Finsbury Food Group Plc Annual Report 2021

FY2021 Annual Report · Finsbury Food Group Plc

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Annual Report & Accounts 2021
Annual Report & Accounts 2019

Finsbury Food Group
Annual Report and Accounts 2021

Introduction

We continue to create and supply
high-quality bread and cakes through
a variety of brands and channels.
We supply major retailers and the
foodservice channel across the UK,
and in Europe, with proprietary,
own brand and licensed brand
bread and cakes.

Strategic Report
Highlights

Our Business

Market Review

Strategy and Objectives

Business Model

Chairman’s Statement

Chief Executive’s Report

Engaging with Our Stakeholders

Key Performance Indicators

Risk Report

Financial Review

Corporate Governance
Chairman’s Introduction to Governance

Report on Corporate Governance

The Directors

Directors’ Report

The Group Executive Committee

Audit Committee Report

Directors’ Remuneration Report (unaudited) 54

Independent Auditor’s Report to the
Members of Finsbury Food Group Plc

Statement of Directors’ Responsibilities
in Respect of the Annual Report and the
Financial Statements

Financial Statements
Consolidated Statement of
Comprehensive Income

Consolidated Statement of Financial Position 66

Consolidated Statement of Changes in Equity 67

Consolidated Cash Flow Statement

Notes to the Consolidated
Financial Statements

Company Balance Sheet

Company Statement of Changes in Equity 100

Notes to the Company’s
Financial Statements

Advisers

101

108

Find out more
www.finsburyfoods.co.uk
Investors | Reports & Presentation

Our Business
We have continued
to serve a diverse mix
of customers.

Finsbury Food Group
Annual Report and Accounts 2021

Market Review
An overview of the markets we operate
in, and a summary of the key trends
we aim to take advantage of.

Strategy and Objectives
Our Purpose, Strategy and Operating Principles
provide a vision and framework for strategic
governance, creating value, sharing best practice
and working effectively as a Group.

Chairman’s Statement
The robust performance delivered by the Group
for the full year ended 26 June 2021 is testament
to the resilience of our business.

Chief Executive’s Report
It is testament to the hard work and commitment
of our teams that we have been able to successfully
manage and adapt the business.

Peter Baker
Non-Executive Chairman

John Duffy
Chief Executive Officer

Engaging with Our Stakeholders
This section serves as our section 172
statement and should be read in conjunction
with the Strategic Report and the Company’s
Corporate Governance Statement.

Sustainable Approach
Sustainability metrics and goals are embedded
within all business strategies and key to reducing
our environmental impact.

People Who Care
We launched our Health and Wellbeing
Strategy which includes three pillars:
mental, physical and financial health.

Financial StatementsStrategic ReportCorporate Governance2

Finsbury Food Group
Annual Report and Accounts 2021

Strategic Report
Highlights

Resilient Group Revenue
Summary
The full year figures represent twelve months trading in the pandemic
environment compared to three months in the previous year. It also embraces
six months trading post Brexit. The year on year growth across all metrics
reflects how resilient the Group is and how well it can adapt in an environment
of uncertainty.

• Group revenue up 2.3% to £313.3m.

• Group EBITDA*1 up 2.5% to £26.9m.

• Profit before tax up 493% to £17.0m.

• Adjusted Basic EPS*2 (pence per share) 9.1p (2020: 7.9p).

• Strong cash generation driving down net bank debt down from

£26.5m to £13.1m (excluding IFRS 16 debt), reducing leverage to
0.5 times annualised EBITDA of the Group (2020: 1.1 times).

• The Group’s Operating Brilliance Programme continues to drive
improvements in operational variances, with gross margin increasing
1.7% to 32.9%.

Strategic Highlights
• Extremely positive second half performance with second half revenues

up 9.1% against the corresponding period in the prior year.

• Progressive improvement year on year with retail up 5.8% and

foodservice down 14.9% as it recovers from Covid impact.

In order to understand the business performance, adjusted measures for the
Group are presented which exclude the impact of significant non-recurring
items and other items to present adjusted EBITDA, operating profit and
profit before tax. In the opinion of the Board the adjusted measure allows
shareholders to gain a clearer understanding of the trading performance
of the Group. The analysis below shows the movement from adjusted to
statutory measures, the figures are for the 52 weeks ended 26 June 2021
and 52 weeks ended 27 June 2020:

Adjusted EBITDA

2021
£000

2020
£000

26,904

26,248

Significant non-recurring items – (See Note 4)

958

(10,331)

Difference between Defined Benefit Pension
Scheme charges and cash cost
Movement in the fair value of foreign
exchange contracts
Adjustments, significant non-recurring and
other items

EBITDA

473

696

200

(73)

2,127

(10,204)

29,031

16,044

2021
£000

2020
£000

16,100

14,939

958

(10,331)

473

696

200

(73)

2,127

(10,204)

18,227

4,735

2021
£000

2020
£000

15,126

13,728

958

(10,331)

249

696

(105)

(56)

(73)

(14)

– The foodservice business continues to improve with second half

revenues up 4.6% against the comparative period in the previous year.

Adjusted Operating Profit

• Significant growth in overseas division up 13.4% against the

previous year.

• Investment in capital projects of £6.2m, including:

– A new frozen dough ball facility commissioned in Manchester;

– Additional 50% capacity in state-of-the art artisan bread

production equipment.

• Further innovation in line with consumer trends with:

Adjusted operating profit

Significant non-recurring items – (See Note 4)

Difference between Defined Benefit Pension
Scheme charges and cash cost
Movement in the fair value of foreign
exchange contracts
Adjustments, significant non-recurring and
other items

– Award-winning Free From and vegan cakes; and

Operating profit

– Launch of vegan doughnuts and a range of artisan

gluten-free breads.

• Continued double-digit growth in artisan sourdough breads.

• Product excellence illustrated by the winning of several Quality

Food and Drink ‘Q’ Awards.

• Continued investment in development, engagement and the health

and wellbeing of employees.

Adjusted Profit Before Tax

Adjusted profit before tax

Significant non-recurring items – (See Note 4)

Difference between Defined Benefit Pension
Scheme charges and cash cost
Movement in the fair value of foreign
exchange contracts

Discounting of deferred consideration

Movement in the fair value of interest rate swaps

(386)

Adjustments, significant non-recurring and
other items

Profit before tax

1,887

(10,860)

17,013

2,868

*1 The Group uses Alternative Performance Measures (APMs) which are non-IFRS measures to

monitor performance of its operations and of the Group as a whole. These APMs along with their
definitions are provided in the Adjusted EBITDA, Operating Profit and Profit Before Tax tables and
the tables in the Financial Review section. APMs are disclosed as, in the opinion of the Board, this
will allow shareholders to gain a clearer understanding of the trading performance of the Group.

*2 Adjusted EPS has been calculated using profit, excluding amortisation of intangibles, significant
non-recurring and other items as shown in the tables above net of associated taxation.
In the opinion of the Board, the adjustments made will allow shareholders to gain a clearer
understanding of the trading performance of the Group.

Strategic Report

Corporate Governance

Financial Statements

Finsbury Food Group
Annual Report and Accounts 2021

Group Performance
Measures

Statutory Measures

Group Revenue

£313.3m

up 2.3%

Adjusted EBITDA*1

EBITDA

£26.9m

up 2.5%

£29.0m

Adjusted Operating Profit*1

Operating Profit

£16.1m

up 7.8%

£18.2m

Adjusted Profit*1 Before Tax

Profit Before Tax

£15.1m

up 10.2%

£17.0m

Adjusted Basic EPS

9.1p

up 15.2%

Capital Investment

£6.2m

up 31.6%

Basic EPS

9.8p

Net Debt (excl leases)

Net Debt (incl. leases)

£13.1m

down 50.4%

£23.7m

*1 The Group uses Alternative Performance Measures (APMs)
which are non-IFRS measures to monitor performance of
its operations and of the Group as a whole. These APMs
along with their definitions are provided Adjusted EBITDA,
Operating Profit and Profit Before Tax tables on the previous
page and the tables in the Financial Review section. APMs
are disclosed as, in the opinion of the Board, this will allow
shareholders to gain a clearer understanding of the trading
performance of the Group.

Adjusted EPS has been calculated using profit, excluding
amortisation of intangibles, significant non-recurring and
other items as shown in the tables on the previous page
net of associated taxation. In the opinion of the Board, the
adjustments made will allow shareholders to gain a clearer
understanding of the trading performance of the Group.

*2 Measures that do not vary are shown in the first column only.

Financial StatementsStrategic ReportCorporate Governance
4

Our Business

Our business is split into UK bakery and overseas.
The UK bakery manufactures and sells bakery
products to the UK's multiple grocers and foodservice
sectors. More information on manufacturing,
products and customers is shown below.

Manufacturing
Finsbury Food Group includes
eight manufacturing facilities and
bakery companies (including two
facilities in the newly acquired
Ultrapharm Group) and one
distribution company.

Our Customers
Our UK bakery segment supply
supermarkets, discounters and
convenience stores within the retail
sector and hotels, pubs, restaurants,
high street chains, fast food outlets
and contract caterers within the UK
foodservice sector.

Our overseas businesses supply the
retail sector in France, Benelux, and
Switzerland where cake has seen
real growth over recent times. The
Ultrapharm business has extended
us into additional markets of Poland,
Scandinavia and Italy.

Fletchers Bakeries

Sheffield

Johnstone’s Food Service

East Kilbride

Kara Foodservice

Manchester

Lightbody of Hamilton

Hamilton

Memory Lane Cakes

Cardiff

Nicholas & Harris

Salisbury

Ultrapharm UK

Pontypool

Ultrapharm Poland

Rybarzowice and Żywiec,
Poland

Lightbody Europe
(distribution company)

Rennes, France

Finsbury Food Group Annual Report and Accounts 2021Our Products
We make a wide range of cake and
bread products to serve the UK retail
and foodservice markets. Our cake
products are retailer own label and
licensed brands, our bread products
are retailer/wholesaler label with our
Kara foodservice brand representing
a significant proportion of our total
foodservice business.

Bread, Morning Goods and Cakes
• Speciality breads

• Buns and rolls

• Celebration cakes

• Sharing cakes

• Snacking cakes

• Gluten-free bread, morning goods and cakes

Kara Foodservice
Kara is our own foodservice brand. The Kara
brand covers an ever-growing portfolio of savoury
and sweet baked goods, including floured baps,
artisan breads, brioche buns and single serve cakes
focusing on the latest consumer trends.

Licensed Brands
We have a long-standing relationship with many
licensed brands, manufacturing quality bread and
cakes for some of the biggest names in the market.

Mars
The Mars cake range is now one of the top
performing brands within the category. You can
find a celebration cake and/or a sharing cake
across most of their iconic brands i.e. Galaxy, Twix,
M&M’s and Maltesers in retail outlets. The success
and popularity of this product range can be closely
attributed to the careful development of product
flavour profiles that align with the respective
confectionary brand. The Mars sharing cake range
has been a key contributor to the sharing category
over the last 12 months.

Thorntons
Our long partnership with Thorntons has allowed
us to bring to market a range of premium
confectionery products in celebration, sharing,
snacking, food to go and seasonal cake formats.
Thorntons is the 5th biggest brand within the
cake category and the biggest single brand in
celebration cake overall.

BOSH!
This plant based, vegan friendly brand is now
a year old, with a product range that includes
celebration, sharing and food-to-go categories.
Working closely with brand founders and friends
Henry Firth and Ian Theasby we continue to
develop innovative products that meet the ever-
growing vegan consumer and BOSH! fan’s needs.
The BOSH! brand is now seen as the no.1 go to
brand for everything vegan.

Mary Berry
Now in our sixth year of partnership we continue
the evolution of our Mary Berry product range.
The Mary Berry brand is now established as a
core staple within cake, across both celebration
and sharing cake categories.

Diageo
Our relationship with Diageo has now evolved
across key brands such as Baileys, Guinness,
and Gordon’s. This partnership has allowed us
to develop on trend product profiles that meet
that ever popular “boozy cake” trend, delivering
both in taste and occasion needs. The product
range stretches across celebration, snacking and
seasonal areas and has become an integral part
of our branded portfolio.

Character Licenced Portfolio
We have a broad and unique portfolio of
character-based entertainment licences that
meet a broad age range and diverse consumer
occasions. We work with some of the biggest
character licensed brands in the world. Our ever-
evolving portfolio is vital in meeting consumer
trends and expectations. We continue to build
on our range of nut-free celebration cakes by
leveraging our key brands and in turn to meet the
growing demands of this market. With a range that
covers everything from movie to gaming based
and collectable toy licence properties, we work
with some of the biggest globally recognised
brand owners, for example Disney, Warner Bros.
Xbox, Nintendo, Hasbro and Universal and we
are able to bring to market leading celebration
cakes that meet every birthday age that the
consumer is looking for.

Disney
Disney has continued to perform strongly for
the business even in light of the last 12 months.
With established listings across our UK and
French customer base, we have continued to
develop and launch new products and large cake
formats under key evergreen Disney and Marvel
franchises such as Frozen, Princesses, Cars, Toy
Story, Avengers and Spiderman.

TGI Fridays
The TGI Fridays collaboration is new to our
portfolio but has been borne out of meeting
the growing dessert trend within the market.
Our new range of American themed treat cakes
are perfect for all sharing occasions and has
ably fulfilled a gap in the market.

Vogel’s
Alfred Vogel was a pioneering Swiss nutritionist
who used natural ingredients. Vogel’s loaves are
baked without added sugar, emulsifiers, enzymes,
or artificial preservatives or flavourings, and are
bursting with seeds and grains.

Village Bakery
The range of organic fresh rye bread brands for
those looking to avoid wheat. All made with no
added yeast, emulsifiers, or enzymes.

Cranks
Wholesome, simple, nutritious bread baked
with organic stoneground wholemeal flour
and fermented for longer, made without any
additives such as emulsifiers and enzymes.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance
6

Market Review

An overview of the markets we operate in,
and a summary of the key trends we aim
to take advantage of.

Our Markets
Market conditions in the last 18 months
have unsurprisingly been entirely shaped by
the ongoing Covid-19 pandemic with overall
demand for food and drink (both in-home and
out-of-home) fluctuating significantly, shaped
by national, regional and local lockdowns
and restrictions.

Retail
Grocery
Total retail grocery sales since the start of the
pandemic have increased by £10.1 billion (source:
IRI, July 2021) and are currently still tracking
ahead of 2019’s pre-pandemic levels. We are
now starting to see a rebalancing in shopper
behaviour with many pre-pandemic trends
starting to return suggesting that the road back
to normality is underway. As a nation we are now
shopping more often again, later in the week
(a trend which changed significantly in 2020) and
are spending less per trip. Momentum is returning
to those channels which struggled at the height
of the pandemic such as the discounters and
high street, while the convenience channel which
saw a huge growth in the first few months of the
pandemic has now returned to more familiar
levels. Online share of the grocery market
doubled during the pandemic and continues to
be significantly higher than 2019 but has also
fallen back from its peak share.

Cake
The Company is one of the largest ambient cake
manufacturers in the UK, a market valued at
over £980.0 million (source: IRI 52 w/e July 2021).
We trade across all major categories, with large
presences in celebration cake, sharing cake and
seasonal categories.

Bread
The retail bread and morning goods market has
a value of £5.1 billion and has grown by 6% year
on year (source: Kantar Worldpanel 52 w/e July
2021). We have sizeable presences in buns and
rolls, hot cross buns and artisan bread.

Free From
The retail Free From cake market is valued at
£52.0 million (source: Kantar Worldpanel 52 w/e
May 2021) and the retail Free From bread and
morning goods market is valued at £145.0 million
(source: Kantar Worldpanel 52 w/e July 2021).

Retail value of the Free From cake market
as of May 2021.

Finsbury Food Group Annual Report and Accounts 20217

Although consumers will
remain cautious and price-
conscious, they will continue
to want affordable treats,
so pricing needs to reflect
household economics.

Out-Of-Home
The UK out-of-home market spans many
sub-sectors including coffee chains, restaurants,
pubs, hotels and the non-profit sector such as the
prison service or education. Each has different
routes to market. The forecast value of the total
UK out-of-home market size in 2021 is £63.0 billion
(source: Lumina Intelligence), growth of circa one
third compared to a heavily pandemic impacted
2020. This equates to the market recovering circa
70% of its 2019 pre-pandemic value. If 2022
sees non-restricted trading then the out-of-home
market is set to make a full recovery, grow by
44% to £91.9 billion and exceed its 2019 value
(source: Lumina Intelligence).

We have a significant presence in the out-of-home
bread and morning goods sector, primarily via
our buns and rolls business and with our Kara
brand. In sweet treats our presence is primarily
within the coffee chains.

Out-of-home market has recovered to
70% of its 2019 pre-pandemic value.

Consumer Trends
Consumer confidence has been weak for
some time, and continues to be so despite
improvements in Q2 2021 as the staged roadmap
to end restrictions has been implemented.
Although consumers will remain cautious and
price-conscious, they will continue to want
affordable treats, so pricing needs to reflect
household economics.

The trend towards healthier eating options has
been a feature of the UK food and drink market
for several years and has continued to evolve.
However, indulgence remains a key trend and
consumers continue to look to ‘sweet-treating’
categories for affordable treats. Media focus and
regulatory pressure will remain a driver for recipe
reformulation, portion size and product innovation.
Indeed, new legislation targeting a number
of ‘High Fat, Salt and Sugar’ (HFSS) categories
including cake and morning goods is due to come
into effect in 2022. This will lead to changes in the
way these categories are advertised, displayed
and promoted in store and online.

Long-term social and demographic trends have
a major bearing on the food sector. These include
the rise of smaller households, single-person
mealtimes, an ageing UK population, growing
urbanisation, and an increasingly mobile
population (although this has stalled due to
Covid-19) with less time to eat. This growing
fragmentation of consumers, channels, eating
moments and needs is translating into increasing
demand for personalised products to meet
individual needs. As a result, single-serve and
individually wrapped products are becoming
more prevalent and important. The latter may
continue to gain popularity as a consequence
of the Covid-19 pandemic with food safety
and hygiene featuring higher on the list of
consumer priorities.

Overseas
Our overseas markets are primarily in Europe,
principally France, Benelux and Ireland, with a
smaller presence in most other major European
countries. The size of these markets is significant,
and their structure is similar.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance8

Strategy and Objectives

Our Purpose, Strategy and Operating Principles
provide a vision and framework for strategic
governance, creating value, sharing best practice
and working effectively as a Group.

Our Purpose
Baking
brilliance
makes every
day special.

Our Purpose
People love the high-quality products
we make. They are essential parts of
their daily lives and offer enjoyable
treats and choices for every occasion.
So, we are committed to building
the leading speciality bakery group
– because baking brilliance makes
every day special.

Our Vision and Strategy
Our strategic objective is to
create sustainable value for our
shareholders, customers and
other stakeholders by building the
leading speciality bakery group.

We produce a broad range of high-quality bread,
cake and bakery snacking products targeted at
growing channels and market niches. These offer
growth potential and differentiation for our major
customers, while fulfilling the changing needs
and desires of end consumers.

To achieve this our strategy is to:

• Invest in our people and our manufacturing sites
to form a strong foundation for our strategy.

• Create innovative, high-quality bakery

products that anticipate key market trends.

• Ensure customer and consumer needs
are at the heart of our decision making.

• Develop a strong licensed brand

portfolio to complement our core retailer
brand relationships.

• Aim to succeed in both the retail grocery and
out-of-home channels in the UK and in Europe.

• Grow through a combination of organic

growth and targeted acquisitions.

Finsbury Food Group Annual Report and Accounts 20219

Our Operating Principles
To achieve baking brilliance,
we have to constantly raise
standards and work effectively as
a Group. The Finsbury Operating
Principles are a set of practical
commitments and guidelines for
how we run our business, and
which bring our strategy to life
in our day-to-day work.

Increasingly all stakeholders in our business are
looking to understand our Environmental, Social
and Governance (ESG) credentials. The Operating
Priciples by their nature incorporate our ESG
commitment. The pages dedicated to expanding
on our Business Model, together with the case
studies, give good examples in support of our ESG
agenda. Appropriate KPIs are in place to measure
our progress (some of the key metrics are given
on pages 26 and 27).

Operating Excellence

Sustainable Approach

Quality and Innovations

We continually invest in our bakeries to improve
our efficiency and customer satisfaction.

We optimise our use of resources and focus
on reducing waste throughout our supply
chain and in our bakeries.

Our innovative, high-quality bakery products
reflect changing customer needs and anticipate
key market trends.

Cost Effectiveness

Growth with Our Partners

People Who Care

We maintain strict cost controls without
compromising quality, streamlining our
processes from sourcing to delivery.

Through long-term relationships with our
customers and suppliers, and an understanding
of their needs, we can all enjoy profitable growth.

We invest in our people, who take personal pride
in their contribution to our success, and are
strong advocates of our business and products.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance10

Business Model

Our vision is to be a leading speciality bakery group, producing
a broad range of high-quality products targeted at growing channels
and market niches, which deliver growth and differentiation for
our customers while fulfilling the needs of end consumers.

The Resources We Employ
Financial Capital
The Company is AIM-listed giving it the
potential to access institutional funding.
The Group also benefits from bank support
for strategic investment and acquisitions.

• 3 banks supporting total facilities up to

£90.0 million.

• Scottish and Welsh businesses benefit from
local government initiatives to promote
investment and employment opportunities.

• Low leverage with net debt to EBITDA of 0.5x.

Relationship Capital
• Long-term relationships with key partners,

suppliers and customers.

Intellectual Capital
• Extensive speciality bakery product know-how,

category insight and understanding.

• Extensive customer relationships in both

the retail and foodservice sectors in the UK,
France and throughout Europe.

• Known brand in foodservice in the UK.

• Licence arrangements with brand owners

in the UK and in Europe.

Manufacturing Capital
• Plant and machinery well invested and

maintained, with flexibility to cover niche
to mainstream products.

• Ownership of all major sites, with available
space for new production or consolidation
of facilities.

• Common Group IT ERP platform.

Human Capital
• Structured people strategy to attract and retain
employees and to provide training to ensure they
are given the skills required for their roles.

• Talent management programme to attract
and develop graduates and other employees.

• Structured learning programmes and

performance development review process.

Social and Natural Capital
• Signed up to Fairtrade, sustainable sourcing

for ingredients.

• Food safety and technical standards are

maintained to the highest level.

• Health and Safety (H&S) is a top priority for
the Group, with a largely uniform H&S system
across the business units and the drive forward
of the “HomeSafe Every Day” strategy.

Operating Excellence

Sustainable Approach

• Our Operating Brilliance Programme has
a number of workstreams that deliver
Operating Excellence:

– Process Blueprint is a product design

framework delivering quality and efficiency.
It ensures a standardised process across all
bakeries with results evidenced by increased
efficiencies and lower waste;

– The Engineering Forum provides all
bakeries with common engineering
standards and approaches. This forum
embraces the asset care programme
optimising the performance of our
production assets;

– The newly formed Operational Forum

retains the momentum from the initiatives
and forum above; and

– A newly formed Supply Chain Forum
is designed to optimise inbound and
outbound material and product flow.

• Sustained strategy to invest in the capability
and capacity of our manufacturing assets:

– Automated single-serve cake bar
packing, improving capability and
cost effectiveness;

– New frozen doughball line targeted

at the foodservice sector; and

– New gluten-free bakery in Poland with
modern travelling ovens, improving
capacity and efficiency.

• Optimisation of Group-wide common

IT platform.

• Following a successful trial on localised
energy monitoring, which resulted in a
10% reduction of energy, this initiative
is being rolled out across the business.
All key assets in all bakeries will have
localised energy monitoring in place
to enable measurement of key energy
reduction projects.

• We continue to drive conversion to LED

lighting across the Group, making progress
at all sites with a Group conversion rate
of around 60% to date.

• We have engaged with specialist Group-
wide providers in waste management to
drive our zero waste to landfill target across
all sites by the end of 2020 and are working
with WRAP to identify further opportunities
to reduce waste at source. Our Operating
Brilliance Programme has focused on waste
reduction, delivering some significant
benefits. For example, work in this area has
delivered a 25% year on year reduction in
waste at one of our bakeries.

• We are continuing to drive plastics
reduction by optimising pack sizes
wherever possible. Significant work has
been undertaken to ensure all plastics are
recyclable. Currently almost all our plastic
packaging is recyclable with over 90% of
it being readily recyclable in the UK.

For more information
See pg 20-21

For more information
See pg 22-23

Finsbury Food Group Annual Report and Accounts 2021Quality and Innovations

Cost Effectiveness

• Centralised Group buying is focused
on high-quality and cost-effective
ingredients and efficiency of scale
in the procurement of indirect items
(e.g. personal protective equipment).

• Operational excellence initiatives are

focused on achieving lowest-cost-producer
status in areas where we have niche strength
(e.g. artisan breads or round sharing cake).

• Our capital investment is focused
on capability and cost reduction.

• Extensive insight capabilities mean

new product development is in line with
market trends.

• Over 60 employees are engaged

in developing new products.

• Manufacturing Process Blueprint

embraces the production of high-quality
premium products.

• All sites hold BRC A-grade or above for

food safety standards.

• The Health agenda is embedded into the
development process, with over 98% of
products achieving 2017 FSA salt targets.
Good progress has been made across
all categories in reducing sugar in line
with PHE targets, and further research is
underway to achieve their 2020 objectives.

For more information
See pg 24-25

For more information
See pg 28-29

Growth with Our Partners

People Who Care

• Our scale and diversity of products across
UK bakery means the relationship with
grocery retail customers is a partnership.

• Our business with discounters is growing
in line with their growth within UK grocery.

• Our channel diversification into foodservice,
our Kara foodservice brand, and our broad
frozen foodservice range of products see
us as the leading foodservice partner.

• We are growing with partners in the UK

and across the rest of Europe in both bread
and cakes.

• Our Lightbody Europe subsidiary in France
and the Ultrapharm business in Poland
gives a growing presence in Europe.

• A health and safety risk management team
with their mantra of ‘HomeSafe Every Day’
is supported by resource and a common
Group-wide strategy and programme.

• Our values of teamwork, honesty,

ownership, respect and communication
are fundamental to the business.

• The Workplace by Facebook communication
tool is transforming communication with
and between employees.

• We offer a people strategy for all employees,
embracing courses in basic English, an
engineering apprenticeship programme,
a graduate recruitment programme and
leadership development programmes.

• Biennial employee survey to obtain our

employees’ views.

For more information
See pg 34-35

For more information
See pg 38-39

Creating Value
Value for Shareholders
Using our Operating Principles achieves
our Purpose and Strategy, creating long-term
shareholder value through share price growth
and attractive dividends. Success in our Operating
Brilliance Programme has played a significant
role in the improvement of gross margin of 1.7%
to 32.9%. A reduction in debt of £13.4 million
with the debt to EBITDA ratio being 0.5x at the
year end, is testimony to the success of the
initiatives progressed during the year and to
the strength of the Company’s balance sheet.

Bread and Cakes for Customers
and Consumers
We define ourselves as a speciality bakery group.
Everything we do is with a view to achieving
baking brilliance. We are predominantly a ‘retailer
brand’ manufacturer, but target our product
development at ‘wowing’ consumers, in line
with emerging trends and shopping evolution.
We constantly innovate and refresh our hot cross
buns, artisan breads, celebration cakes, sharing
cakes, Christmas yule logs, and our Kara range
of foodservice bakery products. We are rapidly
expanding our range of gluten-free products
in both bread and morning goods and cake.

We measure success by the closeness of our
long-term relationships with our retail and
foodservice partners, by our growing presence
in the discounter and convenience channel, and
by the growth in our Foodservice business, where
we are one of the leading suppliers in bakery.

Our products reach a broader base of consumers
through a strategy to diversify across all UK
channels and European markets. Our customer
base is broad, and having no single dependency
lowers risk and creates value.

Employment and Development Opportunities
for Individuals and Communities
People are important to our business. We have
over 3,000 employees, ranging from unskilled,
through semi-skilled, to management.
Opportunities exist within all our bakeries for
training and development programmes and
talent management initiatives. We recognise
potential and develop skills, facilitating personal
development and advancement. Our ‘People
Who Care’ Operating Principle, and initiatives
that support it, reflect the importance of people
to our business.

Tax Paid
Finsbury generates substantial tax for the country.
Our employees pay tax on their earnings and
the Company pays national insurance on those
earnings. The Company pays Corporation Tax
with an effective tax rate of circa 19.8% (French
corporation tax rates 28.0% from 1 January
2020), as well as paying indirect taxes such as
packaging, apprenticeship levies and in areas such
as energy, where there are significant government
imposed renewable taxes. Our French and
Polish-based subsidiaries pay similar taxes
in their respective jurisdictions.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance12

The robust performance delivered by the Group for the full year
ended 26 June 2021 is testament to the resilience of our business,
the strength of the management team, the efforts of the whole
Finsbury team and our well-defined strategy.

The whole of this financial year has been affected by the external
management of the pandemic. This has created challenges both
within our business and our end markets. Our ongoing priority over
the period has been to ensure the safety of our employees whilst
maintaining excellent continuity of supply to our customers and
consumers. Without the hard work and dedication of our teams,
in incredibly challenging circumstances, we would not have been
able to deliver the performance we have achieved.

RESILIENCE

It has been an
extraordinary year for
the people of Finsbury
with daily challenges
for everyone, both
professionally and
personally.

Finsbury Food Group Annual Report and Accounts 2021Chairman’s Statement13

Pleasingly, the Group has been able to adapt,
develop and strengthen over the course of the
year, resulting in year-on-year revenue growth and
a total sales figure almost at pre-pandemic levels.
Our focus on strategic execution has not wavered
and we have continued to make progress against
our objectives to ensure that our businesses
operate as one cohesive unit with a greater
uniformity of processes and procedures and
better communication.

A Resilient Performance
The resilience and determination of the
business has ensured we have delivered a very
encouraging performance, despite the continued
impact of the pandemic. The full-year figures
reflect a period completely impacted by Covid-19
and compares with a previous year period which
included a six-month period of strong growth,
which pre-dated the onset of the pandemic.

Group revenue was £313.3 million
(2020: £306.3 million), adjusted EBITDA increased
by 2.5% to £26.9 million (2020: £26.2 million),
adjusted profit before tax increased by 10.2% to
£15.1 million (2020: £13.7 million) and the Group
delivered EPS of 9.8p. There have been good
improvements in cost and cash performance with
a significant strengthening of the Group’s net
bank debt position by year end to £13.1 million,
a decrease of 50.4%.

Retail sales have performed well and grown
year-on-year which largely compensated
for the shortfall in foodservice sales which
represented 20.0% of the Group’s total
revenue, pre-Covid. Although foodservice was
slower to recover than originally anticipated,
as a result of the timing of restrictions, the
majority of the shortfall was recovered in
the course of year. This resulted in revenue
growing versus last year but is still slightly
below pre-Covid turnover.

The overall business performance has been
enhanced by the Group’s successful Operating
Brilliance Programme which continued despite
Covid restrictions and has delivered improved
line efficiencies and lower waste throughout the
Group’s bakeries.

Dividend
Given the uncertainty at the outset of the
pandemic the Board took the decision to withdraw
the interim dividend and also decided not to
propose a final dividend in the context of the
continued uncertainty surrounding the pandemic
and Brexit. The Board is recommending a full-year
dividend of 2.4 pence per share for the financial
year ending 26 June 2021.

Continued Focus
on Strategic Execution
Over the past few years Finsbury has been focused
on driving operational excellence and achieving
‘Baking Brilliance’, guided by our Operating
Principles. The Finsbury Operating Principles are
a set of practical commitments and guidelines
for how we run our business. They bring our
strategy to life in our day-to-day work.

Indeed, our Process Blueprint is now fully
integrated in all aspects of the business and
we are seeing excellent results throughout,
improving our efficiency and effectiveness
and importantly also our sustainability.

We have also throughout the year continued to
strengthen and develop our Group IT systems in
areas such as supply chain optimisation, product
lifecycle management and sales operations
and planning.

As a Board, we remain committed to reviewing
and evolving the areas of strategic focus to
ensure that the Group is always looking to
improve and is well positioned to capitalise on
the opportunities that present themselves.
The process we adopt has developed well over
the years, involving more key personnel and
has delivered this year the most rigorous and
complete outcome, by far.

BRILLIANCE

A Responsible Business
Acting as a responsible business is at the core
of the Group’s strategy. Finsbury aims to always
operate in an ethical and sustainable way and
to help our people play a positive role in the
communities where we operate.

We are committed to ensuring our people enjoy
a safe working environment and we invest in
their development. We all take personal pride
in the business’s success and remain strong
advocates of the business and products.

Being a responsible business also means
optimising our use of resources, so we do all
we can to reduce waste in our bakeries and
throughout our supply chain, minimising
our impact on the environment.

Outlook
Whilst we navigate through the consequences
of the pandemic’s impact on the economy,
such as inflation and skilled labour and driver
shortages, we remain confident about the
Group’s continued growth prospects. We have
demonstrated the strength of our team and
our ability to adapt and evolve in response to
changing circumstances. As a result, we are
emerging from the shadow of the pandemic
a stronger and more united business, focused
on our goal of becoming the leading speciality
bakery group.

Peter Baker
Non-Executive Chairman
17 September 2021

Our People
It has been an extraordinary year for the people
of Finsbury with daily challenges for everyone,
both professionally and personally. The strength
of our people and culture has continued to shine
through and I am proud to be part of such a
hardworking and resolute group.

Due to the nature of our business, the majority of
our workers are unable to work from home and so
have had to balance their roles within our Group
with their roles at home. I would like to thank
them for the individual sacrifices that they have
made and the dedication that they have shown.

