Strategic Report
Corporate Governance
Financial Statements Notes to the Company’s Financial Statements/Continued
Finsbury Food Group Annual Report and Accounts 2020
103 33. Accounting Policies/Continued
Non-derivative Financial Instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Unless otherwise indicated, the carrying amounts of the Group’s financial assets and liabilities are a reasonable approximation of their fair values.
Trade and Other Payables The value of trade and other payables is the value that would be payable to settle the liability at the period end date.
Cash and Cash Equivalents Cash and cash equivalents comprise cash balances. Bank overdrafts that are repayable on demand and which form an integral part of the Group’s cash management are included as a component of cash and cash equivalents.
Interest-bearing Borrowings Interest-bearing borrowings are stated at amortised cost using the effective interest method.
Share Based Payment Transactions The value, as at the grant date, of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted.
Taxation The credit for taxation is based on the loss for the year and takes into account taxation deferred because of temporary differences between the treatment of certain items for taxation and accounting purposes.
Deferred tax is recognised, without discounting, in respect of all temporary differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the balance sheet date.
Going Concern There have been major disruptions to markets since March 2020 as a result of the impact of the Covid-19 pandemic. Post Covid-19 consumer spending behaviour and lifestyle choices are an unknown. Since the start the Company has been guided by clear priorities to protect employees, safeguard supply, respond to new patterns of consumer demand and to preserve cash. The response by the Company to mitigate cash outflows was swift and proportionate with prioritisation and limitation of capital expenditure, salary reductions across senior executives, use of the furlough scheme and cancellation of interim dividend. We have continued with our close working relationship with our banking partners and have full support with a reset of debt:EBITDA covenant tests at 26 December 2020 and 26 June 2021. Net bank debt levels had decreased over the year by £9.1 million to £26.5 million with a net bank debt to adjusted EBITDA measure of 1.1x down from 1.4x at 29 June 2019.
With knowledge and experience since lockdown a bottom-up full-year 2021 budget and strategic forecast to June 2023 has been compiled. Our supply chain and manufacturing have been robust when faced with unprecedented fluctuation in demand. Revenue trends have improved over the final quarter, with April 24% down year on year, May, 19% down and June 14% down. The Group has a debt facility to February 2023 of £55.0 million with scope for the facility to be increased by up to a further £35.0 million, providing increased capacity for the Group to explore future growth opportunities and support its long-term investment strategy and the Group has a relatively conservative level of debt to earnings.
Having due consideration of the financial projections, the level of debt, and available facilities, it is the opinion of the Directors that the Group has adequate resources to continue in operation for the foreseeable future and, therefore, consider it appropriate to prepare the Financial Statements on the Going Concern basis. Further details are set out in the basis of preparation.
Shares held by Employee Share Trusts Shares held to satisfy options are accounted for in accordance with IAS 32 ‘Financial Instruments. All differences between the purchase price of the shares held to satisfy options granted and the proceeds received for the shares, whether on exercise or lapse, are charged to reserves.
34. Remuneration of Directors Details of Directors’ remuneration are set out in Note 6 of the Group’s Financial Statements.
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