30 Sep 2009 07:00
Date: 30 September 2009
On behalf of: Finsbury Food Group plc ('Finsbury', 'the Company', or 'the Group')
Embargoed until: 0700hrs
Finsbury Food Group plc
Preliminary Results 2009
Finsbury Food Group Plc (AIM: FIF), a leading manufacturer of cake, bread and morning goods, today announces its preliminary results for the year ended 30 June 2009.
Highlights
Revenue growth of 8%, like for like sales increase of 2%
78% improvement in adjusted* profit before tax in second half of the year vs first half
Effective integration of existing businesses
Acquisition of Goswell Enterprises Ltd
Commenting on the results, Martin Lightbody, Chief Executive of Finsbury Food Group plc, said:
"We have spent the last year integrating our business to drive improvements in efficiency, quality and service. Having invested in our understanding of our markets and customers we have adjusted our product ranges and sales strategies to fit in line with changing customer and consumer demands.
"I am delighted that we have continued to grow despite the recessionary environment and continue to enjoy support from our bank and shareholders."
For further information:
Finsbury Food Group Plc www.finsburyfoods.co.uk
Martin Lightbody (Chief Executive) 07778 230 220
Lisa Morgan (Finance Director) 07771 712 720
Panmure Gordon
Andrew Potts/ Ashton Clanfield/ Callum Stewart 020 7459 3600
Redleaf Communications finsbury@redleafpr.com
Emma Kane/ Rebecca Sanders-Hewett/ Anna Dunkin 020 7566 6700
Publication quality photographs are available via Redleaf Communications
Notes to Editors:
Finsbury Food Group plc (AIM: FIF), a leading manufacturer of premium and celebration cakes, low fat cake slices and artisan, organic and gluten free bread and morning goods
Finsbury Food Group is the number 2 player in the UK cake industry a market valued at £1.51bn (TNS, January 2008)
The Group is also the market leader in the supply of baked goods to the UK's multiple grocers
Its strategy is to build a significant food group in core areas, both organically and by acquisition
Chairman's Statement
My first full year as Chairman to June 2009 has required Finsbury to negotiate the most difficult economic and trading environment since listing on AIM in 2002.
We have grown our group quickly since inception by focusing on strong above market growth trends for premium and healthy bakery products. The current recession has negatively impacted both these sectors growth trends, we believe temporarily, and necessitated flexing of our product offering and operating strategies during 2009 to meet customer and consumer trends towards more value conscious food consumption.
Business Performance
Given these conditions our ability to grow sales 8% ahead of last year (2% on a like for like basis) is encouraging and demonstrates the resilience and spread of our businesses. However, our operating margin declined by 2% as a consequence of these market conditions, namely consumer purchasing being more value and promotion led, and difficulty in recovering sufficient raw material and operating cost inflation from customers.
Combined sales from our larger cake manufacturing sites were up 2% on prior year, in line with the ambient cake market, representing a strong relative performance given our greater exposure to the higher unit cost Premium, Celebration and Healthy sectors most impacted by a 'cash strapped' consumer. Our lower unit price licensed cake brands portfolio allowed us to adapt quickly to changing consumer behaviour. Thorntons branded cakes grew by over 70% in the year, making it the fastest growing brand in the cake market, and WeightWatchers branded cakes achieved 25% sales growth bucking a decline in the overall ambient healthy cake market.
The combined sales from our smaller bread and 'free from' sites reflect a strong year with growth of 14% on a like for like basis. We benefited from consolidating our leading position in the fast growing 'free from' market, with the acquisition of Livwell in April 2008, which is now fully integrated with United Central Bakeries (UCB). Nicholas & Harris' speciality bread business also grew significantly and, with the acquisition of Goswell Enterprises Ltd in June 2009, has strengthened its speciality breads licensed portfolio with brands such as Vogel's and Cranks.
I would like to take this opportunity to thank all our staff for their continued commitment and passion which has seen us through our most difficult trading period to date.
Funding and Dividend
New debt and banking facilities have been put in place with our bankers, HSBC Bank Plc, to reflect the needs of the business in the current environment. The Board has decided not to recommend paying a dividend this year. With limited funding available, we continue to invest to grow our business. We remain confident in the potential of the business and intend to re-establish the dividend as soon as cash flow and debt levels allow.
Board Changes
Following the departure of Dave Brooks at the end of September last year, I would like to thank Martin Lightbody for assuming the role of Chief Executive Officer over the last 12 months and steering the Group through a tough trading period. He has been ably assisted by John Duffy who we recruited to strengthen the management team in a new role of Chief Operating Officer.
Having largely completed the business integration, it is now the right time to restructure the Board for the long term. To that end, and on the instruction of the Board, I have invited Martin to replace me as Non-Executive Chairman following the AGM on 25 November 2009. I will remain on the Board and revert to being a Non-Executive Deputy Chairman. John Duffy will be joining the Board with immediate effect as the new Group Chief Executive Officer.
Outlook
Trading conditions are unlikely to improve significantly in the short term with unemployment rising and a generally fragile economic operating environment. Our businesses and their customers will face continued uncertainty in factors such as interest rates and the strength of sterling. However, we have probably weathered the worst part of the recession already and demonstrated the resilience of the food market and the Group's businesses in doing so.
We will increase investment in understanding our markets and consumer needs to better target innovation utilising our unique strong quality baking heritage and licensed brands portfolio. Targeted investment in capacity in areas such as 'free from' fresh bread coupled with further integration of group businesses and supply chain efficiency projects will accelerate a return to profitable growth.
David Marshall
Chairman
Chief Executive's Report
Entering a full blown recession after a period of rapid input price inflation was not necessarily the ideal time to step into the CEO role. It has been a difficult year for our young group. The tough trading climate encouraged us to force the pace on internal integration whilst simultaneously adjusting product ranges, operating and sales strategies to meet consumers' changing buying habits. I am pleased with the way we have responded to the challenges over the last 12 months, growing Group sales despite our premium range focus and whilst short term profit reduced, this is being addressed, as reflected in our improved second half performance.
