Finsbury Food Group Plc Annual Report 2022

FY2022 Annual Report · Finsbury Food Group Plc

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Achieving Brilliance

Annual Report & Accounts 2022
Annual Report & Accounts 2019

GrowthExcellenceResponsibilityFinsbury Food Group
Annual Report and Accounts 2022

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

Chairman’s Statement

Chief Executive’s Report

Strategy and Objectives

Business Model

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 (GEC)

Audit Committee Report

Directors’ Remuneration Report (unaudited) 58

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 70

Consolidated Statement of Changes in Equity 71

Consolidated Cash Flow Statement

Notes to the Consolidated
Financial Statements

Company Balance Sheet

105

Company Statement of Changes in Equity 106

Notes to the Company’s
Financial Statements

Advisers

107

114

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Investors | Reports & Presentations

Finsbury Food Group
Annual Report and Accounts 2022

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

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 Group delivered a record revenue figure for the
full year ended 2 July 2022; this was achieved during
a period of exceptional macroeconomic turbulence.

Chief Executive’s Report
The period under review was a year in
which Finsbury had to navigate significant
post-pandemic challenges.

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 Report.

Sustaining Excellence
Our Operating Brilliance Programme represents
“The Golden Thread” which runs through the
business, at the heart of this is our drive to
continually make tomorrow better than today.

Delivering Growth
Putting growth at the heart of our business
has enabled the Group to deliver record levels
of revenue growth.

Financial StatementsStrategic ReportCorporate Governance2

Finsbury Food Group
Annual Report and Accounts 2022

Strategic Report
Highlights

Summary
The full year figures reflect an evolving trading environment with the
ongoing post-pandemic recovery being followed by inflationary pressures
impacting our operations and total supply chain. The improvement in all
figures is a reflection of the robustness of our business model.

• Group revenue up 13.9% to £357.0 million.

• Gross margins 32.4% (2021: 32.9%).

• Group EBITDA*1 up 6.9% to £28.7 million.

• Profit before tax*1 up 12.1% to £17.0 million.

• Adjusted Diluted EPS*2 (pence per share) up 17% to 10.1p.

• Net bank debt (excluding IFRS 16 debt), £20.6 million
(2021: £13.1 million), representing 0.7 x FY EBITDA.

Strategic Highlights
• Revenue growth, as a result of:

– Strong post Covid-19 recovery in UK foodservice, up 38%;

– UK retail up 7.1%; and

– Overseas division growth of 27%.

• Taking our ownership to 85% in Lightbody-Stretz Limited deepening

our presence in France, Benelux, Scandinavia and Switzerland.

• Innovation in gluten-free recipes and product quality which is driving

organic growth in both the UK and in Europe.

• Operating Brilliance Programme continues to drive significant
operational efficiency which is helping to manage inflationary
pressure in the short-term.

• Clear sustainability agenda driving continued improvement in energy

and waste management.

• Continued investment in development, engagement and the health

and wellbeing of employees.

*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 Earnings Before Interest, Tax, Depreciation
and Amortisation (EBITDA), Operating Profit and Profit Before Tax tables on this 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.

*2 Adjusted EPS has been calculated using profit, excluding amortisation of intangibles, significant
non-recurring and other items as shown in the tables in the Financial Review Section 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.

In order to set out 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 measures allow
shareholders to gain a clearer understanding of the trading performance
of the Group. The analysis below shows the movement from adjusted to
statutory measures.

Adjusted EBITDA

Adjusted EBITDA
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
EBITDA

Adjusted Operating Profit

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
Operating profit

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
Adjustments, significant non-recurring
and other items
Profit before tax

2022
£000

2021
£000

28,747
(1,898)

26,904
958

417

473

(821)

696

(2,302)

2,127

26,445

29,031

2022
£000
17,807
(1,898)

2021
£000
16,100
958

417

473

(821)

696

(2,302)

2,127

15,505

18,227

2022
£000
16,956
(1,898)

2021
£000
15,126
958

132

249

(821)

(54)
(18)

696

(105)
89

(2,659)

1,887

14,297

17,013

Strategic Report

Corporate Governance

Financial Statements

Finsbury Food Group
Annual Report and Accounts 2022

Group Performance
Measures

Statutory Measures

Group Revenue

£356.8m

up 13.9%

Adjusted EBITDA*1

EBITDA

£28.7m

up 6.9%

£26.4m

Adjusted Operating Profit*1

Operating Profit

£17.8m

up 10.6%

£15.5m

Adjusted Profit*1 Before Tax

Profit Before Tax

£17.0m

up 12.1%

£14.3m

Adjusted Diluted EPS

Diluted EPS

10.1p

up 17.4%

7.9p

Capital Investment

£12.5m

up 103%

Net Debt (excl. leases)

Net Debt (incl. leases)

£20.6m

up 57.3%

£29.6m

*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 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 in the Financial Review
Section 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 and Sites

Fletchers Bakeries

Our Customers

Finsbury Food Group includes
eight manufacturing facilities
and bakery companies and one
distribution company.

Our UK bakery segment supplies
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.

Sheffield

Johnstone’s Food Service

East Kilbride

Kara Foodservice

Manchester

Lightbody of Hamilton

Hamilton

Memory Lane Cakes

Cardiff

Nicholas and Harris

Salisbury

Ultrapharm UK

Pontypool

Ultrapharm Poland

Rybarzowice and Żywiec,
Poland

Lightbody Europe
(distribution company)

Rennes, France

Finsbury Food Group Annual Report and Accounts 2022Our 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

Character Licensed Portfolio
We have a broad and unique portfolio of
character-based entertainment licenses
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 meet the growing
demands of this market. With a range that
covers everything from movies to gaming and
collectable toy licence properties, we work
with some of the largest globally recognised
brand owners, such as Disney, Warner Bros.
Xbox, Nintendo, Hasbro and Universal and we
are able to bring market-leading celebration
cakes that meet every birthday age. Over the
last 12 months we have seen the performance
of our character license range grow both
in the UK, France and Benelux due to the
strength of license and product formats we
have developed and produced.

TGI Fridays
The TGI Fridays collaboration is now a year old
and has met the ever-growing dessert trend
within the market. Our range of American-
themed treat cakes are perfect for all sharing
occasions with further flavour profiles being
added to the range.

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.

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
Finsbury are proud of the partnerships we have
with a broad range of different licensed brands,
allowing us to manufacture innovative quality
products across bread and cake.

MARS
We manufacture a broad range of cake
products using some of the iconic brands
within the MARS portfolio such as
Galaxy, Maltesers, M&M’s and MARS Bar.
These product formats range from sharing
cake to celebration cakes and can be found
within most retail outlets. We work closely
with MARS to ensure the products are the
perfect representation of each brand in
terms of taste and quality and meeting
consumer expectations.

Thorntons
Our 20-year partnership with Thorntons
continues to allow us to develop and manufacture
a premium range of celebration, snacking and
seasonal products to the market under this iconic
British brand. The Thorntons brand within cake is
one of the few premium based brands within the
category, with our core iconic caramel shortcake
bites being one of the most popular formats
within the range.

BOSH!
BOSH! is seen as the largest vegan based
brand within the UK market in terms of
reach and engagement and continues to
grow. Working closely with brand founders
and friends Henry Firth and Ian Theasby we
continue to develop innovative products that
meet the ever-growing demands of vegan
consumers and BOSH! fans alike.

Mary Berry
Now in our seventh 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 and Gordons’.
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.

Finsbury Food Group Annual Report and Accounts 2022Financial 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
Despite signs of a return to pre Covid-19
consumption demands, market conditions
continue to be extremely challenging for the
food industry. Commodity price increases,
further destabilising supply chains and
increased costs triggered by the Ukraine
conflict, as well as soaring energy prices pose
a significant challenge to all UK food and
drink businesses.

Retail
Grocery
Inflation dominated headlines throughout
the year, most noticeably in the second
half of our trading period as the impact of
increased fuel and grocery costs was felt.
Ambient grocery sales value fell slightly by
-0.7% with take home volumes falling by 4%
as pressures increase on household budgets,
cancelling out post-Covid-19 volume gains
from last year (Kantar Worldpanel, 7 Aug ’22).
With consumers having limited ability to
offset increased cost pressures, shopping to
budget became the trend in the second half
of our trading period. The average annual
grocery bill is currently projected to rise
by £380 (Kantar Worldpanel, 20 June ’22).
While premiumisation continues to be a key
consumer focus, discounter market share
has recently increased through footfall,
as shoppers seek to manage their weekly
grocery spend.

Cake
Finsbury continues to be one of the most
significant manufacturers of cake in the UK, with
the market currently valued at £1.028 billion
(+7.7% year on year), with volumes up 1% on the
previous year. Celebration cake saw the strongest
value growth at 10.3% for which Finsbury has the
strongest share presence, followed by sharing
products and seasonal (IRI, 52 w/e 16 July ’22).

Bread
The retail bread and morning goods market
has increased in value to £5.25 billion, growing
by 1.7% year on year (Kantar Worldpanel, 52
w/e 10 July ‘22) with Finsbury having a sizeable
presence in buns and rolls, hot cross buns and
artisan bread.

Free From
The retail Free From cake market is valued
at £58.2 million +10.1% (Kantar Worldpanel
52 w/e 7 August ‘22) and the retail Free From
bread and morning goods market is valued
at £164.0 million +13% year on year (Kantar
Worldpanel, 52 w/e 7 August ‘22).

£58.2m

Retail value of the Free From cake market
as of August 2022.

Finsbury Food Group Annual Report and Accounts 20227

Finsbury Food Group
creates and supplies bakery
product ranges across
both retail grocery and
foodservice markets, in the
UK and internationally. We
aim to match and satisfy key
consumer demands, new
consumer trends and specific
bakery-market niches.

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 UK eating out
market is set to value £95.2 billion in 2022, +4%
vs. pre-Covid-19 2019 value, with unrestricted
trading and inflation the main drivers (Lumina
Intelligence). Retail, travel and leisure are the
strongest performing segments, with recovery
particularly driven by quick service channels.

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.

£95.2bn

The UK eating out market value in 2022,
+4% vs. pre-Covid-19 2019 value.

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.

Consumer Trends
Following improvements in consumer
confidence through 2021, views of the state
of the economy are extremely pessimistic,
with consumers seeking value for money in
their purchase choices. However, although
price conscious, they are also seeking
affordable treats from products offering
“value” also in terms of a positive eating
experience, both in and out of home.

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, will be implemented
in the second half of 2022 which will influence
how 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.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance8

The Group delivered a record revenue figure for the full year ended
2 July 2022; this was achieved during a period of exceptional
macroeconomic turbulence. The financial year was set against a
backdrop of further Covid-19 restrictions which helpfully eased as the
year progressed. There were, though, increasing and now persistent
ongoing pressures from input cost inflation, staff shortages and other
supply chain disruptions.

The period under review saw a number of testing
obstacles for the wider consumer sector and the
manner in which Finsbury successfully navigated
these headwinds is testament to the diligence
and experience of our management team.
Whilst these various pressures are likely to persist
in the near future, I am confident that we have the
best possible team in place to continue executing
on our strategy and to further strengthen our
position in the market as our business is aligned
with long-term consumer trends.

The challenges have been significant.
Our commercial teams have needed to be in
constant dialogue with our customers and
suppliers to deliver the necessary revised
commercial arrangements to address this
volatile situation. However, our focus on
strategic execution has not wavered and we
have continued to make good progress against
our objectives, based around our three pillars
of Excellence, Growth and Responsibility and
underpinned by our Operating Principles.

One such objective has been to bring the Group
businesses closer together to operate as a single
cohesive unit. This is giving us both uniformity
and improved efficiency in our processes,
procurement, procedures and communication.
In turn, this will make us stronger; creating a
platform that will enhance our future performance.

The hard work and dedication of the whole
Finsbury team has enabled us to navigate these
challenges and changes while still achieving
strategic progress and delivering a commercial
performance in line with market expectations.

The clarity of our strategy and the resilience of
our business model means the Company is well
positioned for continued growth.

A Robust Performance
Our agile management of the evolving
macroeconomic situation has allowed us to
deliver a robust performance for the period
with the Group posting record revenue figures,
alongside notable operational successes and
continued investment. The full year figures do
reflect the beneficial impact of the relaxation
of Covid-19 restrictions, compared with the
previous 12 months trading.

Group revenue increased by 13.9% to
£356.8 million, bolstered by a particularly
strong second half performance with revenue
up 18.7%, against the corresponding period
in the prior year. Adjusted EBITDA increased
by 6.9% to £28.7 million (2021: £26.9 million),
adjusted profit before tax increased by 12.1% to
£17.0 million (2021: £15.1 million) and the Group
delivered an adjusted diluted EPS of 10.1p.
The Group’s net bank debt position by year end
was £20.6 million (2021: £13.1 million) as the
business increased its stake in Lightbody-Stretz
Limited, its European distribution subsidiary,
from 50% to 85% in February 2022.

It is pleasing and reassuring that the 13.9%
increase in Group revenue was driven by
8.7% of volume growth which indicates the
quality, relevance and innovation of the Group’s
products. The Group’s sales growth has been
achieved through a good performance in the
Group’s UK bakery, up 12.1%, which includes

a continuation of the recovery in foodservice
(up 38.1%). There was also an impressive 26.6%
increase in the Group’s overseas division.
The overseas performance is particularly
pleasing and reflects the management team’s
excellent execution and growth ambitions,
along with our continued desire to invest in the
European opportunity.

The Group also successfully negotiated a new
four plus one year £120 million credit facility
(£60 million core plus £60 million accordion)
effective as of 27 June 2022. Whilst the current
stock market conditions persist and lower
ratings of food manufacturers are weighing
heavily on share prices, these new credit
facilities will provide financial flexibility for
the Group to pursue its significant growth
ambitions. As communicated in the February
2022 Interim Results announcement, the
Board continues to explore opportunities to
accelerate the growth of the Group through
targeted acquisitions. The continued successful
execution of the Group’s strategy positions us
well to succeed in both the retail grocery and
out-of-home channels in the UK and Europe
particularly through the development of a
strong licensed brand portfolio to complement
our core retailer brand relationships.

Finsbury Food Group Annual Report and Accounts 2022Chairman’s Statement9

Our People
Our people are the bedrock of our business
and the culture that pervades across Finsbury
has helped us to endure difficult conditions
with great professionalism and calm. It is
their focus which has resulted in our year on
year progression in quality performance, with
complaint numbers and rates continuing to
reduce on a yearly comparative basis.

Our teams have worked extremely hard to create
the right working conditions for Finsbury to
succeed and, on behalf of the Board, I would like
to take this opportunity to thank all members of
staff for their dedication and commitment.

I would also like to extend my appreciation to the
Board and wider Executive team who have done
an excellent job in navigating the Group through
what has been an exceptionally challenging
period. Through their leadership and expertise,
Finsbury has not deviated from its strategic
ambitions and the robust set of results reflects
their success.

Outlook
The past year has been set against a backdrop
of exceptional macroeconomic headwinds.
Finsbury has faced unprecedented challenges
as a result and, simply taken at face value,
the in-line performance does not convey the
monumental levels of hard work that took place
behind the scenes to deliver it. These results are
a great achievement. Management deserves a
great deal of credit for its stewardship and I am
incredibly grateful to our colleagues who have
all played an important role in getting us to this
point. FY22 was another year in which the agility
and resilience of the Finsbury model was put
to the test, and again it was proven to be more
than fit for purpose even in the most volatile of
trading conditions.

Whilst we recognise that the future is difficult to
predict with any certainty as the true impact of
the inflationary environment is not yet known,
we remain confident in our strategy. The past
few years have not been easy, but we continue
to stand up well. Across our Group, NPD
continues at pace, we have diversification of
products, channels and markets which stand us
in good stead and, ultimately, we have a strong
track record of moving forwards as a business in
difficult times. This gives the Board confidence
that the Group will continue to make progress
and deliver profitable growth.