I would also like to take this opportunity to
say a huge thank you to our executive team,
customers, partners, suppliers and shareholders
for their continued enthusiasm and dedication
and also to the Board for their support and
counsel. I look forward to achieving further
success together in the future.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance14

Chief Executive’s Report

The period under review has been incredibly challenging with
market conditions and channel dynamics being entirely shaped by
the ongoing Covid-19 pandemic. The overall demand for food and
drink (both in-home and out-of-home) has fluctuated significantly,
shaped by national, regional and local lockdowns and restrictions.
However, it is testament to the hard work and commitment of our
teams that we have been able to successfully manage and adapt
the business, resulting in year-on-year revenue growth and
a total sales figure almost at pre-pandemic levels.

COMMITMENT

It is testament to the hard
work and commitment of
our teams that we have been
able to successfully manage
and adapt the business.

Finsbury Food Group Annual Report and Accounts 202115

Robust Performance Despite
a Difficult Trading Environment
The Group delivered a strong second
half performance, with H2 revenues up 9.1%
against the corresponding period in the previous
year despite further Covid unlocking delays.
This strong performance has resulted in revenues
for the year increasing 2.3% to £313.3 million
(2020: £306.3 million), which is almost at
pre-pandemic levels (2019: £315.3 million).

Revenue in the Group's core division, UK bakery,
increased 0.8% for the full year, driven by a
strong second half with H2 revenues up 6.8%
versus the previous year. The recovery of the
Group's foodservice business has continued,
although slower than expected due to ongoing
Covid restrictions.

Overseas revenues for the full year were up
13.4% against the previous year. This was driven
by an extremely positive performance in the
second half versus the corresponding period in
the previous year, which was negatively impacted
by earlier implementations of Covid lockdowns
across Europe.

The Group's Operating Brilliance Programme
continued to drive improvements in cost and cash
performance with a significant strengthening of
the Group's net bank debt position by year end
to £13.1 million, a reduction of £8.4 million from
26 December 2020.

The Group's Operating
Brilliance Programme
continued to drive
improvements in cost
and cash performance with
a significant strengthening
of the Group's net bank
debt position by year end
to £13.1 million, a reduction
of £8.4 million from
26 December 2020.

H2 revenues up against the corresponding
period in the prior year.

Developing an Offering for the Times
As we reflect on lockdown sales patterns and study
demand profiles as restrictions have eased, the
data shows the pandemic has mainly accelerated
existing consumer trends rather than triggered
new ones. Pre-pandemic, online grocery shopping,
for example, had been growing in prevalence for
some time, but no one could have anticipated
the widespread, almost overnight adoption by
large swathes of the country in response to stay at
home guidance. While the nation is returning to
bricks and mortar stores, online has undoubtedly
taken a sizeable share of the market that is unlikely
to revert in the near future. In response to this, we
have been working with key retail partners to share
our cake and celebration cake strategy initiatives
in order to ensure we are aligned with their post
pandemic online strategies.

Similarly, while demand across categories has
ebbed and flowed with restrictions in the period,
momentum behind the consumer trends we have
seen develop in recent years – vegan, artisan and
wellness, for example – has continued to build,
and we continue to work with our partners and
customers to create new and innovative products
in response to them.

GROWTH

In vegan, we now have several touchpoints in
both cake and bread, including a range of cakes
and a brioche bun developed in collaboration
with plant-based food specialist brand BOSH!
In artisan, we continued to cement our position
as a leader in the segment, investing in state-
of-the-art bread production equipment and
upping capacity by 50%.

We have also made investments to extend our
Free From capability within cake, especially the
sharing cake market, and speciality bread ranges
with plans to grow further in Free From.

Wellness remains a major trend and we continue
to take steps to reduce salt and sugar to ensure
all our products can be enjoyed as part of a
balanced diet. More than 98% of our products
meet the salt content targets of the FSA, and we
continue to make good progress against Public
Health England’s sugar reduction ambitions with
content down 12.4% on the previous year versus
an 8.2% reduction this time last year.

From a brand portfolio perspective, we
continued to go from strength to strength.
In the period we were able to deepen our
relationships with existing partners such as Mars
and Diageo, while adding new ones such as TGI
Fridays. The extension of our branded portfolio
further into sharing cake has supported the
implementation of a robust strategy which is
delivering significant category share growth
with key customer partners.

As part of our response to Covid, as well as
mitigating the various risks, we continue to
explore ways to address some of the emerging
opportunities presented by the changing
consumer landscape, such as more at home
lunchtime eating occasions. This will see the
Group gradually step-up investment in specific
areas of capacity and product capability in
the new financial year.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance16

Chief Executive’s Report/Continued

In Pursuit of Operational Excellence
In 2019 we rolled out six Group Operating
Principles, a set of practical building blocks that
establish best practice and how we want to
consistently run our businesses. They are:

• Operating Excellence – we continually invest
in our bakeries to improve our efficiency and
customer satisfaction.

• Sustainable Approach – we optimise our

use of resources and focus on reducing waste
throughout our supply chain and in our bakeries.

• Quality and Innovations – our innovative,

high-quality bakery products reflect changing
customer needs and anticipate key market trends.

• Cost Effectiveness – we maintain strict

cost controls without compromising quality,
streamlining our processes from sourcing
to delivery.

• Growth with Our Partners – through

long-term relationships with our customers
and suppliers, and an understanding of their
needs, we can all enjoy profitable growth.

• People Who Care – we invest in our people,

who take personal pride in their contribution.
to our success, and are strong advocates of
our business and products.

We are now at a more mature stage in the
delivery of our Operating Brilliance Programme
and continue to accelerate the development
of initiatives to enable Finsbury to operate as a
single, efficient Group capable of scale execution,
despite the impacts of Covid. Combined, these
initiatives are designed to benefit the Group over
the long term but we are already seeing tangible
benefits in areas such as factory efficiency and
waste reduction, which is having a positive
impact on our gross margin.

Building on the infrastructure investment made
previously, we have continued to strengthen our
Group IT systems in areas such as supply chain
optimisation, product lifecycle management
and sales and operations planning. We are also
on the verge of completing the implementation
phase of a new Group-wide computerised
maintenance management system, which will
ensure that the equipment and processes in all
bakeries consistently operate to an industry-
recognised high standard.

Linked to this is our Process Blueprint project,
designed to establish, embed and optimise
knowledge of all our processes while encouraging
collaboration and exchange of ideas. This is now
fully integrated and we are seeing excellent results
from both a quality and sustainability perspective.

While the Operating Brilliance Programme
pre-dates the pandemic, there is no doubt our
experience of managing and adapting to the
challenges of the past 18 months has had a
significant, positive impact on our efforts to
find better ways of working.

One example of this is the programme we have
launched with a third-party consultancy to
maximise the efficiency of our workforce and
give our people the tools and training they need
to realise their potential. The vast majority of
this has been carried out remotely at a faster
pace than we had originally anticipated and
is an approach we will continue to take as
conditions normalise.

While we are pleased with the operational
headway made in the year against a challenging
backdrop, there are several key workstreams
underway to identify and address additional areas
for improvement. With each period, Finsbury is
becoming an ever-more optimised organisation,
and I look forward to reporting on further
progress on this front.

Bringing Our People Closer
and Helping Them Succeed
I would like to take this opportunity to
personally thank our people across the Group
for their continued hard work, determination
and commitment through what has been a
challenging time for many of them and their
families. It is thanks to them we have been able
to play a part in keeping food shelves stocked in
the territories we serve and they should all be
extremely proud of their contributions.

Bringing our teams and people closer together
has been a major focus in recent periods and
the past year has seen this process accelerate
considerably, thanks in large part to the sudden
and comprehensive shift to digital. One example
of this is the Group-wide health and safety
exercise we have been conducting with an
external adviser.

The exercise was centred around a series of online
focus groups, and subsequently we received
responses to a request for feedback from over
two and a half thousand colleagues, or more than
75% of the workforce. It is difficult to imagine this
level of engagement being possible – particularly
not at this speed and scale – without the
convenience of the whole exercise taking place
remotely. In addition, further roll out of Facebook
Workplace, an online communication tool, to
connect every member of staff that works for the
Group meant that as a management team we
were able to update on the process in real time via
written and video messages. Workplace has been
an invaluable tool throughout the pandemic, not
just from a communication perspective but in
connecting colleagues and giving people a sense
of shared purpose and collaboration.

As we execute against our strategy and the
business grows and evolves, so should the roles
and responsibilities of the Group Executive
Committee. To this end, we have grown the
senior team in the period, promoting from within
where possible. Our Leadership Development
Programmes have been strengthened, our
Graduate Recruitment Programme continues
to be successful, and our Apprenticeship
Programme, which is key to building a pipeline
of engineers, is growing in popularity. We have
an abundance of talent in the Group and are
committed to continuing to develop colleagues
and giving those who excel the opportunity
to move up through the organisation.

From a wellness perspective, we launched
our Health and Wellbeing Strategy in the period,
comprising three pillars: mental, physical and
financial health. Run by a combination of internal
champions and external partners, the programme
offers a broad range of support both to colleagues
and their families. This is supplemented by various
Group-wide campaigns designed to encourage
our team members to stay active and healthy
which have proven very popular.

Finsbury Food Group Annual Report and Accounts 202117

Outlook
The environment in which we operate continues
to face headwinds in relation to raw material
prices, inflation, and skilled labour and driver
shortages. Nevertheless, over the last 18 months
the Group has shown its resilience and its ability
to adapt, develop and strengthen no matter
the circumstances.

Looking ahead, as we move into the new financial
year, we will maintain our focus on delivering
organic growth, capitalising on the momentum
behind the consumer trends we have seen
develop in recent years such as vegan, artisan and
wellness. We continue to explore ways to address
some of the emerging opportunities presented by
the changing consumer landscape such as more
at home lunchtime eating occasions. This will see
the Group focus its investment programme in
specific areas of capacity and product capability,
as well as further productivity enhancing
automation, in the new financial year.

John Duffy
Chief Executive Officer
17 September 2021

A Growing Focus on Sustainability
Finsbury has always prided itself on being a
responsible business that acts with integrity and
care. Sustainability is in our DNA, with metrics
and goals embedded within all our business
strategies. Despite the operational challenges in
the period related to the pandemic, we continued
to make great strides in the period in becoming
more energy efficient and reducing waste.

This time last year, we reported on how we were
intending to roll out asset energy monitoring
across the Group following a successful localised
trial. I’m pleased to report this is now complete,
and plans are afoot to extend it to water use.
We also updated on our Group-wide transition
to LED lighting. This has risen from 60% to
70% coverage in the period, and is expected to
reach 100% by the end of the current financial
year. We also relocated our foodservice frozen
storage operations to a new, more energy-
efficient facility in the period, achieving an
estimated 65% reduction in carbon emissions.

We continue to reduce plastic use and are making
good progress towards making all plastics 100%
recyclable. Currently, 90% is readily recyclable.
At the same time, we remain a certified zero landfill
business. Over 80% of all our waste is recycled and
we have engaged several third parties to help us
improve our output further. I am also pleased to
report that from May 2021, all of our electricity
is supplied from renewable sources.

We take a Group-wide approach based on our
position as a major and responsible employer in
the food industry, and supplement it with local
initiatives chosen by our employees. In both ways,
we ensure we can have a positive impact on the
communities where we operate, which has always
been an important part of how we do business.
At Group level, we support two charities, Grocery
Aid and FareShare, both of which are closely
aligned to our industry. A high proportion of our
workforce live close to our bakeries, putting them
at the heart of our local communities. We therefore
ask each of our sites to choose a local charity
partner for each year, to help improve the lives and
welfare of the communities we work and live in.

Over 80% of all our waste is recycled.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance18

Engaging with Our Stakeholders

This section serves as our section 172 statement and should be
read in conjunction with the Strategic Report and the Company’s
Corporate Governance Statement. It also provides guidance to
the disclosure of non-financial information that is necessary for
an understanding of the development, performance, and position
and impact of the Company’s activity. The Board’s aim, collectively
and individually, is to always uphold high standards of conduct.
When taking decisions, the Board always considers the long-term
view and looks to act in the interests of shareholders as a whole
and to ensure all shareholders are fairly treated.

Our People

People who care

Our Customers

Our Suppliers

Growth with our partners

Pages: 11, 38 and 39

Pages: 15, 16, 34 and 35

Pages: 16, 34 and 35

Report on Corporate Governance
Pages 40-44: Section 8

Report on Corporate Governance
Pages 40-44: Section 3

Engagement of employees

Pages: 20, 38 and 39

Report on Corporate Governance
Pages 40-44: Section 3

Finsbury Food Group Annual Report and Accounts 202119

Our approach to diversity and equal opportunities
is addressed in The Directors’ Report set out on
pages 47 to 49 and whistleblowing approach is
noted in the Audit Committee Report on pages
52 and 53.

This statement is made in conformity with
the requirement to explain how Directors fulfil
section 172 of the Companies Act 2016.

Find out more
www.finsburyfoods.co.uk
Investors | Reports & Presentation

The Board also believes that the business will
be best served to grow and prosper in the long
term if it understands the views and needs of its
shareholders and other stakeholders and factors
these into its decisions.

Accordingly, engagement with our shareholders
and wider stakeholder groups plays a key role
throughout our business. We engage with our
stakeholder groups in a variety of ways across a
range of channels to facilitate information flows
in both directions, with a view to ensuring our
stakeholders are heard and taken into account
in Board decision making, and also to ensure
that our stakeholders understand the Group’s
perspective and needs. Indeed, some of our key
stakeholders – our employees (“People Who
Care”), our customers and suppliers (“Growth with
Our Partners”), and the environment (“Sustainable
Approach”) - have been built into the very core
of the Finsbury business through our Operating
Principles. Our “Quality and Innovations” and
“Operating Excellence” Operating Principles
also embed our commitment to a long-term
approach. Our Operating Principles are set out
in detail on pages 9 to 11, while examples of how
we engage and put our Operating Principles into
action are set out throughout this report.

Specific references to stakeholder engagement
in this Annual Report are as below.

Our Investors

Dividend

Pages: 13, 36, 47, 54

Our Environment

Responsible Business

Pages: 13 and 17

Focus on sustainability

Page: 17

Sustainable approach

Pages: 6, 22 and 23

Report on Corporate Governance
Pages 40-44: Section 3

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance20

Operating Excellence

We have successfully delivered the first
phase of our Operating Brilliance Programme
(OBP) despite the disruption caused by Covid-19.
Under the banner of Operating Excellence, we
have several key workstreams driving operational
benefits along with Team Member education and
engagement, the primary ones being our Operating
Brilliance Programme, Operations Forum, Supply
Chain Forum, Process Blueprint/Product Design
Framework, and our Engineering Forum.

CONSISTENT

RESTRUCTURING…
The Group embarked on a
restructure to move the supply
chain to a Group function.

This is now complete and leaves the Group
well placed to leverage scale and best practice,
and it provides focus on each of the core areas
of the supply chain.

SUPPORTING…
The workstreams are strongly
supported by our IT function who
have developed a management
information suite to enable informed
decision making and embedded by
our Operating Brilliance Leader and
Practitioner accredited education
programme.

We currently have 80 team members fully trained
and accredited across the Group; we intend to
double this number in the next year.

80 team members fully trained in the
Operating Brilliance Leader Programme.

ENHANCING…
Our Group Supply Chain Forum
initially focused on our Infor M3
ERP, which is now cloud based, and
associated systems with a view to
enhancing capability and getting
the best out of them.

Following a review of how we operate, and how
we intend to operate going forward, we are well
placed to implement Group-wide supply chain
solutions such as Group sales and operations
planning, product lifecycle management and
supply and demand planning systems.

Finsbury Food Group Annual Report and Accounts 202121

STANDARDISING...
Our Process Blueprint/Product
Design Framework initiative is driving
efficiency and quality improvements
in all locations, with the aim of
establishing and embedding
knowledge of all our processes,
enhancing, and embedding them
through OBP activities.

Our aim is to ensure we make fantastic,
consistently high-quality, high-margin products in
an efficient manner every day. Process Blueprint is
key to our our environmental credentials in terms
of reducing resource consumption and waste
across the business.

REVITALISE…
The Group also embarked on
a revitalisation of its Sales and
Operations Planning Programme as
a key pillar in its meeting and reporting
schedule and as a tool to manage the
business in the medium term.

This has been successfully rolled out across the
Group and enables us to identify and address
at a more detailed level and provides a platform
for supporting business growth and taking
advantages of opportunities in a controlled and
joined up way of working.

Our aim is to ensure we
make fantastic, consistently
high-quality, high-margin
products in an efficient
manner every day.

EMBARKING...
The Group embarked on a partnership
with a best-in-class provider of
supply chain integration software
in the food and drinks industry.

This will provide the Group with an end-to-end
supply chain management tool to maximize
supply chain efficiency and cost. Its integrated
machine learning platform covers demand
planning, supply planning and finite scheduling
which will see a significant step change in how
we operate our supply chain in the future.

BETTER…
One of the main pillars of
Process Blueprint is ensuring
that our equipment and processes
operate at Operational Excellence
Management (OEM) standards or
better every day, we are nearing
completion of the implementation
phase of a Computerised
Maintenance Management System
(CMMS) across the Group, coupled
with an Asset Care and Management
Programme which is linked to
our OBP.

BETTER

SUPPORTING
The workstreams are
strongly supported by
our IT Function who have
developed a Management
Information suite to enable
informed decision making
and embedded by our Operating Brilliance
Leader and Practitioner accredited education
programme. We currently have 80 Team
Members fully trained and accredited across
the group, we intend to double
this number in the next year.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance22

Sustainable Approach

Sustainability metrics and goals are embedded
within all business strategies and key to reducing
our environmental impact. We are implementing
a Group-wide environmental system in line with
ISO14001 in 2021, to drive a consistent approach
to measurement and to deliver a robust legal
compliance framework. We have also invested
to upweight resource in relation to environmental
skills and knowledge.

EFFICIENCY

MONITORING…
Following a successful trial with asset
energy monitoring where a 10%
reduction in energy was achieved,
we have now rolled out this initiative
across all UK bakeries.

All key assets now have localised energy
monitoring to identify and measure energy
reduction opportunities in ‘real time.’
This monitoring system will be extended
to cover water use.

10% reduction in energy was achieved.

Finsbury Food Group Annual Report and Accounts 202123

CONVERTING...
We continue to drive conversion to
LED lighting across the Group.

We are currently over 70% LED and will be 100%
by the end of 2021/22 financial year.

Over 70% LED usage across the business.

RENEWABLE...
From May 2021, all our electricity
in the UK is now sourced from
renewable energy generation.

IMPROVEMENT

We have achieved a 65% reduction in
carbon emissions on our frozen storage.

RECYCLING…
We are continuing to drive plastics
reduction by optimising pack sizes
accompanied with the objective
of ensuring that all plastics are
recyclable.

Currently over 90% of our plastic packaging
is recyclable in the UK.

Over 80% of all our waste is recycled.

REDUCING…
We have achieved an estimated 65%
reduction in carbon emissions on our
frozen storage for our foodservice
business following the move to
a modern facility during 2020.

Currently over 90% of our plastic packaging
is recyclable in the UK.

REMAINING...
We remain a certified zero landfill
business.

Over 80% of all our waste is recycled and we
continue to work with specialist partners to
improve our recycling rate through waste
stream separation.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance24

Quality and Innovations

We’re taking the quality journey forward
across the whole of our business by systemising
and embedding our Process Blueprint activities.
This has resulted in some key improvements in
quality consistency and despite the unusual year
we have had the teams have still managed to
drive complaints down across the Group.

INNOVATIVE

INVESTING...
In addition to bread capability
in this area, we have invested to
extend gluten-free capability into
the cake category at our Memory
Lane Cakes site, where across the
past 12 months we have secured
total ownership of the sharing
cake market in this area, with great
plans to grow further with our
enhanced capability across the
next three years.

REDUCING...
We have continued to innovate,
develop and launch fantastic products,
winning 9 awards, showing that
baking brilliance and quality is at
the heart of everything we do.

We focus heavily on metrics including
complaints from customers with the business
as a whole, achieving a 3% reduction in
complaints year-on-year.

DEDICATED...
Playing a key role in healthy innovation
across the business, dedicated
gluten-free bakeries in both Poland
and the UK, manufacturing a wide
range of bakery products.

Investment in this area have expanded our
capability and significantly improved product
quality. This has enabled us to bring to market
gluten-free baguettes from our Polish sites and
also a range of artisan gluten-free breads from
our Ultrapharm site in the UK.

We achieved a 3% reduction in complaints
year-on-year.

Finsbury Food Group Annual Report and Accounts 2021ACHIEVING...
With almost all products meeting the
FSA salt targets we are now targeting
compliance against 2024 targets.

We achieved a sales weighted average sugar
reduction of 13.1% and we are still working on
innovation to further improve on this figure.

INNOVATING...
Innovation is key to our partnership
relationship, particularly with our
customers and consumers.

Our Kara brand vegan buns launched during
the year for our foodservice market and met a
rapidly developing consumer trend. We are very
proud when our products win awards and this
year was no exception. We won 9 awards for our
brilliant bakery products across the business.
We were also awarded Bakery Manufacturing
Company of the Year in recognition for the work
we have done in many areas of our business.

PARTNERING...
We have innovated across our
business to develop a range of vegan
products both in cake and bread.

From partnering with BOSH! to launch a range
of great tasting vegan cakes, to supplying our
own label cake ranges and developing a vegan
brioche are just two of the highlights in this area.

We won 9 awards for our brilliant bakery
products across the business.

We achieved a sales weighted average sugar
reduction of 13.1%.

DEVELOPING

TRANSFORMING...
A key innovation has been
transforming our celebration cake
facility to be completely nut-free.

In the past 12 months we have extended our
nut-free offering from branded celebration
cakes into own label product range and now
make positive nut-free claims across several
key customers. Making our cakes accessible to
people with nut allergies is something we are
very proud of and it is the result of 18 months of
systematic, detailed work both in our business
and throughout the supply chain. This model
for critical due diligence is being rolled out
across our business enabling us to remove
unnecessary alibi labelling.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance26

Finsbury Food Group
Annual Report and Accounts 2021

Key Performance Indicators

Key Performance Indicators
Financial

Sales Growth
Performance

2020

-2.8%

2021 +2.3%

Definition
Revenue £ this year/revenue £ last year
as a percentage.

2021 Performance
A strong second half performance with revenues
up 9.1% against the corresponding period in the
previous year. Revenues for the year almost at
pre-pandemic levels.

Adjusted Operating Profit
Performance

2021

2020

5.1%

4.9%

Adjusted EPS
Performance

Basic

2021

2020

Diluted

2021

2020

9.1p

7.9p

8.6p

7.7p

Definition
Adjusted operating profit £/revenue
£ as a percentage.

2021 Performance
The result of the Operating Brilliance Programme
improving gross margin, an improvement in sales
and continued focus on overhead control.

Definition
Adjusted Basic: adjusted profit attributable to
the equity holders/weighted average number
of ordinary shares in issue during the period.

Adjusted Diluted: adjusted profit attributable to
the equity holders/(weighted average number
of ordinary shares in issue during the period
+ dilutive effect of share options).

2021 Performance
The improved EPS figures naturally follow
the growth in operating profit.

£26.9m

£26.2m

Definition
EBITDA (operating profit before significant
non-recurring and other items adding back
depreciation and amortisation).

2021 Performance
EBITDA growth follows the improving gross
margin, an improvement in sales and continued
focus on overhead control.

Adjusted EBITDA
Performance

2021

2020

Net Debt
Performance

2021 £-13.1m

2020

£-26.5m

Debt to Adjusted EBITDA
Performance

2021 0.5

2020

1.1

Return on Capital Employed (ROCE)
Performance

2021

11.4%

2020 9.6%

Definition
Interest-bearing loans and borrowings plus
unamortised transaction costs, including
cash balances.

2021 Performance
Profitable trading and the cautionary non-
payment of dividend as the Group got to grips
with the impact of the pandemic has driven
significant cash generation and lower debt.

Definition
Net debt (as above) expressed as a ratio to
adjusted EBITDA (pre IFRS 16) (operating profit
adding back depreciation and amortisation).

2021 Performance
Strong cashflow lead to significant reduction
in debt while EBITDA increased slightly.

Definition
Adjusted operating profit (OP)/average
capital employed.*

* Average capital employed = net assets, excluding cash,
interest-bearing borrowings, deferred consideration,
fair value derivatives and pension deficit

2021 Performance
An increase in operating profit and lower
working capital has resulted in an improved ratio
to a level higher than pre-pandemic levels.

Strategic Report

Corporate Governance

Financial Statements

Annual Report and Accounts 2021 27

Finsbury Food Group

Key Performance Indicators
Non-Financial

Revenue £k per Employee
Performance

2021

2020

Complaints per Million Units
Performance

2021 16.6

2020

17.1

Definition
Revenue/the average number of persons
employed by the Group including Directors
and excluding agency staff during the year.

2021 Performance
An improvement due to a steady recovery
in revenue.

Definition
Number of complaints/(number of units
sold/1,000,000).

2021 Performance
Our long-term commitment to product quality
makes this a key measure. Process Blueprint has
progressed throughout the period delivering
tangible benefits.

Number of Accidents per 100k Hours Worked
Performance

Definition
Number of accidents per 100,000 hours worked.

2021 Performance
The third year of our HomeSafe Culture Change
Programme is delivering tangible benefits.

2021 3.5

2020

4.1

CO2 Emissions
Performance

2021 0.17

2020 0.18

Definition
Measure of net refrigerant emissions per
tonne of finished product manufactured.

2021 Performance
An improvement in emissions driven by
sustainability initiatives embedded within
all our business strategies.

Cost Effectiveness

The bakery market is competitive
and cost effectiveness is essential to success.
The implementation of a Group-wide review
and standardisation of bakery processes as
described in more detail under Operating
Excellence has led to improvements in
quality and a reduction of waste.

CONTROL

BETTER…
Efficiency all round in a competitive
market: cost effectiveness is
essential to success.

We are driving consistently towards a culture
of end-to-end Operational Excellence promoting
a ‘better tomorrow than we are today’ culture,
whilst optimising our processes from sourcing
to delivery. Our Group-wide Operating Brilliance
Programme, standardisation of bakery processes
and asset management strategies have led to
improvements in quality, efficiency and
a reduction of waste

We are driving
consistently towards
a culture of end-to-end
Operational Excellence.

Finsbury Food Group Annual Report and Accounts 202129

BUYING...
Our centralised buying process
focuses on high-quality and cost
effective ingredients.

Ethical purchasing and supplier management
is very important to Finsbury Food Group and
we have signed a Statement of Commitment
to honour this. Our purchasing team has taken
proactive steps to safeguard against unethical
conduct and all members have undertaken
CIPS Corporate ethical procurement and
supply training.

Ethical purchasing and
supplier management is
very important to Finsbury
Food Group.

QUALITY

OPTIMISATION…
We invest continually in our people,
plant and processes maximising our
capability and skills base to deliver an
optimum business operating model.

By developing and implementing systems
to capture and interpret business intelligence
we are able to use data-based decision making
at the heart of our operations.

Use of these interactive technologies within
our tiered meeting and reporting alignment
structure allows us to efficiently drive sustainable
business improvement.

INVESTING…
We focus our capital investment
on capability enhancement,
capacity optimisation and
cost reduction.

We aim to achieve Centre of Excellence status
in areas where we have a niche strength such as
artisan breads, premium buns and rolls, food to
go and sharing cake. This holistic investment
approach allows us to deliver consistent profitable
growth and strong customer relationships.

PRODUCING...
We interpret the latest trends into
scalable and profitable product
ranges that align with core asset
capabilities across cake and bread.

We consistently monitor technology advances
in materials, plant and process capability,
to allow us to optimise cost of goods without
compromising quality or consumer appeal.
Working in conjunction with our customers and
supply partners, we innovate to optimise cost
effectiveness throughout the supply chain.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate GovernanceExternal

01 Cyber Security

Movement in year

Principle Risk
• The exposure to random and malicious attacks from Cyber criminals
always exists. Protecting key information assets is of critical importance.

Mitigation
The following actions are in place to manage this risk and are supported
by software solutions (i.e. antivirus software and anti-phishing software).

• Training and awareness of the Group’s IT Acceptable Usage Policy.

• Reviews with software and service providers.

• Preparation of crisis and continuity plans.

• Vendor risk assessment questionnaire completion with key suppliers.

Risk Report

The Directors recognise
the need for a healthy
system of internal controls
and risk management.
We have identified the
following as the principal
risks and uncertainties
the Group faces.

Principle Risks and Uncertainties
Risk management is regarded as essential to achieve
the Group’s strategic and operational objectives.
An annual, formal review of risks is carried out as
an integral part of our strategic planning process.

Each business updates its risk register and the registers are presented
to the Audit Committee together with mitigating actions. Following
a preliminary recommendation by the Audit Committee, the Board
reviews the highest risk items for the Group and the mitigations.

The following show the risks considered material, how they have
evolved year-on-year and the principal mitigating actions.

Commentary
Increased risk offset by enhanced mitigations.

Finsbury Food Group Annual Report and Accounts 202131

External

02 Government
Legislation

03 Pandemic

Movement in year

Principle Risk
• The proposed legislation to be introduced in October 2022 around high

Principle Risk
• The global pandemic introduces risk in many waysnotably risk to the

fat and salt could have a detrimental impact on demand.

health and well-being of our employees.

Mitigation
• Early engagement of development teams internally and collaboration
with customers to ensure products meet legislative requirements and
appeal to consumers.

• Attributed volatility and changes in demand have been experienced.

• The risk of disruption to internal and external resources could have

an impact on the effective operating of the business.

Mitigation
• The priority is, and was, to ensure the safety of all employees and to make
rapid changes to the way the business operates by establishing safe
working practices based on social distancing and home working.

• Close working relationships with suppliers and customers.

Commentary
Early engagement will be key to compliance and to ensure our product
offering remains appealing.

Commentary
The Group has traded successfully throughout the pandemic.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance32

Risk Report/Continued

Operational

04 Health and Safety

05 Business Interruption

or Fire

Movement in year

Principle Risk
• Injury to employees remains an ongoing risk with potentially

Principle Risk
• Risk of serious injury and loss of production capacity.

significant consequences.

Mitigation
• Existing Risk Management Steering Committee with oversight of a

number of strategic processes and procedures. The H&S Committee
is continuing to embed the HomeSafe Every Day Strategy.

• Induction and training programmes underpinned by our Operating

Principle, People Who Care.

• Regular Board reviews and site visits.

• An increased number of large-scale losses in the bakery sector has
resulted in increases in insurance premium costs and a restriction
in affordable capacity.

Mitigation
• Existing Risk Management Steering Committee with a number of strategic
intiatives and related processes and procedures. Continued focus on
preventative measures to reduce risk, including regular fire audits.

Commentary
An area of continued focus and development.

Commentary
Continued focus on preventative measures to reduce risk.

Finsbury Food Group Annual Report and Accounts 202133

Financial

06 Pension Deficit

07 Commodity and Labour
Costs and Availability
Pressures

Movement in year

Principle Risk
• Changes in inflation, investment performance and demographics

Principle Risk
• Global commodity inflation.

(life expectancy) leads to a larger deficit requiring increased
Company contributions.

Mitigation
• Fiduciary Management Investment approach adopted which enables
scheme trustees to execute their long-term strategies efficiently and
target better outcomes.

• Appointed Professional Company Trustee to challenge approach and to

bring knowledge from experiences with many other clients.

• Continuing increases in the National Living Wage.

• The risk associated with Brexit was lower than anticipated but leaves
legacy exposures in the seemingly adhoc enforcement of the import
and export rules and regulations. The post-Brexit period sees risks in the
availability of labour as the Group relies on agency labour for seasonality
demand, quite often sourced from Europe.

Mitigation
• Tight control of costs and mitigation where possible through price

and product engineering.

• Continued programme of Operating Brilliance and capital expenditure,
focused on continuous improvement and cost reduction. All led by the
Group Efficiency Improvement Director.

• Leverage economies of scale from the enlarged group, including Group

Purchasing strategy.

• Retention of permanent staff and less reliance on agency staff, whilst

forging solid working relationships with agencies.

• People strategy focused on staff retention by upskilling of workforce.

• Capital investment has been targeted at automation and

operational efficiency.

Commentary
An ongoing risk of deficit deterioration driven by factors largely outside
the control of the Company.

Commentary
Our Operating Principles of Operating Excellence, Cost Effectiveness
and People Who Care are key to our continued efficient operations.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance34

Growth with Our Partners

We consider customers, licence owners and suppliers
to be our partners. We work with customers to provide
a constant stream of high-quality and innovative
products. Our customer and licence relationships
have continued over many years and recent growth in
share of licence and in the convenience and discounter
channels prove our strong partner credentials. We work
with suppliers to resource high-quality ingredients in
a global marketplace but also to provide innovation
in raw materials and packaging that support our
innovation in product quality and range.

COLLABORATION

DIVERSIFYING...
Our channel diversification across
the business between retail and
out-of-home has helped us to
balance the challenges of the
Covid-19 pandemic.

Retail business has remained strong and in
certain areas for example sharing cake has been
buoyant. We can look forward to improved
performance from our foodservice business
as social distancing restrictions in the UK are
reduced. We deliver to over 300 customers every
week with our extensive range of Kara branded
products for the foodservice market.

We deliver to over 300 customers every week
with our extensive range of Kara products.

CARING...
This year has been particularly
challenging for our foodservice
partners.