Performance
Results for the 53 week period ended 4 July 2009 are covered in full detail within the Business Review section but there are a few major elements that I would like to highlight:
group sales growth of 8% year on year
integration of all group cake businesses completed
integration of Livwell into UCB to create a market leading 'free from' business
acquisition of Goswells speciality bread business in June 2009
strong licensed brand growth with Thorntons becoming the fastest growing cake brand
new debt and banking facilities agreed April 2009
launch of innovative fresh 'free from' bread with brand partner 'Genius'
improved profit performance in the second half of the year - £3.2m vs £1.8m
continued investment in our business with net capital expenditure of £0.6m
significant increase in promotional spend year on year
absorbed major cost increases and impact of sterling weakness
The Group is now more streamlined and group best practice and scale is bringing benefit to areas such as purchasing and overhead services. Considerable investment has been made during the year in senior management, systems and processes to reflect growing scale and customer expectations.
Future Prospects
We are not anticipating any let up in the current difficult trading environment in the short term but remain confident that if we continue to invest in our more integrated subsidiaries, people and facilities, as well as in our customers' requirements, we will exit this recession a stronger business.
Our market positions are good and we are have adapted well to changing consumer needs by focusing on relevant innovation and product quality utilising our unique craft baking experience. We also see organic growth and bolt on acquisition opportunities in our core everyday premium and 'better for you' market segments. I remain excited about the prospects for the business.
John Duffy has been a very capable Chief Operating Officer alongside me over the last 12 months and I look forward to supporting him in my new role as Non-Executive Chairman.
Martin Lightbody
Chief Executive Officer
Business Review
Strategy
Our business 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. We will continue to develop our licensed brand portfolio to complement our core retailer brand relationships and improve our understanding of and response to changing consumer needs.
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.
Whilst our short term focus is on integrating and growing our existing businesses, we aim to take advantage of the right bolt on acquisitions to drive longer term value as opportunities and circumstance allow.
Our Markets
We operate in large markets with combined sales in excess of £4 billion per annum. We continue to lead our core areas within those markets, where there remains significant opportunity for growth by converting consumers to our product range.
The total annual UK ambient cake market (including pre-packed cake and in-store bakery) is valued at £1.5 billion. The past 12 months has seen value growth slow to 2% (source: AC Nielsen) with a decline in volume of just over 1%. We continue to be the second largest supplier of cake to the UK's multiple grocers, with a 20% share of the total pre-packed cake market and have maintained our leading position in the niche areas on which we focus.
Annual bread sales are in excess of £3 billion (source: Mintel). We are a smaller player in this market, with a focus on speciality and organic bread products and we have continued to benefit from the growth in demand for our products, despite the tough economic climate and a general decline in organic bread sales.
Moving to 'free from', the total gluten free market is around £180 million (source: AC Nielsen), with growth of c15% in the last year. The area of this market in which we operate i.e. bread, cake and other bakery products, accounts for c£20 million of these sales, with growth of 8% year on year. The bakery sector growth lags the total gluten free market growth, because of perceived lower quality versus standard bread. We are addressing this via the Genius brand and a range of fresh 'free from' bread products.
Our Business
The Group consists of a maturing collection of businesses acquired over a number of years. Our focus over the last year has been to achieve a more effective integration of these businesses. The main aspects of this have been:-
the centralising of the Group purchasing function
recruitment of a Group Technical Director
integration of Goswells
integration of our two 'free from' manufacturing businesses
integration of our cake manufacturing businesses
Lightbody Group Ltd ('Lightbody'), based in Hamilton, employs around 1,100 people and is the UK's largest supplier of celebration cake. It also produces a range of small cakes, a number of which are under our licensed brands including Thorntons and WeightWatchers.
Memory Lane Cakes Ltd ('Memory Lane'), based in Cardiff, employs around 1,000 people and is the leading manufacturer of the UK retailers' premium own label cake ranges.
California Cakes Ltd ('California') and Anthony Alan Foods Ltd ('Anthony Alan') are now fully integrated into these two larger cake businesses and Campbells Cake Company Ltd ('Campbells'), our smallest site, is now under the management of the Lightbody team.
Sales revenues within the integrated cake businesses have continued to increase (up by 2% year on year), although the rate of growth has slowed versus prior years reflecting the market trends in our core areas of premium, celebration and health.
United Central Bakeries Ltd ('UCB'), based in Bathgate near Edinburgh, employs around 110 people and manufactures a range of gluten free bakery products, yum yums and potato scones. It has recently launched two new fresh gluten free breads under the Genius brand, transforming the gluten free offering within the bread sector.
Livwell Ltd ('Livwell'), based in Hull, employs around 100 people and is the UK's leading supplier of gluten free bread, cake and morning goods to the UK's grocery retailers. It continues to deliver new products into the Free From market, such as pain au chocolate and ciabatta. This business operates under a combined commercial team with UCB.
Nicholas & Harris Ltd ('N&H'), based in Salisbury, employs around 200 people and produces a range of speciality bread products to the UK retailers. It has maintained its leadership position in the supply of 'clean-label' breads. This position has been strengthened following its acquisition of Goswell Enterprises Ltd ('Goswells') in June and with it a number of licensed brands including Vogel's and Cranks. A significant proportion of the Group capital investment was targeted to N&H to facilitate the integration of Goswells into the site in Salisbury.
Growth in sales revenues within both the bread and Free From businesses has continued to accelerate with a combined increase of 47%. The full year effect of acquisitions accounts for 32% of this with the remainder due to organic growth within UCB and N&H.
Brands and Licences
The Group remains primarily a retailer branded business, with sales of retailer own label products accounting for around 70% of our total revenue. We have, however, seen an increase in the proportion of sales of branded products. This reflects the strength of the licensed brands under our control and the fact that, in a number of cases, they have outperformed the rest of the market.
WeightWatchers
WeightWatchers is the 14th largest food brand 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. WeightWatchers now accounts for 69% of the low fat cake market in terms of value, representing year on year growth of 25% - a significant achievement in the context of 0.5% reduction in the overall value of that market.
Thorntons
The Group continues to develop its branded offering within the premium cake sector via its licensing arrangement with the Thorntons confectionery business. Through a combination of new product development, additional listings of existing products and targeted promotional activity, the Thorntons brand within cake has seen growth of 71% year on year. This represents significant out-performance of the rest of the premium cake market, which saw a 2.5% decline in total sales year on year.
We have recently launched two new products under the brand and we will continue to invest in the brand to increase awareness and drive further profitable growth for both us and our customers.
Nestlé Confectionery
We continue to benefit from the rights to manufacture and distribute cake products under Nestlé confectionery brands such as Smarties, Jelly Tots and Munchies.