Peter Baker
Non-Executive Chairman
23 September 2022

A Responsible Business

At Finsbury we hold social responsibility at the
very core of our ethos and, as we challenge
ourselves to be a more conscientious and
socially impactful business, accountability
around our progress is important.

As part of our ongoing social responsibility
programme, we will continue the journey to
our target of reducing emissions in line with
the Science Based Targets initiative (SBTi)
methodology. Alongside this, we will work with
our supply and customer partners to source
raw materials in a sustainable and ethical way.

Investment and development of people is
key to our success, and we are committed
to investing in our staff to help attract
and retain talent through exploring new
recruitment channels, and mechanisms to
engage and retain our existing workforce.
Alongside this, we have invested in graduate
talent, apprenticeships and leadership
development for the future, as well as
launching our Diversity and Inclusion strategy
through a series of policies, campaigns and
training programmes to build awareness
and understanding.

Dividend
Given the robust performance and sound
financial position of the Group, the Board will
be recommending a final dividend of 1.67
pence per share at the forthcoming AGM,
which will take the total dividend for the year
to 2.50 pence per share (2021: 2.40 pence).

Considerable Operational Progress
Despite Macroeconomic Headwinds
We have continued to invest and focus on
the deployment of our Operating Brilliance
Programme (OBP) which, facilitated by a cloud-
based, Group-wide IT system, has enabled us
to recover this inflation, whether it be through
operating efficiency or price increases.

We are progressively delivering a suite of
best-in-class business systems and increased
efficiencies, to optimise our business operations.
This will help protect us in the short-term and
be ready for when the market returns to more
normal conditions.

There is still a lot of work to be done, however,
the progress made this year has been significant.
We have continued to strengthen our category-
leading new product development (NPD)
expertise, and have further implemented
best practice through our Process Blueprint, a
product design framework delivering quality
and efficiency. Steps like these should ultimately
help us to create long-term shareholder
value, through share price appreciation and
attractive dividends.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance10

Chief Executive’s Report

The period under review was a year in which Finsbury had to navigate significant
post-pandemic challenges impacting the availability and cost of all inputs whether
it be materials, utilities, labour and, indeed, overheads in general. The impact and
scale of these additional inflationary pressures throughout the year exceeded
£27 million and the level of response required across the business to address them
and go on to deliver a record sales performance cannot be overstated. For many
years we have been investing to reinforce and optimise the Group, making it as
nimble, adaptable and able to withstand adversity, as possible. FY22 was a real test
of how far we have come, and I am proud of how we performed.

Our retail business
performed well,
we continued to
see a bounce back
in foodservice, and
our overseas division
continued to see
strong growth.

Finsbury Food Group Annual Report and Accounts 2022
11

Within our markets, overall demand for food
and drink has remained resilient. Our retail
business performed well, we continued to see
a bounce back in foodservice, and our overseas
division continued to see strong growth.

Record Revenue Performance
Despite Challenging Environments
The Group delivered a very strong full
year performance, particularly given the
environment in which we were operating
in. Total sales of £356.8 million represent
a 13.9% increase of which volume is 8.7%
versus the corresponding period in the prior
year. The Group delivered a strong second
half performance, with H2 revenues up
18.7% (of which volume is 10%) against the
corresponding period in the prior year.

This growth in sales has been driven by a
stable performance in the Group’s core
division, UK bakery, up 12.1%, which includes
a continuation of the robust recovery in
foodservice, up 38.1%, and a 26.6% increase
in the Group’s overseas division.

Unprecedented pressure from input cost
inflation, staff shortages and other supply
chain disruptions persisted throughout the
period. Pleasingly, the Group was able to
mitigate much of the impact through revised
pricing and commercial arrangements,
operational improvements and supply chain
initiatives. It will continue in the same vein
as further inflationary cost pressures are
expected in the new financial year.

The Group achieved a
record sales performance
while demonstrating strong
resilience. We were able
to mitigate inflationary
pressure on costs through
revised pricing and
commercial arrangements,
operational improvements
and supply-chain initiatives.

13.9%Total sales of £356.8 million represent

a 13.9% increase.

Our strategy is central to the ongoing success of
our business and is spread over three key pillars:

Excellence

Growth

Responsibility

We invest in our people and our
operating sites to form a strong
foundation to underpin our
strategy. We create innovative
high-quality bakery products
that anticipate key market trends
and ensure that customer and
consumer needs are at the heart
of our decision making.

Our Group seeks to drive growth
both organically and through
acquisition, targeting both the
retail grocery and out-of-home
channels in the UK and Europe.
We have developed a strong
licensed brand portfolio to
complement our core retailer
brand relationships.

Our commitment to building a
sustainable operating model is
built on a holistic framework that
puts our people’s development,
engagement and health
and wellbeing at the heart
of our business. We strive to
continually reduce our impact
on the planet by investing in
technology, expertise and driving
shared ownership across our
growth partners.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance12

Chief Executive’s Report/Continued

1. Excellence
The implementation of our Operating
Brilliance Programme (OBP), centred around
building people and process capability,
continues to deliver meaningful benefits
to performance.

In light of the challenging landscape we have
been operating in for several years, we have
focused on building resilience across the
Group and creating a platform for continually
improving performance. In FY22, our
initiatives were responsible for a combined
£4.5 million of gross annual savings, and we
expect these benefits to continue.

A major focus in FY22 has been the
development of a suite of best-in-class
systems, all linked to our business intelligence
software, with a view to delivering Group-
wide, high-quality data which we can use to
make more effective decisions.

FY22 systems investment included:

• An integrated Group Supply Chain Planning
System, which will enable us to move to an
integrated business planning model;

• A Product Lifecycle Management System,
which will transform our development
process, ensuring we have an effective
product design framework to deliver
profitable growth; and

• A Group-wide Computerised Maintenance
Management System (CMMS) roll out has
commenced in all bakeries.

The final piece in the best-in-class systems
jigsaw is a new HR system, which will be
implemented in FY23. Once in place, this
system will materially reduce administration
workload and improve areas like skills training
and development effectiveness within
the business.

Moving forwards, we remain focused on
extending, embedding and sustaining our
Operational Brilliance Programme at an
increasingly Group-wide level, including at
interfaces with key customers and suppliers
to promote best practice both internally
and externally.

2. Growth
The Board is committed to driving growth
through a combination of organic growth and
targeted acquisitions.

We are delighted to report continued growth
across our portfolio in the UK and Europe as
we continue to work collaboratively with our
partners to drive growth in our key markets.
We are particularly focused on capitalising
on the continued rapid growth within our
Lightbody Europe subsidiary aligned to our
celebration, small cake and Free From category
strategies, accelerating progress through
our licensed brand portfolio and a strong
innovation pipeline.

As sales patterns have become more
normalised throughout the period following
the impact of lockdowns, we have continued to
succeed in both the retail grocery and out-of-
home channels in the UK and Europe, working
closely with our foodservice partners to enable
a strong recovery. We continued to embed
our whole cake strategy and accelerate our
small cake performance, led by food to go with
our indulgent and plant based snacking offer
outperforming the market across both the
grocery and convenience channels.

From a brand portfolio perspective, we
continued to go from strength to strength.
We have invested in our gluten-free business
in the UK and Poland, expanding capacity and
capability and driving double-digit growth.
In Europe, we have extended our Free From
Wiso brand, which we will look to drive further
scale in FY23, leveraging our Lightbody Europe
business model to deliver this. Three of the
top five celebration cake lines in the UK are
Finsbury’s and our Xbox product is the fastest
growing cake in the market. We continue
to hold the broadest license portfolio,
which we continually evolve to ensure that
we are catering to the diverse range of
consumer needs.

To remain a leader in our key channels, we will
implement consumer-led growth strategies
across cake product categories and focus
on targeted bread consumer-led growth
in both retail and out-of-home markets.
Product development is also a key future
focus as we increase capacity and capability
in two strategically important category
areas of buns and rolls and celebration cake.
Further development and implementation of
our Group Free From strategy will continue as we
seek to drive further growth within this sector by
extending our reach wider into speciality bread,
morning goods, sweet treat and cake categories.

The Board continues to explore opportunities
to accelerate the growth of the Group through
targeted acquisitions and strategic investments.
In February 2022 we acquired a further 35%
shareholding in Lightbody-Stretz Limited, taking
our ownership from 50% to 85%, reflecting our
continued belief in the opportunity in Europe.

The Group’s new credit facility provides financial
flexibility for the Group to pursue its significant
growth ambitions, as and when appropriate,
potentially through further M&A .

3. Responsibility
Finsbury has always prided itself on being a
responsible business that acts with integrity
and care, both for our people and towards
the planet.

A primary focus has been to further develop
key skills, subject matter expertise and
capability, in addition to investing in graduate
talent, apprenticeships and leadership
development for the future.

This year saw the launch of our Diversity
and Inclusion strategy through a series of
policies, campaigns and training programmes
to develop awareness and understanding.
We also progressed our Health and Wellbeing
and Community Engagement programmes,
including further developing our partnerships
with UK charities GroceryAid and FareShare
at a Group level, whilst continuing to support
team member nominated charities at a
local level. We will soon be redeploying our
Employee Engagement survey to assess
the impact of our Employee Engagement
programme with a view to driving continued
improvement in our workplace culture.

Sustainability is in our DNA, with metrics
and goals embedded within all our business
strategies. As a result of our focus on driving
recycling rates, 85% of our waste is now
recycled (up from 80% last year) with the
balance being used to generate power.
We remain a certified zero landfill business
and as part of our commitment to the WRAP
objectives on plastic usage, 91% of our
packaging is now recyclable. We will continue
to increase the recycling rate through the
training and the application of technology.

‘‘Scope 1 and 2’’ emissions have been reduced
by 20% against our 2016 base line, and we
are creating a Supplier Partner Sustainability
Forum to work collaboratively on reducing
the Group’s environmental impact. This will
include the measurement of our ‘‘Scope 3’’
emissions with our key suppliers.

We now have live data monitoring systems for
electricity use for all our key assets, helping
teams to calculate the impact of action in
real-time and saving up to 10% of energy
usage. The implementation of these systems
has allowed us to convert 90% of our lighting
to LED and we will achieve the complete 100%
transition later in the calendar year 2022,
saving over 260 tonnes of CO2 per annum.
Automated live usage monitoring will be
extended to gas and water to help teams to
identify reduction opportunities.

Raw materials continue to be sourced in
line with a variety of sustainable and ethical
standards, including Fair Trade and the
Rainforest Alliance. Our palm oil adheres to

Finsbury Food Group Annual Report and Accounts 202213

to tackle the cost of living crisis, with energy price
inflation sitting at the centre and affecting both
consumers and companies, is another important
variable that muddies the picture. However, we
are experienced in dealing with adversity; our
business is aligned with long-term consumer
trends; we have a proven, agile model; and we
continue to execute a strategy that we believe will
continue to improve the business irrespective of
external turbulence.

These factors combined give us confidence
that, whilst we can’t control the headwinds we
are facing, we will be well positioned once the
macroeconomic situation stabilises.

Our focus on diversifying
products, channels and
markets, unifying our
businesses and identifying
efficiencies allows us
to respond quickly and
effectively to changing
market dynamics.

John Duffy
Chief Executive Officer
23 September 2022

the RSPO segregated sustainability standard.
Moving forward, we will persist in working
with our supply and customer partners to
source raw materials in a sustainable and
ethical way.

I would like to take this opportunity to
personally thank our teams across the Group
for their continued hard work, determination
and commitment. Without their efforts we
would not have been able to navigate the
challenges we have faced and, in turn, deliver
a record performance.

Outlook
Finsbury has faced unprecedented challenges in
recent years, first triggered by the Covid-19 crisis
and now by arguably the most challenging input
cost inflation in decades and falling consumer
confidence. Despite these, the resilience and
swift response across our business enabled us
to deliver a record revenue performance in the
period under review.

Looking ahead, macroeconomic and inflationary
headwinds are set to persist at levels in excess
of that experienced in FY22. However, Finsbury
is no stranger to responding to difficult trading
conditions and uncertainty. Since long before
the onset of Covid-19, we have been focused on
diversifying products, channels and markets;
unifying our businesses; identifying efficiencies;
and making the Group more resilient and able
to respond quickly and effectively to changing
dynamics. The work our teams have put in over
the past several years continues to leave us in a
strong position relative to many.

The continuation of our Operating Brilliance
Programme has resulted in significant progress to
date and there is encouraging momentum as we
move through the new financial year. FY22 saw
further expansion of our international footprint,
continued reinforcement of our best-in-class
systems, and further advances in refining and
strengthening our product range, such as in
gluten-free. In FY23, we aim to continue in a
similar vein, making incremental improvements
to our operations, such as through the launch of
a new Group-wide HR system, that will stand us in
good stead as we navigate the challenges ahead.

While we now have two months of trading
under our belt in the new financial year, the
complexity of the pressures we are facing and
the uncertain outlook around the phasing
and extent of the impact of rising inflation and
energy prices on consumer demand means it is
difficult to predict how the rest of the year will
unfold. The effectiveness of government policy

We will be well positioned
once the macroeconomic
situation stabilises.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance14

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 Vision
To be
the leading
speciality
bakery group.

Our Strategic Pillars help us create sustainable value
for our shareholders, customers and other stakeholders.

Excellence

Growth

Responsibility

Our commitment to building a
sustainable operating model is
built on a holistic framework that
puts our people’s development,
engagement and health
and wellbeing at the heart
of our business. We strive to
continually reduce our impact
on the planet by investing in
technology, expertise and
driving shared ownership across
our growth partners.

Finsbury Food Group Annual Report and Accounts 202215

xcellence

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
Principles 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
strategy into action. Appropriate KPIs are in place
to measure our progress (some of the key metrics
are given on pages 34 to 35).

Achieving
Brilliance

Responsibility

Operating Excellence

Cost Effectiveness

Growth with Our Partners

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

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.

Quality and Innovations

Sustainable Approach

People Who Care

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

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

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 2022Financial StatementsStrategic ReportCorporate Governance16

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 Use

Financial Capital

AIM-listed, three banks supporting strategic
investment and acquisitions, local government
support for Scottish and Welsh businesses,
low leverage.

Intellectual Capital

Extensive speciality bakery product know-how
and understanding. A known UK foodservice
brand. Licence arrangements with brand owners.

Manufacturing Capital

Well-invested plant and machinery, ownership
of all major sites, with available space for
expansion, common Group enterprise resource
planning (ERP) platform.

Human Capital

Extensive customer relationships in the retail and
foodservice sectors. Structured people strategy
to attract, retain, develop, review, train and
promote people with the right skills.

Social and Natural Capital

Sustainable sourcing, high-quality food safety
and technical standards, uniform health and
safety system across the business.

xcellence

Achieving
Brilliance

Responsibility

Finsbury Food Group Annual Report and Accounts 202217

Creating Value

Value for Shareholders

We aim for share price growth and
attractive dividends.

For Customers and Consumers

We are constantly innovating and refreshing
our selection of bread, cakes, niche,
specialty and branded products to supply a
diverse customer base and a broad range of
end consumers.

For Individuals and Communities

We offer employment and development
opportunities ranging from unskilled,
through to semi-skilled to management
at all our bakeries and offices.

For Society

We generate substantial tax revenues for
the UK and other jurisdictions through
Corporation Tax and many indirect taxes,
as well as employees’ income tax and
national insurance.

Excellence
We invest in our people and our operating
sites to form a strong foundation to underpin
our strategy.

We create innovative high-quality bakery
products that anticipate key market trends and
ensure that customer and consumer needs are
at the heart of our decision making.

For more information
see pages 18 and 19

Growth
Our Group seeks to drive growth both
organically and through acquisition, targeting
both the retail grocery and out-of-home
channels in the UK and Europe.

We have developed a strong licensed brand
portfolio to complement our core retailer brand
relationships.

For more information
see pages 20 and 21

Responsibility
Our commitment to building a sustainable
operating model is built on a holistic framework
that puts our people’s development,
engagement and health and wellbeing at the
heart of our business.

