49 Finsbury Food Group Annual Report & Accounts 2018
Independent Auditor’s Report to the Members of Finsbury Food Group Plc
1. Our Opinion is Unmodified
We have audited the Financial Statements of Finsbury Food Group Plc (“the Company”) for the 52 week period ending 30 June 2018 which comprise the Consolidated Statement of Profit and Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement, Company Balance Sheet, Company Statement of Changes in Equity, and the related notes, including the accounting policies in Notes 1 and 30.
In our Opinion: • The Financial Statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June 2018 and of the Group’s profit for the 52 week period then ended;
• The Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU);
• The Parent Company Financial Statements have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework; and
• The Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
Materiality: Group Financial Statements as a whole Coverage
Risks of material misstatement Recurring risks
£850,000 (2017: £875,000) 5% of adjusted profit before tax
(2017: 5% of adjusted profit before interest and tax) 99% (2017: 90%) of Group profit after tax vs 2017
Recoverability of Group goodwill and of Parent’s investment in subsidiaries 2. Key Audit Matters: Our Assessment of Risks of Material Misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the Financial Statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. This matter was addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. In arriving at our audit opinion above, the key audit matter is as follows:
The risk
Recoverability of Group goodwill and of Parent’s investment in subsidiaries
(Group’s goodwill: £69.2 million; 2017: £69.2 million
Parent investment in subsidiaries: £101.0 million; 2017: £100.8 million)
Refer to page 59 (Accounting Policy) and page 70 (Financial Disclosures).
Forecast-based valuation:
In planning our audit we identified risks that may have indicated risks of irrecoverability of the Group’s significant goodwill balance, potential changes in customer demand and preferences in certain markets and general cost inflation across the industry.
Assessing the recoverability of goodwill involves forecasting and discounting future cash flows, which rely on the Directors’ assumptions and estimates of future trading performance. Parent Company’s investment is assessed in a similar manner.
Our response Our procedures included:
• Benchmarking assumptions: We challenged the discount rate used in the forecasts by benchmarking this against similar companies.
• Sensitivity analysis: We performed sensitivity analysis on key assumptions including: sales growth; margins (incorporating potential adverse pricing as a result of changes to future tariff rates); and the discount rate.
• Tests of detail: We compared the carrying amount of the investments with the net assets value of the respective subsidiary, being an approximation of their minimum recoverable amount, to identify whether the net asset values were in excess of the carrying amounts.
• Our sector experience: Where the investment value was not supported by the net assets of the subsidiary we obtained the forecasts used by the Directors’ in their assessment of the recoverability of their investments. We challenged the forecasts by agreeing the brought forward position to actual results and, based on our understanding of the Company and sector, assessed whether expected future conditions had been incorporated.
We continue to perform procedures over revenue however, following reassessment of the associated risks, we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our report this year.
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