We have been working closely with them to
manage fluctuations in demand during the
pandemic. Together with our partners, we
also supplied over 4 million loaves of bread to
vulnerable people through the Defra ‘Food Box’
scheme. We have actively supported food banks
local to each of our operating locations through
this period, whilst recognising the hugely
important NHS and other key worker populations
with regular product donation initiatives.

We supplied 4 million loaves of bread
to vulnerable people through the Defra
‘Food Box’ scheme.

STRIVING...
We strive to develop better business
relationships. Customers, licence
owners and suppliers are our partners
and we work with them to create
a constant stream of high-quality,
innovative products.

We have built these relationships over many
years and continued growth in our share of the
licensing market and in the convenience and
discounter channels is testament to our strong
partnership credentials. We work with suppliers
to source high-quality ingredients from around
the world, and also to innovate in raw materials
and packaging.

Finsbury Food Group Annual Report and Accounts 202135

GROWING...
We have continued to evolve our
strong licensed brand portfolio
which we work actively to ensure
is best in class.

The broadening of our relationships with
partners such as Mars and Diageo, and the
addition of great new brands such as TGI Fridays,
have allowed us to expedite both UK and wider
European territory growth with our partners.
Our Lightbody Europe subsidiary in France and
the Ultrapharm business in Poland give a growing
presence in Europe. 11% of Group revenue is
made through European sites. We have invested
in a new ‘baguette’ line in Poland to be able to
provide a gluten-free solution to this everyday
staple, not just in France, but across Europe.

SHARING...
Our whole cake strategy is based
on three consumer centric guiding
principles, relevance, regularity and
premiumisation which have driven
significant category share growth
with key customer partners.

By introducing brands into the category,
leveraging an ‘always on’ strategy and bringing
strong innovation to play, we have cemented our
position as category leaders in this area.

We have cemented our
position as category leaders
in the whole cake area.

GROWTH

INVESTING...
Building on the creation of a cake
category first at our Hamilton site,
where we established the first fully
nut-free capability area, we have
continued to extend our range
of character-licensed products,
all clearly marked with our unique
nut-free logo on the pack.

The success of this has enabled us to now
extend positive nut-free on pack declarations
onto own label product ranges with key retail
customer partners.

We continue to win new
business through innovation
with our Ultrapharm
gluten-free business.

We continue to build on our wellness strategy by
winning new business through innovation with
our Ultrapharm gluten-free business, where we
offer a range of premium breads and sweet treats,
such as our award-winning mince pies and hot
cross buns.

We are also currently investing to double the
capacity of our facility in Pontypool to manage
growth with existing customers. In addition to
bread capability in this area, we have invested to
extend this capability into cake at our Memory
Lane Cakes site, where across the past 12 months
we have secured total ownership of the sharing
cake market, with great plans to grow further with
our enhanced capability across the next three years.

We have invested in a new frozen dough ball facility
at our Kara bakery in Manchester to meet growing
demand in the take-away pizza category. This has
already resulted in the winning of new contracts
with some of the UK’s leading restaurant chains.

Having invested to expand capacity at our
Nicholas and Harris bakery in Salisbury, we
continue to see strong double-digit growth
in sourdough bread.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance36

Financial Review

Group revenue for the 52-week period to 26 June 2021 is £313.3 million,
2.3% higher than last year. The growth in revenue is the result of
a strong second half performance which saw Group revenues grow 9.1%.
The recovery of foodservice is driving the second half year uplift
although retail revenues remain positive.

Sales from our overseas division increased
by 13.4% year on year driven by a strong cake
performance in the large French retailers.
Group adjusted operating profit at £16.1 million
is up 7.8% on last year. Despite the pandemic, the
Group has grown both revenue and operating
profit. Adjusted operating profit margins are 5.1%
(2020: 4.9%), a consequence of the success
of our Operating Brilliance Programme.

Other Significant and
Non-Recurring Items
Significant non-recurring income of £1.0 million
relates to the release of provisions for onerous
leases and factory closure costs of £1.4 million
less litigation and legal costs of £0.4 million.
Both items have been excluded from operating
profit in the table below to better reflect the
ongoing trading position.

52 week period ended 26 June 2021

Revenue
Cost of sales
Gross profit
Other costs excluding depreciation and amortisation
EBITDA
Depreciation and amortisation
Operating profit
Finance income
Finance costs
Profit before tax
Taxation
Profit for the year

52 week period ended 27 June 2020

Operating
performance
£000
313,258
(210,273)
102,985
(76,081)
26,904
(10,804)
16,100
-
(974)
15,126
(2,995)
12,131

Significant
non-recurring
items
Note 4
£000
-
-
-
958
958
-
958
-
-
958
(182)
776

Operating
performance
£000
306,348
(210,881)
95,467
(69,219)
26,248
(11,309)
14,939
61
(1,272)
13,728
(3,398)
10,330

Significant
non-recurring
impairment
Note 4
£000
-
-
-
(8,737)
(8,737)
-
(8,737)
-
-
(8,737)
235
(8,502)

Significant
non-recurring
other items
Note 4
£000
-
-
-
(1,594)
(1,594)
-
(1,594)
-
-
(1,594)
303
(1,291)

Dividend
Given the uncertainty at the outset of the
pandemic, the Board took the decision to withdraw
the interim dividend and also decided not to
propose a final dividend in the context of the
continued uncertainty surrounding the pandemic
and Brexit. The Board is recommending a full-year
dividend of 2.4 pence per share for the financial
year ending 26 June 2021.

The tables below show what the Directors
consider to be the trading performance of the
Group. The adjusted measures eliminate the
impact of significant and non-recurring items and
other accounting items, that are not deemed to
reflect the continuing performance of the Group.

Movement in
the fair value
of interest rate
swaps/foreign
exchange
contracts
£000
-
-
-
696
696
-
696
89
-
785
(149)
636

Movement in
the fair value
of interest rate
swaps/foreign
exchange
contracts
£000
-
-
-
(73)
(73)
-
(73)
-
(386)
(459)
87
(372)

Defined
Benefit
Pension
Scheme
£000
-
-
-
473
473
-
473
-
(224)
249
(62)
187

Defined
Benefit
Pension
Scheme
£000
-
-
-
200
200
-
200
-
(256)
(56)
11
(45)

Discounting
of deferred
consideration
£000
-
-
-
-
-
-
-
-
(105)
(105)
20
(85)

As per
Consolidated
Statement of
Comprehensive
Income
£000
313,258
(210,273)
102,985
(73,954)
29,031
(10,804)
18,227
89
(1,303)
17,013
(3,368)
13,645

Discounting
of deferred
consideration
£000
-
-
-
-
-
-
-
-
(14)
(14)
1
(13)

As per
Consolidated
Statement of
Comprehensive
Income
£000
306,348
(210,881)
95,467
(79,423)
16,044
(11,309)
4,735
61
(1,928)
2,868
(2,761)
107

Finsbury Food Group Annual Report and Accounts 2021
37

Earnings Per Share (EPS)
EPS comparatives to the previous year can be distorted by significant non-recurring items and other items highlighted on the previous page.
The Board is focused on growing adjusted diluted EPS which is calculated by eliminating the impact of the items highlighted above as well as
amortisation of intangibles and incorporates the dilutive effect of share options. Adjusted diluted EPS is 8.6p (2020: 7.7p).

Basic EPS
Adjusted basic EPS

Diluted** basic EPS

Adjusted* diluted** EPS
* Further details on adjustments can be found in Note 9.
** Diluted EPS takes basic EPS and incorporates the dilutive effect of share options.

52 week
2021
9.8p
9.1p

9.3p
8.6p

52 week
2020
(0.6)p
7.9p

(0.6)p
7.7p

Cash Flow
There was a net cash inflow before
financing activities of £15.3 million compared
to £13.4 million in 2020, which includes lower
working capital resulting in an inflow of
£2.9 million (2020: £1.0 million decrease), driven
by higher levels of trading accruals and lower
stock levels as restrictions were eased and
activity increased. Corporation Tax payments
made in the financial year totalled £3.9 million
(2020: £1.8 million), representing a more normal
level. Capital expenditure in the year amounted
to £6.2 million (2020: £4.7 million).

Debt and Bank Facilities
The Group’s total net debt is £13.1 million
(2020: £26.5 million), down £13.4 million from
the prior year. Higher levels of EBITDA and the
temporary halt on dividend payments as cash
was preserved during the recovery period
drove the reduction in net debt.

Taxation
The Group taxation charge for the year was
£3.4 million (2020: £2.8 million). The effective
rate of tax on profits before significant and non-
recurring and other items is 19.8% (2020: 24.8%).
You can find further details on the tax charge in
Note 8 to the Group’s Financial Statements.

Financial and Non-Financial Key
Performance Indicators
We monitor a range of financial and non-financial
KPIs at site level covering, amongst others,
productivity, quality and health and safety.

The Group Board receives a regular overview
of all KPIs. We discuss these KPIs in further
detail on pages 26 and 27.

The Strategic Report was approved by the Board
of Directors on 17 September 2021 and was
signed on its behalf by:

Stephen Boyd
Director

The Group recognises the inherent risk
from interest rate rises, and uses interest rate
swaps to mitigate these risks. The Group has
two swaps; one for £20.0 million for five years
from 3 July 2017 (fixed) at 0.455% and one for
£5.0 million for three years from 28 March
2019 (fixed) at 1.002%. The total balance
of swaps at 26 June 2021 is £25.0 million
(2020: £25.0 million). The counterparty to
these transactions is HSBC Bank Plc.

The effective interest rate for the Group
during the year, taking account of the interest
rate swap in place with base rate at 0.10% and
LIBOR at 0.052%, was 2.0% (2020: base rate
0.10% and LIBOR at 0.691%, was 2.2%).

Financial Covenants
The Board reviews the Group’s cash flow
forecasts and key covenants regularly, to ensure
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.
As noted earlier, there has been no breach of
covenants during the year and the Board do not
expect any in the forecast periods.

Interest cover (based on adjusted earnings before
interest, tax, depreciation and amortisation –
EBITDA) for the 52 weeks to 26 June 2021 was
27.2 (2020: 25.3). Net bank debt to EBITDA (based
on adjusted EBITDA) for the 52 weeks to 26 June
2021 was 0.5 (2020: 1.1).

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance
38

People Who Care

We continued to make good progress with
our people strategy, engagement being a major
part. With our planned two-yearly survey postponed
due to Covid-19, we instead ran a sentiment survey
to gather employees' views on our handling of the
crisis. The response was positive providing some
valuable lessons and insights.

DEVELOPING

LEADERSHIP
DEVELOPMENT...
We have launched our new entry
level Leadership Development
Programme to supplement the
more advanced programmes
that already exist.

These include Developing Leaders, which is
accredited via the Institute of Leadership and
Development, and also the Senior Leaders
Development Programme, which includes
executive coaching.

We launched our new
entry level Leadership
Development Programme.

HEALTH
AND WELLBEING...
We launched our Health and
Wellbeing Strategy which includes
three pillars: mental, physical
and financial health.

Our team of Health and Wellbeing Champions
throughout the business help run the programme,
working alongside our Employee Assistance
Programme (EAP) and Occupational Health partners,
with all advice and support available to all team
members. The EAP is available to employees' families
also. We train our mental-health first aiders across
the business to help them play a role in supporting
their colleagues. We also ensure all leaders undertake
mental-health awareness training. On the physical
health side, we run regular interactive campaigns
such as walking challenges, healthy eating tips and
yoga sessions, which many of our people take part in.
On the financial front, we promote Grocery Aid's
hardship fund and school grant initiative, while
helping our colleagues improve their understanding
of their own financial health, for example with
a series of videos on the importance of pension
savings and planning for death in service.

Finsbury Food Group Annual Report and Accounts 202139

CONFERENCE...
We held the fifth FFG Annual
Conference, which has previously
been a face to face event however
due to the pandemic was replaced
with our first live, virtual event.

This enabled us to engage with a much larger
proportion of our workforce live, with many more
of our people able to access the recorded version,
resulting in a much more inclusive event.

Our first live, virtual event
enabled us to engage with
a much larger proportion
of our workforce.

COMMUNITY
ENGAGEMENT…
We take a Group-wide approach,
based on our position as a major
and responsible employer in the
food industry, and supplement it
with local initiatives chosen by
our employees.

In both ways, we ensure we can have a positive
impact on the communities where we operate,
which has always been an important part of how
we do business. At Group level, we support two
charities, Grocery Aid and FareShare, both of which
are closely aligned to our industry. A high proportion
of our workforce lives close to our bakeries, putting
them at the heart of our local communities.

We therefore ask each of our sites to
choose a local charity partner for each year,
to help improve the lives and welfare of the
communities we work and live in. This way, our
local efforts in volunteering, fundraising and
donations are not diluted and provide strong
support throughout the year. Sites can select
a different charity for the following year, or
continue to work with the same charity.

OPPORTUNITIES

COMMUNICATION...
We have continued to embed
the use of Workplace by Facebook
across the business as our primary
communication tool and have now
rolled this out to all staff, including
front line workers.

This enables us to engage directly and instantly
with all our employees, across all locations and
for everyone to easily collaborate, regardless of
location or shift pattern. It has continued to be an
invaluable tool during the pandemic in enabling us
to maintain communication, engagement and a
sense of connection to the organisation and one
another during periods of remote working.

EMPLOYEE REFERRAL...
We launched our Employee
Referral campaign, which incentivises
employees to refer people from
their network to join us.

GRADUATE
RECRUITMENT...
We ran our fifth Finance Graduate
Recruitment campaign.

We have experienced a high retention rate
of those recruited previously via the scheme,
which forms an important part of building
a strong talent pipeline.

RECOGNITION...
We continued to embed the Shining
Example Awards, which recognise
and reward those individuals who
bring the Company Values to life.

We also celebrated the Brilliance Awards, which
recognise the teams that demonstrated tangible
business improvements under each of the
Operating Principles.

APPRENTICESHIPS...
We are continuing with the
business-wide Engineering
Apprenticeship Programme which is
key to building a talent pipeline for
the future and also to address the
national shortage of engineers.

Finsbury Food Group Annual Report and Accounts 2021Financial StatementsStrategic ReportCorporate Governance40

Corporate Governance
Chairman's Introduction to Governance

As Chairman of the Board, it is my responsibility to ensure that
the Group has both effective corporate governance and Board
leadership. The Company has adopted the Quoted Companies
Alliance Corporate Governance Code (the ‘QCA Code’) and this
report follows the structure of these guidelines and explains
how we have applied the guidance. The Board considers that
the Group complies with the QCA Code.

COMMITMENT

The Board
The Board believes that corporate governance
is more than just a set of guidelines; rather it is
a framework which underpins the core values
for running the business in which we all believe,
including a commitment to open and transparent
communications with stakeholders. We believe
that good corporate governance improves
performance while reducing or mitigating risks.

During the year under review, we obviously faced
significant challenges as a result of the Covid-19
pandemic which necessitated changes to how
we worked but I believe that the Board and the
business rose to those challenges, adapted to
them at a remarkable pace and found new ways
of operating to maintain our services and our
governance structures without compromising
on our principles. We have learned from the
experience and will be using those learnings
to support constant improvement.

Peter Baker
Non-Executive Chairman

Finsbury Food Group Annual Report and Accounts 2021Report on Corporate Governance

QCA Principles

1. Establish a strategy and business model which
promote long-term value for shareholders
The Group’s vision is to be the UK’s most innovative
speciality bakery group, providing differentiation
for our customers. Our business model, and the
Finsbury ‘recipe for growth’ Operating Principles
by which we manage our business, are shown
on pages 8 to 11. Our strategy and markets are
explained in detail in our Strategic Report on
pages 4 to 8.

The creation of our Strategic Plans (which are
prepared on a rolling three-year basis) is an
extensive process bringing together market
intelligence, customer feedback, supply chain
management, risk and financial and operational
considerations. The Board is involved and updated
through the development of the plan prior to
formal approval along with the related budget.

2. Seek to understand and meet shareholder
needs and expectations
Relationships with our shareholders are
important to us and we seek to provide effective
communications through our Interim and Annual
Reports along with Regulatory News Service
announcements. We also use the Company’s
website, www.finsburyfoods.co.uk for both financial
and general news relevant to shareholders.

The Executive Directors meet shareholders
and other investors/potential investors at regular
intervals during the year. The Company also hosts
broker and analyst meetings from time to time.
Historically these have been conducted on site at
the Group’s facilities. Whilst this was not possible
during the year under review and communications
were virtual, the Company intends to resume these
on site activities and in person meetings where
appropriate. The Non-Executive Directors are also
in contact with shareholders as needed in relation
to matters such as Executive remuneration.

The broker and NOMAD, Panmure Gordon, is
briefed regularly and updates the Board during the
year on shareholder sentiment and expectations.

The Board has reviewed its Annual General
Meeting (AGM) arrangements in light of its
experiences through the pandemic and considered
how to improve the Board’s visibility, accessibility
and interaction with a broader range of its
shareholder base. In summary, the Board has
decided to include a retail focussed presentation
(through Investor Meet Company) as part of its
investor results roadshows and revise the format
of the AGM. Please see Principle 10 below for our
proposals in this regard.

3. Take into account wider stakeholder and
social responsibilities and their implications
for long-term success
The Board considers that it has operated in full
regard of its responsibilities under section 172
of the 2016 Companies Act as outlined in the
Strategic Report on pages 18 and 19. The Group’s
Purpose is widely understood and drives the
decision making which aims to optimise the
long-term value of the business.

Our continued success is built entirely on the
talented people who work here, and employee
engagement forms a major part of our Operating
Principles. Everyone at Finsbury Food Group is
a valued member of the team, and our aim is to
help every individual achieve their full potential.
We offer equal opportunities regardless of race,
gender, gender identity or reassignment, age,
disability, religion or sexual orientation.

Clearly, the health and safety of our workforce
is our most important consideration. As well as
instituting operational measures to keep our
people safe, we have also focussed on health
and wellbeing to support our staff during the
pandemic, recognising that the last year has been
very challenging for many on a physical, emotional,
and financial level. The management team has
worked hard to build and maintain employee
engagement through the pandemic which
has been one of the key challenges. Again, the
pandemic provided an opportunity to reimagine
our employee engagement and the entire
permanent workforce is now included on the
Workplace platform where we can communicate
virtually in topic or site teams or as a whole Group,
share news, ideas, knowledge and best practice,
support wellbeing initiatives, gain feedback and
recognise and applaud the achievements and
talents of our people in real time. This has been a
highly beneficial development delivering multiple
positive outcomes for the business. We believe
this high level of engagement makes us a more
attractive employer in a competitive marketplace
for talent and we look forward to continuing to
drive our employee engagement agenda.

Another key element of our recipe for growth
is to work for mutual benefit with our partners,
including retail grocery and foodservice
customers, all of whom benefit from tailored
innovation and service. Joint business plans are
agreed, and customers are increasingly returning
to visit our sites where it is safe to do so, to be
involved in product development and business
planning activities. Over the year we have worked
closely with our foodservice customers by
becoming a bigger partner to those supplying the
state sector and also continuing to work with them
as we emerge from restrictions. We also supported
our retail partners through this uncertain period
ensuring continuity of supply and adapting our
range of products to meet the changing consumer
needs. I am pleased to say that as we supported
our partners, they have supported us, with
everyone involved recognising the scale of effort,
cooperation and consideration necessary to keep
feeding the nation during this unprecedented
period. We consider being seen as a good business
partner as critical to our long-term success.

Our key strategic suppliers are long term in
nature and work in partnership with the Group
on innovations in both product and service.
We believe an ethical supply chain is a sustainable
one. Finsbury Food Group is a long-standing
member of Sedex, an organisation for promoting
improvement in responsible and ethical business
practices in supply chains.

In many cases, our sites have been a significant
local employer and community member for
many years. We consider community acceptance
to be an important element of our operating
framework. Our businesses’ local reputation
can influence our ability to recruit and retain
talent and create a mutually respectful operating
environment. If we were to lose community
support, this could manifest in various ways
including planning objections and recruitment
issues. We seek to retain the support of our local
communities and support community initiatives
by being a positive and considerate neighbour
and supporting local initiatives by empowering
each facility to choose one charity the employees
want to support.

4. Embed effective risk management,
considering both opportunities and threats,
throughout the organisation
The Board recognises the need for a robust
system of internal controls and risk management.
The assessment of risks and the development
of strategies for dealing with these risks are
achieved on an ongoing basis through the way
in which the Group is controlled and managed
internally. A formal review of these risks is carried
out by the Group on an annual basis.

The review process involves the identification
of risks, assessment to determine the relative
likelihood of them impacting the business
and the potential severity of the impact and
determination of what needs to be done to
manage them effectively. Risk management is
integral to the ability of the Group to deliver
on its strategic objectives.

The system of internal control is structured
around an assessment of the various risks to
the business and is designed to address those
risks that the Board considers to be material,
to safeguard assets against unauthorised use or
disposition and to maintain proper accounting
records which produce reliable financial and
management information.

The key features of the Group’s system of risk
management and internal controls are as follows:

• An ongoing process of risk assessment to

identify, evaluate and manage business risks;

• Management structure with clearly defined

responsibilities and authority limits;

• GEC overview of the risk review process;

• Ongoing policy development,
implementation and testing;

• Internal audit function reporting to the Audit
Committee with a remit beyond financial
controls and encompassing policy adherence;

• Maintenance of a central Group-wide key

risk register supported by site and function
specific registers;

• An operational Risk Steering Committee to

consider all material risks and their management
and mitigation on an ongoing basis;

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Report on Corporate Governance/Continued

• Oversight of key risks by Audit Committee reporting back to the Board;

• Key risk item focussed reviews at Audit and where appropriate Board level;

• A comprehensive system of reporting financial results to the Board;

• A Group-wide ERP system (M3) with related applications that embeds processes and procedures implemented to control risk;

• A rolling programme of internal audit activities carried out by Group finance reporting to the Audit Committee;

• Appraisal and authorisation of capital expenditure projects; and

• Dual signatories on all bank accounts.

Since the year end, the business has appointed a Group Health, Safety, Environment and Risk Director, a promotion from within. The GHSER Director is
a member of the Group Executive Committee and reports to the Group Efficiency Director and indirectly to the Chief Executive ensuring his remit has an
appropriate high profile, with the resource and authority to drive the risk management agenda. The GHSER Director has been working in the business
for the last four years developing the non-financial risk function, a key role during the pandemic, and has worked closely with the Audit Committee and
GEC throughout that time. This appointment represents a further step in the Group’s risk identification, understanding, management and mitigation
processes and reflects the priority status accorded to it.

5. Maintain the Board as a well-functioning, balanced team led by the Chair
The Board is currently made up of two Executive Directors, the Chairman and three other independent Non-Executive Directors.

The Chairman is responsible for the leadership of the Board and ensuring its effectiveness in all aspects of its role. He is also responsible for creating the
right Board dynamic and for ensuring that all important matters, in particular strategic decisions, receive adequate time and attention at Board meetings.
The Executive Directors are responsible for the day-to-day running of the business and developing corporate strategy, while the Non-Executive
Directors are tasked with constructively challenging the decisions of executive management and satisfying themselves that the systems of business risk
management and internal financial controls are robust.

A calendar of meetings and principal matters to be discussed is agreed at the beginning of each year. Board papers are circulated one week before
meetings, allowing time for full consideration and necessary clarifications before the meetings. Board meetings are open and constructive, with every
Director participating fully. Historically, meetings are held at operating sites on a rotating basis, enabling the Board to meet the senior site teams and
to visit the bakeries. Pre-meetings and Board dinners were also historically held to enable broader discussion and development of effective Board
relations. While these activities were not possible during the year under review, the Board has now returned to this model.

The Board held five scheduled meetings during the year under review, all of which were held online, due to the impact of Covid-19. Additional Board
meetings are held throughout the year as required on an ad hoc basis. Attendance by individual Directors at Board and scheduled Committee
meetings was as follows:

Director

John Duffy
Steve Boyd
Peter Baker
Bob Beveridge
Ray Duignan
Marnie Millard

Board Meetings
(5 meetings)

Audit Committee
(3 meetings)

Remuneration Committee
(2 meetings)

Nominations Committee
(1 meeting)

5
5
5
5
5
5

-
-
-
3
3
-

-
-
-
-
2
2

-
-
1
-
1
-

The Company’s Non-Executive Directors are expected to commit between 15-18 days per year to the Company and the Chairman is expected to commit
at least three days per month to the Company. Terms of reference for the Committees are published on the Group’s website. The Committees have the
necessary skills and knowledge to discharge their duties effectively.

6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The Non-Executive Directors have both the breadth and depth of skills and experience to fulfil their roles. With the executive team, the Board contains
a broad range of relevant skills, experience and contacts which are deployed to the benefit of the Company. Details of the Directors’ individual experience
and areas of expertise are outlined on pages 45 and 46. The Nominations Committee is responsible for considering Board composition, including diversity
issues and making appropriate recommendations. Diversity and gender balance will be taken into account in respect of any future Board appointments
with the overriding objective of securing the right person for the role.

The Non-Executive Directors maintain ongoing communications with each other and executives between formal meetings.

In addition to their general Board responsibilities, Non-Executive Directors are encouraged to be involved in specific workshops or meetings, in line with
their individual areas of expertise.

The Audit Committee Chairman updates his technical and financial experience by attending workshops held by the major accounting firms.

The Remuneration Committee utilises specialist remuneration consultants to provide advice in relation to remuneration policy decisions and the Board
utilises specialist pension advisers to provide advice in relation to Group pension arrangements. The Remuneration Committee Chair also attends relevant
sessions run by the remuneration consultants and others.

All Directors have access to the Company Secretary, who is responsible for ensuring that Board procedures are followed. If required, the Directors
are entitled to take independent legal advice and if the Board is informed in advance, the cost of the advice will be reimbursed by the Group.

The Company is a member of the QCA and all Directors have access to the QCA’s publications, updates and events.

Finsbury Food Group Annual Report and Accounts 2021Report on Corporate Governance/Continued

7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board evaluation exercise is designed and led by the Company Secretary, working closely with the Chairman of the Board. Anonymous questionnaires are
used to promote disclosures with the results being collated and returned to the Board for consideration, discussion and action where appropriate. The areas
covered are structure and skills, operating effectiveness, operating efficiency, quality of information and ongoing development.

A similar process is followed for the Audit and Remuneration Committees. During the year under review, individual Director and Chairman reviews were not
undertaken with the Board preferring to wait for an opportunity for face-to-face meetings. These have now been completed. All reviews sought feedback
from other Directors to ensure a balanced approach. Where relevant, Board performance improvements are discussed through the year on an ad hoc basis.

In respect of succession planning, the Company has, where possible, identified internal candidates as possible replacements for senior managers/site managers.
In the event of a site manager leaving the Company in a situation where an internal candidate has not been identified or has been deemed not to have the
requisite experience, the Company will seek to recruit externally.

The 2021 Board evaluation exercise was completed in June 2021. The average scores were all satisfactory, with the vast majority rated consistently good or
excellent. It was noted that the pandemic had impacted information flow to a minor degree and the Nominations Committee was advised to increase the
formality of its operations. Views on performance of the Board during the pandemic were specifically sought, with an average score of 4.5 out of 5.

8. Promote a corporate culture that is based on ethical values and behaviour
As an innovative food business in a highly competitive market our success depends crucially on people who care and are fully engaged to do their best
for Finsbury. The values of Communication, Respect, Ownership, Honesty and Teamwork are integral to the corporate culture. The management of the
Group and all bakeries is underpinned by the Operating Principles which are:

• Operating Excellence;

• Sustainable Approach;

• Quality and Innovations;

• Cost Effectiveness;

• Growth with Our Partners; and

• People Who Care.

Further information on our Operating Principles is set out on pages 9 to 11, 20 to 25, 28 to 29, 34 to 35, 38 to 39 and on our website.

The Group has rolled out Workplace by Facebook to facilitate promotion of the corporate culture and values, communication across the Group and sharing of
ideas and best practice through all our sites and across all staff. “Shining Example” awards allow staff to nominate their colleagues for excellence in reflecting
Finsbury values. Senior staff attend an annual conference which is again based on communicating and embedding our core values throughout the business.
This was successfully hosted as a virtual conference through Workplace in the year under review.

9. Maintain governance structures and processes that are fit for purpose and support good decision making by the Board
The Board reviews its corporate governance arrangements regularly and expect to evolve these over time.

The Board has reviewed the schedule of matters reserved for its decision during the year, a full copy of which is available on the corporate governance
page of the Company’s website. These matters include:

• Strategy;

• Acquisition policy;

• Corporate governance;

• Risk management;

• Health and safety;

• Approval of major capital expenditure;

• Approval of annual budgets;

• Approval of Annual Reports; and

• Dividend recommendations and policy.

The Board delegates authority to three Committees to assist in meeting its business objectives while ensuring a sound system of internal control
and risk management. The Committees meet independently of Board meetings.

Audit Committee
The Audit Committee has two members, Bob Beveridge (Chairman) and Ray Duignan. The Group Finance Director, other members of the finance team and
Internal Audit function and external auditors attend meetings by invitation. The Audit Committee’s responsibilities include the review of the scope, results
and effectiveness of the external audit, the review of half-year and annual accounts, and the review of the Company’s risk management and internal control
systems. The Committee had three scheduled meetings during the year. A separate report of the Audit Committee activities is outlined on pages 52 and 53.

Remuneration Committee
The report of the Remuneration Committee is set out on pages 54 to 58. The Remuneration Committee has two members, Marnie Millard (Chairman)
and Ray Duignan. The Committee is responsible for setting the remuneration arrangements, including short-term bonus and long-term incentives, for
Executive Directors as well as approving, the remuneration principles for senior staff. The Committee had two scheduled meetings during the year.

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Report on Corporate Governance/Continued

Nominations Committee
The Nominations Committee has two members, Peter Baker (Chairman) and Ray Duignan. The Nominations Committee considers succession planning, reviews
the structure, size, skills, diversity and composition of the Board and nominates candidates to fill Board vacancies. The Committee met once during the year
under review.

Group Executive Committee
In addition to the Board Committees, the Company has a Group Executive Committee comprising the CEO and a team of senior executives supporting
him in the delivery of the strategy and running of the Company.

10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Board maintains a general policy of keeping all interested parties informed by regular announcements and update statements. In doing this, we keep
in mind the proportions of direct, nominee and institutional shareholders, and distribute communications between them accordingly. The Company
retains a financial PR firm to assist it in ensuring that key messages reach the appropriate audiences.

Specific methods of communication with investors are:

• The Annual General Meeting;

• The Annual Report;

• Corporate website;

• Broker briefings;

• Broker and analyst visits to operating sites; and

• One-to-one meetings with investors.

During the year under review we released an additional trading update in May outside of our normal reporting cycle, to ensure appropriate visibility
of performance for shareholders and the wider investment community during an uncertain time.

The Board believes its shareholder communications to be healthy, effective and appropriate bearing in mind the composition of its shareholder register.
The Annual General Meeting provides a forum for shareholders to air their views and ask questions. Meetings throughout the year with key institutional
shareholders (by the Executive and Non-Executive Board members) and feedback from the Company’s broker help to ensure that the Board is kept up
to date with shareholder sentiment on key issues and is able to take it into account where necessary and appropriate. The Company has also sought to
provide a comprehensive website to educate and inform all interested parties about the Company’s business, strategy and values. The Company has
refreshed its website during the year to ensure improved user experience and enhanced information provision to stakeholders.

The Company has viewed its Annual General Meetings (AGM) as an opportunity to meet, listen and present to shareholders. Due to the pandemic,
the 2020 AGM was held as a closed meeting and shareholders were encouraged to vote by proxy. Shareholders were able to view (but not participate
in) the AGM (which included a presentation on the business) via webcast and were invited to submit questions in advance which the Board would
address at the AGM. Ultimately no questions were submitted.

The Board has reflected on the AGM arrangements since then and has concluded that its traditional AGM arrangements do not maximise the
opportunities for shareholder engagement. To increase our visibility and accessibility to a broader range of our shareholder base, we will be running an
Investor Meet Company presentation as part of our full year and interim results roadshows. Further details will be provided by RNS. This will enable any
interested shareholders to join the roadshows and submit questions to the management. The AGM this year will take place in Cardiff and be broadcast
via webcast to enable shareholders to view proceedings remotely. As in other years, there will be a presentation on the business and the Company’s
performance. Shareholders will be encouraged to vote by proxy whether or not they intend to be present. We are also conscious that our AGM is held in
the winter months. Accordingly, while shareholders will (under the current rules) be able to attend in person, we are mindful that our AGM coincides with
the possibility of increased risk from Covid-19 and other respiratory illnesses. With this in mind, to minimise risk to attendees we will not be providing
goodie bags this year and there will not be any informal mingling with the Board before or after the AGM. Masks and social distancing may also be
required depending on the prevailing conditions and guidance at the time. We would ask shareholders to refrain from attending if they are experiencing
any Covid-19 symptoms or have been asked to isolate. Full details of the AGM arrangements will be set out in the Notice of Annual General Meeting.

Shareholders with a specific query can contact us on finsbury@almapr.co.uk or for Company secretarial matters on company.secretary@finsburyfoods.co.uk.

Peter Baker
Chairman
17 September 2021

Finsbury Food Group Annual Report and Accounts 202145

The Directors

The Board is made up of two Executive Directors, three
independent Non-Executive Directors, and the Chairman,
Peter Baker, who is also considered to be independent.
The matters overseen by the Board are detailed in section 9
of the Corporate Governance Report.