Disney
Our rights to use the Disney brand extend to the Pixar movies and complement our market position within celebration cake. Brands within the portfolio such as High School Musical have been particularly successful for us over the past year and we expect that Toy Story will lead our drive to realise further growth within this sector over the coming months.
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. Properties such as Ben 10 and Peppa Pig have their own target market and offer excellent additions to the range.
Bread Licences
We are pleased to have branded offerings in our bread and Free From businesses. The Village Bakery is an organic brand which N&H have been working with for a number of years, generating sales of around £1 million per annum. The range is based primarily around clean label rye breads and lines are stocked by all our bread customers. The Vogel's brand covers a range of natural sliced breads with added rye, grains and seeds to improve the health attributes of the product. The rights to manufacture products under this brand came along with the acquisition of Goswells in June and complements the mainly own label range of products within N&H's portfolio. This acquisition also brought with it the Cranks license to manufacture a range of organic vegetarian bread products.
Genius is a new brand within the Free From market and at UCB we have helped develop the first 'mass market' fresh gluten free bread that looks, smells and tastes like 'real' bread. Two products were launched with a major retailer in April this year on an exclusive basis and sales to date have exceeded our expectations, as well as those of our customer and the brand owner. There are a number of range extensions in the development 'pipeline' and we are embarking on a £2 million capital investment project at UCB to increase the manufacturing capacity to deal with these along with the roll out to other customers when the exclusivity period ends in October.
Principal Operating Risks
In the course of its normal business the Group is exposed to a number of risks and uncertainties which could impact on the results of the Group. A formal review of these risks is carried out by the Group on an annual basis. The review process involves the identification of current 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:
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 has recruited a Group Technical Director to help ensure 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, their customers. The Group maintains product recall insurance cover to mitigate the potential impact of such an occurrence.
Raw Materials - Prices and Supply
Increases in the price of raw materials can adversely impact the core profitability of the business and any related shortage in supply 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 will, therefore, have an impact on the cost of these.
The Group will aim to pass on increased costs to its customers as far as is reasonable in the circumstances whilst maintaining its tight control of overhead costs to mitigate the 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.
Economic Environment
Whilst the price sensitivity of our products is relatively low, there have been some particular trends in the premium and health sectors of the cake market that have impacted the demand for products within these sectors. The recessionary environment has resulted in demand from customers for increased levels of support via promotional activity as they compete with each other to offer consumers greater value for money.
The Group has taken steps to improve the assessment of this promotional support to ensure an acceptable level of return on this expenditure. The strength of the brands at our disposal has also helped to mitigate the impact - this is reflected in the growth we have seen in Thorntons and WeightWatchers, in particular.
Input Costs
Input costs have continued to impact the Group's profitability. Whilst the pressure on some commodities has eased during the year, the ongoing prices remain significantly higher than they were and a number of raw materials key to our product range have increased, such as chocolate, egg and sugar.
We have also seen a significant increase in the cost of utilities year on year. An on cost of c£1m represents a 40% increase on the previous financial year.
Trading Results
Changes have been made to our presentation of revenue and cost of sales for this year's financial statements. Revenue is now reported after deducting sales over-riders and rebates payable to customers as well as promotional discounts. Cost of sales now includes direct distribution costs and royalties payable to our brand licensors as well as material and direct labour costs. The calculation of gross margin is also changed as a result. Prior year comparable figures have been restated so that the year on year movement may be properly assessed.
Group revenue for the 53 week period to 4 July 2009 was £178.9 million (52 week period to 28 June 2008: £165.1 million), an increase of £13.8 million (8.4%) year on year. Like for like sales from continuing operations, excluding the incremental sales from the business acquired during the year (namely Goswells), the full year effect of prior year acquisitions (namely Livwell and Anthony Alan) and the extra 53rd week of trading, were £168.2 million. This represents an increase of £3.1 million (1.9%) year on year.
Gross margin for the financial year was 27.2% (2008: 26.8%) representing an increase of 0.4% year on year. The full year impact of price increases achieved in the prior year has been offset by further rises in input costs during the year that we were unable to pass onto our customers.
Administrative expenses increased by £7.1 million year on year. The major contributing factors to this increase were:-
£2.1 million relating to the full year effect of Livwell
£1.0 million increase in utilities costs
£1.1 million increase in sales administration & marketing related expenses
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
| 53 week period ended 4 July 2009 | |||||||||||||
| 2009 | 2009 | 2009 | 2009 | 2009 | 2009 | 2009 | |||||||
| Adjusted profit and loss | Non-recurring significant items | Share options charge | Defined benefit pension scheme | Fair value of interest rate swaps | Fair value on acquisition | As per income statement | |||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||
| Revenue | 178,931 | - | - | - | - | - | 178,931 | ||||||
| Cost of sales | (130,180) | - | - | - | - | - | (130,180) | ||||||
| Gross profit | 48,751 | - | - | - | - | - | 48,751 | ||||||
| Other costs excluding depreciation & amortisation | (38,324) | (1,069) | (220) | (57) | - | - | (39,670) | ||||||
| Other income | - | - | - | - | - | - | - | ||||||
| EBITDA | 10,427 | (1,069) | (220) | (57) | - | - | 9,081 | ||||||
| Depreciation & amortisation | (2,790) | - | - | - | - | - | (2,790) | ||||||
| Results from operating activities | 7,637 | (1,069) | (220) | (57) | - | - | 6,291 | ||||||
| Financial income | - | - | - | 1,309 | - | - | 1,309 | ||||||
| Financial expenses | (2,589) | - | - | (1,086) | (1,793) | (357) | (5,825) | ||||||
| Profit before tax | 5,048 | (1,069) | (220) | 166 | (1,793) | (357) | 1,775 | ||||||
| Taxation | (1,296) | 299 | 62 | (46) | 502 | 99 | (380) | ||||||
| Profit after tax | 3,752 | (770) | (158) | 120 | (1,291) | (258) | 1,395 | ||||||
| 52 week period ended 28 June 2008 | |||||||||||||
| 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | |||||||
| Adjusted profit and loss | Non-recurring significant items | Share options charge | Defined benefit pension scheme | Fair value of interest rate swaps | Fair value on acquisition | As per income statement | |||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||
| Revenue | 165,105 | - | - | - | - | - | 165,105 | ||||||
| Cost of sales | (120,611) | (494) | - | - | - | (266) | (121,371) | ||||||
| Gross profit | 44,494 | (494) | - | - | - | (266) | 43,734 | ||||||
| Other costs excluding depreciation & amortisation | (31,216) | (1,595) | (194) | (128) | - | - | (33,133) | ||||||
| Other income | - | 182 | - | - | - | - | 182 | ||||||
| EBITDA | 13,278 | (1,907) | (194) | (128) | - | (266) | 10,783 | ||||||
| Depreciation & amortisation | (2,735) | - | - | - | - | - | (2,735) | ||||||
| Results from operating activities | 10,543 | (1,907) | (194) | (128) | - | (266) | 8,048 | ||||||
| Financial income | - | - | - | 1,271 | - | - | 1,271 | ||||||
| Financial expenses | (2,809) | - | - | (806) | (157) | (481) | (4,253) | ||||||
| Profit before tax | 7,734 | (1,907) | (194) | 337 | (157) | (747) | 5,066 | ||||||
| Taxation | (2,090) | 847 | 55 | (94) | 44 | 209 | (1,029) | ||||||
| Profit after tax | 5,644 | (1,060) | (139) | 243 | (113) | (538) | 4,037 | ||||||
Adjusted profit before tax was £5.0 million (2008: £7.7 million). This was achieved after net interest payable of £2.6 million (2008: £2.8 million).
