Strategic Report
Corporate Governance
Financial Statements
Finsbury Food Group Annual Report and Accounts 2020
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As we reported in our interim results in February, the first half of the financial year was a period of encouraging progress for the Group, with the benefits of our long-term investment programme and operating initiatives coming on stream. Indeed, this continued through until almost the end of our third quarter.
The outbreak of the coronavirus, with the consequential lockdown in March, had a major impact on businesses across the UK and Finsbury was no exception. Food was suddenly consumed almost entirely in the home. The demand profile across our product portfolio underwent rapid change and we had to act decisively and adapt quickly to continue producing food products in a way that kept our colleagues safe, whilst at the same time protecting the long-term sustainability of the business.
There are now encouraging signs that we are moving in the right direction once again, after a challenging few months. However, it is important that the pandemic does not overshadow the significant operational progress the Company has continued to make, which will stand it in good stead to deliver on its longer-term growth ambitions, once more normal trading patterns return.
A Resilient Performance Considering the extent of the impact of the pandemic from March, the financial performance for the year was a very credible one. Group revenues were £306.3 million (2019: £315.3 million), adjusted EBITDA was £24.4 million (excluding £1.8 million uplift from first time adoption of IFRS 16 leases). We have impaired assets by £8.7 million, considered to be overvalued considering their expected cash generation, delivering a profit before tax of £2.9 million (see Note 10).
From the start of our new financial year, strong sales growth, profit and cash generation were driven by ongoing delivery against our strategy of selling an ever-expanding and diverse range of innovative products through a broad range of channels while seeking opportunities to drive increased productivity and efficiency. This pattern continued until the nationwide lockdown in March.
Since then sales in the largest part of our business, Retail, have remained relatively resilient and have continued to recover month by month since April. Everyday bakery
products such as rolls proved popular but demand for celebration cakes was more subdued as a result of lockdown restricting social gatherings. It is hard to overstate the magnitude of the impact the outbreak of the pandemic had on our foodservice and food- to-go division, which in the prior financial year was 20% of sales turnover. Their end markets suddenly disappeared, almost completely, as restrictions on travel were introduced and consumer behaviour was thrust into unchartered territory. Encouragingly, this improved and sales in foodservice and food to go recovered to around 39% of prior year levels for Q4.
As outlined in our Covid-19 trading updates, management implemented a range of measures to control costs and preserve cash while scaling back production in response to reduced demand. As a result of these actions, we find ourselves in a healthy and secure financial position. The Group has remained cash generative throughout the period, has not needed to make use of any government financial assistance schemes aside from furlough, and has extensive headroom remaining of its £55 million revolving credit facility.
The coronavirus presented our teams with significant operational challenges, the likes of which had not been encountered before, but they met them with enthusiasm and tenacity and I am proud of the way they were able to keep the business running without compromising on the high standards we set for ourselves.
Considerable Strategic Progress Despite the Pandemic Finsbury Food Group comprises several once independent businesses; a major strategic focus of the past few years has been on introducing initiatives to ensure they operate as one cohesive unit with a greater uniformity of process and procedures, and better communication. Work on that front continued apace during the year, despite the disruption caused by the pandemic.
I am proud of the way our teams met operational challenges with enthusiasm and tenacity and I am proud of the way they were able to keep the business running without compromising on the high standards we set for ourselves.
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