Peter Baker
Non-Executive
Chairman

EXPERIENCE

John Duffy
Chief Executive
Officer

Peter joined the Board on 1 July 2014
and is also Chairman of the Nominations
Committee. Peter has over 30 years’ senior
CEO and Board level experience within the
global bakery and consumer packaged goods
industry. He chairs one other Board, is a
Non-Executive Director and a Trustee of two
charities. Peter held the position of Managing
Director of Maple Leaf Bakery from 2009
to 2013, moving into this position after the
sale of La Fornaia Bakeries, where he was the
CEO. Prior to these roles, Peter held COO and
Divisional Managing Director positions at RHM
in the Consumer Brands, British Bakeries and
Cereals Divisions (including Rank Hovis Mills).
Peter was previously a Non-Executive Director
at Jordan’s Cereals, now a part of Associated
British Foods.

He has also served as Vice President of CIAA
now Food Drink Europe (a European trade
association for food and drink) and was on
the Executive Board of FDF, the UK Food and
Drink Federation.

Key areas of expertise are knowledge of the
food industry, strategy, change management,
leadership and corporate governance.

John was appointed CEO of Finsbury Food
Group with effect from 30 September 2009 to
lead a turnaround of a then overleveraged and
decentralised Group. Through a combination
of strong organic growth, MandA activity,
restructuring and investment it has been
transformed into a broadly diversified
speciality bakery Group with over £300 million
of sales across both retail and out-of-home
channels in the UK and Europe.

Following an engineering degree and initial
career with Shell International, John completed
a full-time MBA before pivoting into the food
industry and enjoying 10 years in Director level
manufacturing and logistics roles at Mars.
This was followed by private equity experience
as Operations Director at crisps and snacks
manufacturer Golden Wonder and Managing
Director of WT Foods’ largest chilled foods
subsidiary, Noon Products, before and after its
sale to Kerry Foods. John has Non-Executive
Director experience in both start-up and
established businesses.

Key area of expertise are strong leadership
and general management skills, operations
and engineering experience, turnaround,
change management and MandA.

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The Directors/Continued

Steve was appointed Group Finance
Director in January 2010. Steve has spent
25 years in the food manufacturing sector
and previously was Group Finance Director
at Golden Wonder. Subsequent to that
he was Group Finance Director and Chief
Operating Officer at WT Foods Group
Plc. Steve worked with John Duffy at both
Golden Wonder and WT Foods.

Key areas of expertise are strong financial
management and cost control, MandA,
investor relations, financing, strong
leadership and general management skills.

Raymond was appointed to the Board in July
2013. He has extensive industry experience
having set up a specialist investment bank,
Stamford Partners, in the mid-1990s
advising the European food and drink
industries with clients including many blue
chip companies.

Key areas of expertise are strategy, finance
and detailed knowledge of the European
food and drink industry.

Raymond Duignan
Non-Executive
Director

Stephen Boyd
Group Finance
Director

Marnie Millard
Non-Executive
Director

Marnie was appointed to the Board
on 1 February 2016. From May 2013 to
December 2020, Marnie was the Group
Chief Executive of Nichols Plc, an AIM-listed
branded soft drinks group serving both the
UK retail and out-of-home channels, with
international sales across 70 countries.
Marnie worked in the soft drinks industry
for over 20 years in a number of senior roles
with Macaw Soft Drinks, Refresco Gerber
Ltd and Vimto/Nichols. Marnie is also a
Director of Kidly Limited, an online children’s
retailer, and UA92, an innovative university
establishment in Manchester set up in
collaboration with a group of well-known
footballers to increase educational access
opportunities. Marnie is Chairman of the
Remuneration Committee.

Key areas of expertise are sales and
marketing, manufacturing, supply chain
and international trade.

Bob Beveridge
Non-Executive
Director

Bob was appointed to the Board on 1 July
2017. He is a Chartered Accountant with
extensive financial management, city
and corporate transaction experience
in consumer goods and technology
companies, including Cable and Wireless
Communications Plc, Marlborough Stirling
Plc, and McBride Plc, a European private
label manufacturer. For the last nine years
he has been a portfolio Independent
Director and Audit Committee Chairman
and is currently Senior Independent Director
on the Board of Inspiration Healthcare Plc,
Chairman of the Thames Valley Berkshire
LEP and an independent Audit Committee
member of The Health Foundation. He also
provides mentoring services to aspiring
and existing Finance Directors via the
Institute of Chartered Accountants.
He chairs the Audit Committee.

Key areas of expertise are Board level
financial skills, risk management, corporate
governance, MandA and digital technology.

Finsbury Food Group Annual Report and Accounts 2021Directors’ Report

Background
The Group is a speciality bakery group which is focused on premium, celebration and wellbeing products. These products are supplied both under the
retailers’ own brands and through a number of licensed brands to which the Group has access.

A review of the activities and any likely future developments in the business of the Group is given in the Chairman’s Statement, Chief Executive’s Report
and the Strategic Report on pages 1 to 39.

Dividend
Given the uncertainty at the outset of the pandemic the Board took the decision to withdraw the interim dividend and also decided not to propose a final
dividend in the context of the continued uncertainty surrounding the pandemic and Brexit. The Board is recommending a full year dividend of 2.4 pence
per share for the financial year ending 26 June 2021.

Directors and their Interests in the Company
The Directors and brief biographies are detailed on pages 45 and 46.

In accordance with the Articles of Association, Peter Baker and John Duffy retire by rotation and being eligible offer themselves for re-election at the
Company’s forthcoming AGM.

The beneficial interests of the Directors in the Ordinary Shares of the Company on 26 June 2021 and 27 June 2020 are set out below:

Ordinary Shares

P Baker
R Beveridge
S A Boyd
J G Duffy
M J Millard

26 June 2021

27 June 2020

96,817
14,000
1,195,543
2,617,592
9,366

96,817
14,000
1,095,543
2,443,679
9,366

Details of Directors’ share options are set out in Note 6 to the Financial Statements. There has been no change to the Directors’ share interests
since 26 June 2021.

Details of the emoluments of the Directors are given in Note 6 to the Financial Statements.

Share Capital
Details of the changes in the share capital of the Company during the year are set out in Note 26 to the Financial Statements.

Substantial Interests
The following substantial interests (3% or more) in the Company’s issued share capital have been notified to the Company as at 27 August 2021:

Ruffer (London)
FIL Investment International (London)
Investec Wealth and Investment (RS) (London)
Premier Miton Asset Mgt (London)
Canaccord Genuity Wealth Mgt (London)
Finsbury Food Group Employee Benefit Trust
London Finance and Investment Group (London)
Hargreaves Lansdown Asset Mgt (Bristol)
Interactive Investor Trading

Research and Development
Research and development (RandD) expenditure is expensed in the year in which it is incurred.

Number of shares

% shareholding

25,607,500
13,119,780
11,745,855
8,489,675
8,349,345
6,194,155
6,000,000
4,513,933
4,069,120

19.6
10.1
9.0
6.5
6.4
4.8
4.6
3.5
3.1

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Directors’ Report/Continued

Streamlined Energy and Carbon Reporting
The UK Government’s Streamlined Energy and Carbon Reporting (SECR) policy was implemented on 1 April 2019. The table below represents Finsbury
Food Group’s energy use and associated greenhouse gas (GHG) emissions from electricity and fuel in the UK for the year ended 26 June 2021. The data
covers seven manufacturing sites in the UK.

UK Greenhouse Gas Emissions and Energy Use Data

Energy consumption used to calculate emissions (kWh)

Total Energy Consumption (kWh)
Energy consumption break down (kWh):
Natural gas
Electricity
Transport
Diesel
LPG

Scope 1 emissions in metric tonnes CO2e
Natural gas
Refrigerant emissions
Diesel
LPG
Company owned/leased vehicles

Scope 2 emissions in metric tonnes CO2e
Purchase of electricity

Scope 3 emissions in metric tonnes CO2e
Private vehicles on Company business

Total gross emissions in metric tonnes CO2e
Intensity ratio tonnes CO2e per tonne produced

Electricity purchased through supplier REGO cert.

Total net emissions in metric tonnes CO2e
Intensity ratio tonnes CO2e per tonne produced
Emission factors are based on Government published 2020 GHG conversion factors.

52 weeks ending
26 June 2021
kWh

52 weeks ending
27 June 2020
kWh

102,577,469

106,904,756

69,487,690
32,624,756
162,423
149,094
153,506

67,208,470
38,714,433
433,331
367,909
180,613

Tonnes CO2e

12,747.99
497.37
37.69
32.96
10.43

12,357.62
179.90
93.00
38.74
18.85

7,463.49

9,025.88

30.89

85.28

20,820.82
0.19

21,799.27
0.18

2,160.00

18,660.82
0.17

21,799.27
0.18

Directors’ and Officers’ Liability Insurance
The Company maintains a Directors’ and Officers’ liability insurance policy that has been in force throughout the year and at the year end.

Financial Instruments
The Group’s financial instruments comprise a revolving credit facility, cash and liquid resources, and various items arising directly from its operations,
such as trade creditors. The main purpose of these financial instruments is to finance the Group’s acquisitions and operations. It is the Group’s policy
that no trading in financial instruments shall be undertaken.

The bank facility is a £55.0 million revolving credit facility provided by a club of three banks – HSBC, Rabo Bank and RBS. The facility is available until
February 2023 and also includes scope for the facility to be increased by up to a further £35.0 million.

The main risks arising from the Group’s financial instruments are interest rate risk, foreign exchange and liquidity risk. The Board reviews and agrees
policies for managing these risks, which have remained substantially unchanged for the year under review. The policies are summarised below:

Interest Rate Risk
The facility totalling £55.0 million available of which £22.4 million was drawn at 26 June 2021 leaving a headroom of £32.6 million plus a cash balance
of £9.3 million with a further approved accordion facility of £35.0 million. The interest rate risk is managed through interest rate swap transactions.
The Group has two interest rate swaps. A five-year swap from 3 July 2017 with a coverage of £20.0 million fixed at a rate of 0.455% and a three-year
swap from 28 March 2019 with a coverage of £5.0 million fixed at a rate of 1.002%.

The counterparty to these transactions is HSBC Bank Plc.

Finsbury Food Group Annual Report and Accounts 2021Directors’ Report/Continued

Foreign Exchange Risk
The Group uses forward foreign exchange contracts to manage its exposure to fluctuations in foreign currency rates. Full details are given in Note 24.

Liquidity Risk
Short-term flexibility is available through the existing bank facilities and the netting off of surplus funds. The Group has a £55.0 million RCF facility, the facility
utilised at the balance sheet date was £22.4 million giving £32.6 million headroom plus a further £35.0 million accordion. Full details are given in Note 24.

Diversity
Finsbury Food Group is committed to encouraging diversity, promoting a diverse culture where everyone is treated with respect and valued for their
individual contribution and creating a work environment free of bullying, harassment, victimisation and unlawful discrimination. We have a diversity
policy in place to ensure that selection for employment, promotion, development or any other benefit is on the basis of merit and ability and does not
impact negatively upon diversity. It is a key objective to ensure that all employees are helped and encouraged to fulfil their potential.

Equal Opportunities
It is our policy to ensure equal opportunity in recruitment, selection, promotion, employee development, training and reward policies and we have an
equal opportunities and diversity policy in place. It is a key objective to ensure that successful candidates for appointment and promotion are selected
taking account of individual ability, skills and competencies without regard to age, gender, race, religion, disability or sexual orientation.

Involvement of Employees
Employees are key to the Company’s success and we rely on a committed workforce to help us achieve our business objectives. Employees are
encouraged to operate in an open environment, embracing teamwork and aligning personal development with the strategy of the business and their
behaviours with Company values. We are keen to engage our employees by providing an environment where they can contribute their own ideas and
challenge those of others. We are committed to involving employees and consider that good communication helps to achieve this. All sites have regular
briefings, employee forums and communication mechanisms which are designed to keep colleagues informed of, amongst other things, the financial and
economic factors that affect the Company’s performance. Many sites also hold open days to allow employees’ families to see the environment in which
their family members work. We have also rolled out Workplace by Facebook across the Group to improve communication between employees, increase
engagement and drive forward idea generation and sharing of good practices.

Political and Charitable Contributions
During the year charitable donations amounting to £4,000 (2020: £9,000) were made. No political donations were made.

In response to the pandemic and support needed in the local communities we provided charitable food donations to NHS and key workers
as well as local care homes.

Going Concern
The Group has delivered a resilient trading performance against a continued challenging backdrop. The impact of the pandemic has varied considerably
between businesses with some continuing to be impacted by the Government restrictions. Forecasts have been built on a bottom-up basis and stress
tested to prepare a forecast to be used as a basis for reviewing going concern. The Board, having reviewed the Group’s short and medium-term plans and
available financial facilities, has reasonable expectations that the Group has adequate resources to continue in operational existence for the foreseeable
future. The Group has stayed comfortably within its banking facilities during the period, meeting covenant requirements and has full support of our
banking partners with a reset of debt: EBITDA covenant tests at 26 June 2021. The Group has a £55.0 million revolving credit facility plus scope for the
facility to be increased by up to a further £35.0 million, which are committed until February 2023. In addition, the Group has a strong trade debtor book
and strong asset backing. Accordingly, the Board continues to adopt the going concern basis in preparing the Financial Statements. Debt levels had
decreased over the year by £13.4 million to £13.1 million with a debt to adjusted EBITDA measure of 0.5x down from 1.1x at 27 June 2020.

Auditors
In accordance with Section 148 of the Companies Act 2006, a resolution for the appointment of PricewaterhouseCoopers LLP as auditors is to be
proposed at the forthcoming AGM.

• So far as each Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and

• Each Director has taken all the steps that they ought to have taken as a Director in order to make himself or herself aware of any relevant audit

information and to establish that the Company’s auditors are aware of that information.

The Directors’ Report was approved by the Board of Directors on 17 September 2021 and was signed on its behalf by:

Stephen Boyd
Director

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 202150

The Group Executive Committee (GEC)

The Executive Directors are
responsible for implementing
and achieving the strategy through
the day-to-day running of the
business. They are supported
by a team of Executives on the
Group Executive Committee.

Ian joined Finsbury Food Group in 2005.
He now has 24 years’ experience in the
food industry as well as over 20 years’
experience in process control in non-
food manufacturing. Ian’s first role in
food was in engineering and operations
for a prepared vegetable business,
before moving to chilled high-care food
manufacturing with Food Partners,
where he was Managing Director.

Ian Chree
Group Efficiency
Improvement
Director

Sat joined Memory Lane Cakes in 1998
as a packaging buyer. Memory Lane
was subsequently acquired by Finsbury
Food Group and Sat progressed to his
current position. After studying Chemical
Engineering, Sat started his career with
Cima Foods as a process controller. He
moved to the purchasing side of the
business looking after juice procurement
and logistics. Cima was acquired by Princes
Foods and during his 15 years with the
Company, Sat progressed to Senior Buyer,
before his move to Memory Lane Cakes.

Sat Hanspal
Group Purchasing
Director

Jackie joined Finsbury Food Group in
2015. She has over 21 years’ experience
in the food manufacturing sector. Before
joining Finsbury, she was HR Director at
Burton’s Biscuit Company for a number
of years and also worked in the meat
processing sector. Her early roles were
operational and HR positions within Rank
Hovis McDougall, having completed their
graduate programme. Jackie holds a BA
Hons degree from the University of Leeds
and a Diploma in Personnel Management
as well as qualifications in occupational
testing, coaching and mentoring.

Jackie Kent
Group Human
Resources Director

Finsbury Food Group Annual Report and Accounts 2021The Group Executive Committee/Continued

Frances joined Finsbury Food Group in
October 2009. She has worked in the food
industry for over 30 years, 20 of them
at Technical Executive or Director level.
Previous positions include senior roles at
Greencore, Fresh-Pak, Geest Prepared
Foods and United Biscuits in a range of
operational, technical, manufacturing
and engineering roles.

Simon joined Finsbury Food Group in 2005
as Managing Director of the Nicholas and
Harris speciality bread business. Before
this he was a Commercial Director at
Greencore. This followed a long career at
Unigate, having joined after graduating
from Manchester University with a degree
in Management Sciences. He held many
roles within the St.Ivel division, including
Sales Director. Simon has been Managing
Director of Finsbury’s bread business for
the last five years.

Simon Staddon
Managing Director
– Bread and
Morning Goods

Frances Swallow
Group Technical
Director

Lucy joined Finsbury Food Group in
2011. She has over 19 years’ experience
in the food manufacturing sector. Prior to
joining Finsbury Lucy headed up Senoble
UK’s chilled desserts multi-site operation.
Earlier career experience was within the
sandwich manufacturing sector with
Food Partners where she held a range
of supply chain and operational roles.

Jon joined Finsbury Food Group in 2015
and lead Fletchers Bakery for the first
five years. Jon has 21 years’ experience in
Operations and Engineering management
roles. Jon started his career as a
Manufacturing Engineer in the Automotive
industry but moved into the high volume
bakery sector in 2002. Past senior roles
outside of Finsbury Food Group include
General Manager at New York Bagel and
Dual Site Director for Hovis.

Jon Cooper
Operations Director
– Bread and
Morning Goods

Lucy Wills
Managing Director
– Cake

Matthew joined Finsbury Food Group in
2019. Matthew has over 25 years supply
chain experience in both retail and as
a supplier. Matthew also has extensive
international experience with Kerry and
RB having worked in EU, South East Asia
and North America for a number of years.

Matthew Baxter
Group Supply
Chain Director

Dan Bowles
Group Health, Safety,
Environment and
Risk Director

Dan joined Finsbury Food Group in
2017. He has 19 years’ experience in
Health, Safety and Environmental roles
in a number of industries including civil
engineering, process engineering and food
and drink. Dan holds a BSc Hons. degree
in Health, Safety and Environmental
management. He is a Chartered Member
of the Institute of Occupational Health
and Safety (IOSH) and a Practitioner
Member of the Institute of Environmental
Management and Assessment (IEMA).

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 202152

Audit Committee Report

The Audit Committee comprises two members: Bob Beveridge, a chartered accountant with recent and relevant financial experience, and Ray Duignan.
It met three times during the year with 100% attendance. The external auditors and Finance Director attended all meetings at the invitation of the
Committee Chairman. The Committee also met with the external auditors without the presence of Executive Directors or management.

Role
The Audit Committee is responsible for ensuring that the financial performance of the Group is properly reported and reviewed. Its role includes
monitoring the integrity of the Financial Statements (including Annual and Interim Accounts and results announcements), reviewing internal control and
risk management systems, reviewing any changes to accounting policies, reviewing and monitoring the extent of the non-audit services undertaken by
external auditors and advising on the appointment of external auditors.

Terms of Reference
The duties of the Committee are set out in its terms of reference which is published on the Group’s website (www.finsburyfoods.co.uk/investor-
relations/corporate-governance)

The main items of business carried out in the year included:

• Review of the FY21 audit plan and audit engagement letter;

• Consideration of key audit matters and how they are addressed;

• Review of effectiveness of the external auditor;

• Review of the Financial Statements and Annual Report;

• Consideration of the external audit report;

• Going concern review;

• Review of the risk management process and internal control procedures;

• Review of internal audit reports and plans;

• Meeting with the external auditor without management present; and

• Review of whistleblowing and anti-bribery arrangements.

Financial Reporting
During the year, the Committee concluded that the Annual Report and Financial Statements, taken as whole, were fair, balanced and understandable and
provided the information necessary for shareholders to assess the Group’s business model, strategy and performance. During the year, the Committee
considered the following key matters of judgement:

• Valuation of goodwill and intangible assets and review for potential impairment, ensuring the reasonableness of key assumptions, considering the

impact of sensitivities to these assumptions and identifying the degree of sensitivity which would lead to a potential impairment.

• Accounting for Defined Benefit Pension Scheme; ensuring consistency with prior years and external benchmarks.

• Alternative performance measures; agreed to remove non-critical measures and add carbon emission KPI. Reviewed methodology of calculations.

In terms of going concern, the Committee considered a range of scenarios for both the budget and the three-year business plan including a reasonable
worst-case scenario. It was concluded that the going concern basis is appropriate.

The Committee reviewed the full-year and half-year results announcements, Annual Report and Financial Statements and considered reports from the
external auditors. The Committee also reviewed the Strategic Report and concluded that it presented a useful and fair, balanced and understandable
review of the business.

External Audit
The Committee carried out a detailed assessment of the audit effectiveness, including a site questionnaire covering 20 criteria. The overall assurance
rating was deemed to be good and opportunities for improvement were agreed, mainly relating to timing of work. The relatively high level of partner
engagement was regarded as very helpful. Discussions relating to judgemental items had been carried out in a timely manner and the audit challenges
were rigorous and appropriate.

During the year, the fees paid to the auditors, PwC, were £183,000, (2020: £183,000) for audit services, and £41,000 (2020: £20,000) for non-audit
services. No services were provided pursuant to contingent fee arrangements.

The Committee reviewed and considered a number of factors to assess the auditors’ objectivity and independence, including their internal procedures,
the degree and nature of challenges and scepticism shown by the partner. The Committee is satisfied with PwC’s independence, objectivity and expertise
and believes the Group is subjected to a rigorous audit process. As PwC has been auditor for three years there is no intention to re-tender and the Board
will recommend their ongoing appointment at the AGM.

Finsbury Food Group Annual Report and Accounts 2021Audit Committee Report/Continued

Risk Management, Internal Controls and Internal Audit
The risk management process this year was further improved as for the second time it formed an early stage of the strategic planning process, owned
by the business areas. A report was prepared that identified the risks, the procedures in place to mitigate those risks and uncertainties and the potential
impact on the Group. The Committee reviewed this report and reported its views to the Board. The principal risks and uncertainties to which the Group
is exposed are set out in the Strategic Report on pages 30 to 33.

During the year the Committee completed a review of the Group’s internal control framework, following its implementation last year. Controls and
spending limits have been built into the M3 Financial system. There is strong automation and segregation of duties enforced within the M3 system
as part of the revenue recognition process. Internal audit reviews during the year have focused on compliance with the control framework and the
internal audit reports were reviewed by the Committee together with follow up actions identified.

Whistleblowing and Anti-Bribery
The Committee considered reports of whistleblowing from the hotline which confirmed its view that the hotline was a valuable assurance with
issues being identified and followed through appropriately. It reviewed minor updates to whistleblowing and anti-bribery policies.

Other Matters
During the year the Committee completed reviews into IT risks including cyber-security, M3 Cloud migration, GDPR compliance and received
presentations from the Group’s Health and Safety manager, outlining further progress on the HSE strategy. Additionally, the Committee reviewed
foreign exchange, interest rate and commodity hedging policies, the Group’s insurance policies and reviewed the Audit Committee’s effectiveness
via a questionnaire completed by senior finance executives as well as Committee members.

Conclusion
Having given due and full consideration to all the matters referred to above, the Committee is satisfied that the Group has in place effective internal
control systems and risk management process. The Committee is also satisfied that the Financial Statements present a fair, balanced and understandable
view and provide shareholders with the necessary information to assess the Group’s position and performance, strategy and business model.

Bob Beveridge
Chairman, Audit Committee
17 September 2021

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 202154

Directors’ Remuneration Report (unaudited)

Statement from the Chairman of the Remuneration Committee
Dear Shareholder,

I am pleased to present the Directors’ Remuneration Report as Chair of the Remuneration Committee of Finsbury Food Group for the year ended
26 June 2021.

A copy of our Directors’ Remuneration Policy (the “Policy”) which has been applied since 2017-18 is available on our website at www.finsburyfoods.
co.uk/investor-relations/corporate-governance. During the year the Committee reviewed the Policy and concluded that it continues to be aligned
with our business and talent strategy and the long-term interests of our shareholders. The Committee noted that the existing malus and clawback
provisions in the LTIP are in line with market practice for an AIM listed company. The Committee also noted the significant shareholding held by the
Executive Directors and their immediate families. No changes are therefore being made to the Policy.

The Annual Report on Remuneration which is on pages 56 to 58 provides details of the amounts earned in respect of the year ended 26 June 2021.

Similar to previous years and as a matter of best practice, the Annual Report on Remuneration has been prepared taking into account the
remuneration reporting regulations applicable to fully listed companies in the UK.

Remuneration in Context
Despite the uncertain operating environment and challenging economic backdrop, as outlined below, we finished the year with revenues at almost
pre-pandemic levels. The Group’s Operating Brilliance Programme continued to drive improvements in cost and cash performance with a significant
strengthening of the Group’s net bank debt position by year end to £13.1 million, a reduction of £8.4 million from 26 December 2020.

This strong performance is a testament to the strength of the leadership team and the hard work and commitment by all our colleagues throughout
a sustained period of challenge. We would like to thank everyone for that commitment which they have demonstrated throughout the last 18 months.

Our approach of balancing the experience of employees, shareholders and other stakeholders has continued, with the resumption of dividend
payments for the financial year ending 26 June 2021 and investing in our colleagues. After no base pay increases or bonuses in 2020, in June 2021,
the Board awarded staff a thank you payment of £200 in appreciation of everyone’s contribution through the year.

Review of the 2020-2021 Financial Year and Remuneration Outcome
The first half of the year was heavily impacted by the initial pandemic lockdown. The disruption continued to a lesser extent in the second half
with disruption particularly within foodservice. Overall, the strong performance resulted in revenues for the year increasing 2.3% to £313.3 million
(2020: £306.3 million), which is almost at pre-pandemic levels (FY19: £315.3 million). This translated to an increase in adjusted operating profit to
£16.1 million, up £1.2 million versus the prior year.

As detailed in the Remuneration Report last year, to mitigate cash outflows at the outset of the pandemic the Board elected to take a 30% salary
reduction between 1 April 2020 and 30 June 2020. No base salary increases were awarded to John Duffy, our CEO, or Stephen Boyd, Group Finance
Director for the 2020-2021 Financial Year.

As set out on page 57, based on adjusted EBITDA performance of £26.9 million, the Executive Directors earned a bonus of 100% of salary for 2020-2021.
50% of the bonus earned will be paid in cash and the balance is paid in the form of shares. This is the first bonus payment to the Executive Directors for
four years and reflects the outstanding leadership of the Executive Directors under challenging circumstances, resulting in year-on-year revenue growth
and a total sales figure almost at pre-pandemic levels. We congratulate the management team on such a strong performance and believe the full award
of the incentive is well deserved.

The LTIP awards granted on 2 January 2019 were based on the three-year performance period ending on 26 June 2021. Notwithstanding the strong
performance delivered in the year, these LTIP awards have now lapsed. EPS (50% of the total award) as at 26 June 2021 was 8.60p which was below
the threshold EPS target of 11.50p; and relative Total Shareholder Return (“TSR”) performance (50% of the total award) was below the threshold
target of being ranked at median against the FTSE Small Cap (excluding investment).

The Committee awarded nil-cost share options as Performance Share Plan (“PSP”) awards under the LTIP to Executive Directors (and participants
including senior management) during the year. The number of shares awarded to each Executive Director was equivalent to 100% of salary based
on the average price of the shares over the three business days immediately prior to the end of the Company’s financial year ended 27 June 2020.

These awards and the respective conditions are detailed on page 58.

Finsbury Food Group Annual Report and Accounts 2021Directors’ Remuneration Report (unaudited)/Continued

Remuneration in Respect of the 2021-2022 Financial Year
Salary and Fees
The next review of Executive Directors’ salary will be undertaken in September 2021. It is intended that the Executive Directors’ salaries will increase
in line with the general increases applied to the wider workforce.

The next review of the Chairman and Non-Executive Directors’ fees will be undertaken in September 2021. This is the first review of the Non-Executive
Directors’ fees in six years. In addition, the Non-Executive Directors were keen to support the organisation through the pandemic which saw a reduction
of the fees alongside the executive team.

Annual Bonus
No changes are proposed to the bonus opportunity. The maximum bonus opportunity for the Executive Directors will be up to 100% of salary. The annual
bonus will continue to be based on adjusted EBITDA performance as the Committee considers this to be the most appropriate short-term measure
for assessing Executive Directors’ performance. At year end, when we determine the performance outcomes for the year, we will be thoughtful in our
assessment of results, balanced with the shareholder and workforce experience. Details of the performance targets for the 2021-2022 bonus will be
reported in the 2022 Annual Report.

LTIP
Awards under the LTIP will be made following the announcement of our results. The maximum opportunity for the Executive Directors will be 100% of
salary. The LTIP awards will be subject to EPS and relative TSR performance conditions. The targets will be disclosed in the Remuneration Report next year.

Marnie Millard
Chairman, Remuneration Committee
17 September 2021

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 202156

Directors’ Remuneration Report (unaudited)/Continued

The full Policy can be viewed in the investor section of the website at www.finsburyfoods.co.uk/investor-relations/corporate-governance.

The main aim of the Company’s Policy is to align the interests of Executive Directors with the Company’s strategic vision and the long-term creation
of shareholder value. The Company aims to provide returns to shareholders through both organic and acquisitive growth. The Policy is intended to
remunerate our Executive Directors competitively and appropriately for effective delivery of this and allows them to share in this success and the value
delivered to shareholders. The Policy is based on a broad set of remuneration principles:

• Promote shareholder value creation;

• Support the business strategy;

• Promote sound risk management;

• Ensure that the interests of the Directors are aligned with the long-term interests of shareholders;

• Deliver a competitive level of pay for the Directors without paying more than is necessary to recruit and retain individuals;

• Ensure that the Executive Directors are rewarded for the contribution to the success of the Group and share in the success delivered to shareholders; and

• Motivate the Directors to deliver enhanced sustainable performance.

Unaudited Annual Report on Remuneration

Single Total Figure of Remuneration
The tables below detail the total remuneration earned by each Director in respect of the financial years ended 26 June 2021 and 27 June 2020:

2021

Executive Directors
J G Duffy
S A Boyd

Non-Executive Directors
P Baker
R Beveridge
R P E Duignan
M J Millard

2020

Executive Directors
J G Duffy
S A Boyd

Non-Executive Directors
P Baker
R Beveridge
R P E Duignan
M J Millard

Salaries/
fees
£000

Taxable
benefits
£000

Annual
bonus
shares
£000

Annual
bonus
cash
£000

LTIP1
£000

Total
remuneration
£000

428
300

728

85
55
58
55

253

981

12
12

-
-
-
-

214
150

364

-
-
-
-

214
150

364

-
-
-
-

364

-
-

-
-
-
-

868
612

1,480

85
55
58
55

253

1,733

Salaries/
fees
£000

Taxable
benefits
£000

Annual
bonus
£000

LTIP1
£000

Total
remuneration
£000

394
274

668

79
51
53
51

234

902

12
12

-
-
-
-

-
-

-
-
-
-

-
-

-
-
-
-

406
286

692

79
51
53
51

234

926

To mitigate cash outflows at the outset of the pandemic the Directors elected to take a 30% salary reduction between 1 April 2020 and 30 June 2020.
This reduced the salary costs of the Group during this period. This reduction is reflected in the Executive Director and Non-Executive Director base
salaries and fees in the table above.

1 No long-term incentive awards vested with respect to a performance period ending during the year to 26 June 2021 or with respect to a

performance period ending during the year to 27 June 2020.

Finsbury Food Group Annual Report and Accounts 2021Directors’ Remuneration Report (unaudited)/Continued

Notes to the Table

Base Salaries
The base salaries for the Executive Directors are set with effect from 1 October each year. The salaries in the financial years ended 27 June 2020 and
26 June 2021 were as follows:

Executive Directors
J G Duffy
S A Boyd

From 1 October 2021
£427,980
£299,790

From 1 October 2020
£427,980
£299,790

Percentage increase
nil
nil

As outlined in the single figure table on page 56, the Executive Directors elected to take a 30% salary reduction between 1 April 2020 and 30 June
2020. This reduced the salary costs of the Group during the year to 27 June 2020. This reduction is not reflected in the base salaries in the table above.

Taxable Benefits
The taxable benefits for the Executive Directors in the year included a car allowance and private medical insurance. The Executive Directors do not
receive a pension allowance.

Annual Bonus
The annual bonus is the total value of the bonus earned in respect of the financial year (including the amount delivered in shares). For the financial year
ended 26 June 2021, Executive Directors were able to earn a bonus of up to 100% of annual base salary subject to the achievement of stretching EBITDA
performance targets. Based on adjusted EBITDA performance of £26.9 million, the threshold adjusted EBITDA target has been achieved. Thus, the Executive
Directors earned a bonus for 2020-2021.

The following table sets out the bonus pay-out to the Executive Directors for 2020-21 and how this reflects EBITDA performance for the year.

Performance measure

Actual performance

Resulting level of award
for each Executive as a
percentage of salary

Earnings before interest, tax, depreciation
and amortisation (EBITDA)

EBITDA £26,900,000

100% of salary

Bonus to be paid
50% of the
bonus earned will be
paid in cash and the
balance is paid in
the form of shares.

Long-Term Incentives
Awards granted on 21 January 2019 were based on performance over the three financial years to 26 June 2021 and vested as to the amounts set out below.
These awards are subject to a two-year holding period.

50% of the award subject to
adjusted diluted Earnings Per
Share in the final year of the
performance period

50% of the award based upon
Relative Total Shareholder
Return against the FTSE Small
Cap (excluding investment
trusts) (“TSR”) over the
performance period

Total % of award vesting

Performance conditions

Adjusted diluted EPS

Below 11.50p
At 11.50p

Between 11.50p and 13.00p

Above 13.00p

Relative TSR ranking

Below median
Median

Between median and upper quartile

Upper quartile

% vesting

0
25%
Straight-line
vesting to 100%
100%

% vesting

0
25%

Straight-line
vesting
100%

Actual performance

% of this
element vesting

% of award

8.6pps

Below median

nil

In arriving at the adjusted EPS out-turn of 8.6p, the Committee has excluded the significant and non-recurring costs relating to restructuring
and impairments.