The significant non-recurring items in 2009 referred to above, totalling £1.1 million loss before tax, can be broken down as follows:
reorganisation costs (including redundancies) associated with the integration of our cake business (£0.3 million)
exit costs relating to outgoing Chief Executive Officer (£0.5 million)
provision for company contributions to defined benefit scheme related to pension augmentation (£0.3 million)
The significant non-recurring items in 2008, totalling £1.9 million loss before tax, can be broken down as follows:
reorganisation costs associated with the relocation of California Cakes Ltd (£1.2 million)
operating loss and costs associated with the closure of Lightbody Group's Czech subsidiary (£0.3 million)
reorganisation costs associated with integration of Anthony Alan Foods Ltd (£0.2 million)
reorganisation costs associated with integration of Livwell Ltd (£0.3 million)
professional fees relating to the preparation of the claim for research and development tax relief (£0.1 million)
profit on replacement of fire damaged assets at United Central Bakeries Ltd (£0.2 million)
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. Adjusted diluted EPS is 6.9p for the 53 week period (2008: 10.5p).
Basic earnings per share (EPS), calculated on the weighted average number of shares in issue during the year, are 2.3p (2008: 7.5p). Adjusted EPS is calculated by eliminating the impact of the items shown above and is 6.9p for the year (2008: 10.6p). Taking into account the dilutive effect of share options, diluted basic EPS is 2.3p (2008: 7.4p).
Financial Key Performance Indicators
| KPI | 2009 | Restated 2008 | Restated 2007 | Restated 2006 | Restated 2005 |
| Revenue | £178.9m | £165.1m | £107.6m | £72.0m | £58.1m |
| Adjusted EBITDA | £10.4m | £13.3m | £7.9m | £4.3m | £2.9m |
| Adjusted diluted EPS | 6.9p | 10.5p | 9.5p | 6.3p | 4.0p |
| Net debt/(cash) | £41.0m | £43.7m | £29.0m | £14.0m | (£1.3m) |
EBITDA is calculated as earnings before interest, taxation, depreciation and amortisation
Net debt is calculated as cash balances less overdrafts, bank loans, asset finance and mortgages
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.
Acquisitions
In June, the Group (via N&H) acquired the entire issued share capital of Goswell Enterprises Ltd for a total consideration of £2.2 million (including costs), of which £1.7 million is deferred and unconditional. Loan notes have been issued in respect of the deferred consideration and these loan notes are interest free. The initial consideration was financed by the Group's existing cash flow.
During the year deferred consideration of £0.6 million was paid in respect of the acquisition of Yorkshire Farm Bakeries and A&P Foods, acquired in April 2008. At the year end there remained a further £3.3 million deferred consideration in respect of this acquisition, due to be paid over the next 13 months. This deferred consideration does not attract any interest payments.
Cash Flow
The Group realised a net cash inflow from operating activities of £8.2 million during the financial year (2008: £5.9 million) representing an increase of 38% on the previous financial year.
There was a reduction in our working capital requirement of £2.7 million compared to last financial year reflecting the impact of an increased focus in this area over the past 12 months.
Corporation tax payments made in the financial year totaled £0.8 million (2008: £2.2 million) - these payments took account of the research and development tax relief due to the Group and identified in the previous financial year.
Capital expenditure in the period amounted to £3.4 million net of disposals (2008: £2.4 million). £1.1 million was spent at N&H - this was necessary to facilitate its acquisition of Goswells and the associated transfer of production. £0.8 million was spent at UCB with the majority of this in preparation for the development of its existing spare manufacturing facility.
Debt & Bank Facilities
The Group's total net debt as at 4 July 2009 was £41.0 million (28 June 2008: £43.7 million) including net borrowings from HSBC Bank Plc and guaranteed loan notes only. Within this total net debt, £14.5 million is due within one year, including invoice finance and loan notes payable on demand (2008: £12.8 million). Net debt in this instance excludes deferred consideration payable in respect of acquisitions.
During the year the Group agreed revised terms on its debt facility with HSBC Bank Plc. This process was completed in March 2009 and the revised facility took effect from April 2009.
The key features of the revised facility, totaling £49 million, are as follows:-
overdraft (£2.0m)
confidential invoice discounting facility (£16.0m flexible)
two term loans repayable over five years (£12.9m)
two term loans repayable at the end of five years (£4.7m)
mortgage unchanged from current facility (£8.2m)
rolling asset finance facility (£5.4m)
There has been some movement in the interest rate margins on this revised facility and the new term loans are linked to LIBOR. The margins on the remaining items under the facility are linked to the base rate. The impact of these changes on our effective interest rate was to increase it by 1.1%.
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, UCB and Campbells in Scotland, and at Livwell in Hull. In addition, the Group has a strong trade debtor book to support the invoice discounting facility, made up primarily of the UK's major multiple retailers. This debtor book stood at £21.9 million (2008: £23.0 million) at the balance sheet date.