We strive to continually reduce our impact
on the planet by investing in technology,
expertise and driving shared ownership across
our growth partners.

For more information
see pages 22 and 23

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance18

Excellence

We have been steadily investing in
and building a suite of best-in-class
business systems.

KEY DRIVER

WHAT WE HAVE ACHIEVED

Acceleration of Operating
Excellence maturity.

Continued investment in systems,
process and people allowing
leverage of scale benefits.

Our Operating Brilliance Programme (OBP)
journey has continued to progress at pace and
is delivering a step change in performance by
building people and process capability under a
clear purpose banner. The Operating Excellence
agenda touches every Operating Principle and
is now “The Golden Thread” that runs through
the business.

Our business forums have continued to mature
over the past 12 months and reach across
operations, supply chain and commercial.
They are allowing delivery of initiatives which
allow leverage of Group scale, for example
successfully embedding best-in-class sales
and operations planning (S&OP) process
and execution.

We have been steadily investing in and building a
suite of best-in-class business systems, all linked
to Power BI, which delivers Group-wide high-
quality business intelligence, driving effective
decision making and directly influencing our
ability to continually improve.

FY22 investment includes:

• Optimity, our supply and demand planning

system, which is a key enabler for our
strategic goal to move formally to an
integrated business planning model.

• Point 74, which will transform our

development process and will ensure we have
an effective product design framework to
deliver profitable growth.

• A Group-wide CMMS roll out has commenced
in all bakeries, this is a key element to drive
our holistic asset care aspirations, under the
OBP banner.

Building business resilience within
a challenging landscape and
creating a platform for continually
improving performance.

Rapid deployment of our Operating Brilliance
Programme despite the challenging external
environment, has returned gross benefits
of £4.5 million in FY22 and we expect these
to continue.

We have utilised our strategic supply and
customer relationships to manage the impacts of
inflationary pressures whilst maintaining a focus
on longer-term growth strategic objectives.

Targeted investment in core category areas of
buns and rolls and celebration cake have laid the
foundations for cost effective growth through
enhanced productivity.

Finsbury Food Group Annual Report and Accounts 2022Excellence19

FUTURE FOCUS

INTERNAL KPI

Our headline future focus is to extend,
embed and sustain our Operational Brilliance
Programme Group-wide, including interfaces
with key customers and suppliers.

Specific focus will be on asset care and optimised
organisational design in order to support
Operational Excellence maturity.

OBP maturity vs. world-
class standards.

As we continue our journey towards Operating
Excellence maturity we will capture, benchmark,
and deploy best practice both internally
and externally.

The final piece in the best-in-class systems jigsaw
is a new HR system, this will be implemented
in FY23.

Using our business systems framework we
will focus on process standardisation and
effective use of all key systems and processes.
Priority within this will be to streamline data flow,
eliminating manual intervention and ensure
linkages of key business processes both internally
and externally – ultimately to drive value.

OTIF of systems integration
vs. plan.

% of automated management
information KPI.

Continued delivery of benefits associated with
the Operating Brilliance Programme, with the
scale of these increasing as maturity evolves and
we broaden the focus enterprise wide.

Development and deployment of a robust Value
Add and Value Engineering strategic programme
enabled by a holistic partnership approach with
strategic supply and customer base partners.

Value of FY23 OBP benefits.

Implementing the first phase of our
sustainable automation strategy to drive
enhanced productivity.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate GovernanceExcellence20

Growth

Category strategies and targeted category
leadership have enabled continued growth
across our portfolio.

KEY DRIVER

WHAT WE HAVE ACHIEVED

Drive growth through a
combination of organic growth
and targeted acquisitions.

Acquired a further 35% shareholding in
Lightbody-Stretz Limited in February
2022 taking our ownership from 50% to
85%, reflecting our investment behind our
European growth.

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

We have worked closely with our foodservice
partners to enable a strong post ‘lockdown’
recovery in our out-of-home. We continued to
embed our whole cake strategy and accelerate
our small cake performance, led by food to go
with our indulgent and plant based snacking
offer outperforming the market across grocery
and convenience channels.

Category strategies and targeted category
leadership have enabled continued growth across
our portfolio in the UK with key grocery partners
and across Europe.

We continue to enhance our quality reputation
within the market through our category leading
NPD expertise and Process Blueprint foundations.

We have continued to drive year on year progress
in quality performance with complaint numbers
and rates continuing to reduce year on year on a
like-for-like basis.

Develop a strong licensed brand
portfolio to complement our
core retail relationships.

We have invested in our gluten-free business
in the UK and Poland, expanding capacity and
capability and driving double-digit growth.
In Europe, we have launched our ‘Wiso’ brand.

Brilliant NPD in FY22 has ensured that three of
the top five celebration cake lines are Finsbury
‘owned’; our Xbox product is the fastest growing
cake in the market. We continue to hold the
broadest license portfolio, which we continually
evolve to ensure that we are catering to the
diverse range of consumer needs.

Finsbury Food Group Annual Report and Accounts 2022Growth21

FUTURE FOCUS

INTERNAL KPI

We will continue to work collaboratively with
our partners to drive growth in our key markets,
leveraging our category marketing expertise.

Capitalise on continued rapid growth across
our Lightbody Europe subsidiary aligned to our
celebration, small cake and Free From category
strategies, accelerating progress through

Deliver consumer led growth strategies across
cake product categories, and focus on targeted
bread consumer led growth in both retail and
out-of-home markets.

Increase capacity and capability in our
strategically important category areas; buns and
rolls and celebration cake.

Further development and implementation of
our Group Free From strategy to drive growth
within the sector by extending reach wider into

our licensed brand portfolio and a strong
innovation pipeline.

Revenue Growth %.

Continue to progress our Process Blueprint
excellence agenda moving forwards to the next
phase where we start to bring in predictive and
closed loop quality control elements driven by
high-quality management information.

Market Performance by Category.

speciality bread, morning goods, sweet treat
and cake categories.

Revenue Growth %.

Market Performance by Category.

Continue to drive our best-in-class quality
agenda in all key strategic product areas,
supported by the implementation of our product
lifecycle management system over the course of
FY22/FY23. This will deliver right first-time NPD
and a more agile response to customers.

Deliver a continually evolved and innovation led
celebration cake brand portfolio that represents
a best-in-category solution for each of our key
customer partners.

Broaden our branded small cake offering across
differing channels and in new formats.

Revenue Growth %.

Look to drive scale of our Wiso brand across
Europe leveraging our Lightbody Europe business
model to deliver this.

Market Performance by Category.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance22 Finsbury Food Group

Annual Report and Accounts 2022

Responsibility

We continue to source raw materials to a
variety of sustainable and ethical standards,
including Fair Trade and Rainforest Alliance.

KEY DRIVER

WHAT WE HAVE ACHIEVED

Treading lightly on the planet.

We have now recruited a dedicated Group
Sustainability Manager to work with our
business and with our partners throughout
our value chain.

We now have live data monitoring systems for
electricity use for all our key assets, helping teams
to calculate the impact of action in real-time and
saving up to 10% of energy usage.

Be recognised as a
great place to work.

Our teams have focused on driving recycling
rates and 85% of our waste is now recycled (up
from 80% last year) with the balance being used
to generate power. We remain a certified zero
landfill business.

As part of our commitment to the WRAP
objectives on plastic usage, 91% of our packaging
is now recyclable.

We have reduced our ‘‘Scope 1 and 2’’ emissions
against our 2016 base line by 20%.

We have converted 90% of our lighting to LED
and will complete this in 2022, saving over 260
tonnes of CO2 per annum.

We continue to source raw materials to a
variety of sustainable and ethical standards,
including Fair Trade and Rainforest Alliance.
Our palm oil adheres to RSPO segregated
sustainability standard.

We continue to drive our ‘‘HomeSafe’’ safety
programme and have initiated a culture-based
safety improvement programme to support a
further improvement in our safety performance.

We have launched our Diversity and Inclusion
strategy through a series of policies, campaigns
and training programmes to develop awareness
and understanding.

We have progressed our Health and Wellbeing
and Community Engagement programmes
including further developing our partnerships
with GroceryAid, to ‘‘Gold’’ partner status, and
FareShare at a Group level whilst continuing to
support team member nominated charities at
a local level.

We have addressed the labour availability
challenge via a series of initiatives including
exploring new recruitment channels, and
mechanisms to engage and retain our
existing workforce.

We have further embedded the use of Workplace,
our digital communication platform, across the
entire workforce – driving engagement step
change across the business.

We have continued to further develop key
skills and subject matter expertise capability,
in addition to investing in graduate talent,
apprenticeships and leadership development
for the future.

Responsibility23

FUTURE FOCUS

INTERNAL KPI

We are creating a Supplier Partner Sustainability
Forum to work collaboratively on reducing
our environmental impact. This will include the
measurement of our ‘‘Scope’’ emissions with
our key suppliers.

Our Environmental Management System will
be aligned and audited in line with ISO14001
standards by 2024.

We will continue to increase the rate of recycling
of waste through the training and engagement of
our teams, and by applying technology to allow us
to optimise performance in this area.

Automated live usage monitoring will be
extended to gas and water to help teams to
identify reduction opportunities.

We will continue our journey to our target
of reducing emissions in line with the SBTi
methodology, aligned with a 1.5C limit to global
warming by 2030.

We will continue to work with our supply and
customer partners to source raw materials in a
sustainable and ethical way.

CO2 reduction of 58.8%
(from 2016 baseline) by 2030.

Waste recycling rates.

Continue to drive our health and safety
performance forwards through engaging our
teams in behavioural safety initiatives as part of
our ‘‘HomeSafe’’ programme to achieve a healthy
and safe workplace.

Be assessed as working in line with IS045001 by
independent bodies for our health and safety
management system.

Further develop our Diversity and Inclusion,
Health and Wellbeing and Community
Engagement programmes with national and
local partners.

Deploy our Employee Engagement survey to
assess the impact of our Employee Engagement
programme and drive continued improvement in
our workplace culture.

Actively promote our employer brand to drive
engagement across diverse resourcing channels.

Continue to invest in developing key skills and
capability as a source of competitive advantage,
including graduate talent, apprenticeships and
leadership development and develop roles that
are more highly skilled and rewarding.

Accident frequency rate reduction.

Uptake of Employee Assistance
Programme service by 33%
over three years.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate GovernanceResponsibility24

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

Pages: 14-17

Our Customers

Our Suppliers

Growth with Our Partners

Pages: 15-16

Page: 15

Report on Corporate Governance
Pages 42-47: Section 3, 8

Report on Corporate Governance
Pages 42-47: Section 8

Our People

Pages: 14-17

Growth Strategic Pillar

Excellence Strategic Pillar

Pages: 20-21

Pages: 18-19

Responsibility Strategic Pillar

Growth Case Study

Responsibility Strategic Pillar

Pages: 22-23

Pages: 28-29

Pages: 22-23

Responsibility Case Study

Pages: 30-33

Finsbury Food Group Annual Report and Accounts 202225

Our approach to diversity and equal opportunities
is addressed in The Directors’ Report set out on
pages 50 to 53 and whistleblowing approach is
noted in the Audit Committee Report on pages
56 and 57.

This statement is made in conformity with the
requirement to explain how Directors fulfil
section 172 of the Companies Act 2006.

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

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 supporting our
Strategic Pillars are set out in detail on pages 15
to 16, while examples of how we engage and put
our Operating Principles into action are set out
throughout this report.

Our Investors

Creating Value

Page: 17

Our Environment

Sustainable Approach

Pages: 16-17

Report on Corporate Governance
Pages 42-47: Section 1,2

Report on Corporate Governance
Pages 42-47: Section 3,28

Dividend

Pages: 9, 17, 40

Responsibility Strategic Pillar

Pages: 22-23

Responsibility Case Study

Pages: 30-33

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance26

Excellence

Sustaining
Excellence

xcellence

Lucy Wills, Group Operations Director – “Our Operating
Brilliance Programme represents “The Golden Thread”
which runs through the business, at the heart of this is our
drive to continually make tomorrow better than today.”

This continued pursuit of Operating
Excellence is best articulated by our
brilliant team; Site Lead, Martin Hart
chats with Operations Manager,
Suzanne Cooper and Simon Taylor,

xcellence

Operating Brilliance Lead of the
Kara Foodservice team about the
ideas, processes and teamwork
they’ve brought about at the site
following the Covid-19 pandemic.

Responsibility

MARTIN
Firstly, could you give us a quick overview of the
Kara story to date.

SUZANNE
A couple of years ago when the country shut
down for Covid-19, Kara was massively affected.
We’re 100% foodservice, operating six days per
week, then literally overnight restaurants and
takeaways closed, and customers didn’t need
our products anymore. So in a matter of days we
had to shut down production. There were a lot
of worries on site and concerns that we wouldn’t
open again, so it was a really tough time for Kara.

MARTIN
So Simon, let’s bring you in here, what happened
after that?

SIMON
We were closed for running for 10 weeks, we
decided to take the opportunity to make some
improvements. The engineering team did some
fantastic work on the factory floor, such as LED
lighting so the site is over 95% complete with
LED lighting saving us energy. We engaged
heavily in asset care activities doing deep dives
into machinery which we wouldn’t be able to do
under normal circumstances, and we came back
stronger than before. We’re now up to six days
running, and are producing on average 1.0 million
buns per day.

MARTIN
Brilliant, tell us a little bit more Simon, what
have been the key activities behind the
performance turnaround?

SIMON
It’s been a challenging 18 months. Some of the
key activities involved understanding the process.
That was a big one for us, understanding what our
machines could do and streamlining production.
MARA played a big part for us as well, that’s our
meeting and reporting alignment. Especially the
tiered meetings – ensuring that people came on
time, they had actions, and they were delivering
these as well to facilitate the turnaround.
And team member engagement was a really big
piece for us on the factory floor, without their
buy in none of this would have been possible.
And probably understanding the why as well,
I can’t stress that enough. Know why you’re doing
the projects in the first place and why you’ll get
the results you’re wanting to.

MARTIN
That’s great and it’s certainly borne out by
site performance numbers and scores on the
Employee Engagement survey. So Suzanne, can
you tell us some of the practical things you did?
I’m really interested to know how the likes of our
shift managers and front line team members
got involved.

Finsbury Food Group Annual Report and Accounts 2022MARA tiered meetings in action –
Dave Everett (Shift Manager)

We introduced some visual critical
checks for the line to first line managers.
They’d walk the line at the beginning and
end of shifts, to make sure everything
was in place for good efficiency and
low waste, and they could escalate any
issues if needed to the shift manager.
We also introduced an improved shift
manager report, including all the relevant
information that could be escalated up to
tier one, two and three meetings.

Tiered meetings use an aligned meeting
agenda. Tier one focuses on live issues
so we could identify them and look to
resolve them at the earliest opportunity.
At tier two meetings we introduced ‘Five
Whys’ root cause analysis to pinpoint
issues we were having. As tier one and
tier two meetings are run effectively, all
the information is then ready for senior
management’s tier three meetings.

SUZANNE
We’ve got an amazing team here at Kara, and the
start of our journey was with external consultants.
They did a lot of coaching with us and opened us
up to new ways of thinking. Some people assume
that if you’re trying to improve your efficiencies
and trying to improve your waste that it’s all just
down to production and a little help from an
engineer because you want some improvements
to a machine. But at Kara we’ve had some
fantastic cross-functional working where we’ve
involved the warehouse technical and hygiene
teams. We’ve had some really good ideas coming
back through the Site Employee Forum, and
we’ve been able to get some really quick wins in
place. At Kara nobody says it’s not my job, every
department helps each other, and that’s been so
important for us – cross-functional working.

The projects have been brilliant that the guys
have been doing so I think it’s important that they
tell you about that, it’s not just about me, Simon
and Martin.

