42 Finsbury Food Group Annual Report & Accounts 2017


Notes to the Consolidated Financial Statements (forming part of the Financial Statements)


Presentation of Financial Statements


Basis of Preparation These accounts cover the 52 week period ended 1 July 2017 (prior financial year is the 53 week period ended 2 July 2016). The Group Financial Statements consolidate those of the Company and its subsidiaries (together referred to as the “Group”). The Company is a public company which is incorporated, domiciled and registered in the UK.


The Group Financial Statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”). The Financial Statements for the Company have been prepared in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”), these are presented on pages 72 to 81.


It should be noted that current liabilities exceed current assets. Having reviewed the Group’s short and medium term plans and available financial facilities, the Board has reasonable expectations that the Group has adequate resources to continue in operational existence for the next 12 months and the foreseeable future.


The Group meets its funding requirements through internal cash generation and bank credit facilities, which are committed until October 2019. Committed banking facilities are £50.9m, of which £17.5m were drawn at the year end. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, including the possible effect of the UK’s decision to withdraw from the EU, show that the Group will be able to operate comfortably within its current bank facilities. The Group has a relatively conservative level of debt to earnings. As a result, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.


The Board reviews the Group’s covenants on a regular basis to ensure that 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 and none expected during the next 12 months. All covenant tests were passed at the year end.


After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in the preparation of the Financial Statements. Accordingly, the Board continues to adopt the going concern basis in preparing the Financial Statements for both the Group and the Parent Company. The Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of derivative financial instruments and pension scheme assets.


Critical Accounting Estimates and Judgements The Group is required to make estimates and assumptions concerning the future. These estimates and judgements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. Accounting estimates and judgements have been required for the production of these Financial Statements. The following are those that are deemed to require the most complex judgements about matters that have the most significant effect on the amounts recognised in the Financial Statements.


• The carrying value of goodwill and intangible assets is significant. The determination of the estimated recoverable amount is subjective due to the inherent uncertainty involved in forecasting and discounting future cash flows. Impairment reviews in respect of intangibles are performed where there is indication of impairment. Impairment of goodwill is carried out annually and can significantly impact the Group’s Consolidated Statement of Profit and Loss for the year. The Group estimates the recoverable amounts based on historical experience of margin, volumes and cost structure and expectations of future events. The discount rate takes account of the current market conditions and is applied as a pre-tax discount factor to obtain a current value. Refer to Note 10 for further details.


• The Group has one defined benefit pension scheme. The net deficit or surplus is the difference between the plan assets and plan liabilities at the period end date. The valuation of the assets and liabilities is based on a number of judgements. The assets are based on market value at the period end date, the liabilities are based on actuarial assumptions such as discount, inflation and mortality rates. The assumptions applied are based on advice provided by the scheme’s actuary in accordance with IAS 19 (Revised), further detail can be found in Note 13.


• A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. The deferred tax asset recognised for losses relate to acquired businesses. Based on current and forecast levels of profitability, the losses are expected to be utilised within 3 years.


• The Grain D’Or business unit has been historically loss making and despite the implementation of a range of initiatives to improve the business including strict cost control and new working practices the site remained loss making in the year to 1 July 2017. The Company now proposes to close the site. A formal consultation with representatives of the workforce commenced on 1 September 2017. The consultation is expected to conclude mid October 2017. Until this consultation period concludes uncertainty remains over the use of the assets. In light of this a decision has been taken to impair the assets used in the business by £4.0 million in the year to 1 July 2017. A degree of judgement has been exercised in calculating the level of impairment based on information available at the time of preparing these Financial Statements.


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