The Group recognises the inherent risk from interest rate rises. To mitigate these risks, the Group has four interest rate swaps in place with a total coverage of £19.0 million (equivalent to 46% of total net debt) at a weighted average rate of 5.3%. In June, a forward starting participating swap arrangement was entered into - this takes effect in June 2010 and runs for four years from that date.
The effective interest rate for the Group at the year end, taking account of the interest rate swaps in place and with base rate at 0.5%, was 5.26%.
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.
Interest cover (based on adjusted EBITDA) for the year to 30 June 2009 was 4.7 (2008: 4.9). Net debt to EBITDA (based on adjusted EBITDA) for the year to 30 June 2009 was 3.9 (2008: 3.3).
It should be noted that whilst current liabilities of £49.9 million, as shown in the consolidated balance sheet at 30 June 2009, exceed current assets of £30.5 million, there is no foreseeable reason why the Group will not be able to meet its current liabilities as they become due.
Taxation
The Group corporation tax charge for the year was £0.4 million (2008: £1.0 million). This represents an effective rate of 21.4% (2008: 20.3%).
Further details on the tax charge can be found in note 6 to the Group's financial statements.
Consolidated Income Statement
for the 53 weeks ended 4 July 2009 and 52 weeks ended 28 June 2008
| 2009 | Restated 2008 | ||||||||||||||||
| Note | Before significant items | Significant non-recurring items | Total | Before significant items | Significant non-recurring items | Total | |||||||||||
| £000 | £000 | £000 | £000 | £000 | £000 | ||||||||||||
| Revenue | 1 | 178,931 | - | 178,931 | 165,105 | - | 165,105 | ||||||||||
| Cost of sales | (130,180) | - | (130,180) | (120,877) | (494) | (121,371) | |||||||||||
| Gross profit | 48,751 | - | 48,751 | 44,228 | (494) | 43,734 | |||||||||||
| Administrative expenses | 3 | (41,391) | (1,069) | (42,460) | (34,273) | (1,595) | (35,868) | ||||||||||
| Other income | 4 | - | - | - | - | 182 | 182 | ||||||||||
| Results from operating activities | 7,360 | (1,069) | 6,291 | 9,955 | (1,907) | 8,048 | |||||||||||
|
|
|
|
|
| |||||||||||||
| Financial income | 5 | 1,309 | - | 1,309 | 1,271 | - | 1,271 | ||||||||||
| Financial expenses | 5 | (5,825) | - | (5,825) | (4,253) | - | (4,253) | ||||||||||
| Net financing expense | (4,516) | - | (4,516) | (2,982) | - | (2,982) | |||||||||||
| Profit before tax | 2,844 | (1,069) | 1,775 | 6,973 | (1,907) | 5,066 | |||||||||||
| Taxation | 6 | (679) | 299 | (380) | (1,876) | 847 | (1,029) | ||||||||||
| Profit from continuing operations | 2,165 | (770) | 1,395 | 5,097 | (1,060) | 4,037 | |||||||||||
| Profit for the financial year | 2,165 | (770) | 1,395 | 5,097 | (1,060) | 4,037 | |||||||||||
| Attributable to: | |||||||||||||||||
| Equity holders of the parent | 1,942 | (770) | 1,172 | 4,910 | (1,060) | 3,850 | |||||||||||
| Minority interest | 223 | - | 223 | 187 | - | 187 | |||||||||||
| Profit for the financial year | 2,165 | (770) | 1,395 | 5,097 | (1,060) | 4,037 | |||||||||||
| Earnings per ordinary share (pence) | |||||||||||||||||
| Basic | 7 | 2.3 | 7.5 | ||||||||||||||
| Diluted | 7 | 2.3 | 7.4 | ||||||||||||||
Consolidated Statement of Recognised Income and Expense
for the 53 weeks ended 4 July 2009 and 52 weeks ended 28 June 2008
| 2009 | 2008 | ||
| Note | £000 | £000 | |
| Actuarial losses on defined benefit pension scheme | (1,634) | (2,682) | |
| Movement in deferred taxation on pension scheme liability/asset | 458 | 801 | |
| Foreign exchange translation differences | 33 | (35) | |
| Movement in deferred taxation on share based payments | - | (227) | |
| Net expense recognised directly in equity | (1,143) | (2,143) | |
| Profit for the financial year | 1,395 | 4,037 | |
| Total recognised income and expense for the financial year | 252 | 1,894 | |
| Attributable to: | |||
| Minority interest | 223 | 187 | |
| Equity holders of the parent | 29 | 1,707 | |
| Total recognised income and expense for the financial year | 252 | 1,894 | |
Consolidated Balance Sheet
at 4 July 2009 and 28 June 2008
| Note | 2009 | 2008 | |
| £000 | £000 | ||
| Non-current assets | |||
| Intangibles | 62,221 | 60,382 | |
| Property, plant and equipment | 25,237 | 24,642 | |
| Other financial assets - investments | 25 | 25 | |
| Pension fund surplus | - | 177 | |
| 87,483 | 85,226 | ||
|
|
| ||
| Current assets | |||
| Inventories | 4,386 | 5,110 | |
| Trade and other receivables | 24,868 | 25,340 | |
| Other financial assets - fair value of interest rate swaps | - | 292 | |
| Cash and cash equivalents | 1,273 | - | |
| 30,527 | 30,742 | ||
| Total assets | 118,010 | 115,968 | |
| Current liabilities | |||
| Bank overdraft | - | (5,965) | |
| Other interest-bearing loans and borrowings | (16,146) | (6,705) | |
| Trade and other payables | (27,007) | (25,578) | |
| Provisions | (750) | (857) | |
| Deferred purchase consideration | (746) | (705) | |
| Contingent deferred purchase consideration | (2,285) | - | |
| Other financial liabilities - fair value of interest rate swaps | (1,501) | - | |
| Current tax liabilities | (371) | (100) | |
| (48,806) | (39,910) | ||
| Non-current liabilities | |||
| Other interest-bearing loans and borrowings | (26,736) | (30,268) | |
| Provisions and other liabilities | (408) | (525) | |
| Deferred purchase consideration | (2,459) | (3,050) | |
| Contingent deferred purchase consideration | - | (2,103) | |
| Deferred tax liabilities | (508) | (1,571) | |
| Pension fund liability | (1,291) | - | |
| (31,402) | (37,517) | ||
| Total liabilities | (80,208) | (77,427) | |
| Net assets | 37,802 | 38,541 | |
| Equity attributable to equity holders of the parent | |||
| Share capital | 514 | 514 | |
| Share premium account | 26,680 | 26,680 | |
| Capital redemption reserve | 578 | 578 | |
| Retained earnings | 9,701 | 10,584 | |
| 37,473 | 38,356 | ||
| Minority interest | 329 | 185 | |
| Total equity | 37,802 | 38,541 | |
These financial statements were approved by the board of directors on 29 September 2009 and were signed on its behalf by:
Lisa Morgan (Director)
Consolidated Cash Flow Statement
for the 53 weeks ended 4 July 2009 and 52 weeks ended 28 June 2008
| Note | 2009 | 2008 | |
| £000 | £000 | ||
| Cash flows from operating activities | |||
| Profit for the year | 1,395 | 4,037 | |
| Adjustments for: | |||
| Taxation | 380 | 1,029 | |
| Net finance expenses | 4,516 | 2,982 | |
| Depreciation | 2,753 | 2,735 | |
| Release of government grant | - | (64) | |
| Loss/(profit) on disposal of plant, equipment and trademark | 15 | (182) | |
| Non-current onerous lease provision | - | 525 | |
| Share options charge | 220 | 194 | |
| Current service cost element of pension scheme | 407 | 355 | |
| Contributions by employer to pension scheme | (350) | (227) | |
| Fair value adjustment for inventory revaluation on acquisition of subsidiaries | - | 266 | |
| Operating profit before changes in working capital | 9,336 | 11,650 | |
| Changes in working capital | |||
| Decrease/(increase) in inventories | 723 | (606) | |
| Decrease in trade and other receivables | 356 | 586 | |
| Increase/(decrease) in trade and other payables | 1,596 | (1,219) | |
| Cash generated from operations | 12,011 | 10,411 | |
| Interest paid | (3,024) | (2,310) | |
| Interest received | - | - | |
| Tax paid | (751) | (2,167) | |
| Net cash from operating activities | 8,236 | 5,934 | |
|
| |||
| Cash flows from investing activities | |||
| Purchase of property, plant and equipment | (3,393) | (2,551) | |
| Proceeds from disposal property, plant and equipment | 30 | - | |
| Proceeds of insurance claim on property, plant and equipment | - | 185 | |
| Purchase of subsidiary companies | (1,025) | (17,400) | |
| Net cash used in investing activities | (4,388) | (19,766) | |
| Cash flows from financing activities | |||
| Drawdown of invoice discounting | 12,454 | - | |
| Repayment of current bank loans | (6,039) | (2,992) | |
| (Repayment) / drawdown of former bank facility | (1,737) | 14,600 | |
| Repayment of loan notes | (50) | (819) | |
| Drawdown of asset finance facilities | 1,277 | 2,245 | |
| Repayment of asset finance liabilities | (1,337) | (1,096) | |
| Issue of ordinary share capital | - | 104 | |
| Equity dividend paid | 10 | (1,132) | (1,029) |
| Minority interest dividend paid | 10 | (79) | (39) |
| Net cash generated by financing activities | 3,357 | 10,974 | |
| Net increase / (decrease) in cash and cash equivalents | 7,205 | (2,858) | |
| Opening cash and cash equivalents | (5,965) | (3,176) | |
| Effect of exchange rate fluctuations on cash held | 33 | 69 | |
| Cash and cash equivalents at end of period | 1,273 | (5,965) | |
Notes to Financial Statements
1. Revenue and segment information
The Group is managed as one operation involving the sale of celebration, health and indulgent products in the bakery sector and is reported as one segment for the purpose of these Financial Statements.
An analysis by geographical segment is shown below:
| Restated | |||||
| Geographical split of turnover by destination | 2009 | 2008 | |||
| £000 | £000 | ||||
| United Kingdom | 167,367 | 158,654 | |||
| Europe | 10,944 | 6,451 | |||
| Rest of World | 620 | - | |||
| Total | 178,931 | 165,105 | |||
| Net asset and margin geographical split would not provide meaningful information owing to the necessity to allocate costs, assets and liabilities. Capital expenditure on segment assets, on a cash basis, in the year is in relation to the UK segment and is detailed in note 13. | |||||
| Geographical split of turnover by source | United Kingdom | Europe | Total | ||
| £000 | £000 | £000 | |||
| 2009 | |||||
| Turnover | 169,551 | 9,380 | 178,931 | ||
| Gross Profit | 45,909 | 2,842 | 48,751 | ||
| Total assets | 116,010 | 2,000 | 118,010 | ||
| Total liabilities | (78,455) | (1,753) | (80,208) | ||
| Net assets | 37,555 | 247 | 37,802 | ||
| 2008 | Restated | Restated | Restated | ||
| United Kingdom | Europe | Total | |||
| £000 | £000 | £000 | |||
| Turnover | 156,308 | 8,797 | 165,105 | ||
| Gross Profit | 41,407 | 2,327 | 43,734 | ||
| Total assets | 113,252 | 2,716 | 115,968 | ||
| Total liabilities | (74,671) | (2,756) | (77,427) | ||
| Net assets | 38,581 | (40) | 38,541 | ||
Notes (continued)
2. Cost of sales, gross profit and other operating expenses
| 53 weeks ended 4 July 2009 and 52 weeks ended 28 June 2008 | 2009 | 2009 | 2009 | Restated 2008 |
| £000 | £000 | £000 | £000 | |
| Continuing | Impact of Goswells | Total | Continuing | |
| Revenue | 178,743 | 188 | 178,931 | 165,105 |
| Cost of sales | (130,057) | (129) | (130,180) | (121,371) |
| Gross profit | 48,686 | 59 | 48,751 | 43,734 |
| Gross profit % | 27.2% | 31.3% | 27.2% | 26.5% |
| Administration | (41,367) | (56) | (41,391) | (34,273) |
| Other income* | - | - | - | 182 |
| Results from operating activities before reorganisation costs | 7,319 | 3 | 7,360 | 9,643 |
| Reorganisation administration expenses | (1,069) | - | (1,069) | (1,595) |
| Results from operating activities after reorganisation costs | 6,250 | 3 | 6,291 | 8,048 |
| *Other income 2008: £182,000 relates to the difference between the insurance proceeds received and the net book value of the assets destroyed by the fire at United Central Bakeries in October 2006. | ||||
Notes (continued)
3. Expenses and auditors' remuneration
Included in profit are the following:
| 2009 | 2008 | |
| £000 | £000 | |
| Depreciation of owned tangible assets | 2,138 | 2,175 |
| Depreciation on assets under finance leases and hire purchase contracts | 615 | 560 |
| Government grants | - | (64) |
| Difference on foreign exchange | 388 | (269) |
| Hire of plant and machinery - operating leases | 323 | 500 |
| Hire of other assets - operating leases | 571 | 446 |
| Share option charges | 220 | 194 |
| Movement on fair value of interest rate swaps | 1,793 | 157 |
| Research and development | 1,487 | 1,490 |
| Amortisation of intangibles | - | - |
In addition to the above, an amount of £60,000 (2008: £188,000) relating to corporate finance fees has been capitalised during the year. These costs relate to acquisitions made during the year.
