FIF.L Regulatory News (FIF)

Finsbury Food Group plc

Preliminary results

Finsbury Food Group plc (AIM: FIF), a leading manufacturer of cake, bread and bakery goods, is pleased to announce its preliminary results for the 52 weeks ended 29 June 2013.

Highlights

§ Group revenue from continuing operations £176.6 million (2012 £178.9 million)

§ Adjusted* profit before tax up 19% to £5.5 million (2012: £4.6 million)

§ Adjusted* diluted EPS 5.9p (2012: 5.0p)

§ Total net debt significantly reduced by 78% to £7.4 million (2012: £33.9 million)

§ Successful equity placing in November 2012 raised £3.8 million

§ Re-instatement of dividend with a proposed total dividend of 0.75 pence per share

Operational Highlights

§ Sale of Free From business for approximately £21 million

§ Transformed balance sheet enables increased investment and M&A opportunities

§ Expansion of bread manufacturing facilities at Nicholas & Harris

§ Continued investment and growth in brands and renewal of licenses

§ Bakery Awards supplier of the year 2013

* Refer to trading results section within the Business Review for further details on the adjusted profits.

Commenting on the results, John Duffy, Chief Executive of Finsbury Food Group plc, said:

"These results signal the Group's shift from a transitionary period, to a new period of financial stability. Whilst a strategic disposal has driven this change, the Company is trading maturely, paying down debt and generating cash.

Growth remains our priority. Driving organic growth is one of our key focus areas whilst evaluating bolt-on acquisition opportunities. We will ensure that we maintain our operational excellence and product innovation as this will continue to underpin our future growth.

Following the reinstatement of the dividend, we are also pleased to announce the proposed total dividend at 0.75p. The Group now looks forward to directing this new stage of development and implementing our growth with the ultimate goal of creating value for our shareholders."

For further information:

Finsbury Food Group plc www.finsburyfoods.co.uk

John Duffy (Chief Executive) 029 20 357 500

Stephen Boyd (Finance Director)

Cenkos Securities plc

Bobbie Hilliam (Corporate Finance) 020 7397 8900

Alex Aylen (Sales)

Redleaf Polhill finsbury@redleafpr.com

Rebecca Sanders-Hewett 020 7382 4730

Jenny Bahr

Rachael Brown

Publication quality photographs are available via Redleaf Polhill on the numbers shown above

Notes to Editors:

§ Finsbury Food Group plc (AIM: FIF), is a leading manufacturer of cake, bread and bakery goods. Within its Cake business, the Group's focus is premium and celebration cakes plus low fat cake slices. Its Bread business manufactures artisan and organic bread and also morning goods.

§ Finsbury Food Group is the second largest manufacturer of Ambient Packaged Cake (excluding In Store Bakery) in the UK, a market valued at £901m (Source: Kantar Worldpanel Total UK Coverage, June 2013).

§ The Group's strategy is to generate returns for shareholders by building a crafted bakery group focused on premium, celebration and well being that delivers for customers and consumers. Finsbury continues to develop its licensed brand portfolio to complement its core retailer brand relationships and improve its understanding of and response to changing consumer needs.

§ Whilst the Company sees exciting organic growth opportunities in all its businesses and its short-term focus is on integrating and growing its existing businesses, the aim is to take advantage of the appropriate bolt on acquisitions to drive longer term value as opportunities and circumstance allow.

Chairman's Statement

It was always going to take time. Turning around a group the size of Finsbury Foods demanded a concerted and prolonged effort by a team with the skill, resolve and foresight to overcome adverse trading conditions.

Although significant challenges remain in our business, a degree of momentum has clearly become apparent. I am pleased to report that underlying operating profit from continuing activities for the financial year ended June 2013 has risen to £7.4m from £7.2m. Debt and interest costs have been substantially reduced and the Board has proposed a final dividend of 0.5p, amounting to a total dividend of 0.75p for the year.

