Strategic Review


60 Finsbury Food Group Annual Report & Accounts 2019


Notes to the Consolidated Financial Statements


Corporate Governance


Financial Statements


1. Significant Accounting Policies (continued)


Taxation Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.


Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the period end date, and any adjustment to tax payable in respect of previous years.


Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:


• The initial recognition of goodwill; • The initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and • The differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.


The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the period end date. 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.


Research and Development Expenditure The expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the Consolidated Statement of Comprehensive Income as incurred.


2. Acquisition


On 3 September 2018 the Group acquired the entire share capital of Ultrapharm Limited (Ultrapharm) for £16.9 million plus up to £3.0 million payable in annual instalments to the period to 30 June 2021 and a final incentive payment subject to performance criteria over the period to 30 June 2021. No provision has been made for an incentive payment as the criteria are not currently expected to be met. As a specialist ‘Free From’ bakery, the business has an extensive product range including bread, buns and rolls and other morning goods. Ultrapharm has a diverse customer base with long-term blue-chip customers, including Finsbury itself, where it supplies Free From products to Lightbody Europe.


The cash outflow under ‘purchase of companies’ of £16,915,000 on the face of the Consolidated Cash Flow Statement in the 52 weeks ended 29 June 2019 relates to the following:


£000


Initial consideration Debt settled Cash acquired


Cash consideration (excluding acquisition costs) Working capital adjustment


Discounted deferred consideration net of deferred taxation Total consideration including working capital adjustment


The acquisition had the following effect on the Group’s assets and liabilities:


Fair value and book value £000


Acquiree’s net assets at acquisition date: Property, plant and equipment Stock


Trade and other receivables Deferred tax liability


Trade and other payables Net identifiable assets Intangible Goodwill


5,766 1,200 2,392 (381)


(2,652) 6,325 1,721


11,546 19,592


The post-acquisition revenue included within these financial results amounts to £15,690,000 (including £2,584,000 of inter-company sales) and an operating profit of £295,000.


14,869 2,792 (746)


16,915 (60) 2,737 19,592


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