Energy Management –
Adam Woods (OBP Green Belt)

We’ve been using a system called ClearVUE
proactively since about December 2020, to
tell us how our equipment is actually doing
and how much energy its using. We’ve utilised
that data to look for opportunities where
we can actually save energy, whether it be
shutdowns or start-ups. We’ve also held
awareness training with the senior leadership
team and right through the site with customer
care. It’s just little tips on how to switch things
off, or when to switch things off, and it’s been
taken on board really well. Especially with
energy prices going up, it’s all about saving
that energy!

Process Blueprint –
Stephen Sullivan-Hatfield
(Bakery Process Manager)

Being a fully automated site, Blueprint
should be quite simple. However, this wasn’t
the case. We had to change the culture of
the site and explain what Blueprint was
all about. We achieved this using monthly
updates and coaching sessions with senior
management, right the way down to the
factory floor. Everyone now understands the
importance and value of Process Passports,
process audits and process improvements,
which has resulted in an increase in efficiency,
consistency in quality and a reduction in
waste over the past six months. The continual
monitoring and business improvements now
mean that we work smarter and not harder.

MARTIN
If you had to pick one element from the Kara
site turnaround that you’re most proud of, what
would it be?

SUZANNE
The Employee Engagement survey results.
It shows that everything we’re doing on site with
the teams is working and is paying off, and it’s
fantastic recognition for the hard work of the
teams and everything that’s going on that our
survey results are so high. We can’t do it without
our brilliant team at Kara, and that’s showing in
our engagement scores.

MARTIN
Kara had really positive scores in the recent
Employee Engagement survey, what were the key
things you did to deliver this?

SUZANNE
It’s really about getting to know each other and
working together. We all have each other’s back
at the end of the day. Nobody says “it’s not my
job”; we champion cross-functional working.
We have a really great Site Employee Forum (SEF),
involving a good mixture of people across the
site. We’ve got some really good wins from the
SEF, enabling ideas from the shop floor to come
through, so we can try and help make their lives a
bit better at Kara and try and put some quick wins
in place. We use Workplace and site noticeboards
to keep people informed and up to date on what’s
going on, so they feel included with everything.
And lots of thank you’s and little treats for them
like a food van can go a long way.

Ian Chree, Group Efficiency
Improvement Director

The team at Kara have really embraced the
principles of Operating Brilliance, one of
the key pillars of our Operating Excellence
Operating Principle. The first step was
to understand what we do and why we
do it – Process Blueprint. This allowed
the team to set standards around our
key operating parameters and develop
Process Passports for all our end-to-
end processes. These Passports provide
the detailed instructions for our team
members to ensure we make high-quality
products, efficiently every day, with a real
focus on explaining “why” we do what we
do. The team have also grasped the audit
process around our processes, which feed
into our Operating Brilliance Programme
(OBP) that drives continuous improvement
of our standards. The real step change
in improvements at Kara began when
the team ramped up their team member
engagement activities around Process
Blueprint and OBP and involved the whole
team, with a focus on explaining why and
encouraging everyone to ask why.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance28

Growth

Delivering
Growth

xcellence

Responsibility

Graeme Clark, Group Commercial Director –
“Putting growth at the heart of our business has
enabled the Group to deliver record levels of revenue
growth against a backdrop of an extremely turbulent
macroeconomic environment. I will discuss how this
was achieved with Adam Arnott, Sales Director and
Daryl Newlands, Head of Marketing.”

transparency. The successful suppliers during
these tough times were also able to offer strong
mitigation plans to help the customers have a
balanced recovery plan.

GRAEME
Our partnership with Lightbody Europe went
from strength to strength this year, how did we
support this growth?

DARYL
Our growth with our Lightbody Europe business has
been driven primarily through our strong licensed
partnership success as well as supporting the
team with on-trend product innovation. We have
established a core range of products that give us
a point of difference in the European markets that
we trade within. Our portfolio of licenses, which are
globally recognised, and our on-trend new product
development has allowed our European colleagues
to develop a unique product offering that meets
an ever-increasing demand for both themed
celebration cakes and premium small cake formats.
This has been the catalyst behind the growth we
have seen in the last 12 months.

GRAEME
13.9% revenue growth was a record for the
Group, what were the key highlights?

ADAM
We delivered strong, targeted growth throughout
the year by focusing on our core commercial
strategy. Our strategies focus on our strongest
product segments within the bakery category.
This has delivered strong growth in celebration
cake, whole cake, small cake, artisan bread and
the wellness product areas. We also focus on
our channel strategies where we have benefited
from the shopper returning to the out-of-home
channel and our food-to-go products that
feature in the successful meal deal offer.

GRAEME
With input price inflation at record levels in
FY22, how did the commercial teams manage
this situation?

ADAM
Inflation has been a huge pressure in the past
year, not only do we have strong pricing power
with the range of products we supply, we also
have fantastic customer relationships which we
were able to work collaboratively with through
these difficult times. It was key to be open and
share the inflationary market conditions with our
customers; the only way to be successful was full

Finsbury Food Group Annual Report and Accounts 2022GRAEME
New product development plays such a key role
in our growth both in retailer own brand and our
license brand portfolio, how have we managed
this process?

DARYL
Our approach to new product development is
very much aligned to our category and consumer
strategies in order to deliver the right offering
across our multi-channel customer partnerships.
The investment and time put into this process
allows us to develop products that meet most
product segment and usage occasions within
our categories. Having a forward view on how
we approach new product development is key to
our business performance and how we develop
our capability and processes alike. Like every
business, we haven’t always got it right, however
we have always ensured we have taken the right
approach to what we launch, and we have seen
some real successes in the last year.

GRAEME
As the macroeconomic environment becomes
even more difficult how do we plan to continue
our path to profitable growth?

ADAM
The macroeconomic environmental challenges
we have seen over recent times will continue to be
a challenge in the medium term. The knock-on
effect of this has been price inflation which will
continue to be driven by the accumulation of
these factors, plus new government regulations
(HFSS) will make our market conditions even
more challenging. We continue to look for routes
to mitigate these and provide the lowest cost
solutions for our customers and consumers.
One approach to the new regulation of HFSS is
the development of a new brand and product
range that meets the guidelines this new
regulation brings. We believe our strong customer
partnership positions us well to mitigate the strong
headwinds we face as a Group.

In summary the consistency of our
commercial strategy means we will stay
laser focused on growth. We will utilise
our Group scale to deliver our channel
growth plans in retail and out-of-home
bakery markets. Efficiency in our ways of
working will enable Finsbury Food Group
to navigate the macroeconomic storm, and
with the support of our brilliant people, we
will maximise all the growth potential in
our markets.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance30

Responsibility

Championing
Responsibility

Diversity and Inclusion (D&I) is increasingly high
profile. Environmental, Social and Governance
(ESG) investing is gathering momentum.

xcellence

Investors and Millennials/Gen Z
are making ESG central to their
investment approach, choosing
to invest in companies that reflect
their values and positively impact
the planet and society.

Responsibility

The ‘Social’ element of ESG incorporates
‘Employee Relations and Diversity’ as a key
pillar and companies are increasingly expected
Responsibility
to have a comprehensive D&I strategy.

INITIATE
We implemented a series of
initiatives to raise awareness and
understanding of D&I, which
included the launch of a new
Diversity and Inclusion policy

which set out our position in
relation to D&I and clearly outlined
what both the business and
colleagues should expect from
one another.

The Covid-19 crisis has also accelerated
employee, and prospective employee,
expectations in terms of employers
demonstrating a more empathic and inclusive
approach than previously. D&I therefore now
has a strong influence upon employer branding
and business success and should form a key
part of the business and people strategy. UK
legislation continues to focus upon this area
with the introduction of Gender Pay Gap
Reporting and the voluntary gender diversity
target for Boards of FTSE 100 firms.

TRAIN
Training was rolled out across
the business for all colleagues
to provide a base level of
understanding and awareness of
D&I and reinforce the key role that
our colleagues play in delivering
this. More comprehensive training
was also provided for leaders.

CONNECT
We joined the GroceryAid Diversity
and Inclusion Programme in order to
connect with other businesses across
our industry and share learnings
regarding best practice.

We launched a series of D&I campaigns across
the business, including International Women’s
Day, Pride and World Cultural Diversity Day in
order to engage colleagues in the D&I agenda.

Finsbury Food Group Annual Report and Accounts 202231

ENGAGE
It is our anticipation that our internal
campaigns, which have received
positive engagement to date, will
continue to gather momentum and
drive increased engagement across
the organisation.

ATTRACT
Our successful partnership with
Tempus Novo has resulted in
us securing employment for a
number of current/ex-offenders
at our Fletchers site, which has led
us to now extend this to include
other sites across the Group.

As we accelerate the building of our employer
brand in the external market this year, D&I
will play an increasingly important role
in the attraction of diverse talent to our
organisation in order to further strengthen
our competitive advantage.

EXPLORE
We explored new and diverse
resourcing channels including
initiating partnerships with
Tempus Novo, who specialise in
securing employment for ex and
current offenders, and JobOppo
who work with veterans.

TRANSFORM
We are still relatively early on in
our D&I journey, however we have
established a firm foundation
upon which to build.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance32 Finsbury Food Group

Annual Report and Accounts 2022

Responsibility

Embracing
Responsibility

xcellence

Responsibility

WASTE MANAGEMENT
CHALLENGE
Across our manufacturing sites
we recognise that there is a need
to be a responsible manufacturer.

Through FY22 we have been working with
our purchasing teams, operational teams and
waste management partners to understand
where within our business waste is generated,
how we can control and reduce the amount
produced and how we can increase recycling
rates where waste needs to be disposed.

ACTION
In order to reduce the amount
of waste we generate, our
Operating Brilliance Programme
(OBP) teams across our Group
have looked at how we reduce
waste from our manufacturing
process and this continues to be
a focus across the business.

This has led to the creation of manufacturing
standard processes which is helping to reduce
the amount of waste produced.

Through FY22 we have continued working with
our waste management specialist contractor
to understand the waste we generate and
where possible we have continued to move
away from dry-mixed recycling to single waste
stream segregation. This ensures that we can
maximise the potential recyclability of waste
produced and reduce the amount of waste
going for energy recovery.

During the course of the last year we have
introduced a number of waste management
pods at a number of our factories in order
to simplify the management of waste in our
factories. These have been supported by our
food waste management contractor, which
means that we are now able to allocate the
amount of food waste being produced to
specific production lines within our factories.

85%The actions across all sites has

resulted in our waste recycling
rates increasing to 85% in FY22.

Again, this allows us to apply our OBP
process to reduce the amount of food waste
being produced.

To drive better understanding and support
for waste management we piloted a waste
management modular training course at
our Lightbody site that is aimed at all our
team members. This course takes place
over five modules and explains the reasons
for waste management, how we approach
waste management within the Group and
the comparisons with the approach of waste
management in our team members’ personal
life. Feedback from this course has been
positive and will be rolled out across the rest
of the bakeries within the Group.

We also recognise that to support all of the
above we needed to have clear, unambiguous
measures and meetings to drive improvement.
In FY22 we introduced a clear Meeting,
Analysis and Reporting Arrangement (MARA)
process across the whole Group that looks at
the amount of waste being generated by each
site and the amount of waste being recycled
(including and excluding food waste). This data
is shared on a monthly basis and discussed at
a number of meetings and forums within the
Group. This ensures progress on initiatives to
reduce waste is tracked, best practice is shared
and corrective actions are undertaken.

IMPACT
The actions across all sites has
resulted in our waste recycling
rates increasing to 85% in FY22
and we continue to be certified
‘zero to landfill’ across the Group
for another year.

Waste management is a clear priority with
our sustainable approach strategic plan, with
clear KPIs and actions required by all parts of
the Group. This will continue to be monitored
through FY23 and will be supported by the
creation of the Sustainability Forum that
will focus on waste management and other
sustainability topics.

ENERGY MANAGEMENT
CHALLENGE
One of our most significant
impacts on the environment is
the energy we use at our bakeries.

Our sustainability strategy focuses on
the areas where we can make the biggest
difference; in 2021 we strengthened our
commitments on climate change, by
announcing an ambitious 2035 target to
reduce our carbon emissions from our own
operations which follows the Science Based
Targets initiative (SBTi) approach.

IMPACT
Over the past year, the system
has been used to monitor and
drive improvements. The ability
to monitor our energy use at
the asset level in 15-minute
intervals gives insightful data and
understanding of our process. We
can then use the data to identify
improvements in performance,
eliminating waste and reducing
energy costs.

Our ClearVUE super users have been able
to identify the peaks and troughs of energy
consumption. The ability to provide historical
data has also been beneficial, allowing
the business to spot patterns, trends, or
anomalies, helping us plan differently. It has
been particularly useful in understanding our
start-up and shutdown procedures and has
helped us identify ways to improve efficiency
and productivity.

The wealth of data the system provides has
enabled us to plan future cost-avoidance
projects with greater accuracy in predicting
savings and the ability to verify results of
energy projects.

The ability to understand our energy
consumption, by asset, by area and by
hour has allowed us to involve more of our
colleagues in energy management. It is clear
that if we are to achieve our ambitious carbon
reduction targets then we need to have
everyone involved. Having this energy system
has led to increased engagement across the
business, improved interaction from the sites
and is helping to generate energy saving ideas
from the bottom up.

We strongly believe that significant progress on
energy reduction will only be achieved through
the involvement of every one of our people at
Finsbury and having the right data is key.

ACTION
In order to make significant
improvements in energy usage
we knew we needed better data
to allow us to measure, manage
and reduce.

We invested in an energy management system
(ClearVUE) across our business to allow us to
better understand our energy use. All our UK
facilities now have detailed sub-metering of
energy consumption, with the ability to drill
down into deep analytics for different assets
and locations.

The energy management system takes the
information from key energy assets and
converts the data into graph form to be more
easily analysed, interpreted and understood.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance34

Finsbury Food Group
Annual Report and Accounts 2022

Key Performance Indicators

Key Performance Indicators
Financial

KPI Measure

Why Measure?

FY22 Performance

Link to Strategic Pillar

Sales Growth %

2022

2021

2.3%

2020

-2.8%

2019

3.8%

2018

-3.4%

Adjusted Operating Profit %

2022

2021

2020

2019

2018

5.0%

5.1%

4.9%

5.3%

5.9%

Adjusted Diluted EPS

2022

2021

2020

2019

2018

10.1p

8.6p

7.7p

9.0p

9.8p

Adjusted EBITDA

+13.9%

The Group considers revenue
performance central to our
Strategic Pillar of Growth.

Ongoing recovery, volume gains
and price increases impacting on
year on year performance.

Growth

Measures the underlying
performance and relative
to revenue.

Adjusted diluted EPS measures
as a measure of the underlying
performance of the Group and
the returns generated per share
taking into consideration of
dilutive impact of share options.

Excellence

Growth

A slight decrease in the margin
as a result of the unprecedented
inflation and challenging market
conditions. The level achieved
reflects the ability to navigate the
challenges and the results of our
Operating Brilliance Programme.

A growth in EPS reflects a growth
in the operating profit level.

Excellence

Growth

2022

2021

2020

2019

2018

£28.7m

Measures the absolute
underlying performance.

£26.9m

£26.2m

£25.5m

£25.6m

The level achieved reflects the
ability to navigate the challenges
and the results of our Operating
Brilliance Programme.

Excellence

Growth

Debt to Adjusted EBITDA

2022

0.7

2021 0.5

2020

2019

2018

0.6

1.1

1.4

Return on Capital Employed (ROCE)

2022

2021

2020

2019

2018

12.1%

11.4%

9.6%

10.8%

13.3%

Debt to EBITDA is a covenant
test and demonstrates our
headroom against our banking
covenants (max 3.0x).

Excellence

Growth

Increase in EBITDA and an increase
in debt levels as dividends are
reinstated, capital expenditure is
almost double the FY21 level and
an increase in our shareholding
of Lightbody-Stretz Limited.
Debt:EBITDA is sub 1.0 times
thereby allowing us to achieve the
lowest facility margin levels.

A key measure to determine
performance of assets.

Increased ROCE reflecting the
increase in EBITDA levels.

