Chief Executive’s Report
Our attitude has remained consistent. Identifying areas of cost saving, paying down debt, restructuring our product range for growth, deleveraging the balance sheet: each element laying the platform for the step change acquisition that would accelerate progress.
In October 2014, Finsbury acquired the Fletchers Bakery Group, a bread and morning goods business with three sites and a £100m turnover.
It was a big call for the Board but the right call. Part funded by an oversubscribed equity raise, the acquisition necessitated re-listing the Company on the AIM market.
I am pleased to report the larger Group is operating well, maintaining strong growth and sales trajectories.
“To some degree, a dividend is about confidence. What the dividend says is we believe in the earnings.”
Trading Performance Results for the full 52-week period ending 27 June 2015 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 £256.2 million (£175.7 million in 2014).
• Adjusted profit before tax up 76% to £11.4 million (2014: £6.5 million).
• Record capital investment spend £7.4 million (2014: £6.2 million).
• Strong growth in adjusted diluted EPS, up 22% to 7.7p per share.
• Final dividend 1.67p per share, amounting to a total dividend of 2.50p per share (2014: 1.00p).
• Total net debt £21.3 million equates to 1.0 times pro forma annualised Group EBITDA.
• Foodservice sales growth outpacing market, 20 new products launched across five ranges.
• Winner of 2015 Insider Wales Dealmakers Deal of the Year Award.
• Winner of Bakery Manufacturer of the year for 2015 at the Bakery Industry Awards.
• Food Manufacturers’ Bakery Manufacturing Company of the Year 2014. 1st, 2nd and 3rd place in the Q Awards.
• Successful robotic installation in Hamilton and Cake Innovation Centre completed.
• Baking Academies set up in Cake and Bread.
Drilling Down Our core business continues to perform strongly. Underlining a robust performance in the second half of last year, our cake business registered an increase in market share, volume and turnover. Organic growth of 6% was stimulated by increased investment in promotional campaigns, outstanding performance from licensed products and innovative methods of optimising the mix for customers.
One acquisition followed another. Reaching the growth stage has taken longer than anticipated but momentum was sustained by a second acquisition, Johnstone’s, in June.
Johnstone’s Just Desserts Ltd offers fresh sales outlets and distribution channels, this acquisition will complement our Fletchers growth plans to reconfigure established products – Sharing & Snacking cakes and Artisan Bread – making them available to an entirely new audience of foodservice customers.
The pace of progress is evident in all areas of activity. We invested £7m in capital expenditure this year and will spend £11m over the next 12 months. Now employing 3,200 members of staff across the Group, Finsbury is developing people strategies in both divisions, establishing Baking Academies and setting up sustainability initiatives.
Our balance sheet has been transformed. Raising fresh equity enabled the Group to take on less debt, enabling us to pay a bigger dividend. To some degree, a dividend is about confidence. What the dividend says is we believe in the earnings.
However, the economic outlook remains uncertain. Consumers still have limited disposable income and they want to spend it wisely. Discounters are continuing to take market share in a grocery sector that is relatively static.
Scale becomes important. If you’re up against a well-run, well-invested larger business, it’s increasingly hard to compete in the area of food. I think we’re seeing a number of small food businesses go into receivership – we’ve just bought one – and I see more opportunities of this kind in the future.
The coming year, behind the scenes, will be demanding. Fresh layers of infrastructure are required to support £300m of annualized sales. We have already recruited a senior Group HR Director; we need to make sure we have the right people around the table to engage in the debate and make sure we take the right decisions.
Our vision has never wavered; to build a speciality bakery group focused on quality products, delivering what consumers demand and our customers want.
That vision is starting to bear fruit. We’ve done the hard yards, built a track record of doing the right things and navigated a route to balance sheet resilience.
The Group is taking shape as a diversified platform, equipped to increase shareholder value, identify acquisition opportunities and deliver further growth.
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