The movement on the fair value of interest rate swaps reflect the decrease in interest rates between the periods from 6.0% to 2.8%.
Amortisation of intangibles for the year was deemed to be negligible given the date of acquisition being 17 June 2009.
Auditors' remuneration:
| 2009 | 2008 | |
| £000 | £000 | |
| Audit of these financial statements | 93 | 95 |
| Amounts receivable by auditors and their associates in respect of: | ||
| Other services in relation to taxation | 83 | 111 |
| The auditor's remuneration is in respect of KPMG Audit Plc. The fee for other services in relation to taxation in 2009 includes tax inquiry work and tax planning (2008 includes £96,000 for assistance in preparing research and development claims). | ||
Notes (continued)
4. Significant non-recurring items
The Group presents certain items as significant and non-recurring. These relate to items which, in management's judgement, need to be disclosed by virtue of their size or incidence in order to obtain a more meaningful understanding of the financial information.
| 2009 | 2008 | ||||
| £000 | £000 | ||||
| Reorganisation costs | (789) | (1,993) | |||
| Administrative expenses | (280) | (96) | |||
| Other income | - | 182 | |||
| (1,069) | (1,907) | ||||
a) Reorganisation costs
The reorganisation costs relate to the following:
| 2009 | 2008 | ||||
| £000 | £000 | ||||
| Reorganisation costs (including redundancies) associated with the integration of the cake business | (455) | - | |||
| Exit costs relating to outgoing Chief Executive Officer | (334) | - | |||
| Relocation and integration of the California Cake Company business from their previous site to the Lightbody site in Hamilton | - | (1,214) | |||
| Operating loss and closure costs associated with the Lightbody Group subsidiary in the Czech Republic | - | (252) | |||
| Reorganisation costs associated with the integration of Anthony Alan Foods Limited | - | (200) | |||
| Reorganisation costs associated with the integration of Livwell Limited | - | (327) | |||
| (789) | (1,993) | ||||
| b) Administrative expenses £280,000 relates to the provision for future company contributions as a result of a contractual liability for staff pension augmentation, relating to defined benefit scheme (2008: £96,000 represents the fees payable to KPMG LLP, an associate of KPMG Audit Plc for assistance in submission of a claim to the Inland Revenue for research and development tax relief covering the period 1 July 2002 to 30 June 2007).
| |||||
| c) Other income There was no other income during the year (2008: £182,000 relates to the difference between the insurance proceeds received and the net book value of the assets destroyed by the fire at United Central Bakeries in October 2006). | |||||
5. Finance income and expense
Recognised in the income statement
| 2009 | 2008 | |
| £000 | £000 | |
| Finance income | ||
| Expected return on defined benefit pension plan obligation | 1,309 | 1,271 |
| Total finance income | 1,309 | 1,271 |
| Finance expense | ||
| Interest on defined benefit pension plan obligations | (1,086) | (806) |
| Bank interest payable | (2,238) | (2,964) |
| Interest on interest rate swap agreements | (351) | 155 |
| Change in fair value of interest rate swaps | (1,793) | (157) |
| Discount charge on deferred consideration - Goswell Enterprises Ltd | (2) | - |
| Discount charge on deferred consideration - Yorkshire Farm Bakeries and A&P Foods | (173) | (223) |
| Discount charge on deferred consideration - Anthony Alan Foods Ltd | (182) | (128) |
| Discount charge on deferred consideration - Lightbody Group Ltd | - | (130) |
| Total finance expense | (5,825) | (4,253) |
| The Group has entered into four interest rate swap arrangements and one forward starting participating swap arrangement to hedge its risks associated with interest rate fluctuations: £5.0m for five years from 18 November 2005 (fixed) at 4.7% £5.0m over five years from 18 November 2005 (reducing to nil over five years) at 4.8% £11.0m over five years from 23 February 2007 (reducing to £3.5m over five years) at 5.8% £5.0m for five years from 1 May 2008 (fixed) at 5.5% £10.0m for four years from 1 June 2010 (fixed) at 4.9% These arrangements do not meet the conditions necessary for hedge accounting to be applied and, therefore, changes in their fair value are recognised immediately in the income statement resulting in a charge of £1,793,000 as indicated above. This charge represents a movement of 3.2% in the weighted average market rate payable for similar contracts from 6.0% at 30 June 2008 to 2.8% at 30 June 2009. | ||
Notes (continued)
6. Taxation
Recognised in the income statement
| 2009 | 2008 | |
| £000 | £000 | |
| Current tax expense | ||
| Current year | 1,106 | 1,672 |
| Adjustments for prior years | (84) | (393) |
| Current tax expense | 1,022 | 1,279 |
|
| ||
| Deferred tax expense | ||
| Origination and reversal of timing differences | (660) | (312) |
| Retirement benefit deferred tax charge | 46 | 94 |
| Adjustments for prior years | (28) | (32) |
| Deferred tax (credit)/ expense | (642) | (250) |
| Tax expense in income statement | 380 | 1,029 |
|
|
|
Reconciliation of effective tax rate
The tax assessed for the period is lower (2008: lower) than the standard rate of corporation tax in the UK of 28% (2008: 30%). The differences are explained below:
| 2009 | 2008 | |
| £000 | £000 | |
| Profit per accounts before taxation | 1,775 | 5,066 |
| Tax using the UK corporation tax rate of 28%, (2008: 30%) | 497 | 1,520 |
| Non-deductible expenses | 6 | 15 |
| Timing differences on share options | 84 | (21) |
| Unrelieved tax losses | 5 | 75 |
| Utilisation of tax losses | (63) | - |
| Recognition of tax losses | (81) | - |
| Adjustments to tax charge in respect of prior periods | (112) | (425) |
| Overseas profits charged at different taxation rate | 43 | 19 |
| Reduction in taxation rate | 1 | (98) |
| Other movements | - | (56) |
| Total tax expense | 380 | 1,029 |
The parent company has a deferred tax asset of £672,105 (2008: £672,105 restated at 28%). This asset has not been recognised in these Financial Statements as suitable profits are not expected to arise in the future.