J G Duffy
S A Boyd

Number of
shares granted
344,262
241,147

Number of
shares vesting
nil
nil

Value of LTIP
shares vesting
nil
nil

Chairman and Non-Executive Director Fees
Details of Chairman and Non-Executive Directors’ fees for 2020-21 are as set out below:

Chairman fee
£85,000

Non-Executive
Director fee
£50,000

Chairman of the
Remuneration
Committee
£5,000

Member of the
Remuneration
Committee
£2,500

Chairman of the
Audit Committee
£5,000

Member of the
Audit Committee
£2,500

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Directors’ Remuneration Report (unaudited)/Continued

Payments for Loss of Office Made During the Year
No payments for loss of office were made in the year to any Director of the Company.

Statement of Directors’ Shareholding and Share Interests
The interests of the Directors and their immediate families in the Company’s ordinary shares as at 26 June 2021 and 27 June 2020 were as follows:

Executive Directors
J G Duffy
S A Boyd

Non-Executive Directors
P Baker
R Beveridge
R P E Duignan
M J Millard

26 June 2021

27 June 2020

2,617,592
1,195,543

2,443,679
1,095,543

96,817
14,000
-
9,366

The wives of J G Duffy and S A Boyd both purchased shares in the market during the year. The current personal shareholdings of J G Duffy and S A Boyd
and their immediate families equate to circa 5.5 and 3.6 times salary respectively.

The interests of the Directors and their immediate families in the Company’s ordinary shares did not change between 26 June 2021 and the date
these accounts were signed on 17 September 2021.

The interests of each Executive Director of the Company as at 26 June 2021 and 27 June 2020 in the Company’s share schemes were as follows:

Executive Director
J G Duffy
J G Duffy
J G Duffy
J G Duffy
S A Boyd
S A Boyd
S A Boyd
S A Boyd

Date of grant
04/12/2015
21/01/2019
28/10/2019
22/10/2020
04/12/2015
21/01/2019
28/10/2019
22/10/2020

Number of options at
27 June 2020
655,614
344,262
1,174,090
-
476,364
241,147
833,380
-

Granted
-
-
-
705,888
-
-
-
494,458

3,724,857

1,200,346

Exercised
-
-
-
-
-
-
-
-

Lapsed
-
(344,262)
-
-
-
(241,147)
-
-

(585,409)

Number of options at
26 June 2021

655,614
-
1,174,090
705,888
476,364
-
833,380
494,458

4,339,794

Details of the LTIP awards granted on 22 October 2020 are given in the table below:

Number of shares

Basis of award*

Performance/vesting period

Performance conditions

J G Duffy

705,888

S A Boyd

494,458

100% of salary
Nil cost option (PSP Award)

3 financial years from
27 June 2020

50% subject to EPS growth and 50% subject to
relative TSR (further details below).

3 financial years from
27 June 2020

50% subject to EPS growth and 50% subject to
relative TSR (further details below).

The value of the shares subject to each PSP Award was calculated using the average price of the shares over the three business days immediately prior
to the end of the Company’s financial year ended 27 June 2020.

PSP awards will be subject to a further two-year holding period following the end of the performance period.

PSP vesting of 50% of the award will normally be based upon the amount of the adjusted diluted Earnings Per Share (EPS) delivered in the final Financial Year
of the three-year performance period beginning with the start of the Company’s 2021 Financial Year. Below the threshold vesting target of 7.60p, none of this
component of the award will vest. 25% of this component will vest if adjusted diluted EPS is 7.60p with 100% vesting at 8.80p and vesting determined on a
straight-line basis between these figures. This is subject to the Committee’s discretion to adjust vesting levels and/or substitute such condition with EBITDA
target ranges if it considers that such condition is no longer a fair and appropriate measure of the Company’s financial performance during the performance
period, taking into account factors such as the Company’s EBITDA performance relative to the wider market.

PSP vesting of 50% of the award will be based upon Relative TSR against the FTSE Small Cap (excluding investment trusts) over the performance period.
At below median relative TSR ranking, none of this component of the award will vest. 25% of this component will vest at median ranking, with 100%
vesting at upper quartile or above ranking, and vesting determined on a straight-line basis between these points.

Approval
This report was approved by the Board on 17 September 2021 and signed on its behalf by:

Marnie Millard
Chairman, Remuneration Committee
17 September 2021

Finsbury Food Group Annual Report and Accounts 2021Independent Auditors’ Report to the Members of Finsbury Food Group Plc

Report on the Audit of the Financial Statements

Opinion
In our opinion:

• Finsbury Food Group Plc’s Group Financial Statements and Company Financial Statements (the “Financial Statements”) give a true and fair view of the state

of the Group’s and of the Company’s affairs as at 26 June 2021 and of the Group’s profit and the Group’s cash flows for the 52 week period then ended;

• The Group Financial Statements have been properly prepared in accordance with international accounting standards in conformity with the

requirements of the Companies Act 2006;

• The Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice

(United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law); and

• The Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the Financial Statements, included within the Annual Report and Consolidated Financial Statements (the “Annual Report”), which
comprise: Consolidated Statement of Financial Position and Company Balance Sheet as at 26 June 2021; Consolidated Statement of Comprehensive
Income, Consolidated and Company Statements of Changes in Equity and Consolidated Cash Flow Statement for the period then ended; and the
notes to the Financial Statements, which include a description of the significant accounting policies.

Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the Financial Statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in the
UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements.

Our Audit Approach

Overview
Audit Scope
• We performed a full-scope audit procedures in respect of the Group’s five largest manufacturing locations as well as Finsbury Food Group Plc; and

• Our audit procedures covered entities contributing 88% of the Group’s revenues for the 52 week period ended 26 June 2021.

Key Audit Matters
• Goodwill impairment assessment (Group);

• Recoverability of the Company investments in subsidiaries (Parent); and

• Impact of the outbreak of Covid-19 on the Financial Statements (Group and Parent).

Materiality
• Overall Group materiality: £1.6m (2020: £1.5m) based on 0.5% of total revenues;

• Overall Company materiality: £1.5m (2020: £1.5m) based on 1% of total assets (restricted by Group materiality); and

• Performance materiality: £1.1m (Group) and £1.1m (Company).

The Scope of our Audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the Financial Statements. In particular, we
looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain.

Key Audit Matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the Financial Statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, 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. These matters, and any comments we make on the results of our procedures thereon, were 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 these matters.

This is not a complete list of all risks identified by our audit.

The key audit matters below are consistent with last year.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 202160

Independent Auditors’ Report to the Members of Finsbury Food Group Plc/Continued

Key audit matter

How our audit addressed the key audit matter

Goodwill Impairment Assessment (Group)
At 26 June 2021, the Consolidated Statement of Financial Position includes
£73.2 million of goodwill (2020: £73.2 million).

In accordance with the requirements of IAS in conformity with the
requirements of the Companies Act 2006, management has performed
impairment reviews in relation to the goodwill held in the Group’s cash
generating units (CGUs). Management has prepared value in use calculations
for each of the CGUs using board approved strategic plans. The impairment
reviews include significant estimates and judgements in respect of future
growth rates and cash flows, and the discount rate employed.

An impairment of £7.5 million was recognised in the prior year in relation to
the Ultrapharm CGU as a result of slower than expected development.

Recoverability of the Company Investments in Subsidiaries (Parent)
At 26 June 2021, the Company’s Statement of Financial Position included
£112.1 million of investments in subsidiaries (2020: £112.0m).

In accordance with the requirements of IAS in conformity with
requirements of the Companies Act 2006, management has performed
an analysis comparing the carrying amount of the investments with the
calculated value in use (noted above). No impairment has been recognised
in the current year. The impairment reviews include significant estimates
and judgements in respect of future growth rates and cash flows, and the
discount rate employed.

An impairment of £3.5 million was recognised in the prior year in relation
to the Ultrapharm business, due to slower than expected development.
An impairment in relation to Anthony Alan Foods was also recognised in
the prior year, as there were no future cash flows to consider hence an
impairment charge of £3.0 million is recognised to write the balance of
this investment down to nil.

We obtained the relevant CGU cash flow forecasts supporting
management’s calculation of value in use and evaluated the
appropriateness of key assumptions. We assessed the methodology used
by management in performing the assessments and challenged key inputs.

Our procedures included:

• Verifying the accuracy of the underlying calculations in the model and
agreeing the cash flow forecasts to the plan approved by the Board;

• Evaluating the appropriateness of forecast cash flows by understanding
management’s process for forecasting, examining the support for forecast
cash flows and assessing CGU specific cash flow assumptions such as testing
the exclusion of cash flows to improve or enhance the CGU’s performance;

• Evaluating the appropriateness of the projected revenue growth rates

used, both over the short-term to 2024 and over the longer-term, including
assessing and challenging the assumptions over the impact of Covid-19
on trading;

• Consideration of prior year and current performance in comparison to

projected results;

• Considering the impact of a range of sensitivities to assess the impact
of reasonably possible changes in key assumptions to those used by
management;

• Evaluating the appropriateness of discount rates used, which included

comparing the rate used to other similar companies;

• Evaluating other key inputs to the cash flows, including the forecast

margins and capital expenditure; and

• Reviewing management’s disclosures in the Financial Statements.

We believe that the assumptions in the value in use model and the
conclusion reached that no impairment is required is reasonable. We also
believe that the disclosures in note 10 of the Financial Statements in respect
of sensitivities that would result in impairment are appropriate. We consider
that the carrying value of the goodwill balance is materially correct and we
believe that the disclosures in the Financial Statements are appropriate.

We obtained the relevant subsidiary’s cash flow forecasts supporting
management’s assessments and evaluated the appropriateness of key
assumptions. We assessed the methodology used by management in
performing the assessments and challenged and evaluated key inputs including:

• Verifying the accuracy of the underlying calculations in the model and
agreeing the cash flow forecasts to the plan approved by the Board;

• Evaluating the appropriateness of forecast cash flows by understanding

management’s process for forecasting, examining the support for
forecast cash flows and assessing subsidiary or CGU specific cash flow
assumptions such as testing the exclusion of cash flows to improve or
enhance the subsidiary or CGU performance;

• Evaluating the appropriateness of the projected revenue growth rates

used, both over the short-term to 2024 and over the longer-term, including
assessing and challenging the assumptions over the impact of Covid-19
on trading;

• Consideration of prior year and current performance in comparison to

projected results;

• Considering the impact of a range of sensitivities to assess the impact
of reasonably possible changes in key assumptions to those used by
management;

• Evaluating the appropriateness of discount rates used, which included

comparing the rate used to other similar companies;

• Evaluating other key inputs to the cash flows, including the forecast

margins and capital expenditure; and

• Reviewing management’s disclosures in note 38 of the Financial Statements.

We consider the carrying value of the investment balance to be
materially correct.

Finsbury Food Group Annual Report and Accounts 2021Independent Auditors’ Report to the Members of Finsbury Food Group Plc/Continued

Key audit matter

How our audit addressed the key audit matter

Impact of the Outbreak of Covid-19 on the Financial Statements
(Group and Parent)
In March 2020 the global pandemic from the outbreak of Covid-19
became significant and is causing widespread disruption to financial
markets and normal patterns of business activity across the world,
including the UK. Covid-19 has had a large impact on Finsbury Food
Group Plc both operationally and further in relation to the forecasted
future demand for product and consequential impact on funding and
cash flow management.

It has impacted the results of the Group and Company for the 2021
financial year to date and is expected to continue to impact the Group
and Company for some of 2021/22 whilst economies continue to recover,
albeit the severity of the impact is expected to reduce over time. Disclosure
of the risk to the Group and Company of Covid-19 and management’s
conclusions on going concern and have been included within the relevant
sections of the Annual Report.

We critically assessed management’s assessment of the impact of Covid-19.
We considered:

• The timing of the development of the outbreak across the world and in

the UK; and

• How the Financial Statements and business operations of the Group and

Company might be impacted by the disruption.

In forming our conclusions over going concern, we evaluated whether
management’s going concern assessment considered impacts arising from
Covid-19. Our procedures in respect of going concern included:

• We made enquiries of management to understand the potential impact

of Covid-19 on the Company’s financial performance, business operations
and financial position;

• We reviewed management’s going concern assessment, based upon the
bottom-up full year 2022 budget and strategic forecast to June 2024, to
ensure the impacts of Covid-19 have been appropriately reflected; and
• We have challenged the key assumptions in this assessment, including

the availability of sufficient facilities and cash resources and compliance
with future banking covenants.

Refer to our first and second Key Audit Matter above for details of
how we considered the impact of Covid-19 in our procedures over the
recoverability of goodwill and investments.

Based on the work performed, we are satisfied that the matter has been
appropriately evaluated and reflected in the Financial Statements and
concur with management’s assessment that the impact of Covid-19 has
not had a significant impact on the going concern assessment. We also
assessed the adequacy of disclosures related to Covid-19 included in the
notes of the Financial Statements and assessed these to be appropriate.

How We Tailored the Audit Scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Financial Statements as a whole,
taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.

The Group has six main manufacturing sites across the UK, together with a distribution centre in France, operations in Poland, and a head office location
based in the UK. Each manufacturing site has its own accounting team and the financial reporting for Finsbury Food Group Plc is undertaken by a team
based at the head office.

Of the Group’s 9 reporting components, 5 are considered to be financially significant components of the Group, given the significant revenue generated
at these locations. All of these components were based in the UK and full scope audit procedures were led by the Group engagement team. The Group
engagement team also audited the Parent Company, which was scoped in accordance with the Company materiality and focused on the investment
carrying value and the revolving credit facility held by the Company.

Our audit addressed components making up 90% of the Group’s revenues for the period.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative
considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement
line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the Financial Statements as a whole.

Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:

Overall materiality

How we determined it
Rationale for benchmark applied

Financial Statements - Group
£1.6m (2020: £1.5m)

Financial Statements - Company
£1.5m (2020: £1.5m)

0.5% of total revenues
Revenue is a key metric used by management and
investors and given the relative volatility of profit before
tax in recent years, this was considered to be a more
consistent metric in line with prior year.

1% of total assets (restricted by Group materiality)
We determined our materiality based on total assets,
which is more applicable than a performance-related
measure as the Company is primarily an investment
holding Company for the Group. However, as this
materiality was greater than overall Group materiality,
we have restricted the entity materiality.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021
62

Independent Auditors’ Report to the Members of Finsbury Food Group Plc/Continued

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality
allocated across components was £0.6 million to £1.5 million. Certain components were audited to a local statutory audit materiality that was also less
than our overall Group materiality.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall
materiality, amounting to £1.1m for the Group Financial Statements and £1.1m for the Company Financial Statements.

In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk
and the effectiveness of controls – and concluded that an amount in the middle of our normal range was appropriate.

We agreed with those charged with governance that we would report to them misstatements identified during our audit above £78,000 (Group audit)
(2020: £72,000) and £74,000 (Company audit) (2020: £72,000) as well as misstatements below those amounts that, in our view, warranted reporting
for qualitative reasons.

Conclusions Relating to Going Concern
Our evaluation of the Directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of accounting included:

• Evaluating the appropriateness of forecast cash flows by understanding management’s process for forecasting and examining the support for

forecast cash flows;

• Evaluating the appropriateness of the projected revenue growth rates used, over the next 12-18 months, including assessing the assumptions over

the impact of Covid-19 on trading;

• Consideration of prior year and current performance in comparison to projected results. The Group were ahead of budget for the 2020/21 year

and are currently performing ahead of budget for the 2021/22 year;

• Considering the impact of a range of sensitivities to assess the impact of reasonably possible changes in key assumptions to those used

by management;

• Evaluating other key inputs to the cash flows, including the forecast margins and capital expenditure. These are consistent historic trends and spend;

• Reviewed covenant calculations to ensure no covenant breaches in the current year and no forecast covenant breaches throughout the period,

there are no current or forecast breaches;

• Performed sensitivities on the covenant calculations to assess headroom, which showed significant decreases in EBITDA would be required in

order for covenants to be breached; and

• Assessed current and forecast headroom for the Group in relation to their available cash facility, which shows clear headroom throughout the

assessment period.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern for a period of at least twelve months from when the
Financial Statements are authorised for issue.

In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the
Financial Statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the Company’s ability
to continue as a going concern.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Reporting on Other Information
The other information comprises all of the information in the Annual Report other than the Financial Statements and our auditors’ report thereon.
The Directors are responsible for the other information. Our opinion on the Financial Statements does not cover the other information and, accordingly,
we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material
misstatement of the Financial Statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.

With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have
been included.

Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below.

Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ Report for the period
ended 26 June 2021 is consistent with the Financial Statements and has been prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not identify
any material misstatements in the Strategic report and Directors’ Report.

Finsbury Food Group Annual Report and Accounts 2021Independent Auditors’ Report to the Members of Finsbury Food Group Plc/Continued

Responsibilities for the Financial Statements and the Audit
Responsibilities of the Directors for the Financial Statements
As explained more fully in the Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements, the Directors are
responsible for the preparation of the Financial Statements in accordance with the applicable framework and for being satisfied that they give a true and
fair view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements
that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these Financial Statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.

Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to
food and hygiene laws, health and safety regulations, environmental legislation, AIM listing regulations, pension legislation, employment laws and tax
legislation, and we considered the extent to which non-compliance might have a material effect on the Financial Statements. We also considered those
laws and regulations that have a direct impact on the Financial Statements such as the Companies Act 2006. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the Financial Statements (including the risk of override of controls), and determined that the principal risks
were related to posting of inappropriate journal entries to manipulate financial results and potential management bias in accounting estimates. Audit
procedures performed by the engagement team included:

• Evaluation of the adequacy of the design of management’s controls to prevent and detect irregularities;

• Enquiry of management around known or suspected instances of non-compliance with laws and regulations and fraud;

• Review of minutes of meetings of those charged with governance;

• Challenge assumptions made by management in its significant accounting estimates; and

• Identifying and testing the validity of journal entries, in particular any journal entries posted with unusual account combinations and consolidation journals.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws
and regulations that are not closely related to events and transactions reflected in the Financial Statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However,
it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular
items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the
population from which the sample is selected.

A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this Report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Other Required Reporting
Companies Act 2006 Exception Reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:

• We have not obtained all the information and explanations we require for our audit; or

• Adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

• Certain disclosures of Directors’ remuneration specified by law are not made; or

• The Company Financial Statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Jason Clarke (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors, Cardiff
17 September 2021

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 202164

Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have prepared the Group
Financial Statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and
the Parent Company Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law).

Under Company law, Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs
of the Group and Parent Company and of the profit or loss of the Group for that period. In preparing the Financial Statements, the Directors are required to:

• Select suitable accounting policies and then apply them consistently;

• State whether applicable international accounting standards in conformity with the requirements of the Companies Act 2006 have been followed
for the Group Financial Statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the Parent Company
Financial Statements, subject to any material departures disclosed and explained in the Financial Statements;

• Make judgements and accounting estimates that are reasonable and prudent; and

• Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue

in business.

The Directors are responsible for safeguarding the assets of the Group and Parent Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.

The Directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and Parent Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and Parent Company and enable them to ensure that
the Financial Statements comply with the Companies Act 2006.

The Directors are responsible for the maintenance and integrity of the Parent Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

On behalf of the Board
Stephen Boyd
Director
17 September 2021

Finsbury Food Group Annual Report and Accounts 2021Financial Statements
Consolidated Statement of Comprehensive Income
for the 52 weeks ended 26 June 2021 and 52 weeks ended 27 June 2020

Revenue
Cost of sales
Gross profit
Administrative expenses
Administrative items – significant and non-recurring

Operating profit
Finance income
Finance cost
Net finance cost
Profit before tax
Taxation

Profit for the financial year

Other comprehensive income/(expense)
Items that will not be reclassified to profit and loss
Remeasurement on Defined Benefit Pension Scheme
Movement in deferred taxation on Pension Scheme liability
Other comprehensive income/(expense) for the financial year, net of tax
Total comprehensive income/(expense) for the financial year

Profit/(loss) attributable to:
Equity holders of the Parent
Non-controlling interest
Profit for the financial year

Total comprehensive income/(expense) attributable to:
Equity holders of the Parent
Non-controlling interest
Total comprehensive income/(expense) for the financial year

Earnings/(loss) pence per ordinary share
Basic
Diluted

The Notes on pages 69 to 98 form an integral part of these Financial Statements.

Note

2021
£000

2020
£000

3
4

7
7

14
23

9
9

313,258
(210,273)
102,985
(85,716)
958
18,227
89
(1,303)
(1,214)
17,013
(3,368)
13,645

396
811
1,207
14,852

12,347
1,298
13,645

13,554
1,298
14,852

9.8
9.3

306,348
(210,881)
95,467
(80,401)
(10,331)
4,735
61
(1,928)
(1,867)
2,868
(2,761)
107

(3,806)
723
(3,083)
(2,976)

(759)
866
107

(3,842)
866
(2,976)

(0.6)
(0.6)

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Consolidated Statement of Financial Position
at 26 June 2021 and 27 June 2020

Non-current assets
Intangibles
Property, plant and equipment
Deferred tax assets

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Other financial assets – fair value of derivatives

Total assets

Current liabilities
Other interest-bearing loans and borrowings
Trade and other payables
Provisions
Other financial liabilities – fair value of derivatives
Deferred consideration
Current tax liabilities

Non-current liabilities
Other interest-bearing loans and borrowings
Provisions
Deferred consideration
Deferred tax liabilities
Pension fund liability

Total liabilities

Net assets

Equity attributable to equity holders of the Parent
Share capital
Share premium account
Capital redemption reserve
Employee share reserve
Retained earnings

Non-controlling interest
Total equity

Note

2021
£000

2020
£000

10
12
23

15
16
17
13

18
20
21
13
22

18
21
22
23
14

26
25
25
25
25

88,019
59,015
5,961
152,995

15,027
50,986
9,523
405
75,941
228,936

(2,039)
(62,490)
(222)
(121)
(976)
(689)
(66,537)

(31,029)
(160)
(466)
(2,944)
(14,529)
(49,128)
(115,665)

88,626
61,736
4,623
154,985

14,618
40,003
10,173
-
64,794
219,779

(3,191)
(48,861)
(471)
(501)
(481)
(1,375)
(54,880)

(45,113)
(550)
(1,357)
(2,117)
(15,174)
(64,311)
(119,191)

113,271

100,588

1,304
64,956
578
(5,374)
49,021
110,485
2,786
113,271

1,304
64,956
578
(3,378)
34,918
98,378
2,210
100,588

The Financial Statements on pages 65 to 98 were approved by the Board of Directors on 17 September 2021 and were signed on its behalf by:

Stephen Boyd
Director

Registered Number 00204368

The Notes on pages 69 to 98 form an integral part of these Financial Statements.

Finsbury Food Group Annual Report and Accounts 2021

Consolidated Statement of Changes in Equity
for the 52 weeks ended 26 June 2021

Share
capital
£000

Share
premium
£000

Note

Capital
redemption
reserve
£000

Employee
share
reserve
£000

Retained
earnings
£000

Non-
controlling
interest
£000

Total
equity
£000

Balance at 30 June 2019

1,304

64,956

578

(3,616)

44,207

2,188

109,617

Profit for the financial year

Other comprehensive:
Remeasurement on defined benefit pension
Deferred tax movement on Pension Scheme remeasurement
Total other comprehensive expense
Total comprehensive (expense)/income for the period

Transactions with owners, recorded directly in equity:
Shares issued from EBT
Shares acquired during the year
Impact of share-based payments
Deferred tax on share options
Foreign exchange translation differences
Dividend paid
Balance at 27 June 2020

Balance at 28 June 2020

Profit for the financial year

Other comprehensive:
Remeasurement on defined benefit pension
Deferred tax movement on Pension Scheme remeasurement
Total other comprehensive income
Total comprehensive (expense)/income for the period

Transactions with owners, recorded directly in equity:
Shares acquired during the year
Impact of share-based payments
Deferred tax on share options
Foreign exchange translation differences
Dividend paid

14
23

26
26
26

14
23

26
26

-
-
-
-

-
-
-
-
-
-
1,304

-
-
-
-
-
-
64,956

-
-
-
-
-
-
578

1,207
(969)
-
-
-
-
(3,378)

(759)

866

107

(3,806)
723
(3,083)
(3,842)

(1,207)
-
(1,066)
(182)
(17)
(2,975)
34,918

-
-
-
866

-
-
-
-
-
(844)
2,210

(3,806)
723
(3,083)
(2,976)

-
(969)
(1,066)
(182)
(17)
(3,819)
100,588

1,304

64,956

578

(3,378)

34,918

2,210

100,588

-
-
-
-

-
-
-
-
-

-
-
-
-

-
-
-
-
-

-
-
-
-

-
-
-
-
-

12,347

1,298

13,645

-
-
-
-

396
811
1,207
13,554

(1,996)
-
-
-
-

-
1,001
89
(541)
-

-
-
-
1,298

-
-
-
-
(722)

396
811
1,207
14,852

(1,996)
1,001
89
(541)
(722)

Balance at 26 June 2021

1,304

64,956

578

(5,374)

49,021

2,786

113,271

The Notes on pages 69 to 98 form an integral part of these Financial Statements.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Consolidated Cash Flow Statement
for the 52 weeks ended 26 June 2021

Cash flows from operating activities
Profit for the financial year
Adjustments for:
Depreciation
Depreciation right-of-use assets
Significant non-recurring items
Significant non-recurring items – impairment of fixed assets
Impairment of goodwill
Net finance costs
Taxation
Amortisation of intangibles
Change in fair value of foreign exchange contracts
Contributions by employer to Pension Scheme
Operating profit before changes in working capital

Changes in working capital:
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations before costs of disposals and acquisitions

Costs relating to closure of bakeries and commissioning
Lease payments
Interest paid
Tax paid
Net cash generated from operating activities

Cash flows from investing activities
Purchase of property, plant and equipment and intangibles
Purchase of companies
Net cash used in investing activities

Cash flows from financing activities
Repayment of revolving credit
Purchase of shares by Employee Benefit trust
Dividend paid to non-controlling interest
Dividend paid to shareholders
Net cash used in financing activities

Net decrease in cash and cash equivalents
Opening cash and cash equivalents
Effect of exchange rate fluctuations on cash held

Cash and cash equivalents at end of period

The Notes on pages 69 to 98 form an integral part of these Financial Statements.

Note

2021
£000

13,645

7,235
1,752
(1,125)
167
-
1,214
3,368
1,817
(696)
(473)
26,904

(568)
(11,274)
14,749
29,811

(364)
(2,789)
(715)
(3,926)
22,017

(6,190)
(500)
(6,690)

(13,753)
(1,996)
(722)
-
(16,471)

(1,144)
10,173
494
9,523

3
3
4
4,12
10
7
8
10
13
14

27
27

2020
£000

107

7,656
1,919
1,594
1,237
7,500
1,867
2,761
1,734
73
(200)
26,248

210
9,949
(9,192)
27,215

(1,887)
(3,362)
(1,088)
(1,822)
19,056

(4,703)
(1,000)
(5,703)

(10,960)
(969)
(844)
(2,975)
(15,748)

(2,395)
12,358
210
10,173

Finsbury Food Group Annual Report and Accounts 2021

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 26 June 2021 (prior financial year is the 52-week period ended 27 June 2020). 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 England and Wales. The Group Financial Statements have been prepared and approved by the Directors
in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The “requirements of the
Companies Act 2006” here means accounts in accordance with “international accounting standards” as defined in section 474(1) of that Act, as it applied
immediately before Implementation Period (‘IP’) completion day (end of transition period), including where the Group also makes use of standards which
have been adopted for use within the United Kingdom in accordance with regulation 1(5) of the International Accounting Standards and the European
Public Limited Liability Company (Amendment etc.) (EU Exit) Regulations 2019, these are presented on pages 99 to 107.

Going Concern and Impact of Covid-19
In the current climate where there is uncertainty around the impact of Covid-19, relevant judgements and assumptions have to be made. This will include
the impact of Covid-19 on the economic recovery. The extent and duration of social distancing measures will impact demand and the workforce. The
grocery sector has been heavily impacted by the pandemic as consumers respond to the ever-evolving situation particularly with the new variants of the
virus and the speed of the vaccination roll out programme. The health and safety of our employees is a top priority and UK Government guidelines are
being adhered to with regards to social distancing and working remotely.

The Group has demonstrated a robust performance driven by a resilient supply chain and production network in order to navigate through the
challenging trading environment. As a manufacturer of a wide range of baked goods, the Covid-19 impact has varied considerably between businesses.
The hospitality sector outdoors and take home grocery sales remain strong driven by measures of lockdown easing and continued drinking and eating at
home with consumer behaviour adjusting to the unwinding of lockdown measures. Demand recovery is anticipated across businesses at different rates
with category demand evolving. We should expect different paces of correction for different markets, dictated by factors such as weather, holidays and
working patterns. When considering going concern judgement has to be made as to the extent of disruption, the ongoing challenges and the speed of
recovery. Forecasts have been built on a bottom-up basis and stress tested to prepare an approved budget used as a basis for reviewing going concern.
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 February 2023.
Committed banking facilities are £55.0 million with a further accordion available of £35.0 million, net bank debt at the year end was £13.1 million.
The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance 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.

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.

The performance of the Group has been robust and resilient with strong trading driven by improving volume performance and the benefits of the
Group’s Operating Brilliance Programme. 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, 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

Judgements
In the course of preparing the Financial Statements, judgements which do not involve estimation have been applied. The key accounting judgements,
without estimation are as follows:

• Basis of Consolidation

Lightbody Stretz Limited, which is 50% owned by the Group is consolidated into the Group accounts as a subsidiary with a corresponding non-controlling
interest on the basis that the Company is commercially dependant on Finsbury Food Group Plc. Philippe Stretz through Phaste EURL is the owner of the
remaining 50%.

• Classification of Items as Significant Non-Recurring

The Group presents certain items as non-recurring and significant. These relate to items which, in management’s judgement, need to be disclosed by
virtue of their size or incidence in order to obtain a more meaningful understanding of the financial information. They reflect costs that will not be repeated
and therefore do not reflect ongoing trading of business which is more meaningful to users. Group management exercises judgement in assessing each
significant and non-recurring item and analyses whether the treatment of these items is consistent with accounting policies and practice.

No other significant judgements have been made in the process of applying the Group’s accounting policies, other than those involving estimations.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021
70

Notes to the Consolidated Financial Statements/Continued

Estimates
The Group is required to make estimates and assumptions concerning the future. These 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, particularly in the challenging environment with the uncertainty around the impact of Covid-19, the extent and
duration of social distancing measures and the impact on the economy. Accounting estimates have been required for the production of these Financial
Statements. The following are those that are deemed to require the most complex assumptions about matters that have the most significant risk of
resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

• Defined Benefit Pension Scheme Valuation

The Group has one legacy Defined Benefit Pension Scheme that was closed to future accrual in May 2010. The net deficit 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 assumptions. 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 valuation is
sensitive to changes in actuarial assumptions, whereby modest changes can have a material impact on the valuation. The risks include economic risks
(such as interest rate risk and inflation risk) and demographic risks (for example members living longer than expected). The Group accounts for defined
benefit pension based on advice provided by the Scheme’s actuary in accordance with IAS 19 (revised) ‘Employee Benefits’, with independent actuaries
being used to calculate the costs, assets and liabilities to be recognised in relation to the Scheme. The present value of the defined benefit obligation, the
current service cost and past service costs are calculated by these actuaries using the projected unit credit method, further detail can be found in Note 14.
The valuation is prepared on a consistent basis and the assumptions are compared to prior periods and market conditions. The assumptions are audited
annually by a team of technical experts to assess whether the assumptions used are within an acceptable range.

• Impairment of Investments (including Goodwill and Intangibles)

The Group holds goodwill and intangibles and the Parent Company holds investments in the respective balance sheets. The carrying values are tested
for impairment on an annual basis (more frequently if there are indications of impairment due to changes in market environment or changes that may
affect the carrying value).

Detailed impairment models are prepared for each cash generating unit, detailed budgets and strategic forecasts are used as a basis for the
modelling. Budgets and forecasts are sense checked during various rounds of internal management reviews. Sensitivities are applied to the discount
rates used and the assumptions and results are reviewed by the Audit Committee and audited annually by external auditors. Impairment testing
involves significant judgement as to whether the carrying value of each asset can be supported by the net present value of estimated future cash
flows derived from such asset using cash flow projections which have been discounted at an appropriate rate. The key areas are:

– Discount rates;
– Future revenue and costs; and
– Long-term growth rates.

The impact of the Covid-19 pandemic has added a further level of complication and challenge due to the uncertainty of economic recovery with consumer
behaviour adjusting to the unwinding of lockdown measures. Detailed bottom-up budgets have been prepared at business level and sensitivities applied,
more complex assumptions had to be made on recovery rates of demand adding more uncertainty into modelling than previous years.

Further detail can be found under the significant accounting policy for intangible assets and goodwill and in Note 10.

• Taxation

Significant judgement is exercised by management in determining the amounts to be provided for both current and deferred tax. The final tax
determination of certain transactions is often uncertain and may not be known for some time in the future. The appointment of external tax
advisers to calculate the provisions during the year end process will focus expertise in this area and provide an independent technical interface with
the auditors. The tax position is reviewed and assumptions are challenged by the external auditors and the actual tax charge is clearly reconciled to
the theoretical tax charge in the Annual Report disclosures to ensure that variances are visible and understood. 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 two years. If profits declined by 30% the losses would be utilised within three years.

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

1. Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated Financial Statements, except as
explained in the basis of preparation, which addresses any changes in accounting policies resulting from new or revised standards.

