Chief Executive’s Report


Finsbury Foods had two very different halves during the financial year. The first half maintained the hard-earned impetus of previous periods. Sales were marginally down but Profit Before Tax registered a 50% uplift, principally due to the decrease in interest charges following the sale of our Free From business.


Te second period was more challenging. Commodity price inflation began edging back upwards with escalating costs in chocolate, butter, energy and labour. Our historical customer base was adjusting to meet the threat of value- oriented discounters and we found ourselves squeezed on all sides.


We have underlined yet again our ability to achieve consistent results under demanding conditions.


Refocus was imperative. Around the turn of the year, the management team set about eliminating £1m in annualised overhead costs and implemented a dramatic increase in capital spend. Significant projects included the installation of leading edge robotics at the cake factory in Scotland and extending space at Nicholas & Harris by 60%.


At the end of another exacting year, it gives me great pleasure to report a further rise in bottom line growth. We have good momentum slightly disguised by a poor market, underlining yet again our ability to achieve consistent results under demanding conditions.


Trading Performance Results for the full 52-week period ending 28 June 2014 are described in greater depth in the Strategic Report but there are a number of areas I would like to take this opportunity to highlight:


• Group revenue from continuing operations £175.7 million (2013: £176.6 million)


• Profit before tax up 18% to £6.5 million (2013: £5.5 million)


• Total net debt £8.8 million (2013: £7.4 million)


• Adjusted diluted EPS 6.3p (2013: 5.9p) • Final proposed dividend 0.75 pence per share, amounting to a total dividend of 1 pence per share (2013: 0.75 pence per share)


• Capital investment spend £6.2 million (2013: £4.2 million)


• Investment in single serve cake slice 'snap pack' successfully completed during the year as well as the largest cake bites robotic picking installation in the world


• Commissioning of speciality bread facility expansion, delivering 60% additional space at Nicholas & Harris.


Beyond Te Numbers


Consumer behaviour has changed, polarising the marketplace. Having spotted an opportunity on margin, Aldi, Lidl and Pound Shops are reporting up to 30% year-on-year growth. Premium retailers, hindered by low food inflation, are struggling to retain market share.


For Finsbury Foods, the situation is delicate. Tere are self-evident sensitivities between our historical customer base and the burgeoning new players. Ultimately, you have to follow the consumer but existing relationships must be safeguarded.


Given our recent track record, one area of relative disappointment is the speciality bread business which had been enjoying double-digit growth. A flat year was primarily caused by market dynamics, specifically the impact of the so-called ‘Bread Wars’.


Organic growth will be harder to come by. Acquisitions signpost the route forward but not at any price. Te Board has been working assiduously to uncover investment opportunities but is not prepared to meet unrealistic valuations. I am confident that value expectations will start to temper in the near future and we will be ready to step in.


After years of dedicated service, Martin Lightbody has relinquished the role of Chairman. Having assumed the mantle under testing circumstances, Martin proved a steady figurehead during the turnaround phase, carrying out his duties with dedication and resilience. David Marshall and Crawford Currie have also stepped down from the Board after many years service and I would like to thank all three for the support and contribution.


As of 1 July, the baton passed to the suitably surnamed Peter Baker. Steeped in industry experience at RHM Consumer Brands, British Bakeries and Rank Hovis Mills, Peter is committed to taking a proactive role on behalf of Finsbury, acting as a conduit for change.


It has taken a lot longer than I hoped or expected to get to this stage but recognition is spreading. In 2013, Finsbury Foods received the coveted Bakery Supplier of Te Year Award while Martin Lightbody was voted Chairman of Te Year at the Quoted Company Awards.


Finsbury Foods remains driven by a passion to meet consumer expectations for affordable quality food. We didn’t install robots to keep pace with technology but to pass efficiencies down to our consumers, enhancing the appeal of our category and our cake.


Our course is set. Te business environment isn’t going to get any easier but doing the right things is the only long-term solution. We must persevere with internal investment, keep scanning the horizon for acquisitions and the right opportunities will come.


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