Progress is founded on a combination of factors. Finsbury Foods has continued to develop our licensed and retailer brand portfolios providing bakery goods that are attractive and affordable for consumers. We maintain first class relationships with grocery multiples, focusing on the specialty brands that remain appealing even in tough times.

In November 2012, a successful equity placing during the first half of the year raised £3.8m to fund capital investment projects in our core cake business. The placement attracted a welcome blend of new and existing institutional investors, indicating a long awaited shift in market perception towards Finsbury Foods.

In February 2013, our Free From business was sold to Genius Foods for £21m on a debt-free, cash-free basis, with £18m up front and a further £3m due to the group in 2015. Although the sale reduces the overall size of the business, the Board viewed the disposal as a small step back that would allow us to take a much bigger step forward.

The net effect of those transactions has been transformative. Total group debt has fallen from £33.9m in the previous period to £7.4m, interest charges will also fall, with levels falling beneath £1m for the next twelve months. Debt to EBITDA multiples have responded in kind, registering a decline from just under 5 in 2009 to below 1.

Of course, consumer markets remain challenging. Weary consumers have grown increasingly deal focused while commodity prices continue to rise. Finsbury Foods has responded to the value conscious environment with a series of cost and product initiatives, reacting nimbly to the changing needs of the marketplace.

The sale of Free From will enable the company to rebase, driving forward organic growth. £6m has been set aside for new capital investment projects in our core cake business this year, the scale of investment demonstrating the depth of our ambition.

Reinstating the dividend is another statement of intent. Returning to the dividend list for the first time since 2008 is evidence of our ability to reward shareholders for their faith in the Company. Public markets often take a while to overcome adverse sentiment and the recent rise in the share price is gratifying.

The market is beginning to view our story afresh, assessing the current management team on its own merits, recognising the inherent value that lies in this business. Our attention is starting to turn outwards. It is always convenient, especially for a group with a track record of acquisitions, to return to M&A activity once the balance sheet has been restored.

Seeking deals that offer the right synergies and appropriate benefits is clearly attractive. While this offers a quick way of progressing the size of the Group, nurturing existing businesses remains the priority. Investment will build upon the foundations we have created, bolt-on acquisitions driving long-term value as and when opportunities arise.

I would like to take this opportunity to express my thanks to Ian Farnsworth who has stepped down after 15 years of distinguished service in the boardroom. A warm welcome is extended to Raymond Duignan who joined the board as a Non-Executive Director in July and has assumed Ian's duties as Chair of the Audit and Remuneration Committee.

We have arrived at a moment of transition: Finsbury Foods has attained a position of hard-earned stability, trading maturely, paying down debt and generating cash. We have traded our way through a difficult market, regenerated all aspects of the business and completed a strategic disposal that will allow us to move forward. As we head into a new financial year, I retain a deep-seated desire to build a business that we can all be proud of. Excellence and innovation continue to signpost the way forward, laying the foundations for further growth and driven by the ultimate objective of creating value for shareholders.

Martin Lightbody

Non-Executive Chairman

Chief Executive's Report

Light at the end of the tunnel is always welcome. While the precise length of the tunnel remains a matter of debate, it is pleasing to reflect on a year in which the enduring efforts of senior management and staff at all levels of Finsbury Foods generated demonstrable progress.

Trading Performance

Results for the full 52-week period ending 29 June 2013 are described in greater detail in the Business Review Section but there are a number of key areas I would like to take this opportunity to highlight:

§ Underlying profit before tax from continuing operations rising 19.3% to £5.5m (2012: £4.6m)

§ Group revenue from continuing operations down 1.3% to £176.6m driven primarily by currency fluctuations in our overseas subsidiary

§ 17% sales growth in bread driven by growth of licensed brands (Vogel's, Cranks and Village Bakery)

§ Net debt reduction from £33.9m to £7.4m  

§ Fully subscribed Equity placement in Nov 2012 raising £3.8m for capital investment projects

§ Sale of Free From business for £21m in February 2013

§ Restructured balance sheet capable of funding further capital investment and M&A

§ Debt to EBITDA ratio down to below 1x (2009 peak was nearly 5)

§ Dividend reinstatement (last paid in 2008)

§ Bakery Awards supplier of the year 2013

Results in Perspective

It was a mixed year in our core UK Bakery division. The bread business maintained long-term growth trends; the business has doubled in size over the last five years, benefitting from an increased demand for artisan and organic products. The cake business endured tougher trading conditions. Sales in the UK were relatively flat while performance in the Overseas division was adversely impacted by exchange rate fluctuations.