Basis of Consolidation
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration the potential
voting rights. The acquisition date is the date on which control is transferred to the acquirer. The Financial Statements of subsidiaries are included in the
consolidated Financial Statements from the date that control commences until the date that control ceases. The accounting policies of new subsidiaries
are changed when necessary to align them with the policies adopted by the Group. Intra-group balances and transactions are eliminated in preparing the
consolidated Financial Statements.

New and Upcoming Standards
The following new standards, new interpretations and amendments to standards and interpretations are applicable for the first time for the financial
year ended 26 June 2021.

• Amendment to IFRS 16 “Leases” – Covid-19 related rent concessions (effective 1 June 2020);

• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 (effective on or after 1 January 2021 with early

application permitted); and

• Amendments to IFRS 17 and IFRS 4 “insurance contracts”, deferral of IFRS 9, as amended June 2020 (effective on or after 1 January 2021).

None of the amendments to the above standards had a material impact on the Financial Statements.

There are a number of new standards, interpretations and amendments to existing standards that are not yet effective and have not been adopted
early by the Group. The future introduction of these standards is not expected to have a material impact on the Financial Statements of the Group.

• Amendments to IFRS 3 – Business Combinations (effective 1 January 2022);

• Amendments to IAS 16 – Property, Plant and Equipment (effective 1 January 2022);

• Amendments to IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (effective 1 January 2022);

• Amendments to IAS 1, Practice statement 2 and IAS 8 – Accounting policies, Changes in Accounting Estimates and Errors (effective 1 January 2022);

• Annual improvements to IFRS standards 2018-2020 – IFRS 1, IFRS 9, IAS 41 (effective 1 January 2022); and

• Amendments to IAS 1 – Presentation of Financial Statements on Classification of Liabilities (effective 1 January 2023).

Work will continue in the new financial year to assess the impact of the new standards and interpretations on the Group’s Financial Statements.

Business Combinations
The acquisition method of accounting is used in accounting for the acquisition of businesses. In accordance with IFRS 3 Business Combinations, the
assets and liabilities of the acquired entity are measured at fair value. When the initial accounting for a business combination is determined provisionally,
any adjustments to the provisional values allocated are made within twelve months of the acquisition date and are affected from the date of acquisition.

Foreign Currency
Transactions in foreign currencies are translated to Sterling at the foreign exchange rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the period end date are retranslated to Sterling at the foreign exchange rate ruling at that date.

Any exchange differences arising on the settlement of monetary items, or on translating monetary items at rates different from those at which they
were initially recorded are recognised in the Consolidated Statement of Comprehensive Income in the period in which they arise.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Sterling, at
foreign exchange rates ruling at the period end date. The revenues and expenses of foreign operations are translated at an average rate for the year
where this rate approximates to the foreign exchange rates ruling at the dates of the transactions.

Derivative Financial Instruments
The Group has derivative financial instruments in respect of interest rate swaps and foreign exchange hedges. The Group does not hold derivative financial
instruments for trading purposes. The existing interest rate swaps and foreign exchange hedges used by the Group while they function as hedges, do not
meet the criteria for hedge accounting set out by IFRS 9, and have thus been treated as financial assets and liabilities which are carried at their fair value in the
Consolidated Statement of Financial Position. Fair value is deemed to be market value, which is provided by the counterparty at the year end date.

Changes in the market value of interest rate swaps have been recognised through the Consolidated Statement of Comprehensive Income as finance
income or cost. Changes in the market value of foreign exchange hedges have been recognised through the Consolidated Statement of Comprehensive
Income within administrative costs.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 202172

Notes to the Consolidated Financial Statements/Continued

1. Significant 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 Receivables
The value of trade and other receivables is the amount that would be received if the receivable was paid on the period end date which is a close
approximation to amortised cost.

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.

Property, Plant and Equipment
Recognition and Measurement
Items of property, plant and equipment are measured at cost or fair value at the date of acquisition, less accumulated depreciation and impairment
provisions. Costs include expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost
of materials and direct labour and any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs
of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the
related equipment is capitalised as part of that equipment.

Depreciation
Depreciation is provided to write off the cost, less estimated residual value, of the property, plant and equipment by equal instalments over their estimated
useful economic lives to the Consolidated Statement of Comprehensive Income. When parts of an item of property, plant and equipment have different
useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The depreciation rates used are as follows:

Freehold buildings
Leasehold property
Fixtures and fittings

2%-20%
Up to the remaining life of the lease
10%-33%

Plant and equipment
Assets under construction
Motor vehicles

10%-33%
nil
25%-33%

Impairment reviews of fixed assets are undertaken if there are indications that the carrying values may not be recoverable.

Leases
The Company leases various land and buildings, fork lift trucks and equipment. Rental contracts are typically made for fixed periods of between two
months and 18 years but may have extension options.

Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease
components based on their relative stand-alone prices. However, for leases of real estate for which the Company is a lessee and for which it has major
leases, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose
any covenants other than the security interests in the leased assets that are held by the lessor.

Leased assets may not be used as security for borrowing purposes. Until the 2019 financial year, leases of property, plant and equipment were classified
as either finance leases or operating leases. From 30 June 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date
at which the leased asset is available for use by the Company.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:

• Fixed payments (including in-substance fixed payments), less any lease incentives receivable;

• Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date;

• Amounts expected to be payable by the Company under residual value guarantees;

• The exercise price of a purchase option if the Company is reasonably certain to exercise that option; and

• Payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease.

If that rate cannot be readily determined, which is generally the case for leases in the Company, the lessee’s incremental borrowing rate is used, being
the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.

Finsbury Food Group Annual Report and Accounts 2021Notes to the Consolidated Financial Statements/Continued

1. Significant Accounting Policies/Continued

The Company is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability
until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against
the right-of-use asset.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

• The amount of the initial measurement of lease liability;

• Any lease payments made at or before the commencement date less any lease incentives received;

• Any initial direct costs; and

• Restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Company
is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis
as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.

Low-value assets comprise small items of warehouse equipment and office equipment.

The Company changed its accounting policy in the prior year for leases where the Company is the lessee to comply with IFRS 16. IFRS 16 Leases sets
out the principle for the recognition, measurement, presentation and disclosure of leases for both lessee and lessor. It eliminates the classification
of leases as either operating leases or finance leases and introduces a single lessee accounting model where the lessee is required to recognise assets
and liabilities for all material leases that have a term greater than a year.

On adoption of IFRS 16 Leases, the Group recognised liabilities in relation to leases which had previously been classified as operating leases under
the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the Groups’
incremental borrowing rate as of 27 June 2020. The weighted average incremental borrowing rate applied was 2.21%.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period
of the lease.

Intangible Assets and Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested
annually for impairment. Intangible assets are capitalised separately from goodwill as part of a business combination, only if the fair value can be
measured reliably on initial recognition and if the future economic benefits are expected to flow to the Group. All intangible assets recognised are
considered to have finite lives and are amortised on a straight-line basis over their estimated useful economic lives that range from 15 to 20 years.
Goodwill arises when the fair value of the consideration for the business exceeds the fair value of the net assets acquired. Where the excess is negative
(negative goodwill), the amount is taken to retained earnings. Goodwill is capitalised and subject to impairment reviews both annually and where there
are indications that the carrying value may not be recoverable.

Impairment
The carrying amounts of the Group’s intangible assets and goodwill are reviewed at each period end date to determine whether there is an indication
of impairment. Intangible assets and goodwill are considered to be impaired if objective evidence indicates that one or more events have had a negative
effect on the estimated future cash flows of that asset. If any such indication exists, the asset’s recoverable amount is estimated.

For goodwill and intangible assets that have an indefinite useful life, the recoverable amount is estimated at each period end date.

An impairment loss would be recognised whenever the carrying amount of an intangible asset, goodwill or its cash generating unit exceeds its recoverable
amount. Impairment losses are recognised in the Consolidated Statement of Comprehensive Income.

Calculation of Recoverable Amount
The recoverable amount is the greater of the asset’s fair value less costs to sell and its value in use. In assessing an assets’ value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset.

Inventories
Inventories are measured at the lower of cost and net realisable value. Cost is determined on the first-in first-out basis, and includes all direct costs incurred
and attributable production overheads. Net realisable value is based upon estimated selling price allowing for all further costs of completion and disposal.
Specific provisions are made against old and obsolete stock taking the value to zero or an estimated reduced value based on the most likely route for
disposal of each particular item of stock.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 202174

Notes to the Consolidated Financial Statements/Continued

1. Significant Accounting Policies/Continued

Employee Benefits

Defined Benefit Plans
Memory Lane Cakes Ltd operates a Defined Benefit Pension Scheme and the pension costs are charged to the Consolidated Statement of Comprehensive
Income in accordance with IAS 19 (revised), with current and past service cost being recognised as an administrative expense, interest on assets and liabilities
is shown as finance income or a finance cost in the Consolidated Statement of Comprehensive Income. The remeasurements are recognised in full in Other
Comprehensive Income (see Note 14).

Defined Contribution Plans
The costs of contributing to defined contribution and personal Pension Schemes are charged to the Consolidated Statement of Comprehensive
Income as an administrative expense in the period to which they relate.

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.

Revenue
Revenue is measured at the fair value of consideration received or receivable excluding value added tax, trade discounts, transactions with or between
subsidiaries and less the cost of price promotions and sales related rebates known as over-riders. Revenue represents the amounts derived from the sale
of bakery products.

Revenue is recognised when the single performance obligation has been satisfied and this is when goods (bakery products) are transferred to the
customer which takes place upon delivery of agreed goods to the customer.

Delivery occurs when the goods have been despatched to an agreed specific location or have been directly receipted by the customer and removed from
an operational site by them. At this stage the risks of obsolescence and loss have been transferred to the customer, as it is deemed that the customer has
accepted the products in accordance with the specific sales agreement for those goods.

Price promotions, sales related rebates and returns are provided for as a reduction to revenue recognised based on management’s best estimate of
the amount required to meet claims by customers, taking into account contractual and legal obligations which are typically known, historical trends
and accumulated past experience.

A receivable is recognised on the delivery of goods as this is the point in time that the consideration is unconditional because only the passage of
time is required before the payment is due.

Segmental Reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group’s other components. All segments’ operating results are reviewed regularly
by the Group’s Board of Directors. The Group’s Chief Operating Decision Maker is considered to be the Board.

Licence Fees
Payments made for licence fee charges are recognised under cost of sales in the Consolidated Statement of Comprehensive Income in the period to
which they relate. Any charges relating to future years are deferred and recognised in the Consolidated Statement of Comprehensive Income under
cost of sales over the life of the contract.

Finance Income and Cost
Finance costs comprise loan interest payable, interest payable and finance charges on lease liabilities recognised using the effective interest method,
unwinding of the discount on provisions and deferred consideration, interest on the net Defined Benefit Pension Plan position and adverse changes
in the fair value of interest rate swaps.

Finance income comprises interest receivable on funds invested and favourable changes in the fair value of interest rate swaps. Interest income is
recognised in the Consolidated Statement of Comprehensive Income as it accrues, using the effective interest method.

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.

Finsbury Food Group Annual Report and Accounts 2021Notes to the Consolidated Financial Statements/Continued

1. Significant Accounting Policies/Continued

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.

Government Grants
Furlough grants claimed to cover employee costs who have been furloughed during the pandemic are recognised in the Consolidated Statement of
Comprehensive Income in the same period in which the related expense occurred. Related costs and income have been included in administrative expenses.

2. Revenue and Segment Information
Operating segments are identified on the basis of the internal reporting and decision making. The Group’s Chief Operating Decision Maker is deemed to
be the Board as it is primarily responsible for the allocation of resources to segments and the assessment of performance by segment. The Board assesses
profit performance principally through adjusted profit measures consistent with those disclosed in the Annual Report and Accounts.

The UK bakery segment manufactures and sells bakery products to UK grocery and foodservice sectors. It comprises six subsidiaries all of which manufacture
and supply food products through the channels described above. These subsidiaries have been aggregated into one reportable segment as they share similar
economic characteristics. The economic indicators considered are the nature of the products and production process, the type and class of customer,
the method of distribution and the regulatory environment.

The overseas segment procures and sells bakery products to European grocery and foodservice sectors. It comprises Lightbody Europe and Ultraeuropa.
Ultraeuropa has manufacturing facilities in Poland where it manufactures and sells Free From bakery products into the European markets.

The UK bakery segment also made sales directly to overseas markets.

Revenue

UK bakery

Overseas

Total Group

52 weeks to 26 June 2021 and 52 weeks to 27 June 2020

2021
£000

2020
£000

2021
£000

2020
£000

2021
£000

2020
£000

Total

273,633

271,414

39,625

34,934

313,258

306,348

Reportable Segments
Revenue UK bakery
Revenue overseas
Total revenue

Adjusted operating profit UK bakery
Adjusted operating profit overseas
Total adjusted operating profit
Significant non-recurring impairment
Significant non-recurring other
Defined Benefit Pension Scheme
Fair value foreign exchange contracts
Operating profit
Finance income
Finance expense
Net finance cost
Profit before taxation
Taxation
Profit for the financial year

52 weeks to
26 June 2021
£000
273,633
39,625
313,258

52 weeks to
27 June 2020
£000
271,414
34,934
306,348

13,609
2,491
16,100
-
958
473
696
18,227
89
(1,303)
(1,214)
17,013
(3,368)
13,645

13,162
1,777
14,939
(8,737)
(1,594)
200
(73)
4,735
61
(1,928)
(1,867)
2,868
(2,761)
107

The Group has three customers (2020: three) which individually account for 10% or more of the Group’s total revenue. These customers individually account
for 23%, 12% and 10%. In the prior year these same three customers accounted for 21%, 12% and 10% of the revenue in the 52 weeks to 27 June 2020.
In addition to the Europe sales disclosed in Reportable Segments, the Group also made sales to European markets through UK-based organisations.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

3. Administrative Expenses and Auditors’ Remuneration
Included in profit are the following:

Amortisation of intangibles
Depreciation of owned tangible assets
Depreciation on right-of-use assets
Impairment of fixed assets
Impairment of goodwill
Loss on foreign exchange
Variable lease payments
Expenses relating to short-term and low-value leases
Movement on fair value of foreign exchange contracts
Research and development
Share option charges

Auditors’ remuneration:

Audit of these Financial Statements
Audit of the Financial Statements of subsidiaries of the Company
Other services

Other services relate to assistance with non-UK VAT registrations.

2021
£000

1,817
7,235
1,752
167
-
235
203
51
(696)
2,124
1,001

2021
£000

50
133
41

2020
£000

1,734
7,656
1,919
1,237
7,500
213
193
164
73
2,244
145

2020
£000

50
118
20

4. Significant Non-Recurring Items
The Group presents certain items as significant and non-recurring. These relate to items which, in management’s judgement, need to be disclosed
by virtue of their size or incidence in order to obtain a more meaningful understanding of the financial information. They reflect costs that will not be
repeated and therefore do not reflect ongoing trading of business which is most meaningful to users.

Included within significant non-recurring items shown in the table on page 36 of the Financial Review section are the following costs:

Release of onerous lease and closure costs provision
Litigation and legal costs
Commissioning costs
Impairment of goodwill (refer to Note 10)
Impairment of fixed assets (refer to Note 12)
Other reorganisation people costs

2021
£000

1,340
(388)
-
-
(167)
173
958

2020
£000

-
-
(257)
(7,500)
(1,237)
(1,337)
(10,331)

The release of provisions includes £0.8 million of lease costs avoided due to successful re-letting of closed sites plus £0.4 million of related closure
costs and £0.2 million of unused reorganisation provisions. Legal costs have been accrued in relation to a dispute and costs of £0.2 million relating
to fixed assets are the final impairment at Cardiff.

In the prior year we had the impairment of unused assets in Cardiff and an impairment of goodwill on the Ultrapharm acquisition based on trading
at the time as well as re-organisation costs relating to changes made in response to the pandemic.

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

5. Staff Numbers and Costs
The monthly average number of persons employed by the Group including Directors and excluding agency staff during the year, analysed by category,
was as follows:

Production
Selling and distribution
Administration, technical, new product development

The aggregate payroll costs of these persons were as follows:

Wages and salaries
Share option charges
Social security costs
Charge in respect of defined benefit plans
Charge in respect of defined contribution pension plans

6. Remuneration of Directors

Fees
Executive salaries

Number of employees

2021

2020

2,659
150
399
3,208

2,654
117
406
3,177

2021
£000

2020
£000

78,944
1,001
7,596
490
2,085
90,116

2021
£000

253
748
1,001

77,913
145
6,987
200
2,099
87,344

2020
£000

234
690
924

The aggregate of emoluments and amounts receivable under long-term incentive schemes of the highest paid Director was £438,000 (2020: £404,000),
there were no Company pension contributions made to a defined contribution scheme during the current or prior year. No bonuses were paid in the current
or prior year.

There was nil (2020: 1,108,881) share options exercised in the period by the highest paid Director.

There were no retirement benefits accruing to Directors during the current or previous year.

The emoluments paid to Directors were as follows:

P Baker
R Beveridge
S A Boyd
J G Duffy
R P E Duignan
M J Millard

Fees
£000

85
55
-
-
58
55
253

Salary
£000

-
-
300
428
-
-
728

Benefits
£000

Annual bonus
£000

Year ended
26 June 2021
£000

Year ended
27 June 2020
£000

-
-
10
10
-
-
20

-
-
-
-
-
-
-

85
55
310
438
58
55
1,001

79
51
286
404
53
51
924

During the previous year 602,819 shares were issued to J G Duffy and 382,075 shares were issued to S A Boyd in settlement of the exercise of share
options. During the year awards over 1,200,346 shares under the long-term incentive plan (LTIP) were granted to Directors in the form of nil cost options
(2020: 2,007,470). The vesting of the awards is conditional upon performance conditions over a three-year period commencing 28 June 2020 and are
subject to a further two-year holding period.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

6. Remuneration of Directors/Continued
Directors’ rights to subscribe for shares in the Company are listed below:

S A Boyd
S A Boyd
S A Boyd
S A Boyd
S A Boyd
J G Duffy
J G Duffy
J G Duffy
J G Duffy
J G Duffy

Number of
options at
26 June 2021

Number of
options at
27 June 2020

Exercise
price

Earliest
exercise
date

Exercise
expiry
date

476,364
-
395,365
438,015
494,458
655,614
-
548,780
625,310
705,888
4,339,794

476,364
241,147
395,365
438,015
-
655,614
344,262
548,780
625,310
-
3,724,857

nil
nil
nil
nil
nil
nil
nil
nil
nil
nil

01/07/2020
07/07/2023
28/10/2022
30/06/2024
01/07/2024
01/07/2020
07/07/2023
28/10/2022
30/06/2024
01/07/2024

04/12/2025
21/01/2029
28/10/2029
28/10/2029
22/10/2030
04/12/2025
21/01/2029
28/10/2029
28/10/2029
22/10/2030

The mid-market price of the ordinary shares on 26 June 2021 was 92.5p (2020: 59.3p) and the range during the 52-week period to 26 June 2021 was
51.2p to 96.0p (2020: 53.0p to 104.0p).

7. Finance Income and Cost

Recognised in the Consolidated Statement of Comprehensive Income

Finance income
Interest on interest rate swap agreements
Change in fair value of interest rate swaps
Bank interest receivable
Total finance income

Finance cost
Interest on net pension position
Interest on interest rate swap agreements
Bank interest payable
Unwinding of discount on deferred consideration
Interest on deferred consideration
Lease liabilities
Total finance cost

2021
£000

-
89
-
89

(224)
(119)
(545)
(105)
(36)
(274)
(1,303)

2020
£000

44
-
17
61

(256)
(386)
(999)
(14)
-
(273)
(1,928)

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

8. Taxation

Recognised in the Consolidated Statement of Comprehensive Income

Current tax
Current year
Adjustments for prior years
Total current tax

Deferred tax
Origination and reversal of temporary differences
Rate change
Adjustments for prior years

Total deferred tax
Total tax expense

2020
£000

2,762
6
2,768

130
(222)
85
(7)
2,761

2021
£000

3,277
(263)
3,014

95
252
7
354
3,368

Reconciliation of Effective Tax Rate
The weighted average hybrid rate of UK, Polish and French tax is 20.5% (2020: 22.6%). The tax assessed for the period is lower (2020: higher) than
the hybrid rate of UK and French tax. The UK corporation tax rate for the period is 19.0% (2020: 19.0 %). The differences are explained below:

Profit before taxation
Non-deductible intangible impairment

Tax using the UK corporation tax rate of 19.00% (2020: 19.00%)

Overseas profits charged at different taxation rate
Non-deductible expenses and timing differences
Restatement of opening net deferred tax due to rate change and differences in rates
RandD reclaim
Adjustments to tax charge in respect of prior periods
Total tax expense

2021
£000
17,013
-
17,013

3,232

151
480
298
(537)
(256)
3,368

2020
£000
2,868
7,500
10,368

1,970

439
479
(218)
-
91
2,761

The UK corporation tax rate increase from 19% to 25% from 1 April 2023 was substantively enacted in March 2021. The deferred tax assets and liabilities at
26 June 2021 have been calculated based on a rate at which they are expected to crystallise which is likely to be 19% or 25%.

The adjustment of £256,000 for the prior year includes ineligible capital spends and disallowable expenses being different to the assumed levels at the time
of preparation of the Annual Report.

The Company has an unrecognised deferred tax asset of £239,000 (2020: £182,000) relating to capital losses carried forward. This asset has not been
recognised in the Financial Statements as it is not expected that suitable gains will arise in the future in order to utilise the underlying capital losses.

9. Earnings/(loss) Per Ordinary Share
Basic earnings per share for the period is calculated on the basis of profit for the year after tax, divided by the weighted average number of shares in issue
being 125,805,000 (2020: 127,128,000).

Basic diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of all potential
dilutive ordinary shares. At 26 June 2021, the diluted weighted average number of shares in issue was 132,753,000, (2020: 130,820,000).

An adjusted earnings per share has been calculated to show the trading performance of the Group. These adjusted earnings per share exclude:

• Reorganisation and other significant non-recurring items;

• IFRS 9 ‘Financial Instruments: Recognition and Measurement’ fair value adjustment relating to the Group’s interest rate swaps and foreign exchange contracts;

• IAS 19 (revised) ‘Accounting for Retirement Benefits’ relating to net income;

• The taxation effect at the appropriate rate on adjustments; and

• Amortisation of intangible assets.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

9. Earnings/(loss) Per Ordinary Share/Continued

Profit
Profit/(loss) attributable to equity holders of Company (basic)
Significant non-recurring and other items
Intangible amortisation net of deferred tax
Numerator for adjusted earnings per share calculation (adjusted basic)

Shares
Weighted average number of ordinary shares in issue during the period
Dilutive effect of share options

Earnings/(loss) per share
Basic and diluted
Adjusted basic and adjusted diluted

52 weeks to
26 June 2021

£000

12,347
(1,514)
574
11,407

Diluted
‘000

125,805
6,948
132,753

Basic
‘000

125,805
-
125,805

Basic
‘000

127,128
-
127,128

Basic
pence

Diluted
pence

Basic
pence

52 weeks to
27 June 2020

£000

(759)
10,223
574
10,038

Diluted
‘000

127,128
3,692
130,820

Diluted
pence

9.8
9.1

9.3
8.6

(0.6)
7.9

(0.6)
7.7

Significant non-recurring and other items net of taxation are tabled in the Strategic Report on page 36 and comprise: significant non-recurring
income £776,000 (2020: £1,291,000 charge), Defined Benefit Pension Scheme income £187,000 (2020: charge £45,000), fair value of interest rate
swaps, foreign exchange contracts income £636,000 (2020: £372,000 charge), the unwinding of deferred consideration discounting charge £85,000
(2020: charge £13,000) and impairment of goodwill and fixed assets in the prior year of £8,502,000.

10. Intangibles
Intangible assets comprise customer relationships, brands and goodwill.

Cost at 30 June 2019
Additions
Cost at 27 June 2020
Additions
Transfers from tangible fixed assets
Cost at 26 June 2021

Accumulated amortisation at 30 June 2019
Charge for the year
Impairment
Accumulated amortisation at 27 June 2020
Charge for the year
Accumulated amortisation at 26 June 2021

Net book value at 30 June 2019
Net book value at 27 June 2020
Net book value at 26 June 2021

Goodwill
£000

85,004
-
85,004
-
-
85,004

(4,290)
-
(7,500)
(11,790)
-
(11,790)

80,714
73,214
73,214

Business
systems
£000

9,981
196
10,177
1,045
165
11,387

(826)
(1,025)
-
(1,851)
(1,108)
(2,959)

9,155
8,326
8,428

Brands and
licences
£000

Customer
relationships
£000

3,683
-
3,683
-
-
3,683

(1,502)
(143)
-
(1,645)
(143)
(1,788)

2,181
2,038
1,895

7,630
-
7,630
-
-
7,630

(2,016)
(566)
-
(2,582)
(566)
(3,148)

5,614
5,048
4,482

Total
£000

106,298
196
106,494
1,045
165
107,704

(8,634)
(1,734)
(7,500)
(17,868)
(1,817)
(19,685)

97,664
88,626
88,019

The customer relationships recognised in the opening costs were purchased as part of the Ultrapharm acquisition in September 2018 and the acquisition
of Fletchers Group of Bakeries in October 2014. They are considered to have finite useful lives and are amortised on a straight-line basis over their estimated
useful lives of 20 years for brands and between ten and 15 years for customer relationships. The intangibles were valued using an income approach, using
multi-period excess earnings method for customer relationships and Relief from Royalty Method for brand valuation. The amortisation of intangibles has
been charged to administrative expenses in the Consolidated Statement of Comprehensive Income. The business systems are considered to have finite
useful lives and are amortised on a straight-line basis over their estimated useful lives of ten years.

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

10. Intangibles/Continued
Goodwill has arisen on acquisitions and reflects the future economic benefits arising from assets that are not capable of being identified individually
and recognised as separate assets. The goodwill reflects the anticipated profitability and synergistic benefits arising from the enlarged Group structure.
The goodwill is the balance of the total consideration less fair value of assets acquired and identified. The carrying value of the goodwill is reviewed
annually for impairment. The carrying value of all goodwill has been assessed during the year.

The Group tests goodwill for impairment on an annual basis, or more frequently if there are indications that the goodwill may be impaired. The recoverable
amounts of the cash generating units are determined from value in use calculations. The key assumptions for the value in use calculations are the discount
and growth rates used for future cash flows and the anticipated future changes in revenue, direct costs and indirect costs. The assumptions used reflect the
past experience of management and future expectations.

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. With knowledge and experience throughout varying degrees of lock-down and recoveries, a bottom-up
full year 2022 budget and strategic forecast to June 2024 has been compiled.

The forecasts have taken in consideration the following key factors:

1. Post Covid-19 recovery of sales in full for FY 2022 with bounce-back of foodservice demand.

2. Latest market forecast and market research data has been considered when making commercial judgements.

3. Detailed SWOT analysis of all businesses with a strategic plan to respond to challenges.

4. Plans to combat inflationary pressures particularly labour costs in UK and Europe.

5. Detailed plans supporting strategic initiatives and strategy into action with continued focus in the Operating Brilliance Programme,

Process Blueprint, value engineering, asset management and care.

6. Organisational design and engagement activity to provide bakery teams to support our strategy.

The forecasts covering a three-year period are based on the detailed financial forecasts challenged and approved by management for the next three years.
The cash flows beyond this forecast are extrapolated to perpetuity using a 1.5% (2020: 1.1%) growth rate for all of the CGUs with the exception of Ultrapharm
where growth of 2.9% (2020: 2.9%) has been assumed. The starting position has been impacted by Covid-19 and growth we believe is relatively prudent
when compared to long-term UK GDP basis, to reflect the uncertainties of forecasting further than three years. Changes in revenue and direct costs in the
detailed three-year plan are based on past experience and expectations of future changes in the market to the extent that can be anticipated.

The strategic forecast process commenced in November 2020 to review consumer and competitor insight to prepare the foundations for the financial
forecasts. The strategic forecasts have included assumptions on the post lockdown environment and the journey to recovery. We have been encouraged
by the performance in retail and the recovery in the foodservice sector, with revenue trends improving since the initial lockdown in March 2020.

The revenue growth rate in the strategic forecast combines volume, mix and price of products. An inflation factor has been applied to costs of sales,
variable costs and indirect costs and takes into consideration the general rate of inflation, movements in commodities, improvement in efficiencies from
capital investment and operations and purchasing initiatives. External market data and trends are considered when predicting growth rates. Compound
annual growth rates for revenues for the three-year forecast period range from 5.8% to 9.1%, reflecting the recovery from the lower base year and
budget year that have been impacted by the Covid-19 pandemic and the business wins during the pandemic.

A post-tax discount rate of 8.2% (2020: 7.6%) has been used in these calculations, the equivalent pre tax rates are 11.0% (2020:9.2%). The discount rate
uses weighted average cost of capital which reflects the returns on government bonds and an equity risk premium adjusted specifically for Finsbury plus
further risk premiums that consider cash generating unit risk. The Group has considered the economic environment and higher level of return expected
by equity holders due to the perceived risk in equity markets when selecting the discount rate. The discount rate has increased over the prior year rate as
a result of a lower debt position and an increase in the risk-free rate. The discount rate used for each cash generating unit has been kept constant as the
market risk is deemed not to be materially different between the different segments of the bakery sector, nor over time. When considering the Ultrapharm
discount rate a further 0.5% has been added for the overseas risk element.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 202182

Notes to the Consolidated Financial Statements/Continued

10. Intangibles/Continued
The table below shows the carrying values of goodwill allocated to cash generating units or groups of cash generating units. When calculating the
discount rate that would need to be applied for there to be zero headroom, the discounted cash flows were compared against the carrying amount
of goodwill, plant property and equipment and right-of-use assets. The discount rates are shown in the table below:

Lightbody of Hamilton
Fletchers Bakery
Ultrapharm
Nicholas and Harris
Johnstone’s Food Service

Carrying value of goodwill
2020
2021
£000
£000

45,698
20,118
4,046
2,980
372
73,214

Post-tax discount rate at
which headroom is nil

2021
%

17.2
12.9
9.6
44.3
122.8

2020
%

17.2
10.3
7.9
42.6
76.6

Pre-tax discount rate at
which headroom is nil
2021
%

2020
%

22.9
17.2
12.8
59.1
163.7

20.7
12.4
9.5
51.3
92.3

Impairment
The post-tax discount rate at which the headroom is nil for Fletchers Bakery is 12.9%. There are key strategies and plans in place in order to improve the
performance of Fletchers. Increased volumes have been budgeted as schools, hospitality and leisure industries re-open after Covid-19 lockdown closures,
decrease in retail demand has been considered as the hospitality industry begins to re-open. A strong bounce-back is anticipated in out-of-home and
growth in buns and rolls with strategic partnering, new product development opportunities, by growing our own bakery foodservice brand and working with
strategic end-user customers. There are also further opportunities to drive margin mix upwards through value added and value engineering, price and new
development. Sensitivities have been carried out to exclude any growth, which, after returning to pre-Covid-19 level of sales, demonstrates that headroom
still exists. It has been concluded that no impairment was necessary on the carrying value of goodwill relating to the Fletchers Bakery at 26 June 2021.

The post-tax discount rate at which the headroom is nil for Ultrapharm Limited is 9.6%. There are key strategies in place in order to improve the performance
of Ultrapharm. Targeted new product development recruitment and a better understanding of intellectual property has been a key breakthrough in
developing new and existing product development with new products being launched in the year to 26 June 2021. Growth with our retail partners is driven by
the developments of new products and improved customer confidence. There are also further opportunities in accelerating growth in our own gluten-free
brand. Sensitivities have been carried out to exclude any growth, which, after returning to pre-Covid-19 level of sales, demonstrates that headroom still
exists. It has been concluded that no impairment was necessary on the carrying value of goodwill relating to Ultrapharm Limited at 26 June 2021.

Sensitivity analyses have been carried out by the Directors on the carrying value of all remaining goodwill using post-tax discount rates up to 12.5%,
which would not result in an impairment of any cash generating units.

Further sensitivity analysis has been carried out using a range of factors such as growth rate and cost increases, which would not result in an
impairment. These include:

• If future growth rate assumption of 1.0% was replaced with zero growth rate; and

• If future growth rate assumption of 1.0% was replaced with a decline of 1.0%.

Traction has been gained over the period impacted by the pandemic in Group-wide initiatives to instil the Finsbury ways of working throughout. A more
engaged workforce, standardised processes, asset care and management and supply chain initiatives are driving improvements in efficiencies across the
Group to strengthen our growth position.

Prior Year Impairment
An impairment charge was taken against the Ultrapharm cash generating units in the prior year. The business proved more immature than expected
and additional resource was invested into both the UK and Polish businesses. We faced commercial issues (in part relating to a small warranty claim)
exacerbated by Covid-19 which had adversely affected cash flows and hence valuation. We believe the gluten-free sector remains attractive and that
performance will meet our expectations over time. The conclusion was that, considering all those factors that the business was overvalued. The strategic
forecast revenues and profits had been sensitised and a downside forecast had been considered giving reduced cash flow assumptions, which when
compared to the carrying value of assets had indicated an impairment was necessary. A non-cash impairment of £7.5 million was recognised in the prior
year’s financial results. The downside forecast had been used as a basis for calculating the impairment charge. Revenue in this forecast was expected to
grow over the next three years at an annual growth rate of 10%.

