FIF.L Regulatory News (FIF)

Finsbury Food Group Plc

Trading and COVID-19 Update

Finsbury Food Group Plc (AIM: FIF), a leading UK speciality bakery manufacturer of cake, bread and morning goods for both the retail and foodservice channels, provides the following update in light of COVID-19.

Trading

Following the strong results announced in February, trading in the first two months of the second half of our financial year was tracking in line with market expectations.

Since then, as the effects of COVID-19 on the UK and Europe have become more pronounced, and with the UK government taking the decision to close food outlets, schools and other public places where food is provided, our UK foodservice business, which accounted for approximately 20% of total Group revenue in FY19, has seen a significant reduction in demand.

While the performance of the largest part of the Group, retail, is proving resilient with overtrade in bread and pockets of weakness in cake, trading in our foodservice business is likely to continue to be significantly impacted in the immediate term as a consequence of the closures. We are in the very early stages of understanding the impact of the virus on our business and, with the situation being as fluid as it is, it is not currently possible to provide guidance on future earnings.

Response to COVID-19

As a manufacturer of a wide range of baked goods, we are committed to playing our part in ensuring the UK's supermarkets have the food stocks needed at this time of unprecedented demand. The health and safety of our employees is our top priority, and we continue to adhere to the UK government's rules and guidelines, with extensive procedures in place across our sites.

Considering the actual and anticipated change in demand across the business, the Board is taking actions to manage short-term costs, while ensuring the business remains on a sound footing to deliver on its longer-term growth ambitions. These include:

- Temporarily suspending production at our Kara site in Manchester whilst continuing to service customer sales from stock (Kara is solely focused on the foodservice channel) and reviewing shift patterns and production elsewhere as sales dictate;

- The freezing of all discretionary expenditure and capital investment; and

- Careful management of cash resources.

The Board has also taken the decision to withdraw its proposed interim dividend, as announced on 24 February 2020. While we remain committed to the payment of dividends, we believe it is prudent to conserve the Group's cash at this time of heightened instability. The Board will assess the Group's cash position and the outlook for the business at time of the full year results, and will adjust its approach to the final dividend accordingly.

Financial update

At the end of December 2019, the Group had net debt of £32.5 million. The Group has extensive headroom in its facilities, with a £55.0 million revolving credit facility and an accordion of £35.0 million.

We have strong relationships with our three banks and have been in regular dialogue with them since the onset of COVID-19. They remain highly supportive and the Board is comfortable that it will be able to manage the situation from its current financial position.

Outlook

Until we have more visibility over the COVID-19 situation, we will continue to manage the business with a view to securing maximum stability in the short term for shareholders, employees, customers and suppliers and will provide the market with updated guidance on performance as and when appropriate.

While the virus will continue to have an impact on normal trading patterns in the near term, the fundamentals of the business remain sound, and the Board is confident in the Group's ability to withstand the current situation and deliver on its long-term growth ambitions.

John Duffy, CEO of Finsbury Food Group, said:

"Despite the Group's short-term performance being difficult to predict with any certainty until we have a clearer picture of how COVID-19 will develop, we are encouraged by the healthy demand we continue to see in the larger retail side of our business.

"While the coming weeks and months are likely to be some of the more turbulent we've seen, the fundamentals of the business remain sound and we see no reason to believe the virus will damage the longer-term value proposition of the business.

"Our employees across the Group have thus far risen superbly to the challenge, and I would like to take this opportunity to thank them all for their continued hard work and dedication at what is an extremely difficult time, and to reassure them that their well-being continues to be our priority."

ENDS

This announcement contains inside information.

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Notes to editors:

· Finsbury Food Group Plc (AIM: FIF) is a leading UK manufacturer of cake and bread bakery goods, supplying a broad range of blue chip customers within both the grocery retail and 'out of home eating' foodservice sectors including major multiples and leading foodservice providers.

· The Company is one of the largest speciality bakery groups in the UK and, with its Overseas division, has sales in the financial year ending 29 June 2019 exceeding £315m.

· The Company's bakery product range is comprehensive and includes:

o Large premium and celebration cakes.

o Small snacking cake formats such as cake slices and bites.

o Artisan, healthy lifestyle and organic breads through to rolls, muffins (sweet and savoury) and morning pastries, all of which are available both fresh and frozen dependent on customer channel requirements.

o Gluten Free bread, morning goods and cake ranges.

· The Company is one of the largest ambient cake manufacturers in the UK, a market valued at over £965 million (source: 52 w/e 7th December 2019). The retail bread and morning goods market has a value of £4.6 billion (source: Kantar Worldpanel 52 w/e 29th December 2019). The retail Free From Cake market is valued at £51.7 million (source: Kantar Worldpanel 52 w/e 29th December 2019). The retail Free From bread & morning goods market is valued at £130.2 million (source: Kantar Worldpanel 52 w/e 29th December 2019).The UK Out of Home sector Foodservice Bakery sector is worth approximately £764 million per annum (source: UK foodservice data derived from MCA data for 52 weeks to 30th June 2019). The UK foodservice cake and sweet morning goods bakery sector is worth approximately £941 million per annum (UK foodservice data derived from MCA data for 52 weeks to 30th June 2019).

· The Company comprises a core UK Bakery division and an Overseas division:

o The UK Bakery division has manufacturing sites in Cardiff, East Kilbride, Hamilton, Salisbury, Sheffield, Manchester, and Pontypool.

o The Overseas division comprises the Company's 50% owned company, Lightbody Stretz Ltd, which supplies and distributes the Group's UK-manufactured products and third party products, primarily to Europe, and the Company's manufacturing facility in Żywiec in Poland.