Elsewhere, growth was in evidence across the group. Thornton's cake business registered a 20% jump in sales and our Marvel Film franchise continues to thrive. The Me To You licence came on stream in the second half of the year, a highly promising year-round gift proposition. We also launched Disney Celebration Cakes in Australia, a unique product in that marketplace.

Closer to home, UK consumer behaviour presents a dichotomy. Both ends of the grocery scale are exhibiting signs of expansion but the middle is under stress. Consumers are buying treats where they perceive uniqueness or real quality, shopping across locations to obtain the optimum mix.

It's hard to keep growing at 17% if your major customers are not but our coverage is reassuring. For example, Finsbury Foods' speciality bread business is significantly weighted towards Sainsbury's and Waitrose; they are growing and we are growing alongside them. We are working to retain a strong presence where there is growth, resisting the temptation to chase volume where doing so would be imprudent.

Regrettably, the economic environment remains unhelpful with promotional activity at unsustainable levels in most categories of food. Commodity prices have settled down marginally, we haven't witnessed the huge fluctuations of recent years. Overall, however, trends remain upwards with marked volatility in key ingredients such as wheat, eggs and sugar.

One of the reasons for investing so significantly in the businesses going forward is that the only way we can square the circle of keeping prices keen for consumers and stimulating deals is by being a low cost manufacturer. We've spent a lot of time and effort changing pack sizes, reformulating products and becoming more efficient. Our managers are pulling every possible lever to try and make sure we get back to sensible levels of return.

One of those levers involved securing a long-term lease on the property adjacent to our Nicholas & Harris bakery. Building into the space from our existing facility will add 60% of extra production capacity. Securing the space is strategically significant, an unambiguous signal of our intention to mature into becoming a £50m speciality bread business.

Growth remains the priority. It is a significant achievement to have guided the company through such a difficult period but further evolution is essential.

We need to keep investing in first class machinery, presenting consumers with fresh ideas and products while continuing to develop the shareholder base. I have no doubt that Finsbury Food Group will continue to achieve our growth objectives, both organically and by acquisition. The signs may be propitious but, in many respects, the real work has yet to begin.

John Duffy

Chief Executive Officer

Business Review

Strategy

On 27 February 2013 the Group sold its Free From business for a total value of approximately £21 million to focus on its core Cake and Bread businesses. 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. We will continue to develop our licensed brand portfolio to complement our core retailer brand relationships.

We are still a modest manufacturer in the total Bakery markets in which we operate and see exciting organic growth opportunities in all our businesses.

The sale has and will allow the Group to further invest, pay down debt, and take advantage of additional opportunities available to us, with the ultimate goal of driving shareholder value.

Our Markets

The total annual UK ambient cake market (including pre-packed cake and in-store bakery) is valued at £1.05 billion (source: Kantar Worldpanel). The past 12 months has seen value of sales decline by 2.0% and unit sales decline by 2.5%. We continue to be the second largest supplier of cake to the UK's multiple grocers and have maintained our leading position in the niche areas on which we focus.

Annual bread and morning goods sales are in excess of £3 billion (source: Kantar Worldpanel), although the market remains flat. We are a small but fast-growing player in this market, focusing on speciality breads, where demand remains strong despite the economic climate.

Our Business

Following the disposal of the Free From business, the Group consists broadly of the following businesses:

UK Bakery

Lightbody of Hamilton Ltd ('Lightbody'), based in Hamilton, employs around 1,100 people and is the UK's largest supplier of celebration cake with Disney, Nestle and Thorntons product within its Licenced portfolio as well as Own Label Cake. It also produces a wide range of small cakes, slices and in store bakery (ISB) bites, a number of which are under our licensed brands including Thorntons, and WeightWatchers.