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

11. Leases
The Group adopted IFRS 16 from 30 June 2019 using the modified retrospective approach. Under IFRS 16 the previous operating leases charge has been
replaced by the depreciation on the right-of-use asset and interest on the lease liability. The Group leases many assets including land and buildings,
vehicles, machinery and equipment.

(i) Amounts recognised in the Consolidated Statement of Financial Position
Property plant and equipment comprises owned and leased assets that do not meet the definition of investment property.

Property plant and equipment owned
Right-of-use assets

Note

12
12

26 June 2021
£000

27 June 2020
£000

49,432
9,583
59,015

52,302
9,434
61,736

Included within right-of-use assets in the table above are assets with a net book value of £1,188,000 (2020: £1,373,000) previously recognised as a finance
lease under IAS 17.

Right-of-Use Assets

Balance at 28 June 2020
Additions
Depreciation charge for the year
Balance at 26 June 2021

Property
£000

Plant, equipment
and vehicles
£000

8,859
1,648
(1,349)
9,158

1,763
253
(403)
1,613

Total
£000

10,622
1,901
(1,752)
10,771

Additions include new assets acquired and remeasurement of leases. Depreciation for the period to 26 June 2021 on right-of-use assets for leases
previously treated as operating leases under IAS 17 is £1,734,000 and a net book value at 26 June 2021 of £9,434,000.

Lease Liabilities

Lease liability recognised
Current lease liability
Non-current lease liability

(ii) Amounts recognised in the Consolidated Statement of Comprehensive Income

Interest on lease liabilities
Variable lease payments not included in the measurement of lease liabilities
Expenses relating to short-term leases
Expenses relating to low-value assets, excluding short-term leases of low-value assets

(iii) Amounts Recognised in the Cash Flow Statement

Total cash outflow for lease rentals

At 26 June 2021
£000

At 27 June 2020

£000

10,745
2,039
8,706

12,295
3,191
9,104

At 26 June 2021
£000

At 27 June 2020
£000

(274)
(203)
(36)
(14)

(273)
(193)
(164)
(16)

At 26 June 2021
£000
2,789

At 27 June 2020
£000
3,362

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

12. Property, Plant and Equipment

Cost
Balance at 30 June 2019
Exchange adjustments
Additions
Disposals
Lease modifications under IFRS 16
Balance at 27 June 2020
Exchange adjustments
Additions
Disposals
Transfers

Balance at 26 June 2021

Accumulated depreciation and impairment
Balance at 30 June 2019
Exchange adjustments
Depreciation charge for the financial period
Impairment (Note 4)
Disposals
Lease modifications under IFRS 16
Balance at 27 June 2020
Exchange adjustments
Depreciation charge for the financial period
Impairment (Note 4)
Disposals
Transfers
Balance at 26 June 2021

Net book value
At 30 June 2019
At 27 June 2020
At 26 June 2021

Land and
buildings
£000

Plant and
equipment
£000

Fixtures and
fittings
£000

Assets under
construction
£000

Total
£000

36,610
-
753
(58)
(454)
36,851
(138)
3,295
(225)
159

39,942

(9,999)
-
(2,149)
-
58
454
(11,636)
-
(2,059)
-
157
205
(13,333)

26,611
25,215
26,609

83,286
(155)
5,122
(332)
-
87,921
(65)
2,825
(2,143)
(244)

88,294

(45,650)
-
(7,061)
(1,237)
325
-
(53,623)
(29)
(6,589)
(167)
2,066
(261)
(58,603)

37,636
34,298
29,691

5,531
-
158
-
-
5,689
(218)
252
-
(70)

5,653

(4,161)
4
(365)
-
-
-
(4,522)
-
(339)
-
-
64
(4,797)

1,370
1,167
856

2,559
-
(1,503)
-
-
1,056
139
674
-
(10)

1,859

-
-
-
-
-
-
-
-
-
-
-
-
-

2,559
1,056
1,859

127,986
(155)
4,530
(390)
(454)
131,517
(282)
7,046
(2,368)
(165)

135,748

(59,810)
4
(9,575)
(1,237)
383
454
(69,781)
(29)
(8,987)
(167)
2,223
8
(76,733)

68,176
61,736
59,015

Security
HSBC Bank Plc, HSBC Asset Finance (UK) Ltd, HSBC Equipment Finance (UK) Ltd and HSBC Corporate Trustee Company (UK) Limited have debentures
incorporating fixed and floating charges over the undertaking and all property and assets including goodwill, book debts, uncalled capital, buildings,
fixtures, fixed plant and machinery. Hire purchase obligations are secured on the underlying assets.

The lease obligations are secured on leased equipment (see Note 18).

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

13. Other Financial Assets and Liabilities

Current assets – derivatives
Fair value of interest rate swaps
Fair value of foreign exchange contracts
Total of derivatives with positive fair values

Current liabilities – derivatives
Fair value of interest rate swaps
Fair value of foreign exchange contracts
Total of derivatives with negative fair values

2020
£000

-
-
-

(210)
(291)
(501)

2021
£000

-
405
405

(121)
-
(121)

Interest Rate Swaps at Fair Value
The Group has two forward dated interest rate swap arrangements to hedge its risks associated with interest rate fluctuations:

• £20.0 million for five years from 3 July 2017 (fixed) at 0.455%; and

• £5.0 million for three years from 28 March 2019 (fixed) at 1.002%.

There was £25.0 million coverage in place at the year end (2020: £25.0 million).

An income of £89,000 (2020: charge £386,000) is shown in the finance income for the period reflecting changes in the fair values of interest rate swaps.

Forward Foreign Exchange Contracts at Fair Value
The Group has entered into a number of forward foreign exchange contracts to minimise the impact of fluctuations in exchange rates. An income
of £696,000 (2020: charge £73,000) is shown in administrative expenses for the period reflecting changes in their fair value.

14. Pension Schemes
A number of companies within the Group operate defined contribution Pension Schemes with one company also operating a Defined Benefit Scheme.

Defined Contribution Scheme
The Group made contributions in respect of its defined contribution pension arrangements of £2,085,000 (2020: £2,099,000).

Defined Benefit Scheme
The Group’s Defined Benefit Scheme is the Memory Lane Cakes Pension Scheme, which is a separately administered plan. At the financial year end, the
Scheme had no active members accruing benefits (2020: nil), 157 deferred pensioner members (2020: 168) and 235 pensioner members (2020: 229).

The Scheme was closed to future accrual on 31 May 2010. The assets of the Scheme are held separately from those of the Company. The amounts in the Financial
Statements for the 52 weeks ended 26 June 2021 relating to Defined Benefit Pension are based on a full actuarial valuation dated 31 December 2018.

A £490,000 contribution was paid during the financial year by Memory Lane Cakes Limited (2020: £200,000). The Group’s contribution has been agreed
based on the outcome of the full actuarial valuation dated 31 December 2018. The valuation of the Scheme on an equity/bond basis and projected unit
method, showed that there was a deficit at 31 December 2018 of £12,742,000 equivalent to a 42% deficit of liabilities over assets. The valuation was
conducted by a qualified independent actuary. This deficit is payable at a rate of £500,000 per annum until April 2047. The next full valuation will be
prepared as at 31 December 2021 and will be an opportunity to challenge the appropriateness of this recovery plan taking into consideration the deficit
recovery contributions and actual returns realised on the Pension Scheme assets.

The present value of the Company’s committed deficit reduction contributions does not give rise to a net pension asset or additional Consolidated
Statement of Financial Position liability in accordance with IFRIC 14.

The investments are managed by a fiduciary investment manager River and Mercantile, who were appointed as fiduciary investment manager in December
2018. A new Statement of Investment Principles (SIP) in compliance with the Pensions Act 1995, the Pensions Act 2004 and the Occupational Pension
Schemes (Investment) Regulations 2005 was agreed in January 2019. All of the Scheme’s investments meet the criteria detailed in the SIP relevant for the
Scheme year to 31 December 2018. A change of investments has taken place during 2019 aligning to the new SIP with the introduction of hedging strategies
to its investment portfolio. The expected return on cash balances held is based on the current Bank of England base rate rather than long-term deposit rates,
as cash is held to cover short-term requirements.

The full actuarial valuation differs from the financial year end valuation deficit of £14,529,000 (2020: £15,174,000). No allowance is made in the
financial year end valuation for any outperformance expected from the Scheme’s actual asset holding over and above high-quality corporate bonds.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

14. Pension Schemes/Continued

Fair value of plan assets
Present value of defined benefit obligations
Deficit recognised

The fair value of plan assets and the return on those assets were as follows:

Multi-asset growth fund
Gilts
Liability hedging portfolio (gilts/swaps)
Other
Property
Cash
Fair value of plan assets
Actual return on plan assets

2021
£000

20,803
(35,332)
(14,529)

2021
£000

8,222
5,731
2,505
1,949
1,523
873
20,803
1,551

2020
£000

19,607
(34,781)
(15,174)

2020
£000

12,617
-
2,856
1,704
717
1,713
19,607
959

None of the fair values of the assets shown above includes any of the Company’s own financial instruments or any property occupied by,
or any other assets used by, the Company.

Movements in present value of defined benefit obligation
At beginning of financial year
Past service costs
Interest on plan obligations
Benefits paid
Remeasurement – loss from changes to financial assumptions
Remeasurement – loss from changes to demographic assumptions
At end of financial year

Movements in fair value of plan assets
At beginning of financial year
Interest on plan assets
Return on plan assets less interest
Benefits paid
Contributions by employer
At end of financial year

2021
£000

2020
£000

(34,781)
(17)
(515)
845
(324)
(540)
(35,332)

19,607
291
1,260
(845)
490
20,803

(30,550)
-
(687)
790
(4,334)
-
(34,781)

19,238
431
528
(790)
200
19,607

Remeasurement gains and losses arise due to changes in the key assumptions such as inflation, mortality rates, demographic rates and discount
rates as well as experience gains and losses.

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

14. Pension Schemes/Continued

Expense recognised in the Consolidated Statement of Comprehensive Income
Past service costs
Interest on plan assets/finance income
Interest on plan obligations/finance expense
Total expense

Remeasurement gains and losses recognised directly in equity in the Statement of Comprehensive
Income and Expense since 1 July 2006, the transition date to Adopted IFRS
Cumulative amount at beginning of financial year
Recognised in the financial year – return on plan assets less interest
Recognised in the financial year – experience gains on liabilities
Recognised in the financial year – loss(gain) from changes to financial assumptions
Recognised in the financial year – gains from changes to demographic assumptions
Cumulative amount at end of financial year

Principal long-term actuarial assumptions at the year end
CPI price inflation assumption
Increases to pensions in payment
Discount rate for liabilities
Rate of return for plan assets

2020
£000

-
431
(687)
(256)

(13,135)
528
-
(4,334)
-
(16,941)

2020
%

2.35
2.35
1.50
1.50

2021
£000

(17)
291
(515)
(241)

(16,941)
1,260
-
(324)
(540)
(16,545)

2021
%

2.85
2.85
1.95
1.95

The differential between the assumed rate of inflation and the discount rate for liabilities is 0.90% (2020: 0.85%).

Salary inflation assumptions are as determined by the Board with regard to price inflation. The salary inflation from 31 May 2010, when the Scheme
closed to future accrual was assumed to be in line with inflation.

The financial assumptions are based on market conditions as at the review date of 26 June 2021, with discount rates based on the yields on long-
dated high-quality corporate bonds. The discount rate is higher than the discount rate used last year reflecting the change in bond yields over this
period. The rate of return for plan assets is the long-term rate that reflects the yield on high-quality corporate bonds, as required under changes
to IAS 19. The rate of return is effectively based on the discount rate with no allowance made for any outperformance expected from the Scheme’s
actual asset holding. The actual return on the Scheme’s assets, net of expenses, over the year to the review date was around 8.5% (2020: 5.0%).
The actual return has been impacted by the worldwide Covid-19 pandemic that has had a profound impact on the economy as countries went into
lockdown, while uncertainty and volatility remain a feature of the current equity markets.

Changing the year end 2021 assumptions to those of 2020 year end listed above, the deficit would have been £13,670,000 compared to the
reported deficit of £14,529,000.

Post-retirement
mortality assumption

2021
S3NA tables with CMI 2017 (core parameters) projections
and 1.25% pa long-term rate of improvement

2020
S3NA tables with CMI 2017 (core parameters) projections
and 1.25% pa long-term rate of improvement

Under the mortality tables adopted, the assumed future life expectancy at age 65 is as follows:

Male currently at age 45
Female currently at age 45
Male currently at age 65
Female currently at age 65
Allowance for GMP equalisation (increase liabilities at the review date by):

2021

24.1
26.5
22.7
25.1
1.2%

2020

24.1
26.4
22.7
25.0
1.2%

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

14. Pension Schemes/Continued

Sensitivity Analysis
The calculation of the defined benefit obligation is sensitive to the assumptions set out on the previous page. The following table summarises
changes in these assumptions and their approximate (decrease)/increase in liabilities.

Discount rate plus 0.5%
Discount rate minus 0.5%
Inflation plus 0.5%
Inflation minus 0.5%
Life expectancy plus 1.0 years
Life expectancy minus 1.0 years

2021

(£2.91 million)
£3.32 million
£2.87 million
(£2.96 million)
£1.49 million
(£1.52 million)

The above sensitivities are approximate and only show the likely effect of an assumption being adjusted whilst all other assumptions remain the same.

The weighted average duration of the defined benefit obligation is around 19 years.

Risk Mitigation Strategies
The Scheme’s investments include partial interest rate and inflation hedging. All of the Scheme’s investments meet the criteria detailed in the SIP relevant
for the Scheme year to 31 December 2018.

Effect of the Scheme on the Company’s Future Cash Flows
The long-term nature of the Scheme, coupled with the risks mentioned above, means that there is a large amount of uncertainty over the Scheme’s
projected future cash flows. The estimated duration of the liabilities is around 19 years. The Company is required to agree a Schedule of Contributions
with the Trustees of the Scheme following a valuation which must be carried out at least once every three years. The next valuation of the Scheme will
be prepared as at 31 December 2021. In the event that the valuation reveals a larger deficit than expected, the Company may be required to increase
contributions above those set out in the existing Schedule of Contributions. Conversely, if the position is better than expected contributions may be
reduced. The total cash cost to the Company for the current financial year is £788,000 (2020: £435,000) which includes deficit recovery contributions,
pension protection fund levy fees and cost of advisers. The increase in costs is largely driven by the increased deficit recovery contributions of £290,000.
The Company expects to pay deficit recovery contributions of £500,000 in the year to 2 July 2022. The projected net interest charge to the Consolidated
Statement of Comprehensive Income for the year to 2 July 2022 is £279,000. This projection assumes cash flows to and from the Scheme are broadly
unchanged from the current year figures and that there will be no events that would give rise to a settlement/curtailment/past service cost.

Consolidated Statement of Financial Position

Fair value of plan assets
Present value of the defined benefit obligation
Deficit

Experience adjustments on plan assets
as a percentage of plan assets
Experience adjustments on plan liabilities
as a percentage of plan liabilities
Total remeasurement gains/(losses)
as a percentage of plan liabilities

2021
£000

2020
£000

2019
£000

2018
£000

20,803
(35,332)
(14,529)

1,260
6.1%
-
0.0%
396
1.1%

19,607
(34,781)
(15,174)

528
2.7%
-
0.0%
(3,806)
10.9%

19,238
(30,550)
(11,312)

384
2.0%
1,614
(5.3%)
(332)
1.1%

18,834
(29,370)
(10,536)

(779)
(4.1%)
-
0.0%
(172)
0.6%

2017
£000

19,985
(30,483)
(10,498)

712
3.6%
-
0.0%
(4,031)
13.2%

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

15. Inventories

Raw materials and consumables
Finished goods

Inventories Recognised as an Expense

Opening inventories
Purchases
(Decrease)/increase in stock provisions
Closing inventories
Expensed during the period

Inventories are stated after provisions for impairment of £865,000 (2020: £1,097,000).

16. Trade and Other Receivables

Trade receivables due from third parties
Other debtors
Prepayments and accrued income

Trade receivables due from third parties are stated after provisions for impairment of £1,094,000 (2020: £795,000).

17. Cash and Cash Equivalents Including Bank Overdrafts

Cash at bank and on hand
Bank overdraft

2020
£000

6,311
8,307
14,618

2020
£000

14,805
138,180
321
(14,618)
138,688

2020
£000

36,007
2,356
1,640
40,003

2020
£000

24,181
(14,008)
10,173

2021
£000

6,715
8,312
15,027

2021
£000

14,618
139,094
(320)
(15,027)
138,365

2021
£000

45,799
4,051
1,136
50,986

2021
£000

24,227
(14,704)
9,523

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

18. Other Interest-Bearing Loans and Borrowings
This Note provides information about the contractual terms and repayment terms of the Group’s interest-bearing loans and borrowings, which are
measured at amortised cost, using the effective interest rate method.

2021 Statutory

Margin

Frequency of
repayments

Year of
maturity

Facility
£000

Drawn
£000

Current
£000

Non-current
£000

Revolving credit
Leases*
Unamortised transaction costs

1.50%/LIBOR
Various

Varies
Monthly

2023
Various

55,000

22,431
10,745
(108)
33,068

-
2,039
-
2,039

22,431
8,706
(108)
31,029

* Leases include all leases recognised as lease liabilities under IFRS 16 (see Note 11). Lease liabilities are shown separately in the table below to show total
bank debt as defined by our banking facility agreement, which only recognises leases as defined as finance leases under IAS 17 as part of bank debt.

2021

Margin

Frequency of
repayments

Year of
maturity

Facility
£000

Drawn
£000

Current
£000

Non-current
£000

Revolving credit
Finance lease (under IAS 17)
Unamortised transaction costs
Total bank debt
Operating leases (under IAS 17)
Total debt

1.50%/LIBOR
Various

Varies
Monthly

2023
2023

55,000

2.2%

Varies

22,431
220
(108)
22,543
10,525
33,068

-
128
-
128
1,911
2,039

22,431
92
(108)
22,415
8,614
31,029

2020 Statutory

Margin

Frequency of
repayments

Year of
maturity

Facility
£000

Drawn
£000

Current
£000

Non-current
£000

Revolving credit
Leases*
Unamortised transaction costs

1.50%/LIBOR
Various

Varies
Monthly

2023
Various

55,000

36,184
12,295
(175)
48,304

-
3,191
-
3,191

36,184
9,104
(175)
45,113

2020

Margin

Frequency of
repayments

Year of
maturity

Facility
£000

Drawn
£000

Current
£000

Non-current
£000

Revolving credit
Finance lease (under IAS 17)
Unamortised transaction costs
Total bank debt
Operating leases (under IAS 17)
Total debt

1.50%/LIBOR
Various

Varies
Monthly

2023
2023

55,000

2.2%

Varies

36,184
472
(175)
36,481
11,823
48,304

-
247
-
247
2,944
3,191

36,184
225
(175)
36,234
8,879
45,113

All of the above loans are denoted in pounds Sterling, with various interest rates and maturity dates. The main purpose of the above facilities is to finance
the Group’s operations. For more information about the Group’s exposure to interest rate risk, see Note 24.

As part of the bank borrowing facility the Group needs to meet certain covenants every six months. There were no breaches of covenants during the year.
The covenant tests required are net bank debt: EBITDA, interest cover, debt service cover and capital expenditure.

The revolving credit bank facility available for drawdown is £55.0 million plus a further £35.0 million accordion facility (2020: £55.0 million plus a further
£35.0 million accordion). At the period end date, the facility utilised was £22.4 million (2020: £36.2 million), giving £32.6 million (2020: £18.8 million)
headroom plus a further £35.0 million (2020: £35.0 million) accordion.

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

19. Analysis of Net Bank Debt

The table below is presented to demonstrate total debt as defined by our banking facility agreement. This excludes the lease liabilities created on
transition to IFRS 16 for leases treated as operating leases under IAS 17.

Cash and cash equivalents
Debt due after one year
Hire purchase obligations due within one year
Hire purchase obligations due after one year
Total net bank debt

20. Trade and Other Payables

Current
Trade creditors
Other creditors including taxes and social security
Accruals and deferred income

21. Provisions

Balance at the beginning of the financial year
Released during the year
Utilised during the financial year
Balance at the end of the financial year
Current provisions
Non-current provisions

At year ended
27 June 2020
£000

10,173
(36,184)
(247)
(225)
(26,483)

Cash flow
£000

(650)
13,753
119
133
13,355

At year ended
26 June 2021
£000

9,523
(22,431)
(128)
(92)
(13,128)

2021
£000

2020
£000

38,943
2,409
21,138
62,490

Site closure
£000

Pension
£000

843
(502)
(137)
204
204
-

178
-
-
178
18
160

30,512
2,046
16,303
48,861

Total
£000

1,021
(502)
(137)
382
222
160

The site closure provision relates to the closure of the Grain D’Or site in October 2017. The provision is based on best estimates of the outcome of negotiations
and currently have commitments to June 2023 for service charges, security and insurance costs on a number of leased production units. The increase in the
number of units successfully re-let during the year has led to the release of provisions relating to the ongoing costs that are no longer required.

The pension provision relates to a contractual liability for pension augmentation. The amount utilised during the year represents payments in relation
to the augmentations which are being paid over 12 years.

22. Deferred Consideration
The deferred consideration relates to the acquisition of Ultrapharm Limited (Ultrapharm) for £16.9 million plus up to £3.0 million, £1.5 million of which is
outstanding at the 26 June 2021 and payable in quarterly instalments to October 2022. Discounted amounts payable within one year of the Consolidated
Statement of Financial Position date is £976,000 and amounts due beyond one year is £466,000. Amounts charged to finance expenses during the year
for the unwinding of the discounting is £36,000 (2020: £14,000).

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

23. Deferred Tax Assets and Liabilities

Recognised Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:

Intangibles
Property, plant and equipment
Foreign exchange contracts
Short-term temporary differences
Interest rate swaps
Discounting of deferred consideration
Pension Scheme charges
Employee Share Scheme charges
Losses acquired
Tax assets/(liabilities)
Net tax assets/(liabilities)

Assets

Liabilities

2021
£000

-
-
-
38
23
-
3,632
669
1,599
5,961
3,017

2020
£000

-
-
55
38
40
-
2,883
391
1,216
4,623
2,506

2021
£000

(1,594)
(1,262)
(77)
-
-
(11)
-
-
-
(2,944)

2020
£000

(1,346)
(740)
-
-
-
(31)
-
-
-
(2,117)

Short-term temporary differences relate to general provisions which will be allowed when 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 two years.

Movement in Deferred Tax during the Year

28 June
2020
£000

Recognised in
minority interest
£000

Recognised
in income
£000

Recognised
in equity
£000

(1,346)
(740)
55
38
40
(31)
2,883
391
1,216
2,506

30 June
2019
£000

(1,325)
(415)
37
40
(30)
(30)
1,923
574
1,081
1,855

-
-
(35)
-
-
-
-
-
-
(35)

(248)
(522)
(97)
-
(17)
20
(62)
189
383
(354)

-
-
-
-
-
-
811
89
-
900

Acquired
£000

Recognised
in income
£000

Recognised
in equity
£000

-
103
-
-
-
-
-
-
-
103

(21)
(428)
18
(2)
70
(1)
237
(1)
135
7

-
-
-
-
-
-
723
(182)
-
541

26 June
2021
£000

(1,594)
(1,262)
(77)
38
23
(11)
3,632
669
1,599
3,017

27 June
2020
£000

(1,346)
(740)
55
38
40
(31)
2,883
391
1,216
2,506

The deferred tax liability in respect of intangible assets will unwind in line with the amortisation of intangible assets.

Finsbury Food Group Annual Report and Accounts 2021

Short-term temporary differences relate to general provisions which will be allowed when 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 two years.

Movement in Deferred Tax during the Year

28 June

2020

£000

Recognised in

minority interest

£000

Recognised

in income

£000

Recognised

in equity

£000

23. Deferred Tax Assets and Liabilities

Recognised Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities are attributable to the following:

Intangibles

Property, plant and equipment

Foreign exchange contracts

Short-term temporary differences

Interest rate swaps

Discounting of deferred consideration

Pension Scheme charges

Employee Share Scheme charges

Losses acquired

Tax assets/(liabilities)

Net tax assets/(liabilities)

Intangibles

Property, plant and equipment

Foreign exchange contracts

Short-term temporary differences

Interest rate swaps

Discounting of deferred consideration

Pension Scheme

Employee Share Scheme

Losses acquired

Intangibles

Property, plant and equipment

Foreign exchange contracts

Short-term temporary differences

Interest rate swaps

Discounting of deferred consideration

Pension Scheme

Employee Share Scheme

Losses acquired

Assets

Liabilities

2021

£000

2020

£000

2021

£000

3,632

669

1,599

5,961

3,017

2,883

391

1,216

4,623

2,506

(1,594)

(1,262)

(77)

(11)

(31)

(2,944)

(2,117)

2020

£000

(1,346)

(740)

26 June

2021

£000

(1,594)

(1,262)

(77)

(11)

3,632

669

1,599

3,017

27 June

2020

£000

(1,346)

(740)

(31)

2,883

391

1,216

2,506

(1,346)

(740)

(31)

2,883

391

1,216

2,506

30 June

2019

£000

(1,325)

(415)

(30)

1,923

574

1,081

1,855

(35)

Acquired

£000

103

(248)

(522)

(97)

(17)

(62)

189

383

(354)

(21)

(428)

(2)

(1)

237

(1)

135

811

900

723

(182)

541

Recognised

in income

£000

Recognised

in equity

£000

The deferred tax liability in respect of intangible assets will unwind in line with the amortisation of intangible assets.

Notes to the Consolidated Financial Statements/Continued

24. Financial Risk Management
The main purpose of the Group’s financial instruments is to finance the Group’s operations. The financial instruments comprise a revolving credit
facility, hire purchase, finance leases, interest rate swaps, foreign currency forwards, cash and liquid resources and various items arising directly from its
operations, such as trade receivables and trade payables. The main risks arising from the Group’s financial instruments are interest rate risk and liquidity
risk. The Group’s policies on the management of liquidity, credit, interest rate and foreign currency risks are set out below and the main risks are also
referred to in the Strategic Report on pages 30 to 33.

a) Fair Values of Financial Instruments
All financial assets and liabilities are held at amortised cost apart from forward exchange contracts and interest rate swaps, which are held at fair
value, with changes going through the Consolidated Statement of Comprehensive Income. The Group has not disclosed the fair values for financial
instruments such as short-term trade receivables and payables, because their carrying amounts are a reasonable approximation of fair values.

The fair values of forward exchange contracts and interest rate swaps are determined using a market comparison valuation technique. The fair values
are based on broker quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments. The fair
values relating to these instruments represent level 2 in the fair value hierarchy which relates to the extent the fair value can be determined by reference
to comparable market values. The classifications range from level 1 where instruments are quoted on an active market through to level 3 where the
assumptions used to arrive at fair value do not have comparable market data.

b) Liquidity
The Group’s policy is to ensure that it has sufficient facilities to cover its future funding requirements. Short-term flexibility is available through the
existing bank facilities and the netting off of surplus funds. The carrying amounts are the amounts due if settled at the period end date. The contractual
undiscounted cash flows include estimated interest payments over the life of these facilities. The estimated interest payments are based on interest rates
prevailing at 26 June 2021.

At year ended 26 June 2021

Carrying amount
£000

Total
£000

1 year or less
£000

1 to 2 years
£000

2 to 5 years
£000

5 years and over
£000

Contractual cash flows including estimated interest

Non-derivative financial liabilities
Revolving credit
Trade creditors
Lease liabilities
Other lease liabilities

(22,431)
(38,943)
(10,745)
-
(72,119)

(22,431)
(38,943)
(10,745)
(19)
(72,138)

-
(38,943)
(2,039)
(18)
(41,000)

(22,431)
-
(1,850)
(1)
(24,282)

-
-
(2,638)
-
(2,638)

-
-
(4,218)
-
(4,218)

At year ended 27 June 2020

Carrying amount
£000

Total
£000

1 year or less
£000

1 to 2 years
£000

2 to 5 years
£000

5 years and over
£000

Contractual cash flows including estimated interest

Non-derivative financial liabilities
Revolving credit
Trade creditors
Lease liabilities
Other lease liabilities

(36,184)
(30,512)
(12,295)
-
(78,991)

(36,238)
(30,512)
(13,650)
(200)
(80,600)

-
(30,512)
(3,218)
(192)
(33,922)

-
-
(2,563)
(8)
(2,571)

(36,238)
-
(4,010)
-
(40,248)

-
-
(3,859)
-
(3,859)

The information relating to the interest rate swaps shown in the tables above indicate the cash flows associated with these instruments. This also reflects
the expected effect on the future profit. These amounts will change as interest rates change.

Short-term flexibility is available through existing bank facilities and the netting off of surplus funds.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

24. Financial Risk Management/Continued

c) Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and
arises principally from the Group’s receivables from customers. The Group recognises loss allowances for expected credit losses (“ECLs”) on financial
assets measured at amortised cost. These trading exposures are controlled by assessing the credit quality of the customer, taking into account its
financial position, past experience and other factors and are monitored and managed at operating level and are also monitored at Group level. Whilst
there is a concentration of credit risk arising from the profile of five customers accounting for more than 50% of total revenue, the Group deems this
to be low risk due to the nature of these customers. The carrying amount of the financial assets represents the maximum credit exposure. Therefore,
the maximum exposure to credit risk for the trade receivables at the period end date was £45.8 million (2020: £36.0 million) and the ageing of trade
receivables at the period end date was:

Not past due
Past due 0-30 days
Past due 31-120 days
Past due more than 120 days

2021
£000

42,176
2,610
824
189
45,799

2020
£000

32,668
2,157
890
292
36,007

The above numbers are net of impairment provisions. The Group provides for impairment of financial assets including receivables from customers
based on known events, and some collective provisions are made for losses yet to be identified, based on historical data. The majority of the provision
comprises of specific amounts.

Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there may be no reasonable expectation of recovery
may include the failure of the debtor to engage in a payment plan negotiation, and failure to make contractual payments significantly after the due date.

The Group’s strategy is to focus on supplying UK multiple grocers and foodservice distributors, the nature of these customers is such that there is a
relatively low risk of them failing to meet their contractual obligations. There is no impairment necessary to the value of trade receivables at the period
end date over and above the specific credit note provision and bad debt provision held at the year end. The balance of £1.0 million past due by more than
30 days is equivalent to less than two days sales (2020: £1.2 million, equivalent to less than two days). We have worked with our customers during the
pandemic and the significant disruption that it has brought to the economic environment to ensure cash is preserved and we trade successfully through
these unprecedented challenges with fluctuations in demand, changes to consumer behaviour and sales channel closures.

Based on the above and analysis performed there is no deemed impact of applying Expected Credit Loss (ECL) methodology under IFRS 9 as in the prior year.

Gross trade receivables are assessed regularly by each subsidiary entity locally with reference to appropriate considerations such as the current position
of the relationship with the customer, days past due and the geographical location of each customer. Expected losses are determined based on the
historical experience of write-offs compared to the level of trade receivables. The nature of the Group’s customer base has meant historic write-offs are
trivial, hence no material impact of applying IFRS 9 ECL methodologies. If this impact was deemed significant the historical loss expectations would be
amended for current and forward-looking information such as national economic outlooks to form the basis of any provision.

Details of the Company’s credit risk are not disclosed because the Financial Statements of the Group disclose such details on a consolidated basis.

d) Market Risk
The Covid-19 pandemic has resulted in significant changes to the retail and foodservice sectors. Consumers have changed their shopping behaviour
within retail with both positive and negative implications for Finsbury’s products. Foodservice channels have been impacted by varying degrees of
lockdown and the inevitable impact on recovery of demand which is likely to remain suppressed until a solution for Covid-19 is found.

The priority is, and was, to ensure the safety of all employees and to make rapid changes to the way the business operates by establishing safe ways
of working based on social distancing and home working in order to adapt to the effects of the pandemic. The Group has anticipated and responded
quickly and effectively to changes in consumer demand, maximising the benefits of operational initiatives both new and historical thereby enabling
the Group to carefully manage resources and deliver a robust performance throughout a period impacted by the pandemic.

i) Interest Rate Risk
The Group’s interest rate risk exposure is primarily to changes in variable interest rates. The Group has entered into two interest rate swap
arrangements in order to hedge its risks associated with any fluctuations. Details of swaps are given in Note 13.

The profile of the Group’s loans and overdraft at the period end date were split as follows:

Variable rate liabilities

2021
£000

2020
£000

(22,431)

(36,656)

Swaps amounting to £25.0 million (2020: £25.0 million) limit the risk associated with the variable rate liabilities. The interest rates for the forward
dated swaps are fixed at 0.455% for £20.0 million and 1.002% for £5.0 million.

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

24. Financial Risk Management/Continued
Sensitivity
A 1% increase in the base rate or LIBOR would have the following impact on interest charges and associated net assets for the Group. This sensitivity
relates to interest-bearing bank borrowings and interest rate swaps only and excludes possible changes in pension financing costs.

Profit decrease
Decrease in net assets

2021
£000

(34)
(34)

A 1% decrease in the base rate or LIBOR would have the following impact on interest charges and associated net assets for the Group.