Excellence

Growth

Strategic Report

Corporate Governance

Financial Statements

Annual Report and Accounts 2022 35

Finsbury Food Group

Key Performance Indicators
Non-Financial

KPI Measure

Why Measure?

FY22 Performance

Link to Strategic Pillar

Revenue £k per Employee

2022

2021

2020

2019

2018

110

103

102

The revenue per employee ratio
is important for determining the
efficiency and productivity per
employee of a company.

Increase in revenue per employee
as we reach record levels of sales
for the year.

Excellence

Growth

Complaints per Million Units Performance

2022

2021

2020

2019

2018

11.5

Indicator of quality and
continuous improvements.

16.6

17.1

18.9

20.0

Number of Accidents per 100,000 Hours Worked

2022

2021

2020

3.5

4.1

A measurement of how well
our HomeSafe culture is being
embraced by our employees.

Lower complaints reflecting
our investment in systems
and continuing our Operating
Brilliance Programme journey.

Responsibility

Excellence

Responsibility

Continuing to drive our health
and safety performance forwards
through engaging our teams
in behavioural safety initiatives
as part of our HomeSafe
programme to achieve a healthy
and safe workplace.

CO2 Emissions

2022

0.11

2021

2020

0.17

0.18

A measurement to help monitor
our impact on the environment.

We are working on a number of
initiatives and have dedicated
resource to reduce our impact
on the environment.

Responsibility

Five year KPI trend published where available.

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.

d
o
o
h

i
l
e
k
i
L

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

Priority Rating Post-Mitigation

Low

Moderate

Significant

High

03, 04

Impact

External

01 Cyber Security

02 Government
Legislation

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 solution (i.e. antivirus software and
anti-phishing software).

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

Principle Risk
• The proposed legislation to be introduced in October 2023 around high
in saturated fat, salt and sugar (HFSS) could have a detrimental impact
on demand.

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

• Reviews with software and service providers take place.

• Use of the latest versions of scanning and monitoring

Cyber-security software.

• Preparation of crisis and continuity plans.

• Vendor risk assessment questionnaire completion with key suppliers.

Commentary

Enhanced mitigations offsetting increased risks.

Commentary

A delayed introduction of HFSS and early engagement will be the key
to compliance and to ensure our product offering remains appealing.

Finsbury Food Group Annual Report and Accounts 2022

Operational

03 Health and Safety

04 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.

• 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 initiatives and related processes and procedures.
Continued focus on preventative measures to reduce risk including
regular fire audits.

significant consequences.

• The global pandemic introduces risk in many ways notably risk to the

health and wellbeing of our employees.

Mitigation
• Existing Risk Management Steering Committee with oversight of a

number of strategic processes and procedures.

• The culture change programme involves multi-disciplinary teams to

develop actions to deliver the programme.

• The H&S Committee is continuing to embed a HomeSafe Every

Day strategy.

• Leading metrics such as compliance to audit schedules and actions

completed will become key indicators of HSE performance.

• Induction and training programmes underpinned by our Operating

Principle, People Who Care.

• Regular Board reviews and site visits.

Commentary

An area of continued focus and development.

Continued focus on preventative measures to reduce risk.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance38

Risk Report/Continued

Financial

05 Pension Deficit

06 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 leaves legacy exposures in the

seemingly ad hoc 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

• The Company entered into an Asset Backed Contribution (ABC)

product engineering.

arrangement on 18 May 2022 to improve the funding of the Scheme.

• Continued programme of Operating Brilliance, aided by a suite of

best-in-class business systems and increased efficiencies, to optimise
our business operations is driving significant operational efficiency
across the Group.

• Capital investment has been targeted at automation and

operational efficiency.

• Leverage economies of scale from the enlarged group, including

Group Purchasing strategy.

• Our business forums have continued to mature over the past

12 months and reach across operations, supply chain and commercial.
They are allowing delivery of initiatives which allow leverage of
Group scale.

• People strategy focused on staff retention by upskilling of workforce
and retention of permanent staff and less reliance on agency staff,
whilst forging solid working relationships with agencies.

Commentary

Deficit driven by factors largely outside of the control of the
Company. An Asset Backed Contribution scheme was introduced
during the year to improve the long-term funding position.

Our continued investment and focus on the deployment of our OBP
is key to our operational efficiency.

Finsbury Food Group Annual Report and Accounts 202239

07 Recession

08 Geo-Political

NEW

Principle Risk
• Recession can adversely impact revenue of a business as consumers

reduce spending.

Mitigation
• We will continue to work collaboratively with our partners to drive
growth in our key markets, leveraging our category marketing
expertise, implementing consumer-led growth strategies across
our categories.

• Strategic partnership and product development is also a key future
focus as we increase capacity and capability in two strategically
important category areas of buns and rolls and celebration cake.

Principle Risk
• Prolonged period of uncertainty, owing to economic environment and
political disruption, could expose the Group to risks securing supplies
of key ingredients and labour.

Mitigation
• We have utilised our strategic supply relationships to manage the
impacts of inflationary pressures whilst maintaining a focus on
longer-term growth strategic objectives.

• Constant dialogue with our supply partners is necessary in order to

deliver commercial arrangements in volatile situations.

Commentary

The clarity of our strategy and the resilience of our business model
means the Company is well positioned for continued growth.

Our agile management of the evolving macroeconomic situation
allows us to continue to deliver against our strategic objectives.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance40

Financial Review

Group revenue to 2 July 2022 is £356.8 million, 13.9% higher than last year.
The growth in revenue is the result of volume uplift of 8.7% and price uplift
of 5.2%. The recovery of foodservice is driving much of this growth with a
38% increase year on year uplift, while retail revenues remain positive.

Sales from our overseas division increased
by 27% year on year driven by a strong cake
performance in the large French retailers.
Group adjusted operating profit at £17.8
million is up 10.6% on last year. Despite the
unprecedented inflationary pressures and
challenging macro environment, the Group
has increased both revenue and operating
profit. Adjusted operating profit margins
are 5.0% (2021: 5.1%), a consequence of
the continuing success of our Operating
Brilliance Programme partially mitigating
the extraordinary challenges.

Dividend
The dividend was reinstated during the year.
For the full year to 26 June 2021, a dividend of
2.40p per share was paid on 21 December 2021
to shareholders on the register at the close of
business on 26 November 2021.

An interim dividend for the year ending 2 July
2022 of 0.83p per share (2021: nil) was paid on
21 April 2022 to shareholders on the register at
the close of business on 25 March 2022.

The Board of Directors is recommending a final
dividend for the year ending 2 July 2022 of 1.67p

per share, taking the full year dividend to 2.50p
per share (2021: 2.40p). The final dividend will
be paid on 21 December 2022 to shareholders
on the register at the close of business on
25 November 2022. The election deadline for
participants in the Company’s Dividend Re-
Investment Plan will be 30 November 2022.

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.

53 week period ended 2 July 2022

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 26 June 2021

Operating
performance
£000
356,808
(241,183)
115,625
(86,878)
28,747
(10,940)
17,807
-
(851)
16,956
(3,050)
13,906

Significant
non-recurring
items
Note 4
£000
-
-
-
(1,898)
(1,898)
-
(1,898)
-
-
(1,898)
198
(1,700)

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

Movement in
the fair value
of interest rate
swaps/foreign
exchange
contracts
£000
-
-
-
(821)
(821)
-
(821)
-
(18)
(839)
166
(673)

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

Defined
Benefit
Pension
Scheme
£000
-
-
-
417
417
-
417
-
(285)
132
(33)
99

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

Discounting
of deferred
consideration
£000
-
-
-
-
-
-
-
-
(54)
(54)
10
(44)

As per
Consolidated
Statement of
Comprehensive
Income
£000
356,808
(241,183)
115,625
(89,180)
26,445
(10,940)
15,505
-
(1,208)
14,297
(2,709)
11,588

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

Finsbury Food Group Annual Report and Accounts 2022

Other Significant and Non-Recurring Items
Significant non-recurring cost of 1.9 million relates to acquisition costs for both successful and aborted transactions of £1.6 million, litigation
and legal fees of £0.9 million, asset disposals of £0.2 million offset by the release of provisions for onerous leases and factory closure costs of
£0.8 million. All items have been excluded from operating profit in the table below to better reflect the ongoing trading position.

Earnings Per Share (EPS)
EPS comparatives to the prior year can be distorted by significant non-recurring items and other items 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 10.1p (2021: 8.6p).

2022
8.4p
10.8p

7.9p
10.1p

2021
9.8p
9.1p

9.3p
8.6p

Taxation
The Group taxation charge for the year was
£2.7 million (2021: £3.4 million). The effective
rate of tax on profits before significant and
non-recurring and other items is 18.9%
(2021: 19.8%). 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 34 and 35.

The Strategic Report was approved by the
Board of Directors on 23 September 2022 and
was signed on its behalf by:

Stephen Boyd
Director

Basic EPS
Adjusted basic EPS

Diluted*2 basic EPS
Adjusted*1 diluted*2 EPS

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

Cash Flow
Cash generated from operating activities
increased to £28.7 million. Increased working
capital of £2.5 million driven by the growth
in the business reduced this to £26.2 million.
Interest paid totals £0.7 million. Taxation at
£2.0 million (2021 £3.9 million) is lower than
2021 attributable to the benefit of capital
super allowances. Cash out flows relating to
SNRs (Note 4) cost £2.3 million and should be
considered as one off in nature.

The resulting net cash from operating
activities is £21.3 million which finances a
doubling of spend on capital investment
(£12.5 million) and an acquisition outflow of
£6.1 million (of £7.1 million) as the Company
increased its stake in Lighbody-Stretz Limited
by 35% to 85%. The cash flows associated
with dividend are £4.0 million relating to the
2.4pps 2021 full and final dividend paid in
December 2021, £3.0 million and £1.0 million
for the interim dividend for 2022 paid April
2022 (0.83pps).

Debt and Bank Facilities
The Group’s total net debt is £20.6 million
(2021: £13.1 million), up £7.5 million from the
prior year, for the reasons given above.

The Group recognises the inherent risk from
interest rate rises, and uses interest rate
swaps to mitigate these risks. During the
year the Group had 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 Group entered into a forward
dating swap commencing 3 July 2022 to
10 June 2027 with a coverage of £10.0 million
fixed at a rate of 2.589%. At the year end date
the total balance of swaps was £20.0 million
(2021: £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 average base rate at 0.60%
and LIBOR at 0.263%, was 1.8% (2021: base
rate 0.10% and LIBOR at 0.052%, was 2.0%).

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 53 weeks to
2 July 2022 was 48.6 (2021: 27.2); minimum
cover required is 4.0 times. Net bank debt to
EBITDA (based on adjusted EBITDA) for the
53 weeks to 2 July 2022 was 0.7 (2021: 0.5);
maximum level required under our new
banking facility is 3.0 times.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance
42

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.

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, the business emerged from the Covid-19 pandemic restrictions but was then faced with the sharp deterioration in the
macroeconomic climate due to a convergence of multiple negative influences including the war in Ukraine and its impact on commodity availability
and energy prices. We continue to face ongoing global supply chain pressures, labour shortages and the inflationary impacts of all these factors.

While the war in Ukraine created a shock event, the business has over recent years significantly developed and constantly improves its risk
identification process which includes the appropriate governance environment, and management and mitigation strategies, supported with the
necessary resources. This puts the Company in the best possible position to address these challenges as and when they arise, as well as managing
normal business risks. The Company has continued to steadfastly adhere to its Operating Principles throughout the period and these have provided a
valuable anchor to the business as well as a framework within which to develop its future strategies.

As with the challenges the business faced with the arrival of the Covid-19 pandemic, and with the full support of the Board lending its expertise,
experience and insight, the Executive has once again led the Finsbury team through an incredibly difficult period. This while increasing the resilience
and efficiency of the business with initiatives that include leveraging our integrated information systems with advanced data contained therein,
leveraging our size through enhanced centralisation and focusing on engaging with our stakeholders.

The Board recognises that while the business, like so many others, has faced an extraordinary period of challenge on multiple fronts, there is a silver
lining in that it has developed a business and a team with the sort of experience and resilience that you cannot teach in a classroom. This has, the Board
believes, resulted in a more modern, efficient, integrated Finsbury with an outstanding management team and a modern infrastructure on which to build.

Peter Baker
Non-Executive Chairman

Finsbury Food Group Annual Report and Accounts 202243

Report 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 15 to 16. Our strategy and markets are
explained in detail in our Strategic Report on pages 2 to 41.

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 process is refined and enhanced year on year
and the Board is formally updated and consulted at key stages in the process prior to presentation of the strategic plan for 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 investor roadshows following the release of the Company’s
interim and final results. During the Covid-19 pandemic, to assist engagement with its smaller and retail shareholder base, the Company instigated
“open house” results roadshow presentations through the Investor Meet Company platform (www.investormeetcompany.com) which all shareholders
and interested parties were welcome to attend. The Company intends to continue with these roadshows for the foreseeable future. Questions and
comments can be submitted through the platform. 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 Annual General Meeting of the Company will once again be held in Cardiff and will be broadcast live (on the Investor Meet Company platform).
The Board will be present, and shareholders will have an opportunity to submit questions in advance or raise them on the floor on the day.

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 Companies Act 2006 as outlined in the Strategic
Report on pages 24 to 25. 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 owed to 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 have a formal
Equality, Diversity and Inclusion policy and offer equal opportunities regardless of race, gender, gender identity or reassignment, age, disability,
religion or sexual orientation.

The Workplace platform continues to be a key part of the Group’s Employee Engagement strategy where we communicate virtually on a Group
basis or on particular topics with the appropriate teams. We can 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 continues to be a highly beneficial tool, delivering
multiple positive outcomes for the business. We conducted an Employee Engagement survey via Workplace in February 2022 following which we
have shared the results with all colleagues. Sites and teams have reviewed their local results and are using this insight to collaboratively build plans to
drive engagement further through the coming year.

The Group is focused on ensuring Finsbury remains an attractive place to work, and this year we have reviewed our offering to ensure that we remain
competitive in wage terms, but also in a broader sense of providing a positive and ethical working culture. In addition to our focus on competitive pay
across all employee levels, we have enhanced our offer around maternity/paternity/adoption leave policies and introduced a hybrid working policy.
We also continue to ensure that we offer excellent opportunities for enhanced training and qualifications, and career progression.

Clearly, the health and safety of our workforce is our most important consideration. As well as ensuring operational measures to keep our people safe, we have
continued our focus on team health and wellbeing, through a series of initiatives at site and Group levels. We now have trained mental health first aiders at all
sites and a dedicated Health and Wellbeing group on Workplace with over 2,000 members which provides a platform for sharing inspiration, information and
practical resources around mental, physical and financial health and wellbeing.

We believe our high level of team 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. We consider being seen as a good business partner as critical to our long-term success. Inevitably,
we have had to institute cost recovery strategies in response to the inflationary environment, but have been working closely with our customers to
manage this process in a fair and transparent way.

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 line with our Sustainable Approach Operating Principle, we are focused on minimising our environmental impacts through minimising wastes of
all kinds via our Operating Brilliance Programme, increasing energy and water efficiency and recycling. These topics are included within our business
MARA (Meeting, Analysis and Reporting Arrangement) which ensures constant review and improvement. We have appointed a Group Energy
and Sustainability Manager to help drive this agenda in a consistent way across the business and in line with our Environmental Management and
Sustainability policy. More information on our work in this area is set out on pages 32 to 33.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance44

Report on Corporate Governance/Continued

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.

During the year, the business appointed a Group Health, Safety, Environment and Risk Director. The GHSER Director is a member of the Group Executive
Committee and reports to the Group Efficiency Improvement 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 five
years developing the non-financial risk function, a key role during these uncertain times, and he has worked closely with the Audit Committee and
Group Executive Committee (GEC) throughout that time. This appointment represented a further step in the Group’s risk identification, understanding,
management and mitigation processes and reflects the priority status accorded to it.