Memory Lane Cakes Ltd ('Memory Lane'), based in Cardiff, employs around 700 people and is the leading manufacturer of the UK retailers' premium own label cake ranges. It also produces under a number of brands notably Nestlé, WeightWatchers and Thorntons.

Nicholas & Harris Ltd. (N&H), based in Salisbury, employs around 300 people and produces a range of speciality breads, rolls, hot cross buns and tea cakes to UK retailers. Its focus is on 'clean label' breads, rolls and buns, from which it has seen strong growth with its chosen own label customers. N&H's brand portfolio, which includes Vogel's seeded bread, Cranks Organic and Village Bakery Rye bread, continue to perform well, significantly outgrowing the market by double-digits. Management has now launched reduced carbohydrate bread under its new brand Livlife, augmenting its branded range.

On 27 February 2013 the Group sold its Free From business for a total value of approximately £21 million to focus on its core Cake and Bread businesses. The Free From business consisted of two subsidiaries, Livwell Limited ("Livwell") and United Bakeries (Holdings) Limited ("UBH") (the holding company of United Central Bakeries Limited ("UCB")). These subsidiaries, which account for approximately 14% of Group full year revenues, have been sold to Genius Foods Limited ("Genius"), on a debt-free, cash-free basis.

Brands and Licences

The Group remains primarily a retailer branded business with sales of retailer own label products accounting for around 59% of our total revenue compared to 58% a year ago. The balance represents the strength of both licensed brands and own brands under our control.

WeightWatchers

WeightWatchers is one of the largest food brands in the UK and we hold the licence to manufacture and distribute low fat cake to the UK and Ireland's multiple grocers under this brand. Since the acquisition of Anthony Alan in 2007, the brand has been developed through utilisation of the broad production capability within the Group and our skills in developing new products that adhere to brand guidelines. The Low Fat cake category continues to struggle in the face of recessionary pressures on household budgets. However, this year WeightWatchers has again successfully grown its share of this category. The summer of 2013 will see the WeightWatchers Slices range move into new individually wrapped, snack pack packaging. This significant investment will seek to develop and grow the brand by opening up the important out of home eating occasion.

Thorntons

The Group remains committed to developing its branded range via its licensing arrangement with the Thorntons confectionery business. A combination of new product development, pack formats and targeted promotional activity has seen the Thorntons brand grow sales by 17% in the last year, making it one of the fastest growing Cake brands in the market (Source: Symphony IRI). Our best selling Thorntons Bites range continues to dominate the pre-packed Bites market with a 48% value share of this market (source: Symphony IRI).

Nestlé Confectionery

We continue to benefit from the rights to manufacture and distribute cake products under Nestlé confectionery brands. In addition to our existing range of Smarties and Funtastic products we have this year added the Yorkie and Rowntrees Randoms brands into our portfolio.

Disney

Our successful range of Disney Celebration cakes are continually evolving. Properties within the portfolio include, Disney Princess, Cars, Fairies, Avengers, and Iron Man. The Disney portfolio is a key part of our overall Celebration cake business and plays an important role in retaining our position as the largest supplier of Celebration cake to the UK's multiple grocers. We currently have a 45% share of the UK Celebration Cake market.

Other Celebration Cake Licences

These four major brands are complemented by a range of other licences which are particularly focused on driving celebration cake sales. Evergreen properties such as Peppa Pig and Hello Kitty have their own target market and offer excellent additions to the range. This year we have added the successful Me to You celebration and gift cake to our portfolio, In addition the Spiderman 4 range has proved very successful, delivering in excess of £2m sales, making it the biggest selling celebration cake license in the market in the last year. Other notable launches this year include Fireman Sam, Skylanders and One Direction which together have added a further £2.5m sales (Source Symphony IRI).