Profit (decrease)/increase
(Decrease)/increase in net assets

2021
£000

(233)
(233)

2020
£000

(300)
(300)

2020
£000

112
112

The above movement is not equal to 1% of interest-bearing loans because of interest rate swap cover that is in place.

ii) Commodity Prices
Any rises in commodity prices can adversely impact the core profitability of the business. The Group will aim to pass on its increased costs to its
customers as far as is reasonable in the circumstances whilst maintaining its tight control over overhead costs to mitigate the impact on consumers.
The Group maintains a high expertise in its buying team and will consider long-term contracts where appropriate to reduce uncertainty in commodity
prices. Further information on input prices and risks is contained in the Strategic Report.

iii) Foreign Exchange Risk
We acquired manufacturing facilities in Poland through the Ultrapharm acquisition. The sites supply to mainland Europe with income in Euros and local
costs denominated in Polish złoty. We supply UK-manufactured products to Lightbody Stretz Ltd, our 50%-owned selling and distribution business which
trades in mainland Europe. We also buy a small number of commodities and capital equipment in foreign currency. As a consequence, we are exposed
to fluctuations in foreign currency rates. We manage this risk by continually monitoring our exposure to foreign currency transactions. We use forward
currency contracts when required and our procurement team works hard to ensure we get the best prices for commodities and equipment, giving special
consideration to the benefits of contracts denominated in foreign currency.

e) Debt and Capital Management
The Group’s objective is to maximise the return on net invested capital, while maintaining its ongoing ability to operate and guaranteeing adequate
returns for shareholders and benefits for other stakeholders within a sustainable financial structure.

The Coronavirus crisis has had a profound impact on the economy and with heightened uncertainty around future economic recovery, the Board took the
decision as announced on 29 March 2020, to withdraw its proposed interim dividend. The strong trading, in a period that has been impacted by Covid-19
throughout, has been driven by improving volumes performance and the benefits of the Group’s Operating Brilliance Programme. In light of the expected
performance and current outlook the Board announced in May 2021 the plan to reintroduce the payment of dividends for the financial year ending 26 June
2021. Given the Group’s resilient performance the Board is recommending a full year dividend of 2.4 pence per share for the financial year ending 26 June
2021. It is the Company’s intention to pay dividends at an affordable rate so that the Company can continue to invest in the business in order to grow profits.

The Group manages its capital by monitoring its gearing ratio on a regular basis, there are also covenant tests which are monitored regularly and
presented to the Group’s banks every six months. There have been no breaches of covenant tests during the year and the gearing ratio stands at
0.2 (2020: 0.4). The gearing ratio is calculated taking the total net debt including deferred consideration over net assets.

The Group considers its capital to include share capital, share premium and capital redemption reserve.

The Group does not have any externally imposed capital requirements.

25. Capital and Reserves
The reconciliation of movement in capital and reserves is shown as a primary statement: Consolidated Statement of Changes in Equity on page 67.

Equity comprises the following:

• Share capital representing the nominal value of equity shares;

• Share premium representing the excess of the fair value of consideration received for the equity shares; (net of expenses of the share issue)

over nominal value of the equity shares;

• Capital redemption reserve representing the buyback and cancellation of shares at nominal value;

• Employee share reserve representing ordinary shares held in an Employee Benefit Trust (EBT) to satisfy awards made to employees; and

• Retained earnings representing retained profits.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

26. Share Capital

In issue at beginning of the financial year
Shares issued
In issue at end of the financial year – fully paid

Allotted, called up and fully paid Ordinary shares of 1p each

2021
000’s

130,383
-
130,383

£000

1,304

2020
000’s

130,383
-
130,383

£000

1,304

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of
the Company. Shares are held in an Employee Benefit Trust (EBT), which is intended to be used to satisfy awards made to employees (6,194,155 shares
were held at the year end). All shares are the same class with equal rights. During the year the EBT purchased 2,946,772 ordinary shares of 1p each in
the capital of the Company (“Ordinary Shares”) at a price of £0.6774 per Ordinary Share.

At the 2020 Annual General Meeting held on 19 November 2020 the Directors were authorised to allot shares up to an aggregate nominal amount
of £869,222. The authority shall expire 15 months from the date of the Annual General Meeting or, if earlier, at the conclusion of the Annual General
Meeting of the Company on 18 November 2021.

Share-Based Payments
The Group operates both approved and unapproved share option schemes.

The fair value is calculated at the grant date and ultimately expensed in the Consolidated Statement of Comprehensive Income over the vesting
period, based on the best available estimate of the number of share options expected to vest, with a corresponding credit to reserves. Upon exercise
of the share options the proceeds received net of attributable transaction costs are credited to share capital and where appropriate share premium.

There were a number of options granted during the course of the financial year to 26 June 2021 with further details given below.

Date of grant

22 October 2020
01 January 2021
Charge relating to options granted in the current year
Charge relating to options granted in prior years
Charge included in administrative expenses

Number of
options granted

Number of
options expected
to vest

Exercise
price

Fair value
£000

2,192,275
91,538

nil
nil

621
51

Amount
expensed in
year to
26 June 2021
£000

246
13
259
742
1,001

There were a number of options granted during the course of the financial year to 27 June 2020 with further details given below.

Date of grant

28 October 2019
28 October 2019
Charge relating to options granted in the current year
(Credit) relating to options granted in prior years
Charge included in administrative expenses

Number of
options granted

Number of
options expected
to vest

Exercise
price

Fair value
£000

3,833,219
1,063,325

nil
nil

2,207
560

Amount
expensed in
year to
27 June 2020
£000

488
124
612
(467)
145

Period of
expense

3.0 years
3.0 years

Period of
expense

3.0 years
3.0 years

Finsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

26. Share Capital/Continued
Details of share options outstanding at 26 June 2021 and movements during the year by exercise price is shown below:

Exercise
price

First
exercise
date

Last
exercise
date

At 28 June
2020

Granted

Forfeited

Cancelled/
lapsed

Exercised

At 26 June
2021

nil
nil
nil
nil
nil
nil
nil
nil
nil
nil

Sep 2018
Jul 2019
Jul 2020
Jul 2023
Sep 2021
Sep 2022
Jul 2024
Oct 2023
Jan 2024
Jul 2025

Dec 2025
Jun 2025
Dec 2025
Jan 2029
Jan 2029
Oct 2029
Oct 2029
Oct 2030
Oct 2030
Oct 2030

50,304
-
1,131,978
585,409
567,062
3,833,219
1,063,325
-
-
-
7,231,297

-
-
-
-
-
-
-
991,929
91,538
1,200,346
2,283,813

-
-
-
-
(114,819)
(467,096)
-
-
-
-
(581,915)

-
-
-
(585,409)
(452,243)
-
-
-
-
-
(1,037,652)

-
-
-
-
-
-
-
-
-
-
-

A summary of share options outstanding and movements for the year to 27 June 2020 is shown below:

At 30 June
2019

Granted

Forfeited

Cancelled

Exercised

50,304
-
1,131,978
-
-
3,366,123
1,063,325
991,929
91,538
1,200,346
7,895,543

At 27 June
2020

Number of options

5,782,786

4,896,544

(69,660)

(1,539,228)

(1,839,145)

7,231,297

There were 1,182,282 options exercisable at the period end date (2020: 1,182,282). There were no options exercised during the year (2020: 1,839,145).
There were 1,037,652 options (2020: 1,539,228) that lapsed during the year where performance conditions have not been met in full. The average share
price at dates of exercise during the prior year was 98.0 pence per share.

The options outstanding at the year end have a weighted average exercise price of nil (2020: nil) and a weighted average remaining contractual life
of 1.4 years (2020: 2.2 years).

The Company uses a Monte Carlo model for the valuation of the award subject to relative performance to the TSR of AIM listed companies.
An external consultant assists with the valuation of the awards.

The key inputs into the Monte Carlo model are as follows:

Expected life of option
Volatility of share price
Dividend yield
Risk-free discount rate
Share price at grant date
Exercise price

2021

2020

3.0 years
29%
4.3%
0.5%
82.0p
nil

27. Dividends
Given the uncertainty at the outset of the pandemic the Board took the decision to withdraw the interim dividend and also decided not to propose a final
dividend in the context of the continued uncertainty surrounding the pandemic and Brexit. The Board is recommending a full year dividend of 2.4 pence
per share for the financial year ending 26 June 2021.

During the year a dividend of £722,000 (2020: £844,000) was paid to the holders of the non-controlling interest in Lightbody Stretz Ltd.

28. Commitments
At the financial year ended 26 June 2021, the Group had capital expenditure commitments of £6,000 (2020: £108,000).

The Group has provided a guarantee to the Memory Lane Defined Benefit Pension Scheme for the Scheme’s s.179 deficit at 31 December 2018 which is
circa £13,780,000. The guarantee is capped at the lower of £13,780,000 and the s.179 deficit calculated at the latest triennial valuation. The guarantee
will persist until the Scheme is fully funded on a s.179 basis. Any additional contributions made by the sponsoring employer will reduce the guarantee cap.
The employer will look to review the terms of the guarantee as part of the Scheme’s 2021 valuation, but there is no legal obligation to change it.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

Notes to the Consolidated Financial Statements/Continued

29. Non-Cancellable Leases
The Group has annual commitments under non-cancellable leases expiring within two months to 18 years. The leases have varying terms, escalation
clauses and renewal rights. On renewal, the terms of the leases are renegotiated. The leases relate to land and buildings, fork lift trucks and equipment.
Land and buildings have been considered separately for lease classification. Land and buildings amounts relate to leasehold properties at the Nicholas
and Harris site, Fletchers’ sites in London and Manchester, Johnstone’s site in East Kilbride and Ultraeuropa in Poland.

The Group adopted IFRS 16 from 30 June 2019 using the modified retrospective approach. Under IFRS 16 the previous operating leases charge has
been replaced by the depreciation on the right-of-use asset and interest on the lease liability.

Commitments for minimum lease payments not in scope of IFRS 16 for 2021 and for 2020 in relation to non-cancellable operating leases
(under IAS 17) are as follows:

On leases which expire in:
Less than one year
Between one and five years
More than five years

30. Related Parties

Other

2021
£000

18
1
-
19

2020
£000

192
8
-
200

Related Party Transactions and Directors’ Material Interests in Transactions
A 50% owned subsidiary, Lightbody Stretz Ltd, paid SCI Coysevox £66,000 (2020: £68,500) in respect of rent for offices. No balances were outstanding
at either year end. Lightbody Europe received £36,563 for accountancy and administration services (2020: £12,654) from FoodHub and an additional
£11,310 for royalties (2020: £6,295). Mr P Stretz, the Managing Director of Lightbody Stretz Ltd, being the related party.

The Group paid £nil (2020: £nil) for the supply of finished products from and received £nil (2020: £nil) for the sale of finished products to FoodHub, a
company 50% owned by Mr P Stretz. The amount payable and receivable at the year end was £nil (2020: £nil) and £9,590 (2020: £1,000) respectively.

Transactions with the Memory Lane Pension Scheme are detailed in Note 14.

Transactions with Key Management Personnel
Directors of the Company and their immediate relatives control 3% (2020: 3%) of the voting shares of the Company.

The aggregate compensation of key management personnel (Main Board Executive Directors, Divisional MDs, and the Executive Committee) is as follows:

Company contributions to money purchase Pension Schemes
Executive salaries and benefits

2021
£000

65
2,416
2,481

2020
£000

47
1,816
1,863

Share options held by Group Directors are set out in Note 6. Details of share options outstanding at 26 June 2021 for other key management
personnel by exercise price is shown in the table below.

Exercise price

nil
nil
nil
nil
nil
nil

Number of
options at
26 June 2021

Number of
options at
27 June 2020

Earliest
exercise date

Exercise
expiry date

598,176
1,205,745
-
-
-
50,303
1,854,224

-
1,286,925
259,929
-
-
34,298
1,581,152

28/10/2023
28/10/2022
30/09/2021
02/07/2020
30/09/2019
30/09/2018

22/10/2030
28/10/2029
21/01/2029
26/10/2027
29/09/2026
04/12/2025

31. Ultimate Parent Company
Finsbury Food Group Plc is the ultimate Parent Company and there is no ultimate controlling party.

Finsbury Food Group Annual Report and Accounts 2021

Company Balance Sheet
at 26 June 2021 and 27 June 2020

Non-current assets
Investments
Intangibles
Deferred taxation

Current assets
Debtors
Other financial assets – fair value contracts
Cash and cash equivalents

Current liabilities
Other interest-bearing loans and borrowings
Trade and other payables

Net current assets

Total assets less current liabilities

Non-current liabilities
Other interest-bearing loans and borrowings
Other payables

Net assets

Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Employee share reserve
Profit and loss account
Shareholders’ funds

Note

2021
£000

2020
£000

39
40
41

42
43

45
44

45
46

47
47
47

112,053
36
701
112,790

54,516
42
5,037
59,595

(345)
(10,181)
(10,526)

112,002
-
438
112,440

52,756
-
11,052
63,808

(1,099)
(6,351)
(7,450)

49,069

56,358

161,859

168,798

(22,678)
(606)
(23,284)

(37,158)
(1,989)
(39,147)

138,575

129,651

1,304
64,956
578
(5,374)
77,111
138,575

1,304
64,956
578
(3,378)
66,191
129,651

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Company statement of profit and
loss. The loss for the Company for the financial year was £31,000 (2020: loss £4,281,000).

These Financial Statements were approved by the Board of Directors on 17 September 2021 and were signed on its behalf by:

Stephen Boyd
Director

Registration number: 00204368

The Notes on pages 101 to 107 form an integral part of these Financial Statements.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

100

Company Statement of Changes in Equity
for the 52 weeks ended 26 June 2021

Balance at 30 June 2019
Loss for the financial year
Total comprehensive loss for the period

Transactions with owners, recorded directly in equity:
Shares issued from EBT
Shares aquired during the year
Impact of share-based payments charge to subsidiaries
Impact of share-based payments
Deferred tax on share options
Dividend received
Dividend paid
Balance at 27 June 2020

Balance at 28 June 2020
Loss for the financial year
Total comprehensive loss for the period

Transactions with owners, recorded directly in equity:
Shares acquired during the year
Impact of share-based payments charge to subsidiaries
Impact of share-based payments
Deferred tax on share options
Dividend received
Dividend paid

Share
capital
£000

Share
premium
£000

Capital
redemption
reserve
£000

Employee
share
reserve
£000

Retained
earnings
£000

Total
equity
£000

Note

1,304
-
-

-
-
-
-
-
-
-
1,304

1,304
-
-

-
-
-
-
-
-

64,956
-
-

-
-
-
-
-
-
-
64,956

64,956
-
-

-
-
-
-
-
-

578
-
-

-
-
-
-
-
-
-
578

578
-
-

-
-
-
-
-
-

(3,616)
-
-

64,846
(4,281)
(4,281)

128,068
(4,281)
(4,281)

1,207
(969)
-
-
-
-
-
(3,378)

(3,378)
-
-

(1,996)
-
-
-
-
-

(1,207)
-
105
(1,066)
(182)
11,795
(3,819)
66,191

-
(969)
105
(1,066)
(182)
11,795
(3,819)
129,651

66,191
(31)
(31)

129,651
(31)
(31)

-
(61)
1,001
89
10,644
(722)

(1,996)
(61)
1,001
89
10,644
(722)

Balance at 26 June 2021

1,304

64,956

578

(5,374)

77,111

138,575

The Notes on pages 101 to 107 form an integral part of these Financial Statements.

Finsbury Food Group Annual Report and Accounts 2021

101

Notes to the Company’s Financial Statements
(forming part of the Financial Statements)

32. Accounting Policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Financial Statements.

Basis of Preparation
The financial year was the 52 weeks ended 26 June 2021 (prior financial year 52 weeks ended 27 June 2020). These Financial Statements were prepared
in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). In preparing these Financial Statements, the Company
applies the recognition, measurement and disclosure requirements of International Accounting Standards in conformity with the requirements of the
Companies Act 2006, but makes amendments where necessary in order to comply with the Companies Act 2006 and has set out below where advantage
of the FRS 101 disclosure exemptions has been taken.

The Company proposes to continue to adopt the reduced disclosure framework of FRS 101 in its next Financial Statements. Under section 408 of
the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account. The profit or loss for the year is set
out in the Statement of Changes in Equity.

The following exemptions from the requirements of IFRS have been applied in the preparation of these Financial Statements, in accordance with FRS 101:

• 101p8(a) and paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and weighted average exercise prices of share

options, and how the fair value of goods or services received was determined).

• 101p8(d) and IFRS 7, ‘Financial instruments: Disclosures’.

• 101p8(e) and paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques and inputs used for fair value

measurement of assets and liabilities).

• 101p8(f) and paragraph 38 of IAS 1, ‘Presentation of Financial Statements’ – comparative information requirements in respect of:

(i) paragraph 79(a)(iv) of IAS 1;

(ii) paragraph 73(e) of IAS 16, ‘Property, plant and equipment’; and

(iii) paragraph 118(e) of IAS 38, ‘Intangible assets’ (reconciliations between the carrying amount at the beginning and end of the period).

• 101p8(g) and the following paragraphs of IAS 1, ‘Presentation of Financial Statements’:

– 10(d) (statement of cash flows);

– 16 (statement of compliance with all IFRS);

– 38A (requirement for minimum of two primary statements, including cash flow statements);

– 38B–D (additional comparative information);

– 111 (cash flow statement information); and

– 134–136 (capital management disclosures).

• 101p8(h) and IAS 7, ‘Statement of cash flows’.

• 101p8(i) and paragraphs 30 and 31 of IAS 8, ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the disclosure

of information when an entity has not applied a new IFRS that has been issued but is not yet effective).

• 101p8(j) and paragraph 17 of IAS 24, ‘Related party disclosures’ (key management compensation).

• 101p8(k) and the requirements in IAS 24, ‘Related party disclosures’, to disclose related party transactions entered into between two or more

members of a group.

The Principal Accounting Policies of the Company are as Follows:

Investments
Investments are stated at cost less provision for any permanent impairment. Any impairment is charged to the profit and loss as it arises. Impairment
to investments is tested by considering the carrying value of net assets of the investments and via impairment testing performed over goodwill,
as discussed in Note 1 of the Group Significant Accounting Policies.

Intangibles
All intangible assets recognised are considered to have a finite life and are amortised over their useful economic lives as soon as the asset is in use.
The assets recognised are assets under construction and will not be amortised until the asset is brought into use.

Foreign Currency
Transactions in foreign currencies are translated to Sterling at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the period end date, are retranslated to Sterling at the foreign exchange rate ruling at that date.

Any exchange differences arising on the settlement of monetary items, or on translating monetary items at rates different from those at which they were
initially recorded are recognised in the Consolidated Statement of Comprehensive Income in the period in which they arise.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Sterling, at foreign
exchange rates ruling at the period end date. The revenues and expenses of foreign operations are translated at an average rate for the year, where this rate
approximates to the foreign exchange rates ruling at the dates of the transactions. This revaluation is recognised through Other Comprehensive Income.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

102

Notes to the Company’s Financial Statements/Continued
(forming part of the Financial Statements)

32. Accounting Policies/Continued

Derivative Financial Instruments
The Company has derivative financial instruments in respect of interest rate swaps and foreign exchange hedges. The Company does not hold derivative
financial instruments for trading purposes. The existing interest rate swaps and foreign exchange hedges used by the Company while they function as
hedges, do not meet the criteria for hedge accounting set out by IFRS 9, and have thus been treated as financial assets and liabilities which are carried at
their fair value in the Company Balance Sheet. Fair value is deemed to be market value, which is provided by the counterparty at the year end date.

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.

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
The Covid-19 pandemic has impacted the full financial period with varying degrees of lockdown impacting demand throughout. Post Covid-19 consumer
spending behaviour and lifestyle choices are an unknown. The Company’s priorities continue to be to protect employees, safeguard supply, respond to
new patterns of consumer demand and to preserve cash. The performance of the Company has been robust and resilient with strong trading driven by
improving volume performance and the benefits of the Group’s Operating Brilliance Programme. We have continued 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 £13.4 million to £13.1 million with a net bank debt to adjusted EBITDA measure of 0.5x down from 1.1x at 27 June 2020.

With knowledge and experience since the start of the pandemic a bottom-up full year 2022 budget and strategic forecast to June 2024 has been
compiled. Our supply chain and manufacturing have been robust when faced with unprecedented fluctuation in demand. Revenue trends and
operational performance have improved. 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. 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.

33. Remuneration of Directors
Details of Directors’ remuneration are set out in Note 6 of the Group’s Financial Statements.

Finsbury Food Group Annual Report and Accounts 2021Notes to the Company’s Financial Statements/Continued
(forming part of the Financial Statements)

34. Staff Numbers and Costs
The average number of persons employed by the Company (including Directors) during the year, analysed by category, was as follows:

103

Directors and administrative staff

The aggregate payroll costs of these persons were as follows:

Wages and salaries
Social security costs
Other pension costs

Number of employees

2021

103

2021
£000

9,172
1,008
512
10,692

2020

2020
£000

7,971
978
460
9,409

35. Share-Based Payments
Details of Directors share options are set out in Note 6 of the Group’s Financial Statements and details of all share options issued are set out in Note 26
of the Group’s Financial Statements. During the year 1,200,346 (2020: 3,537,222) of the total 2,283,813 (2020: 4,896,544) share options granted were
issued to employees of the Company. The remaining options were granted to employees of the subsidiary companies with corresponding charges to
the relevant profit and loss accounts. The total charge in the financial year to the Company for all share options relating to current and prior years was
£499,000 (2020: £145,000). Credits relating to options exercised, cancelled or lapsed after vesting have also been passed to the subsidiaries during
the year. The charge totalled £111,000 (2020: charge £105,000) and has resulted in an increase (2020: decrease) in the total cost of investments in the
Company balance sheet. Details of Directors’ share options are set out in Note 6 of the Group’s Financial Statements.

36. Finance Income and Cost
Recognised in the Company Statement of Comprehensive Income

Finance income
Inter-group recharge
Change in fair value of interest rate swaps
Income from interest rate swap agreements
Bank interest receivable
Total finance income

Finance cost
Bank interest payable
Interest on interest rate swaps
Unwinding of discount on deferred consideration
Interest on deferred consideration
Change in fair value of interest rate swaps
Inter-group recharge
Total finance cost
Net finance cost

2021
£000

351
89
-
-
440

(545)
(119)
(105)
(36)
-
(547)
(1,352)
(912)

2020
£000

-
-
44
17
61

(946)
-
(14)
-
(386)
(127)
(1,473)
(1,412)

37. Dividends
Given the uncertainty at the outset of the pandemic the Board took the decision to withdraw the interim dividend and also decided not to propose
a final dividend in the context of the continued uncertainty surrounding the pandemic and Brexit. The Board is recommending a full year dividend
of 2.4 pence per share for the financial year ending 26 June 2021.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

104

Notes to the Company’s Financial Statements/Continued
(forming part of the Financial Statements)

38. Investment in Subsidiaries
Set out below are all undertakings of the Company whose results are included in the Consolidated Financial Statements for the period ended 26 June 2021.

Subsidiary

Registered address

Direct/
indirect
ownership

Country of
incorporation

Class of
shares held

2021

2020

Anthony Alan Foods Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Direct

England and
Wales

Ordinary £1 100% 100%

California Cake Company Ltd

73 Bothwell Rd, Hamilton, ML3 0DW

Indirect

Scotland

Ordinary £1 100% 100%

California Cake Company (Holdings) Ltd

73 Bothwell Rd, Hamilton, ML3 0DW

Direct

Scotland

Ordinary £1 100% 100%

Campbells Cake Company Ltd

73 Bothwell Rd, Hamilton, ML3 0DW

Indirect

Scotland

Ordinary £1 100% 100%

Campbells Cake (Holdings) Ltd

73 Bothwell Rd, Hamilton, ML3 0DW

Fennel Acquisition Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Direct

Fletchers Bakeries Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Indirect

Fletchers Bakeries Investment Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Indirect

Goswell Enterprises Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Indirect

Goswell Marketing Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Indirect

Scotland

Ordinary £1 100% 100%

England and
Wales

Ordinary £1 100% 100%

Johnstones’ Food Service Ltd

73 Bothwell Rd, Hamilton, ML3 0DW

Indirect

Scotland

Ordinary £1 100% 100%

Lifestyle Healthcare Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Direct

Lifestyle Healthcare Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Indirect

England and
Wales

Ordinary £1

50% 50%

Ordinary £1

50% 50%

Lightbody Celebration Cakes Ltd

73 Bothwell Rd, Hamilton, ML3 0DW

Indirect

Scotland

Ordinary £1 100% 100%

Lightbody Group Ltd

Lightbody Holdings Ltd

73 Bothwell Rd, Hamilton, ML3 0DW

Direct

Scotland

Ordinary £1 100% 100%

73 Bothwell Rd, Hamilton, ML3 0DW

Indirect

Scotland

Ordinary £1 100% 100%

Lightbody of Hamilton Ltd

73 Bothwell Rd, Hamilton, ML3 0DW

Indirect

Scotland

Ordinary £1 100% 100%

Lightbody-Stretz Ltd

Lightbody Europe SAS

73 Bothwell Rd, Hamilton, ML3 0DW

Indirect

Scotland

Ordinary £1

50% 50%

14 Allée Coysevox, CS 56939, 35069
Rennes Cedex France

Indirect

France

Ordinary £1

50% 50%

Memory Lane Cakes Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Direct

Nicholas and Harris Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Indirect

Storesurvey Ltd

Ultrapharm Ltd

Maes-y-coed Rd, Cardiff, CF14 4XR

Direct

Maes-y-coed Rd, Cardiff, CF14 4XR

Direct

England and
Wales

Ordinary

1p 100% 100%

Ordinary £1 100% 100%

Ultraeuropa SP. z o.o.

Maes-y-coed Rd, Cardiff, CF14 4XR

Indirect

Poland

Ordinary £1 100% 100%

Finsbury Food Group Annual Report and Accounts 2021Notes to the Company’s Financial Statements/Continued
(forming part of the Financial Statements)

39. Investments

Cost
At beginning of financial year
Additions
At end of financial year

Net book value
At 26 June 2021
At 27 June 2020

105

£000

112,002
51
112,053

112,053
112,002

The additions relate to a share option charge of £51,000 (2020: £26,000 income) passed down to individual subsidiaries.

40. Intangibles
The intangible asset relates to costs for assets under construction for Group-wide projects. Once the projects are complete the cost of the asset will
be transferred to the relevant legal entity.

41. Deferred Tax

Recognised Deferred Tax Assets and Liabilities

Employee share scheme charges
Interest rate swaps
Discounting of deferred consideration
Forward foreign exchange contracts
Short-term temporary differences
Tax assets/(liabilities)
Net tax assets

Assets

Liabilities

2021
£000

669
23
-
-
9
701
682

2020
£000

390
40
-
-
8
438
407

2021
£000

-
-
(11)
(8)
-
(19)
-

2020
£000

-
-
(31)
-
-
(31)
-

The deferred tax asset at 26 June 2021 has been calculated based on the rate of 19% substantively enacted at the balance sheet date. Employee
share scheme charges relate to share options which will be allowed when exercised, short-term temporary differences relate to general provisions
which will be allowed when utilised.

Movement in Deferred Tax during the Year

Employee share scheme
Interest rate swaps
Discounting of deferred consideration
Forward foreign exchange contracts
Short-term timing differences

Movement in Deferred Tax during the Prior Year

Employee share scheme
Interest rate swaps
Discounting of deferred consideration
Foreign exchange contracts

28 June
2020
£000

Recognised
in income
£000

Recognised
in equity
£000

390
40
(31)
-
8
407

190
(17)
20
(8)
1
186

89
-
-
-
-
89

30 June
2019
£000

Recognised
in income
£000

Recognised
in equity
£000

574
(30)
(30)
5
519

(2)
70
(1)
3
70

(182)
-
-
-
(182)

26 June
2021
£000

669
23
(11)
(8)
9
682

27 June
2020
£000

390
40
(31)
8
407

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

106

Notes to the Company’s Financial Statements/Continued
(forming part of the Financial Statements)

42. Debtors

Amounts owed by Group undertakings
Other taxation
Prepayments and accrued income

2021
£000

54,113
175
228
54,516

2020
£000

52,277
101
378
52,756

Amounts due from Group undertakings are classified as current as they are repayable on demand. Balances from Group undertakings are interest
bearing at a rate of 2.4% (2020: 2.2%).

43. Forward Foreign Exchange Contracts at Fair Value
At the year ended 26 June 2021 the Company had entered into a number of forward foreign exchange contracts to minimise the impact of
fluctuations in exchange rates. An income of £42,000 (2020: nil) is included in administrative expenses for the period reflecting changes in their
fair value.

44. Creditors: Amounts Falling Due Within One Year

Trade creditors
Amounts due to Group undertakings
Corporation tax
Other taxes and social security
Accruals and deferred income
Deferred consideration*
Provisions closure of Grain D’Or site

2021
£000

393
519
62
232
7,795
976
204
10,181

2020
£000

78
20
62
196
5,064
481
450
6,351

* Deferred consideration is the consideration payable for the Ultrapharm acquisition, payable in quarterly instalments to 1 October 2022.

Amounts due to Group undertakings are classified as current as they are repayable on demand. Provision for closure of Grain D’Or site has been
passed to the Company from a Group undertaking to ensure that it is managed centrally.

Other Financial Liabilities – Fair Value Interest Rate Swaps
The Company has two interest rate swaps. A five-year swap from 3 July 2017 with a coverage of £20.0 million fixed at a rate of 0.455% and a three-year
swap from 28 March 2019 with a coverage of £5.0 million fixed at a rate of 1.002%. There was 111% coverage at year end (2020: 94%).

An income of £89,000 (2020: £386,000 charge) is shown in finance income (2020: expense) for the year reflecting changes in the fair values of interest
rate swaps. The fair values are liabilities as a result of the current low levels of base and LIBOR interest rates.

Finsbury Food Group Annual Report and Accounts 2021

107

Notes to the Company’s Financial Statements/Continued
(forming part of the Financial Statements)

45. Interest-Bearing Loans and Borrowings
This Note provides information about the contractual terms and repayment schedule of the Company’s interest-bearing loans and borrowings,
which are measured at amortised cost. For more information about the Group’s exposure to interest rate risk, see Note 24.

2021

Currency

Margin

Frequency of
repayments

Year of
maturity

Facility
£000

Total
£000

Current
£000

Non-current
£000

Revolving credit
Unamortised transaction costs

Leases*
Total debt including leases

GBP 1.5%/LIBOR

Varies

2023

£55,000

GBP

2.2%

Quarterly

Varies

22,431
(107)
22,324
699
23,023

-
-
-
345
345

22,431
(107)
22,324
354
22,678

2020

Currency

Margin

Frequency of
repayments

Year of
maturity

Facility
£000

Total
£000

Current
£000

Non-current
£000

Revolving credit
Unamortised transaction costs

Leases*
Total debt including leases

GBP 1.5%/LIBOR

Varies

2023

£55,000

GBP

2.2%

Quarterly

Varies

36,184
(175)
36,009
2,248
38,257

-
-
-
1,099
1,099

36,184
(175)
36,009
1,149
37,158

* Leases include all leases recognised as lease liabilities under IFRS 16 (see Note 11).

HSBC Bank Plc, HSBC Asset Finance (UK) Ltd, HSBC Equipment Finance (UK) Ltd and HSBC Corporate Trustee Company (UK) Limited have debentures
incorporating fixed and floating charges over the undertaking and all property and assets including goodwill, book debts, uncalled capital, buildings,
fixtures, fixed plant and machinery.

46. Creditors: Amounts Falling Due After More Than One Year

Deferred consideration
Provisions closure of Grain D’Or site
Fair value derivatives
Deferred tax liability

2021
£000

466
-
121
19
606

2020
£000

1,357
392
210
30
1,989

Deferred consideration is the consideration payable for the Ultrapharm acquisition payable in quarterly instalments to 1 October 2022.

47. Called Up Share Capital
Note 26 in the Group Financial Statements gives details of called up share capital.

48. Capital and Reserves
The reconciliation of the movement in capital and reserves is shown as a primary statement in the Company’s Financial Statements: Company
Statement of Changes in Equity on page 100 with definition details in Note 25 to the consolidated Financial Statements.

49. Contingent Liabilities
The Company has guaranteed the overdrafts of its subsidiaries; there was a net cash position at the year end of £9,523,000 (2020: £10,173,000).

50. Related Party Disclosures
Note 30 in the Group’s Financial Statements gives details of related party transactions.

51. Financial Risk Management
The Company’s policies on the management of liquidity, credit, foreign currency and interest rate risks are managed at a Group level and are set out
in Note 24 in the Group’s Financial Statements and also referred to in the Strategic Report.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021

108

Advisers

Registered Office
Maes-Y-Coed Road
Cardiff
CF14 4XR
Tel: 029 20 357 500

Registrars
Capita Registrars
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Company Secretary
ONE Advisory Limited
201 Temple Chambers
3-7 Temple Avenue
London
EC4Y 0DT
Tel: 020 7583 8304

Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants
One Kingsway
Cardiff
CF10 3PW

Nominated Adviser and Broker
Panmure Gordon (UK) Limited
1 New Change
London
EC4M 9AF

Solicitors
CMS Cameron McKenna LLP
Cannon Place
78 Cannon Street
London
EC4N 6AF

Remuneration Committee Adviser
Deloitte LLP
Four Brindleyplace
Birmingham
B1 2HZ

Registered Number
00204368

Finsbury Food Group Annual Report and Accounts 2021
109

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Photography by David Hares

Products with a Mixed Sources label support the development of responsible forest management
worldwide. The wood comes from FSC certified well managed forests, company controlled sources and/
or recycled material. Company controlled sources are controlled, in accordance with FSC standards,
to exclude illegally harvested timber, forests where high conservation values are threatened, genetically
modified organisms, violation of people’s civil and traditional rights and wood from forests harvested
for the purpose of converting the land to plantations or other non-forest use.

Financial StatementsStrategic ReportCorporate GovernanceFinsbury Food Group Annual Report and Accounts 2021finsburyfoods.co.uk