A deferred tax asset of £34,424 relating to losses brought forward and transferred from the Anthony Alan Foods Ltd business has not been recognised at the balance sheet date. The losses will be recognised when suitable profits arise to offset these losses.
Notes (continued)
7. Earnings per ordinary share
Basic earnings per share for the period is calculated on the basis of profit for the year after tax, divided by the weighted average number of shares in issue 51,448,466, (2008: 51,359,770).
Basic diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares. For 30 June 2009 the weighted average number is 51,734,501 shares, (2008: 52,212,056).
An adjusted earnings per share and a diluted adjusted earnings per share have also been calculated as in the opinion of the Board this will allow shareholders to gain a clearer understanding of the trading performance of the Group. These adjusted earnings per share exclude:
Reorganisation and other significant non-recurring costs,
IAS 39 'Financial Instruments: Recognition and Measurement' fair value adjustment relating to the Group's interest rate swaps,
IAS 19 'Accounting for retirement benefits' relating to the net income
IFRS 3 'Business Combinations' discount charge relating to the deferred consideration payable for Anthony Alan Foods Limited and the more recent Yorkshire Farm Bakery and A&P Foods acquisition.
The taxation effect at the appropriate rate on the adjustments.
| Year ending 30 June 2009 | Year ending 30 June 2008 | |||||
| Earnings | Weighted average number of shares | Per share amount |
Earnings | Weighted average number of shares | Per share amount | |
| £000 | 000's | Pence | £000 | 000's | Pence | |
| Basic earnings per share | ||||||
| Basic earnings | 1,172 | 51,449 | 2.3 | 3,850 | 51,360 | 7.5 |
| Share option charge | 220 | 0.4 | 194 | 0.4 | ||
| Movement in the fair value of interest rate swaps | 1,793 | 3.5 | 157 | 0.3 | ||
| Defined benefit pension scheme | (166) | (0.3) | (337) | (0.7) | ||
| Fair value adjustments relating to acquisitions | 357 | 0.7 | 747 | 1.5 | ||
| Significant non-recurring items | 1,069 | 2.1 | 1,907 | 3.7 | ||
| Taxation on adjustments | (916) | (1.8) | (1,061) | (2.1) | ||
| Adjusted earnings per share | 3,529 | 51,449 | 6.9 | 5,457 | 51,360 | 10.6 |
| Dilutive effect of options | 286 | 747 | ||||
| Dilutive effect of warrants | - | 105 | ||||
| Basic diluted earnings per share | ||||||
| Basic earnings | 1,172 | 51,735 | 2.3 | 3,850 | 52,212 | 7.4 |
| Share option charge | 220 | 0.4 | 194 | 0.4 | ||
| Movement in the fair value of interest rate swaps | 1,793 | 3.5 | 157 | 0.3 | ||
| Defined benefit pension scheme | (166) | (0.3) | (337) | (0.7) | ||
| Fair value adjustments relating to acquisitions | 357 | 0.7 | 747 | 1.4 | ||
| Significant non-recurring items | 1,069 | 2.1 | 1,907 | 3.7 | ||
| Taxation on adjustments | (916) | (1.8) | (1,061) | (2.0) | ||
| Adjusted diluted earnings per share | 3,529 | 51,735 | 6.9 | 5,457 | 52,212 | 10.5 |
Notes (continued)
8. Acquisition of subsidiaries
Goswell Enterprises Ltd
On 17 June 2009 the Group, via its subsidiary Nicholas and Harris Ltd, acquired 100% of the ordinary shares in Goswell Enterprises Ltd for £2.2m (before the discounting of the loan notes). The company supplies a range of speciality breads to a number of supermarkets. Since the acquisition date of 17 June 2009 the Company has contributed £3,000 of profit before tax to the consolidated results for the year.
Profits and turnover figures as if acquired on 1 July 2008 have not been provided as the operational environment, commercial structure and Group synergies means that the information would not be meaningful.
£1.7m of this consideration was issued in the form of interest free loan notes and will become due in instalments over the next four years. The phasing of the payments is as follows:
£0.5m payable during June 2010
£0.5m payable during June 2011
£0.5m payable during June 2012
£0.2m payable during June 2013
9. Analysis of net debt
| As at year ended 28 June 2008 £000 | Cash flow £000 | Acquisitions and disposals £000 | As at year ended 4 July 2009 £000 | |||||
| Bank (overdraft) / cash | (5,965) | 7,238 | - | 1,273 | ||||
| Loan notes | (135) | 50 | (1,588) | (1,673) | ||||
| Debt | (6,100) | 7,288 | (1,588) | (400) | ||||
| Debt due within one year | (5,514) | 3,149 | - | (2,365) | ||||
| Debt due after one year | (28,752) | 4,627 | - | (24,125) | ||||
| Invoice discounting due within one year | - | (12,454) | - | (12,454) | ||||
| Hire purchase obligations due within one year | (1,161) | 187 | - | (974) | ||||
| Hire purchase obligations due after one year | (2,185) | (127) | - | (2,312) | ||||
| Total net debt | (43,712) | 2,670 | (1,588) | (42,630) | ||||
| Net debt as detailed above excludes discounted deferred consideration of £5.5 million (2008: £5.9 million). Loan notes with a discounted value of £1.6m were issued as part of the consideration of the purchase of the entire share capital of Goswell Enterprises Ltd. These are repayable over the next four years with the final payment due in June 2013. | ||||||||
10. Dividends
The following dividends were paid during the period:
| 2009 | 2008 | |
| £000 | £000 | |
| 2.2p (2008 : 2.0p) per qualifying ordinary share | 1,132 | 1,029 |
The Directors are not recommending payment of a dividend for the period to 4 July 2009.
During the year a dividend of £79,000 (2008: £39,000) was also paid to the other shareholder in Lightbody Stretz.