The Group Risk Process involves the identification of risks, assessment to determine the relative likelihood of them impacting the business, the potential
severity of the impact and determination of what needs to be done to manage them effectively. Risk management is integral to the development of Group
strategic plans and its ability 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:

• Management structure with clearly defined responsibilities and authority limits;

• Comprehensive Delegated Authority policy;

• Group Risk Owners’ Committee comprising subject matter experts from all key functions of the Group which enables peer review of individual risk
owners’ identification, mitigation and control measures and the strength of these controls and drives focus on risk mitigation strategies from a
wider perspective;

• Group Risk Steering Committee comprising of CEO, Group Finance Director and members of the Group Executive Committee who oversee the

risk identification process and challenge findings from the Group Risk Owners’ Committee to ensure that the process remains robust and
continually improves;

• Maintenance of a central Group-wide key risk register supported by site and function-specific registers;

• Risk simulation exercises such as cyber security testing;

• Development of business continuity plans to reroute certain product lines in the event of a line interruption through the use of specialised

technology such as Optimity;

• Ongoing policy development, implementation and testing;

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

• Internal audit function reporting to the Audit Committee with a rolling programme of work and a remit beyond financial controls, encompassing

policy adherence;

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

• Key risk item focused reviews at Audit Committee, and where appropriate, Board level; and

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

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. Ray Duignan has
served on the Board for nine years and accordingly, the Board undertook a formal review of Ray’s status as an independent Non-Executive Director
and concluded that he remains independent. This will be reassessed by the Board on an annual basis at least and Ray will be subject to annual
re-election at the Annual General Meeting.

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, contributing their knowledge and insights,
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. Meetings are held at operating sites on a rotating basis, enabling the Board to meet the site teams and to visit
the bakeries. Pre-meetings and Board dinners are also held to enable broader discussion and development of effective Board relations, and the
opportunity for the Non-Executive Directors to further develop relationships with site management and functional leads.

Finsbury Food Group Annual Report and Accounts 2022Report on Corporate Governance/Continued

The Board held five scheduled meetings during the year under review. 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 were 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
(5 meetings)

Nominations
Committee
(3 meetings)

5
5
5
5
5
5

-
-
-
3
3
-

-
-
-
-
5
5

-
-
3
-
3
2

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. During the year, the
Nominations Committee conducted a skills analysis of the Board to assist it with future appointments. Details of the Directors’ individual experience
and areas of expertise are outlined on pages 48 and 49.

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 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.

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 and meeting effectiveness, operating efficiency, quality of information and ongoing development.

A similar process is followed for the Audit and Remuneration Committees. Individual Director and Chairman reviews have been undertaken since the start
of the financial year. All reviews sought feedback from other Directors to ensure a balanced approach. Where relevant, Board performance improvements
are discussed throughout the year on an ad hoc basis.

The 2022 Board evaluation exercise was completed in June 2022. The average scores were all satisfactory, with the vast majority rated consistently
good or excellent. Given the speed of external changes there was a feeling the Board could have usefully convened outside of the normal meeting
routine to discuss particular matters, this will be discussed at a subsequent Board meeting. Following feedback from the 2021 evaluation exercise, the
Nominations Committee has increased the formality of its operations with three formal meetings held during the year focusing on succession issues,
skills mapping and diversity.

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 15 to 16 and on our website.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance46

Report on Corporate Governance/Continued

In addition to in-person communication and training, the Group uses Workplace to facilitate the promotion of the Group’s 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.

The Group hosts an annual conference which also seeks to promote the Group culture and values. Having enjoyed a successful online experience
with the senior team through Workplace during the pandemic, the conference was again broadcast live online and recorded in October 2021, this
time open to all permanent team members. This allowed teams to join live or catch up with presentations on demand. Feedback from attendees was
very positive with open access being appreciated in particular. Accordingly, the Company intends to maintain the open access element to ensure
maximum participation opportunities and take advantage of this key engagement opportunity. “Shining Example” winners from the previous year
will be invited to join the conference live to further increase recognition and engagement from the team member population.

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 expects these to evolve over time.

The Board maintains a schedule of matters reserved for its decision, 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, the 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 Financial Statements, 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’s
activities is outlined on pages 56 and 57.

Remuneration Committee
The report of the Remuneration Committee is set out on pages 58 to 62. 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 five scheduled meetings during the year.

Nominations Committee
The Nominations Committee has three members, Peter Baker (Chairman), Marnie Millard 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 three times during the year under review, primarily to consider succession issues. Marnie Millard will assume the Chair of the Nominations
Committee after the next Annual General Meeting.

M&A Committee
Peter Baker, John Duffy, Steve Boyd and Ray Duignan form the Board’s M&A Committee and are responsible for the initial evaluation of potential
M&A opportunities. This Committee is convened by the Chair and CEO on an ad hoc basis from time to time as necessary or desirable to respond to
opportunities arising. The Committee is under the direction of, and reports to, the Board which is responsible for making any decisions concerning M&A.

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.

Finsbury Food Group Annual Report and Accounts 2022Report on Corporate Governance/Continued

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;

• One-to-one meetings with investors; and

• Investor Meet Company online roadshow presentations.

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), Investor Meet Company roadshow meetings 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.

To maintain our visibility and accessibility to a broader range of our shareholder base, we will continue to run 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 again take place in Cardiff and be broadcast via webcast to enable
shareholders to view proceedings remotely. Shareholders will be encouraged to vote by proxy whether or not they intend to be present. We are
conscious that our AGM is held in the winter months with the possibility of increased risk from Covid-19 and other respiratory illnesses. Accordingly,
while shareholders will (under current guidance) be able to attend in person, to minimise risk to attendees we will not be providing product samples
and there will not be any informal mingling with the Board before or after the AGM. We would ask shareholders to refrain from attending if they are
experiencing any Covid-19 symptoms. 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
Non-Executive Chairman
23 September 2022

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance48

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.
These are the Directors who were in office during the year
and up to the date of signing the Financial Statements.
The matters overseen by the Board are detailed in section 9
of the Corporate Governance Report.

Peter Baker
Non-Executive
Chairman

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, M&A activity, restructuring and
investment it has been transformed into a
broadly diversified speciality bakery Group
with over £300.0 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 areas
of expertise are strong leadership and
general management skills, operations
and engineering experience, turnaround,
change management and M&A.

Finsbury Food Group Annual Report and Accounts 2022The 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, M&A, 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 the Non-Executive
Chair of Marks Electrical Group plc,
an AIM-listed online electrical goods
retailer, and 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 & Wireless
Communications Plc, Marlborough
Stirling Plc, and McBride Plc, a European
private label manufacturer. For the
last 10 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,
M&A and digital technology.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance50

Directors’ 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 2 to 41.

Dividend
The dividend was reinstated during the year. For the full year to 26 June 2021 a dividend of 2.40p per share was paid on 21 December 2021 to
shareholders on the register at the close of business on 26 November 2021.

An interim dividend for the year ending 2 July 2022 of 0.83p per share (2021: nil) was paid on 21 April 2022 to shareholders on the register at the
close of business on 25 March 2022.

The Board of Directors is recommending a final dividend for the year ending 2 July 2022 of 1.67p per share, taking the full year dividend to 2.50p per
share (2021: 2.40p). The final dividend will be paid on 21 December 2022 to shareholders on the register at the close of business on 25 November
2022. The election deadline for participants in the Company’s Dividend Re-investment Plan will be 30 November 2022.

Directors and their Interests in the Company
The Directors and brief biographies are detailed on pages 48 and 49.

In accordance with the Articles of Association, Bob Beveridge and Marnie Millard retire by rotation and being eligible offer themselves for
re-election at the Company’s forthcoming AGM. In addition, as Ray Duignan has served on the board for the past nine years, he retires and offers
himself up for re-election at the AGM and will do so annually from this year while he remains a Director of the Company. The Board conducted
a formal assessment in 2022 and concluded that Ray remains independent.

The beneficial interests of the Directors in the ordinary shares of the Company on 2 July 2022 and 26 June 2021 are set out below:

Ordinary Shares

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

2 July 2022

26 June 2021

96,817
14,000
1,280,057
2,738,246
9,701

96,817
14,000
1,195,543
2,617,592
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
2 July 2022.

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 2 September 2022:

Ruffer (London)
FIL Investment International (London)
Investec Wealth & Investment (London)
Premier Miton Investors (London)
Finsbury Food Group Plc Employee Benefit Trust (UK)
Janus Henderson Investors (London)
Interactive Investor (Glasgow)
Hargreaves Lansdown Asset Mgt (Bristol)
DBAY Advisors (Douglas)

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

Number of shares

% shareholding

25,112,500
13,346,766
11,386,281
8,489,675
7,385,992
5,100,000
4,907,922
4,236,404
4,025,000

19.26
10.24
8.73
6.51
5.66
3.91
3.76
3.25
3.09

Finsbury Food Group Annual Report and Accounts 2022

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 2 July 2022.
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

53 weeks ending
2 July 2022
kWh

52 weeks ending
26 June 2021
kWh

108,496,995

102,577,469

70,078,064
37,712,271
302,320
404,340
-

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

Tonnes CO2e

12,767.52
344.30
109.17
-
5.76

12,747.99
497.37
37.69
32.96
10.43

7,292.80

7,463.49

68.96

30.89

20,588.51
0.17

20,820.82
0.19

7,292.80

2,160.00

13,295.71
0.11

18,660.82
0.17

Emission factors are based on Government published 2021 GHG conversion factors.

The actions taken to reduce our energy consumption is covered under our Responsibility Strategic Pillar on pages 22 to 23.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance52

Directors’ Report/Continued

Task Force for Climate-Related Financial Disclosure (TCFD)
The first mandatory period for reporting will be FY23. In preparation for this, below is a review of requirements and our current position.
The proposal is to expand disclosures for the FY22 report.

Preparations for TCFD
Governance
Our approach to sustainability (including climate change) is monitored by the Group Executive Committee. A number of the Group Executive
Committee are part of the Sustainability Forum and the activities of the Sustainability Forum are governed by the Group Operations Forum. Both the
Sustainability Forum and the Operations Forum are comprised of a number of leaders across various areas of the business to ensure that this is not
purely operationally focused but is driving improvement across the whole of the business.

The day-to-day management and coordination of activities in relation to climate change risk is carried out by the HSE and Risk Director.

To further support the direction of sustainability, a Group Energy and Sustainability Manager was introduced to the business in April 2022.

Strategy
In FY22 we introduced a clear ‘Sustainable Approach’ strategy that is linked to reducing the risk to the business due to the effects of climate change.
The strategy was created in consultation with multiple stakeholders within the business and is passed to all bakeries within the organisation to
assess their current status versus the to be status. All sites have built action plans in relation to the Sustainable Approach strategy. Progress on these
plans will be monitored primarily via the Group Sustainability Forum (which meets four times a year).

Risk Management
The identification and management of environmental risk (including climate change) currently follows the Group risk-management process. A Risk
Owners Group has been established, comprised of a number of subject matter experts who identify risks and opportunities, assess impact to the
business and also ensure that emerging risks are considered which may impact the Group in the future.

The Group Risk Register has been adapted to identify risks that are likely to be, or are currently impacted by climate change.

The priority for the upcoming year will be to conduct climate change scenario modelling to understand the implications of climate change risk to
ensure more proactive responses to extreme climate change events.

The outputs from this group are provided to the Group Risk Steering Committee and the Group Audit Committee.

Metrics and Targets
A number of metrics and targets have been established within the business in relation to climate change. We have undertaken an assessment using
the principles of the Science Based Targets initiative and we aim to reduce our Scope 1 and Scope 2 targets by 58.8% by 2030 from a 2016 base year.

A further priority for next year will be starting to establish a Scope 3 baseline and target improvements.

Furthermore, we will be establishing a Suppliers Sustainability Forum to link and share best practice across our supply chain.

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.

A new bank facility was agreed in June 2022 of £60.0 million revolving credit facility provided by a club of three banks – HSBC, Barclays and RBS. The
facility is available on a four plus one-year term until June 2027 and also includes scope for the facility to be increased by up to a further £60.0 million.

The main risks arising from the Group’s financial instruments are interest rate risk 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 £60.0 million available of which £27.9 million was drawn at 2 July 2022 leaving a headroom of £32.1 million plus a cash balance
of £7.4 million with a further approved accordion facility of £60.0 million. The interest rate risk is managed through interest rate swap transactions.
The Group had two swaps mature during the year and has one forward-dated interest rate swap commencing 3 July 2022 maturing 10 June 2027
with a coverage of £10.0 million fixed at a rate of 2.589%. The counterparty to this transaction is HSBC Bank Plc.

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 £60.0 million RCF facility,
the facility utilised at the balance sheet date was £27.9 million giving £32.1 million headroom plus a further £60.0 million accordion. Full details are
given in Note 24.

Finsbury Food Group Annual Report and Accounts 2022Directors’ Report/Continued

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 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 (2021: £4,000) were made. No political donations were made.

Going Concern
The Group has delivered a resilient trading performance and achieved record revenues against a continued challenging backdrop in an
unprecedented period of inflation, political instability, a contracting UK economy and Ukraine conflict adversely impacting labour availability and
input prices and supply. 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; forecast assumptions have been critically assessed and financial forecasts have been compared against historical performance to
understand the movements. The Board, having reviewed the Group’s short and medium-term plans and new financing arrangements from June
2022 to June 2027, 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 renewed facility and increase in headroom on the debt:EBITDA covenant test.

The Group has a £60.0 million revolving credit facility plus scope for the facility to be increased by up to a further £60.0 million, which are committed
until June 2027. 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 have increased over the year by £7.5 million to £20.6 million, with a debt to
adjusted EBITDA measure of 0.7x up from 0.5x at 26 June 2021 well within the 3.0x maximum.

Independent 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.

Disclosure of Information to Auditors
• 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 23 September 2022 and was signed on its behalf by:

Stephen Boyd
Director

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance54

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.

There have been a number of promotions into
the Group Executive Committee during July 2022,
Graeme Clark joins the team as Group Commercial
Director and Steven Hill joins as Finance Director.

Ian Chree
Group Efficiency
Improvement
Director

Ian joined Finsbury Food Group in 2005.
He now has 25 years’ experience in the
food industry as well as over 21 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.

Sat joined Memory Lane Cakes Limited
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.

Frances Swallow
Group Technical
Director

Frances joined Finsbury Food Group in
October 2009. She has worked in the
food industry for over 31 years, 21 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.

Sat Hanspal
Group Purchasing
Director

Jackie joined Finsbury Food Group in
2015. She has over 22 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.

Simon Staddon
Group Business
Development
Director

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 before
recently moving into the Business
Development role.

Jackie Kent
Group Human
Resources Director

Finsbury Food Group Annual Report and Accounts 2022The Group Executive Committee (GEC)/Continued

Lucy joined Finsbury Food Group in 2011.
She has over 20 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 led Fletchers Bakery for the first
five years. Jon has 22 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
Group Operations
Director

Mathew joined Finsbury Food Group in
2019. Mathew has over 26 years’ supply
chain experience in both retail and as
a supplier. Mathew also has extensive
international experience with Kerry and
RB having worked in the EU, South East
Asia and North America for a number
of years.

Dan joined Finsbury Food Group in
2017. He has 20 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 Practitioner Member of the Institute
of Environmental Management and
Assessment (IEMA).

Dan Bowles
Group Health, Safety,
Environment and
Risk Director

Mathew Baxter
Group Supply
Chain Director

Graeme joined Finsbury Food Group in
2006. He has over 20 years’ commercial
experience in the bakery industry and
has been Commercial Director of the
cake business for the last six years.
Graeme has recently moved to the new
role of Group Commercial Director.
After graduating university with a BA
in Marketing he spent the first three
years of his career in the textile industry.
Following that Graeme joined Enterprise
Foods and was Head of Commercial
for California Cake Company when the
bakery was acquired by Finsbury Food
Group in 2006.