Speciality Bread Licences

Nicholas & Harris bakery has three brands which it markets under long-term license agreements, all of which are distributed across the UK in the major supermarkets. Vogel's is a 'no artificial additives' seeded bread that has a unique nutty taste and dense texture. Vogel's has grown by over 11% in the last year and now has over 26,000 followers on its Facebook page. Vogel's is licensed by Alan Stevens and co. who owns the brand on a global basis. Crank's is our 'proper Organic Bread' brand and is 'the bread you buy when you don't have time to make your own'. Cranks has grown by over 22% in the last year and is owned by All About Foods ltd. The Village Bakery Melmerby brand is licensed by Bell's of Lazonby and is an Organic Rye bread brand. Village Bakery has grown by 5% and appeals to those trying to avoid wheat.

Livlife is a new brand launched in July 2013. It has half the carbohydrates of regular bread and is aimed at the growing number of consumers who are trying to cut and control the amount of carbs they eat. Livlife is supported by a significant PR, digital media and advertising campaign to build awareness.

Overseas

The Group's 50% owned Company Lightbody Stretz Ltd, supplies and distributes the Group's UK manufactured products and third party products primarily to Europe.Principal Operating Risks

The Group operates in an environment which is continually changing and as a result the risks it faces will also change over time. The assessment of risks and the development of strategies for dealing with these risks are achieved on an ongoing basis through the way in which the Group is controlled and managed internally. A formal review of these risks is carried out by the Group on an annual basis. The review process involves the identification of risks, assessment to determine the relative likelihood of them impacting the business and the potential severity of the impact, and determination of what needs to be done to manage them effectively.

The Directors have identified the following principal risks and uncertainties that could have the most significant impact on the Group's value generation:

Competitive Environment and Customer Requirements

There is currently over capacity in the market place and competition is strong between manufacturers in the Bakery sector. The monitoring of key performance indicators at customer level such as service levels and customer complaints is part of the risk management process associated with this specific risk. Strong customer service, quality products, low costs and innovative new product development are areas of focus to satisfy customer needs and remain strong in a competitive environment. The Group has invested heavily in category management, new product development and marketing skills. This investment has helped create an insight into customers and consumer demands. Continual monitoring of customer KPI's and production quality measures take place to ensure customer requirements are being met and issues are identified in a timely manner to limit their impact.

Product quality

Product quality is a key strength of the Group and failure to maintain a high standard of food quality and safety would have a severe impact on service levels and customer relationships. The Group's quality assurance procedures, managed at site level, are reviewed continuously with improvements made as appropriate. The Group's Technical Director helps provide focus to ensure there is continuous improvement across all sites to meet the increasingly high expectations of our customers. The operating subsidiaries are subject to regular internal and independent food safety and quality control audits including those carried out by, or on behalf of, our customers. The Group maintains product recall insurance cover to mitigate the potential impact of such an occurrence.

Prices and Supply

Increases in the price and volatility of price of raw materials along with increasing utility costs can impact the core profitability of the business and any related shortage in supply of raw materials will impact the business' ability to maintain its service levels to customers - another of its key performance indicators. The prices of certain key commodities (e.g. sugar) are tied to the Euro - the relative strength of sterling and future volatility within the Eurozone will, therefore, have an impact on the cost of these commodities.

Affordability for consumers is essential and the Group will focus on internal efficiencies and productivity initiatives to lessen the rising commodity price impact on consumers. The Group maintains a high level of expertise in its buying team and will consider long term contracts where appropriate to reduce uncertainty in input prices. The team also cultivates strong relationships with its major suppliers to ensure continuity of supply at competitive prices. Regular renovation and innovation in our product range can help to manage margin pressures in an effective manner as far as the competitive environment allows. The Group also purchases forward foreign currency in order to minimise the fluctuation of input costs linked to future currency conversion rates.

Economic Environment

The economic environment remains challenging, with promotional activity at unsustainable levels in most categories of food. The Group will continue to focus on quality and value for money in periods of reduced spending. The Group manages margins through investing in site capabilities to increase efficiency, managing capacity, reformulating and developing products that stand out from the crowd and maintaining strong relationships with customers and licensors.

