Strategic Report
28 Finsbury Food Group Annual Report & Accounts 2018
Financial Review
Corporate Governance
Financial Statements
Earnings Per Share (EPS)
EPS comparisons to the year before can be distorted by significant non-recurring items and other items highlighted in the tables on the previous page. The Board is focused on growing adjusted diluted EPS, which is calculated by eliminating the impact of the items highlighted on the previous page, as well as amortisation of intangibles, and incorporates the dilutive effect of share options. Adjusted diluted EPS is 9.8p (2017: 9.5p).
Basic EPS Adjusted basic EPS Diluted basic EPS Adjusted* diluted** EPS
* You can find further details in Note 9. ** Diluted EPS takes basic EPS and incorporates the dilutive effect of share options.
2018 1.7p
10.2p 1.6p 9.8p
2017
7.1p 9.8p 6.9p 9.5p
Cash Flow
There was a decrease in our working capital requirement of £1.3 million (2017: £2.5 million increase) in the financial year. Corporation Tax payments made in the financial year totalled £3.3 million (2017: £2.7 million). The payments in the current and prior year took account of the research and development tax relief due to the Group, tax losses being utilised, and a higher tax rate charged on overseas profits. Capital expenditure in the year amounted to £12.6 million (2017: £12.5 million).
Debt and Bank Facilities
The Group’s total net debt is £15.6 million (2017: £17.5 million), down £1.9 million from the prior year. During the year, the Group refinanced its debt facilities. The new facility is a £45.0 million revolving credit facility provided by a club of three banks – HSBC, Rabobank and RBS. The facility is on improved terms, is available for five years, and also includes scope for it to be increased by up to a further £45.0 million.
The Group is able to offer strong asset backing to secure its borrowings. The Group owns freehold sites at Memory Lane in Cardiff, Fletchers’ site at Sheffield and Lightbody in Scotland. In addition, the Group has a strong trade debtor book made up primarily of the UK’s major multiple retailers. This debtor book stood at £40.0 million (2017: £45.2 million) at the period-end date.
The Group recognises the inherent risk from interest rate rises, and uses interest rate swaps to mitigate these risks. The Group entered into a swap for £20.0 million for five years from 3 July 2017 (fixed) at 0.455%. The total balance of swaps at 30 June 2018 is £20.0 million (2017: £nil). The counterparty to these transactions is HSBC Bank Plc.
The effective interest rate for the Group at the year end, taking account of the interest rate swap in place with base rate at 0.5% and LIBOR at 0.501%, was 1.66% (2017: 2.15%).
Financial Covenants
The Board reviews the Group’s cash flow forecasts and key covenants regularly, to ensure 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 earnings before interest, tax, depreciation and amortisation – EBITDA) for the 52 weeks to 30 June 2018 was 40.7 (2017: 28.4). Net bank debt to EBITDA (based on adjusted EBITDA) for the year to 30 June 2018 was 0.6 (2017: 0.7).
Taxation
The Group taxation charge for the year was £1.3 million (2017: £3.0 million). This represents an effective rate of 21.5% on profits before significant and non-recurring and other items (2017: 21.6%). You can find further details on the tax charge in Note 8 to the Group’s Financial Statements.
Financial and Non-Financial Key Performance Indicators
We monitor a range of financial and non-financial KPIs at site level covering, amongst others, customer service, quality and health and safety.
The Group Board receives a regular overview of these. We discuss these KPIs in further detail on pages 20 and 21.
The Strategic Report was approved by the Board of Directors on 14 September 2018 and was signed on its behalf by:
Stephen Boyd Director
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