Graeme Clark
Group Commercial
Director

Steve joined Finsbury Food Group in
2017, initially as Finance Director for
the cake business and subsequently as
Finance Director for the UK business.
Prior to that Steve spent 12 years at
Mondelez International and Cadbury,
working in a variety of finance roles
across their businesses in the UK, so has
significant experience in FMCG and
food manufacturing.

Steve Hill
Finance Director

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance56

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 and internal auditor without the presence of Executive Directors.

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 Financial Statements 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 (https://finsburyfoods.co.uk/investor-
relations/corporate-governance/).

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

• Review of the FY22 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 the Defined Benefit Pension Scheme; ensuring consistency with prior years and external benchmarks.

• Alternative performance measures; agreed to refresh measures, consistent with strategic objectives.

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
Considering last year’s detailed assessment of the audit effectiveness, the same audit effectiveness questionnaire was completed, followed by
a joint meeting between senior finance managers and the audit team members to review the results. A joint report was submitted to the Audit
Committee; audit quality was deemed to be good and improvements have been achieved. Further improvements for FY22 were agreed by the
Committee, including planning and escalation procedures and greater focus on internal controls now the common system and controls have been
fully implemented across the Group. The Committee consider that challenges from the external auditor have been suitably rigorous.

During the year, the fees paid to the auditors, PwC, were £199,000 (2021: £183,000) for audit services, and £181,000 (2021: £41,000) 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 four 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 2022Audit Committee Report/Continued

Risk Management, Internal Controls and Internal Audit
Risk management sits with the Risk Steering Committee, chaired by the Group Health, Safety, Environment and Risk Director; the Audit Committee
agreed the terms of reference of this Committee and reviews its outputs and minutes on an ongoing basis. This year the risk management process
was fully integrated with both health and safety and the strategic planning processes. 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 36 to 39.

Internal audit reviews during the year have focused on compliance with the Group’s control framework and the internal audit reports and follow-up
actions were reviewed by the Committee on an ongoing basis.

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 ‘deep dive’ reviews into IT risks including Cyber security and the end-to-end procurement processes.
It received ongoing 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 in this Audit Committee Report, the Committee is satisfied that the Group has
in place effective internal control systems and a 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 of the Audit Committee
23 September 2022

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance58

Directors’ Remuneration Report (unaudited)

Statement from the Chairman of the Remuneration Committee
Dear Shareholder,

As Chair of the Remuneration Committee, I am pleased to present the Directors’ Remuneration Report of Finsbury Food Group Plc (the “Company”)
for the year ended 2 July 2022 (“FY22”) (“Report”). The Remuneration Report follows on pages 60 to 62 and provides details of the earnings of the
Directors of the Company during FY22.

As with 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 Policy
A copy of the Company’s Directors’ Remuneration Policy (the “Remuneration Policy”) is available on our website at www.finsburyfoods.co.uk/
investor-relations/corporate-governance. The Remuneration Policy has been applied since the 2017/18 financial year.

Remuneration in Context
Despite the ongoing pressures and inflationary headwinds that are set to persist, we have a successful track record of navigating challenging market
conditions. We believe the steps already taken to optimise the business to date, stands us in good stead. We have been able to mitigate the impact of
these pressures through commercial negotiation and operational improvements.

With the recovery in foodservice, steady sales in retail and a strong overseas performance, and including the benefits of the decisive mitigation
actions taken in the first half of the year, we are pleased to have been able to deliver a record revenue performance of £356.8 million, up 13.9%
against revenue for the year to 26 June 2021 (“FY21”). The Group’s Operating Brilliance Programme continued to drive improvements in cost and
cash performance and the Group’s net bank debt position at year end was £20.6 million (FY21: £13.1 million). The increase in debt of £7.5 million
reflects our investment in European growth through the acquisition of a further 35% shareholding in our French subsidiary £6.1 million, and the
reinstatement of the FY21 final dividend and the interim dividend paid during FY22 with a cash outlay of £4.0 million.

This strong performance is 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.

Review of FY22 and Remuneration Outcome
Following the voluntary 30% salary/fees reductions taken by the Directors between 1 April 2020 and 20 June 2020 and no salary/fee increases in FY21,
the following remuneration measures were implemented during FY22:

• The Executive Directors received a base salary increase of 2% with effect from 1 October 2022 in line with the average increase for the wider

workforce;

• We have increased pay rates for the team member population across all manufacturing sites in order to remain competitive and ensure we are able
to attract and maintain a skilled and stable workforce. In certain locations where labour shortages have been more acute, the increases have been
higher than current inflationary levels; and

• The first review of the Non-Executive Directors’ fees in six years was carried out in September 2021. As a result, the Chairman’s fee was increased

from £85,000 to £100,000 per annum with effect from 1 October 2021. No changes were made to the other Non-Executive Director fees.

The achievement of a record revenue performance in the face of exceptional negative macroeconomic and inflationary headwinds is a demonstration
of Finsbury’s resilience and strategic focus, and the quality and commitment of its management team. The Group delivered a particularly strong
second-half performance with revenue up 18.7% against H2 FY21, 10.0% of which was attributable to volume growth. This resulted to an increase
in adjusted operating profit for FY22 of £17.8 million, up £1.7 million (10.6%) against FY21.

As set out on page 61, based on an adjusted full-year EBITDA performance of £28.7 million, the Executive Directors earned a bonus of 100% of
salary for FY22. 50% of the bonus will be paid in cash and 50% in shares. The Committee considers that this bonus outturn to the Executive Directors
fairly reflects and rewards their outstanding leadership during an exceptionally challenging period coupled with the delivery of record revenue
performance and profit growth. We congratulate the management team on such a strong performance and believe the full award of the incentive is
well deserved.

The Performance Share Plan (PSP) awards granted on 28 October 2019 were based on the three-year performance period ending on 2 July 2022,
with 50% of the award based on earnings per share (EPS) and 50% of the award based on Total Shareholder Return (TSR) measured against the
FTSE Small Cap comparator group. EPS as at 2 July 2022 was 10.1p which was between the threshold and maximum EPS target disclosed on page
61, therefore 73.42% of EPS element has vested. TSR performance was between the median and upper quartile against the comparator group and
therefore 48.08% of the TSR element has vested. The shares awarded as a result of the PSP awards vesting are subject to a two-year holding period
commencing on 3 July 2022.

The Restricted Stock Awards (RSA) granted on 28 October 2019 to recognise the contribution made and the importance of retaining and motivating
the Executive Directors and the wider management team, will vest on 28 October 2022 subject to continued employment. The RSAs are not subject to
a holding period.

The Committee awarded nil-cost share options as PSP awards under the LTIP to Executive Directors (and participants including senior management)
during FY22. The number of options 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 FY21.

These awards and the respective conditions are detailed on page 61.

Finsbury Food Group Annual Report and Accounts 2022Directors’ Remuneration Report (unaudited)/Continued

Remuneration in Respect of the 2022-2023 Financial Year
Salary and Fees
A review of the Executive Directors’ salary and the Chairman and Non-Executive Directors’ fees was undertaken by the Committee in September
2022. It was determined that the Executive Directors’ salaries will increase by 5.4% in line with the general increases applied to the wider workforce.
There will be no increase for the Chairman or Non-Executive Directors.

Annual Bonus
No changes are proposed to the bonus opportunity for FY23. The maximum bonus opportunity for the Executive Directors remains 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
FY23 bonus will be reported in the FY23 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 Committee is reviewing the performance conditions and targets for the LTIP awards. The performance conditions and targets will be
disclosed in the Remuneration Report next year.

Independent Advice
During the year, the Remuneration Committee retained the services of Deloitte LLP to provide advice and support to the Committee relating to Director
remuneration and incentivisation, and in particular to enable the Committee to consider its options for incentivisation and reward in the context of the
unusual macroeconomic climate, to understand developing market practices and the views of the investor community and how they might relate to the
Company. Deloitte’s fees for providing this service during FY22 were £9,000.

Marnie Millard
Chairman of the Remuneration Committee
23 September 2022

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance60

Directors’ Remuneration Report (unaudited)/Continued

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

The main aim of the Remuneration 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 Remuneration
Policy is intended to remunerate our Executive Directors competitively and appropriately for effective delivery of these objectives, and allows them to
share in this success and the value delivered to shareholders. The Remuneration 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 FY21 and FY22. Explanatory notes are set out below.

FY22

Executive Directors
J G Duffy
S A Boyd

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

FY21

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

434
304

738

96
55
58
56
265
1,003

11
11

-
-
-
-
-
22

217
152

369

-
-
-
-
-
369

217
152

369

-
-
-
-
-
369

Salaries/
fees
£000

Taxable
benefits
£000

Annual
bonus shares
£000

Annual
bonus cash
£000

428
300

728

85
55
58
55
253
981

12
12

-
-
-
-
-
24

214
150

364

-
-
-
-
-
364

214
150

364

-
-
-
-
-
364

LTIP*
£000

270
189

459

-
-
-
-
-
459

LTIP*
£000

-
-

-
-
-
-
-
-

Total
remuneration
£000

1,149
808

1,957

96
55
58
56
265
2,222

Total
remuneration
£000

868
612

1,480

85
55
58
55
253
1,733

* The Performance Share Plan (“PSP”) awards granted on 28 October 2019 vested at 60.54% (see page 61 for further details) with respect to the

performance period ending 2 July 2022. The value attributed to these vested awards in the table above is based on the three-month average share
price to 2 July 2022 (71.09p). These awards are subject to a two-year holding period commencing on 3 July 2022. No long-term incentive awards
vested with respect to a performance period ending during FY21.

The Restricted Stock Awards (RSA) granted on 28 October 2019 to recognise the contribution made and the importance of retaining and motivating
the Executive Directors and the wider management team will vest on 28 October 2022 subject to continued employment. The value of these awards
will therefore be included in the single figure disclosures for FY23.

Finsbury Food Group Annual Report and Accounts 2022
Directors’ 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 FY22 and FY21 were as follows:

Executive Directors
J G Duffy
S A Boyd

From 1 October 2021
£436,540
£305,786

From 1 October 2020
£427,980
£299,790

Percentage increase
2%
2%

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 2 July 2022, Executive Directors were able to earn a bonus of up to 100% of their annual base salary subject to the achievement of
stretching EBITDA performance targets. Based on adjusted EBITDA performance of £28.7 million, the maximum adjusted EBITDA target has been
achieved. Thus, the Executive Directors earned a bonus of 100% of salary for FY22.

The following table sets out the bonus pay-out to the Executive Directors for FY22 and how this reflects EBITDA performance for the year.

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

Actual performance

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

£28.7 million

100% of salary

Bonus to be paid
50% in cash
50% in shares

Long-term Incentives
PSP awards granted on 28 October 2019 were based on performance over the three financial years to 2 July 2022 and vested as to the amounts set
out below. These awards are subject to a two-year holding period from 3 July 2022.

Measure

Performance conditions

Actual
performance

% of this
element vesting

% of full award

50%: Adjusted diluted EPS
for FY22

Adjusted diluted EPS

% vesting

Below 9.00p
At 9.00p
Between 9.00p and 10.72p
Above 10.72p

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

Relative TSR ranking

% vesting

50%: Relative TSR measured
against the FTSE Small Cap
comparator group (excluding
investment trusts) over the
performance period

Total % of award vesting

Below median
Median

Between median
and upper quartile
Upper quartile

0
25%

Straight-line vesting

100%

10.1 pence
per share

73.42%

36.71 %

Between
median and
upper quartile

48.08%

24.04%

60.75%

In arriving at the adjusted EPS out-turn of 10.1p, the Committee has excluded the significant and non-recurring costs relating to restructuring
and impairments.

The table below sets out the number and value of shares resulting from the vesting of the PSP option awards detailed above.

J G Duffy
S A Boyd

Number of
options granted
625,310
438,016

Number of
shares vested
379,876
266,095

Value of
shares vested
£270,051
£189,165

The value vesting in the table above is based on the three-month average shares price to 2 July 2022 (71.09p).

Chairman and Non-Executive Director Fees
Details of Chairman and Non-Executive Directors’ fees earned during FY22 are set out below:

Chairman fee
£96,250

Non-Executive
Director fee
£50,000

Chair of a
Board Committee
£5,000

Member of a
Board Committee
£2,500

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

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 2 July 2022 and 26 June 2021 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

2 July 2022

26 June 2021

2,738,246
1,280,057

2,617,592
1,195,543

96,817
14,000
-
9,701

96,817
14,000
-
9,366

The current personal shareholdings of J G Duffy and S A Boyd and their immediate families equate to circa 4.3 and 2.8 times salary respectively.

The interests of the Directors and their immediate families in the Company’s ordinary shares did not change between 2 July 2022 and the date these
Financial Statements were signed on 23 September 2022.

The interests of each Executive Director of the Company as at 2 July 2022 and 26 June 2021 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
28/10/2019
22/10/2020
01/11/2021
04/12/2015
28/10/2019
22/10/2020
01/11/2021

Number of options
at 26 June 2021
655,614
1,174,090
705,888
-
476,364
833,380
494,458
-

4,339,794

Granted
-
-
-
468,608
-
-
-
328,250

796,858

Exercised
-
-
-
-
-
-
-
-

Lapsed
-
(245,434)
-
-
-
(171,921)
-
-

(417,355)

Number of options
at 2 July 2022
655,614
928,656
705,888
468,608
476,364
661,459
494,458
328,250

4,719,297

Details of the PSP awards granted to the Executive Directors during FY22 are given in the table below:

Number of shares

Basis of award

Performance/vesting period

Performance conditions

J G Duffy

468,808

S A Boyd

328,249

100% of salary
Nil cost option (PSP Award)

3 financial years from
27 June 2021

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 Company’s shares over the three business days
immediately prior to the end of FY21.

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

Vesting of 50% of the FY22 PSP award will normally be based upon the amount of the adjusted diluted EPS delivered in the financial year ending in
2024, being the final financial year of the three financial year performance period beginning with FY22. Below the threshold vesting target of 7.60p,
none of the EPS component of the award will vest. 25% of this EPS component will vest if adjusted diluted EPS is 7.60p with 100% vesting at 9.00p
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 alternative 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.

Vesting of 50% of the FY22 PSP award will be based upon relative TSR against the FTSE Small Cap comparator group (excluding investment trusts)
over the performance period. At below median relative TSR ranking, none of the TSR component of the award will vest. 25% of the TSR component
will vest at median ranking, 100% of the TSR component vesting at upper quartile or above ranking, and vesting will be determined on a straight-line
basis between these points.

Approval
This report was approved by the Board on 23 September 2022 and signed on its behalf by:

Marnie Millard
Chairman of the Remuneration Committee

Finsbury Food Group Annual Report and Accounts 2022Independent 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 2 July 2022 and of the Group’s profit and the Group’s cash flows for the 53-week period then ended;

• The Group Financial Statements have been properly prepared in accordance with UK-adopted international accounting standards;

• 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: the Consolidated Statement of Financial Position and the Company Balance Sheet as at 2 July 2022; the Consolidated Statement of
Comprehensive Income, the Consolidated and the Company Statements of Changes in Equity and the 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 procedure in respect of the Group’s five largest manufacturing locations as well as Finsbury Food Group Plc; and

• Our audit procedures covered entities contributing 82% of the Group’s revenues for the 53-week period ended 2 July 2022.

Key Audit Matters
• Goodwill impairment assessment (Group); and

• Recoverability of the Company investments in subsidiaries (Parent).

Materiality
• Overall Group materiality: £1.8 million (2021: £1.6 million) based on 0.5% of total revenues;

• Overall Company materiality: £1.7 million (2021: £1.5 million) based on 1% of total assets (restricted by Group materiality); and

• Performance materiality: £1.3 million (2021: £1.1 million) (Group) and £1.3 million (2021: £1.1 million) (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.

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.