Trading Results

Group revenue from continuing operations for the 52 week period to 29 June 2013 was £176.6 million (2012: £178.9 million).

Gross margin for the financial year was 26.3% (2012: 25.6%). Commodity prices have settled down marginally and we have not witnessed the huge fluctuations of recent years. The outlook is that marked volatility is expected in key ingredients such as wheat, eggs and sugar.

Administrative expenses on continuing activities have remained fairly stable year on year with continued focus on cost control. Inflationary increases and employee pay rises have been offset largely by operational improvements and returns from capital investment.

The following analysis is included to show what the Directors consider to be the underlying performance of the Group and eliminates the impact of significant non-recurring items and certain charges required by IFRS.

The taxation on IFRS charges includes an element of rate change on opening balances from 24% to 23%.

Profit on sale of Free From businesses of £1,184,000 is shown as non-recurring significant item under discontinued operations.

The taxation on IFRS charges includes an element of rate change on opening balances from 26% to 24%.

Earnings Per Share

EPS comparatives to the prior year can be distorted by significant non-recurring items and IFRS adjustments. The Board is focused on growing adjusted diluted EPS, which is calculated by eliminating the impact of the items highlighted above and incorporates the dilutive effect of share options. Continuing adjusted diluted EPS is 5.9p for the 52 week period (2012: 5.0p).

* Adjusted EPS measures are calculated by eliminating the impact of significant non-recurring items and IFRS adjustments. Further details can be found in Note 7

** Diluted EPS takes basic EPS and incorporates the dilution effect of share options

***Discontinued basic and diluted basic includes the profit on the sale of the discontinued business

Financial Key Performance Indicators

Adjusted EBITDA is calculated as earnings before interest, taxation, depreciation and amortisation

Net bank debt is calculated as overdrafts, bank loans, asset finance and mortgages less cash balances and before unamortised bank fees.

Non-Financial Key Performance Indicators

A range of non-financial key performance indicators are monitored at site level covering, amongst others, customer service, quality and health and safety. The Group board receives an overview of these on a regular basis.

Disposals

On 27 February 2013 the Group sold its Free From business for a total value of approximately £21 million of which £3 million is deferred to 27 February 2015.

The Free From business consisted of two subsidiaries, Livwell Limited ("Livwell") and United Bakeries (Holdings) Limited ("UBH") (the holding company of United Central Bakeries Limited ("UCB")). These subsidiaries, which account for approximately 14% of full year Group revenues, have been sold to Genius Foods Limited ("Genius"), on a debt-free, cash-free basis.

Acquisitions

There were no acquisitions in the period.

Cash Flow

Operating profit of £8.3 million together with a share placing raising £3.8 million and a net cash inflow from the sale of the Free From business of £17.1 million has transformed the balance sheet with bank debt of £27.9 million being repaid during the year. There was a decrease in our working capital requirement of £2.9 million compared to the last financial year reflecting the disposal of Free From business and increased focus on working capital levels. Corporation tax payments made in the financial year totalled £1.8 million (2012: £2.2 million), the payments in the current year took account of the research and development tax relief due to the Group. Capital expenditure in the year amounted to £4.2 million (2012: £3.2 million).

Debt & Bank Facilities

The Group's total net debt including deferred consideration is £7.4 million (2012: £33.9 million) down £26.5 million from prior year.

The Group's total net bank debt excluding deferred consideration after deducting cash balances as at 29 June 2013 was £7.2 million (2012: £32.6 million). Within this total net bank debt, £2.8 million is due within one year, including cash at bank, invoice finance and loan notes payable on demand (2012: £13.9 million).

The Group's debt facility with HSBC Bank Plc totals £32.0m, the key features of the facility are as follows:

§ overdraft (£3.0m)

§ confidential invoice discounting facility (£15.0m)

§ mortgage facility (£4.0m)

§ rolling asset finance facility (£2.0m)

§ revolving credit facility (£8.0m)

Note 8 gives details of the drawn amounts and maturity dates.

