bakery business saw a decline of two percent whilst sales in the Overseas business Lightbody Europe (LBE), the Group´s 50 percent owned subsidiary export business, remained stable year on year.
Cost inflation in key ingredients such as butter and chocolate combined with general cost inflation continues to put pressure on margins. The Company has however mitigated this pressure with internal efficiency investment and a cost reduction focus.
Profit from continuing operations before tax and significant non-recurring and other items was up 50,6 percent to 2,1 million GBP (2012: 1,4 million GBP). This was achieved after net finance expense of 0,5 million GBP (2012: 1,1 million GBP).
The sale of the Free From business on 27 February 2013 for 17,1 million GBP has transformed the balance sheet with bank debt of 27,9 million GBP being repaid during the previous year. Finance expenses have decreased year on year accordingly. A further three million GBP of deferred consideration is payable by the second anniversary of completion of the sale.
The tax charge for the period is based on the estimated effective tax rates on profits for the full year of 23 percent for UK, 33 percent for overseas. Adjusted earnings per share on continuing operations were 2,0 Pence (2012: 1,5 Pence). The adjusted diluted earnings per share on continuing operations were 1,8 Pence (2012: 1,3 Pence).
Debt and Bank Facilities
The Group´s total net debt as at 28 December 2013 was 11,8 million GBP (29 December 2012: 27,4 million GBP) including net borrowings from HSBC Bank PLC and deferred consideration. The total included cash of 0,7 million GBP (2012: 1,9 million GBP). The Group´s debt facility with HSBC Bank PLC totals 32,0 million GBP. The effective rate of interest on the debt at 28 December 2013, taking account of interest rate swaps in place and with the base rate at 0,5 percent, was 5,8 percent (2012: 6,0 percent).
Dividend
On 09 July 2013, the Board approved a final dividend for the year to 29 June 2013 of 0,5 Pence per share which was paid on 11 December 2013 to shareholders on the register at the close of business on 22 November 2013. This brings the total dividend for the year to 29 June 2013 to 0,75 Pence per share. It is the Company´s intention to continue paying dividends at an affordable rate so that the Company can continue to invest in the business in order to grow profits. An interim dividend of 0,25 Pence per share (H1/2012: 0,25 Pence per share) has been proposed.
Outlook
The Board remains confident of reporting a year on year improvement in profit before tax but believes general cost inflation will impact the Group´s performance during the second half of the financial year. In reaction to the current trading environment, the Group plans to increase investment in promotional activities to develop volumes and undertake an overhead reduction programme which will be completed in the second half. The full year benefit of the overhead reduction will be seen in the next financial year.