Discounted deferred consideration of £0.2m is outstanding at the year end and is payable within the next year (2012: £1.2m). This attracts an interest of 5.0% pa (2012: 5.2%).

The Group is able to offer strong asset backing to secure its borrowings. The Group owns freehold sites at Memory Lane in Cardiff, at Lightbody, and Campbells in Scotland. In addition, the Group has a strong trade debtor book to support the invoice discounting facility, made up primarily of UK's major multiple retailers. This debtor book stood at £21.9 million (2012: £27.2 million) at the period end date.

The Group recognises the inherent risk from interest rate rises. To mitigate these risks, the Group has three interest rate swaps in place with a total coverage of £18.0 million (2012: £20.0 million) equivalent to 250% (2012: 61%) of year end net bank debt following the sale of the Free From business at a weighted average rate of 4.0% (2012: 4.7%). The cost of closing out swaps is prohibitive, in June 2014 a £10 million swap will expire and a £6 million swap will commence.

The effective interest rate for the Group at the year end, taking account of the interest rate swaps in place and deferred consideration with base rate at 0.5% and LIBOR at 0.5%, was 5.97% (2012: 5.21%).

Financial Covenants

The Board reviews the Group's cash flow forecasts and key covenants on a regular basis to ensure that it has adequate facilities to cover its trading and banking requirements with an appropriate level of headroom. The forecasts are based on management's best estimates of future trading. There has been no breach of covenants during the year.

Interest cover (based on adjusted EBITDA) for the 52 weeks to 29 June 2013 was 6.3 (2012: 4.7). Net bank debt to EBITDA (based on adjusted EBITDA) for the 52 weeks to 29 June 2013 was 0.6 (2012: 2.6).

Taxation

The Group taxation charge on continuing operations for the year was £1.4 million (2012: £1.3 million). This represents an effective rate of 21.5% (2012: 28.3%).

Further details on the tax charge can be found in Note 6.

Environmental Matters

The Group continues to focus on packaging reduction through innovation and has delivered further reductions across the business. The Group continues to take the key learning and successes from individual sites and applies them across other areas of the business to deliver category leading innovative solutions.

Mandatory participation in the CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment) focuses the Group to reduce its carbon emissions. New production capability, which is in the process of being installed in Hamilton, will further reduce the consumption of cardboard and reduce food waste. Work with local universities on shelf life of product will lead to waste reduction over the coming years.

Nicholas & Harris is now a 'landfill-free' site and all waste materials are recycled

Employee Social and Community Issues

All manufacturing sites are active within their local community supporting local community initiatives. The Group also supports local and national government initiatives such as the New Work programme.

We work closely with local universities business projects and placements and plan to continue this partnership work further in several areas of training, development and project work. They continue to invest in training and development of the workforce supporting a programme of vocational qualifications.

13 Bakers have qualified from the Nicholas & Harris bakers' apprenticeship scheme this year, with City and Guilds' qualifications. Nicholas & Harris is one of the largest employers in Salisbury and have continued in their support of the local community, including sponsorship of the internationally renowned Salisbury Arts Festival.

Technical Matters

All sites have performed well throughout the year and have significantly improved operational performance by a real focus on right first time.

Group technical systems continue to be rolled out across all sites, giving a standardised approach and minimising duplication of effort.

The Group's focus on operational improvement will be instrumental in optimising process control, minimising waste and improving quality consistency. All sites have maintained solid BRC A grades.

Consolidated Statement of Comprehensive Income for the 52 weeks ended 29 June 2013 and 30 June 2012

 Consolidated Statement of Financial Position at 29 June 2013 and 30 June 2012

These financial statements were approved by the Board of Directors on 20 September 2013 and were signed on its behalf by:

Stephen Boyd (Director)

Registered Number 204368

Consolidated Statement of Changes in Equity

for the 52 weeks ended 29 June 2013 and 30 June 2012

Consolidated Cash Flow Statement for the 52 weeks ended 29 June 2013 and 30 June 2012

Notes (forming part of the Financial Statements)

The financial information set out in this preliminary announcement does not constitute Finsbury Food Group Plc's statutory accounts for the 52 week periods ended 29 June 2013 and 30 June 2012. Statutory accounts for the 52 weeks ended 29 June 2013 will be delivered to the Registrar of companies following the Company's Annual General Meeting. Statutory accounts for the 52 weeks ended 30 June 2012 have been delivered to the Registrar of Companies. The Company's auditor has reported on those statutory accounts; their reports were unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

This preliminary announcement has been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) and its interpretations as adopted by the International Accounting Standards Board (IASB) and by the EU (Adopted IFRS).

1 Discontinued operations

On 27 February 2013 the Group sold its Free From business for a total undiscounted value £21,257,000 and a pre-tax gain of £1,184,000 was recorded. The Free From business consisted of two subsidiaries, Livwell Limited ("Livwell") and United Bakeries (Holdings) Limited ("UBH") (the holding company of United Central Bakeries Limited ("UCB").

2 Revenue and segment information

Operating segments are identified on the basis of internal reporting and decision making. The Group's Chief Operating Decision Maker is considered to be the Group Finance Director and Group Chief Executive Officer who have been delegated decision making responsibility from the PLC Board of Directors as they are primarily responsible for the allocation of resources to segments and the assessment of performance by segment.

The Board uses adjusted operating profit, reviewed on a regular basis, as the key measure of the segments' performance. Operating profit in this instance is defined as profit before the following:

· net financing expense

· share option charges

· non-recurring significant items

· fair value adjustments relating to acquisitions

· pension charges or credits in relation to the difference between the expected return on pension assets and interest cost on pension liabilities and

· revaluation of interest rate swaps and forward foreign currency contracts.

On 27 February 2013 the Group sold its Free From business, allowing the Group to concentrate on its core bakery business. This sale has created a shift in the way in which the business is reviewed. The UK cake and bread business is viewed as one segment - UK Bakery, whilst the 50% owned business Lightbody Stretz Limited is viewed as a separate segment - Overseas. Prior year comparatives have been restated accordingly.

The UK Bakery segment manufactures and sells bakery products to the UK's multiple grocers. This segment primarily comprises the operations of Memory Lane Cakes Ltd, Lightbody Group Ltd, Campbells Cake Company Ltd and Nicholas & Harris Ltd. These subsidiaries are aggregated into a single segment after considering the following criteria:

· the nature of the products - products are similar in nature and are classed as manufactured bakery products, the products sit side by side in the retailers' bakery aisles

· the production process - the production processes have the same or similar characteristics

· the economic characteristics - the average gross margins are expected to be similar

· the customers - five customers account for approximately 70-75% of total revenue, these customers are common throughout the subsidiaries

· the distribution methods - the same methods of distribution apply to all subsidiaries.

The core operation of the Overseas segment is the distribution of the Group's UK manufactured product along with the sale of third party products primarily to Europe.

Costs of Group operations plus a 10% premium have been allocated across the segments on the basis of their operating profit. The premium has been charged to reflect the synergies achieved from obtaining resources centrally giving benefits across the operating segments. Operating profit levels have been chosen as the basis, as this reflects the underlying performance of the segment and is also the return the Group expects from those segments.

A purchasing premium of 2% is charged from Group operations, and is calculated on materials and packaging spends at segmental level. This charge is based on the rationale that Group operations, through its Group buyers, optimises the Group's procurement spend through leveraging its purchasing power.

This has resulted in an underlying operating profit from continuing operations of £0.8m (2012: £1.2m) being presented within the Group operations segment.

The Group's finance income and costs cannot be meaningfully allocated to the individual operating segments.

2 Revenue and segment information

Analysis of unallocated assets and liabilities:

Certain operating costs have been incurred centrally, these costs have been allocated to the reporting segments on an appropriate basis.

With regard to continuing revenue, five customers with sales of £36m, £34m, £24m, £18m and £16m account for 73% of revenue, which is attributable to the UK Bakery and Overseas segments above.

2 Revenue and segment information