Impact of the outbreak of Covid-19 on the Financial Statements (Group and Parent), which was a key audit matter last year, is no longer included because
of the Group continuing to operate throughout the pandemic and Covid-19 is no longer considered a pervasive risk. Otherwise, the key audit matters on
the following page are consistent with last year.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance64

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 2 July 2022, the Consolidated Statement of Financial Position includes
£73.2 million of goodwill (2021: £73.2 million). In accordance with the
requirements of UK-adopted International Accounting Standards,
management has performed impairment reviews in relation to the goodwill
held in each of 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. Sensitivities of these key estimates and
judgements are detailed in Note 10, Intangibles.

Recoverability of the Company investments in subsidiaries (Parent)
At 2 July 2022, the Company’s Statement of Financial Position included
£118.4 million of investments in subsidiaries (2021: £112.0 million). In
accordance with the requirements of UK-adopted International Accounting
Standards, management has performed an analysis considering whether
any impairment triggers exist as well as 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.

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 assessing the impact of excluding cash flows that improve or
enhance the CGU’s performance;

• Evaluating the appropriateness of the projected revenue growth rates

used, both over the short term to 2025 and over the longer term,
including assessing and challenging the assumptions compared to
current trading performance and economic conditions;

• 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

benchmarking the rate used to other similar companies;

• Evaluating other key inputs to the cash flows, including the impact of

cost pressures on 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 have considered whether there are any indicators of impairment,
including comparing to current market capitalisation.

In order to support that there is no impairment we have also obtained
the relevant subsidiary cash flow forecasts that support the carrying
value of the investment. We have challenged key inputs, assessed
management’s methodology and evaluated the appropriateness of key
assumptions adopted (as described above).

We believe that the assumptions in the value in use model and the conclusion
reached that no impairment is required is reasonable. We consider the
carrying value of the investment balance to be materially correct.

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 with the consolidation work and Group financial reporting for
Finsbury Food Group Plc being undertaken by a team based at the UK head office.

Of the Group’s nine reporting components, five 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 with the audit
procedures focused on the investment carrying value and the revolving credit facility held by the Company.

Our audit addressed components making up 82% of the Group’s revenues for the period.

Finsbury Food Group Annual Report and Accounts 2022Independent Auditors’ Report to the Members of Finsbury Food Group Plc/Continued

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

£1.8 million (2021: £1.6 million).

Financial Statements – Company

£1.7 million (2021: £1.5 million).

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 the 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.

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 £1.7 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% (2021: 75%) of
overall materiality, amounting to £1.3 million (2021: £1.1 million) for the Group Financial Statements and £1.3 million (2021: £1.1 million) 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 £89,000 (Group audit)
(2021: £78,000) and £85,000 (Company audit) (2021: £74,000) 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

on trading performance and liquidity;

• Consideration of the 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 other key inputs to the cash flows, including the forecast margins and capital expenditure;

• 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 Earnings Before Interest Taxation

Depreciation and Amortisation (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.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance
66

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

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 2 July 2022 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.

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, employment law and environmental 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 AIM listing regulations, pension legislation, tax legislation and 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;

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

journals; and

• Incorporated an element of unpredictability in our audit procedures.

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.

Finsbury Food Group Annual Report and Accounts 2022Independent Auditors’ Report to the Members of Finsbury Food Group Plc/Continued

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
23 September 2022

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance68

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

The Directors are responsible for preparing the Annual Report and Consolidated Financial Statements and the Financial Statements in accordance
with applicable law and regulation.

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 UK-adopted international accounting standards and the 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 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 UK-adopted international accounting standards have been followed for the Group Financial Statements and United

Kingdom Accounting Standards, comprising FRS 101 have been followed for the 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 Company will continue in business.

The Directors are responsible for safeguarding the assets of the Group and 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 Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and 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 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
23 September 2022

Finsbury Food Group Annual Report and Accounts 2022Financial Statements
Consolidated Statement of Comprehensive Income
for the 53 weeks ended 2 July 2022

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
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 for the financial year, net of tax
Total comprehensive income for the financial year

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

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

Earnings pence per ordinary share
Basic
Diluted

The Notes on pages 73 to 104 form an integral part of these Financial Statements

Note

2022
£000

2021
£000

3
4

7
7

14
23

9
9

356,808
(241,183)
115,625
(98,222)
(1,898)
15,505
-
(1,208)
(1,208)
14,297
(2,709)
11,588

7,815
(1,954)
5,861
17,449

10,472
1,116
11,588

16,333
1,116
17,449

8.4
7.9

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

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

Consolidated Statement of Financial Position
at 2 July 2022

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

2022
£000

2021
£000

10
12
23

15
16
17
13

18
20
21
13
22

18
21
22
23
14

26
25
25
25
25

87,355
62,672
4,072
154,099

23,281
58,148
7,381
20
88,830
242,929

(1,605)
(74,284)
(697)
(575)
(496)
(731)
(78,388)

(35,388)
(18)
-
(3,699)
(6,582)
(45,687)
(124,075)

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)

118,854

113,271

1,304
64,956
578
(5,696)
57,456
118,598
256
118,854

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

The Financial Statements on pages 69 to 72 were approved by the Board of Directors on 23 September 2022 and were signed on its behalf by:

Stephen Boyd
Director

Registered Number 00204368

The Notes on pages 73 to 104 form an integral part of these Financial Statements

Finsbury Food Group Annual Report and Accounts 2022

Consolidated Statement of Changes in Equity
for the 53 weeks ended 2 July 2022

Balance at 28 June 2020

1,304

64,956

578

(3,378)

34,918

2,210

100,588

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

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 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
Balance at 26 June 2021

Balance at 27 June 2021

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
Shares issued during the year
Impact of share-based payments
Transactions with non-controlling interests
Costs associated with transactions with
non-controlling interests
Foreign exchange translation differences
Dividend paid
Balance at 2 July 2022

14
23

26
26

14
23

26
26
26

-
-
-
-

-
-
-
-
-
1,304

-
-
-
-
-
64,956

-
-
-
-
-
578

(1,996)
-
-
-
-
(5,374)

12,347

1,298

13,645

396
811
1,207
13,554

-
1,001
89
(541)
-
49,021

-
-
-
1,298

-
-
-
-
(722)
2,786

396
811
1,207
14,852

(1,996)
1,001
89
(541)
(722)
113,271

1,304

64,956

578

(5,374)

49,021

2,786

113,271

-
-
-
-

10,472

1,116

11,588

-
-
-
-

7,815
(1,954)
5,861
16,333

-
-
-
1,116

(500)
178
-
-

-
-
1,524
(4,962)

-
-
-
(1,121)

(375)

7,815
(1,954)
5,861
17,449

(500)
178
1,524
(6,083)

-
-
1,304

-
-
64,956

-
-
578

-
-
(5,696)

(67)
(4,018)
57,456

-
(2,525)
256

(67)
(6,543)
118,854

The Notes on pages 73 to 104 form an integral part of these Financial Statements.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

Consolidated Cash Flow Statement
for the 53 weeks ended 2 July 2022

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
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 in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations before costs of disposals and acquisitions

Significant non-recurring costs
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
Lease payments*
Drawdown/(repayment) of revolving credit
Purchase of shares by Employee Benefit Trust
Transactions with non-controlling interests
Dividend paid to non-controlling interest
Dividend paid to shareholders
Net cash generated 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

* Lease payments see Note 11 for further details.

The Notes on pages 73 to 104 form an integral part of these Financial Statements.

Note

2022
£000

2021
£000

11,588

13,645

3
3
4
4,12
7
8
10
13
14

11
19

22
27
27

7,407
1,986
1,898
-
1,208
2,709
1,547
821
(417)
28,747

(8,254)
(7,847)
13,589
26,235

(2,254)
(678)
(2,018)
21,285

(12,545)
(1,000)
(13,545)

(2,275)
5,444
(500)
(6,083)
(2,525)
(4,018)
(9,957)

(2,217)
9,523
75
7,381

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)
(715)
(3,926)
24,806

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

(2,789)
(13,753)
(1,996)
-
(722)
-
(19,260)

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

Finsbury Food Group Annual Report and Accounts 2022

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

Presentation of Financial Statements

Basis of Preparation
These Financial Statements cover the 53-week period ended 2 July 2022 (prior financial year is the 52-week period ended 26 June 2021). 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, United Kingdom. The Group Financial Statements have been prepared and
approved by the Directors in accordance with UK-adopted 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 69 to 104.

The Financial Statements have been prepared on a historic cost basis, except for the following:

• Certain financial assets and liabilities (including derivative instruments), certain classes of property, plant and equipment – measured at fair

value or revalued amount;

• Assets held for sale – measured at the lower of carrying amount and fair value less costs to sell; and

• Defined Benefit Pension plans – plan assets measured at fair value.

Going Concern
In the current climate in which we navigate well-publicised macro challenges, relevant judgements and assumptions must be made. The Group
continues to operate in a complex trading environment with pressure from inflation, supply chain disruptions, labour availability impacted by the
pandemic, political, economic and legislative changes and economic factors linked to the ongoing conflict in Ukraine. The conflict between Russia
and Ukraine continues to develop and is likely to have a broad impact on the global economy. Whilst navigating these challenges the health and
safety of our employees is a top priority.

When considering going concern, judgement must be made as to the impact of the ongoing macro challenges. 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. Risks and opportunities have been
considered, and plausible downside risks have been assessed. 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 June 2027.
Committed banking facilities are £60.0 million with a further accordion available of £60.0 million, net bank debt at the year end was £20.6 million.
The Group’s forecasts and projections, taking account of 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.

We have delivered record revenue performance, a demonstration of the Group’s resilience and strategic focus. We continue to reap the benefits
of our Operating Brilliance Programme which has been one of the key drivers behind our positive performance.

We have not been immune to the challenges arising from sudden and unexpected input cost inflation over the period. However, we have been able
to mitigate the impact of these pressures through commercial negotiation and operational improvements have seen the benefit of these actions in
our second half profit performance. We have also been affected by staff shortages and supply chain disruption. We will continue to monitor closely
and work through ongoing pressures using the same strategies employed to date. While headwinds are set to persist, we have a successful track
record of navigating challenging market conditions, and the steps we have taken to optimise the business to date stand us in good stead.

We have seen recovery in foodservice, steady sales in retail and strong overseas performance and have the benefits of the decisive mitigation
actions throughout the year. We continue to see opportunities for significant sales growth through gaining market share in existing areas, and
targeted acquisitions, with our increased holding of our French subsidiary to 85% in February reflecting our continued desire to invest behind
our European growth.

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.

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:

• 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.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance
74

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 macro environment. 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 challenges has been modelled through scenario testing; the scenarios assumed by the Group are:

– A base case; and
– A downside scenario.

Detailed bottom-up budgets have been prepared at business level and sensitivities applied. Further details on sensitivity can be found 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 future profits declined by more than 39% the losses would be utilised within three years. Further tax
details can be found in Notes 8 and 23.

Finsbury Food Group Annual Report and Accounts 2022

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.

Lightbody-Stretz Limited, which is 85% owned by the Group is consolidated into the Group Financial Statements 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 15%.

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 2 July 2022.

• Amendments to IFRS 7, IFRS 4, and IFRS 16 – Interest rate benchmark reform – Phase 2 (effective 1 January 2021);

• Amendments to IFRS 4 Insurance Contracts – Deferral of IFRS 9 (effective 1 January 2021); and

• Amendment to IFRS 16, ‘Leases’ – Covid-19 related rent concessions extension of the practical expedient (effective 1 April 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 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.

Change in Ownership Interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A
change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their
relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or
received is recognised in a separate reserve within equity attributable to owners of Finsbury Food Group Plc.

When the Group ceases to consolidate or equity account for an investment because of loss of control, joint control or significant influence, any
retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in the profit or loss. The fair value
becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial
asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group
had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are
reclassified to profit and loss.

If ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of
the amounts previously recognised in the other comprehensive income are reclassified to profit and loss where appropriate.

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.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance76

Notes to the Consolidated Financial Statements/Continued

1. Significant Accounting Policies/Continued

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.

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 Nil
Motor vehicles

10%-33%

25%-33%

Impairment reviews of fixed assets are undertaken if there are indications that the carrying values may not be recoverable.

Finsbury Food Group Annual Report and Accounts 2022Notes to the Consolidated Financial Statements/Continued

1. Significant Accounting Policies/Continued

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 eighteen 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.

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.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance78

Notes to the Consolidated Financial Statements/Continued

1. Significant Accounting Policies/Continued

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.

Employee Benefits

Defined Benefit Plans
Memory Lane Cakes Limited 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.

Finsbury Food Group Annual Report and Accounts 2022
Notes to the Consolidated Financial Statements/Continued

1. Significant Accounting Policies/Continued

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.

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.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance80

Notes to the Consolidated Financial Statements/Continued

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 Financial Statements.

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 SAS and Ultraeuropa
SP.z.o.o., 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

53 weeks to 2 July 2022 and 52 weeks to 26 June 2021

2022
£000

2021
£000

2022
£000

2021
£000

2022
£000

2021
£000

Total

306,650

273,633

50,158

39,625

356,808

313,258

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

53 weeks to
2 July 2022
£000
306,650
50,158
356,808
14,897
2,910
17,807
-
(1,898)
417
(821)
15,505
-
(1,208)
(1,208)
14,297
(2,709)
11,588

52 weeks to
26 June 2021
£000
273,633
39,625
313,258
13,609
2,491
16,100
-
958
473
696
18,227
89
(1,303)
(1,214)
17,013
(3,368)
13,645

The Group has two customers (2021: three) which individually account for 10% or more of the Group’s total revenue. These customers individually
account for 24% and 12%. In the prior year three customers accounted for 23%, 12% and 10% of the revenue in the 52 weeks to 26 June 2021.

Other Segment Information
Assets UK bakery
Assets overseas
Liabilities UK bakery
Liabilities overseas
Depreciation UK bakery
Depreciation overseas
Amortisation UK bakery
Amortisation overseas

53 weeks to
2 July 2022
£000
225,816
17,113
(109,289)
(14,786)
8,486
907
1,547
-

52 weeks to
26 June 2021
£000
213,791
15,145
(103,541)
(12,124)
8,060
927
1,817
-

Finsbury Food Group Annual Report and Accounts 2022

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
Loss on disposal of property, plant and equipment
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

2021
£000

1,817
7,235
1,752
167
145
235
203
51
(696)
2,124
1,001

2021
£000

50
133
41

2022
£000

1,547
7,407
1,986
-
347
213
267
23
821
1,566
1,524

2022
£000

55
144
181

Other services relate to aborted acquisition advice and assistance with non-UK VAT registrations.

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 40 of the Financial Review section are the following costs:

Acquisition costs
Litigation and legal costs
Disposal and impairment of fixed assets (refer to Note 12)
Release of site closure costs provision
Other reorganisation people costs

2022
£000

(1,601)
(858)
(284)
795
50
(1,898)

2021
£000

-
(388)
(167)
1,340
173
958

Acquisition costs are those associated with an aborted acquisition during the year. Litigation and legal costs of £0.9 million (2021: £0.4 million) are
in relation to a dispute over the consideration paid for an earlier year acquisition and costs of £0.3 million (2021: £0.2 million) relating to fixed assets
disposals in the current year and final impairment of assets at Cardiff in the prior year.

The release of site closure provisions of £0.7 million (2021: £0.8 million) relating to lease costs that have been avoided due to successful re-letting
of closed site units plus a release of £0.1 million (2021: £0.4 million) of related site closure costs and £0.1 million (2021 £0.2 million) of unused
reorganisation provisions.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

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 contribution pension plans

6. Remuneration of Directors

Fees
Executive salaries

Number of employees

2022

2021

2,574
245
485
3,304

2,659
150
399
3,208

2022
£000

2021
£000

87,194
1,524
8,539
2,405
99,662

2022
£000

265
1,488
1,753

78,944
1,001
7,596
2,085
89,626

2021
£000

253
748
1,001

The aggregate of emoluments and amounts receivable under long-term incentive schemes of the highest paid Director was £873,000 (2021: £438,000),
there were no Company pension contributions made to a Defined Contribution Scheme during the current or prior year. Bonuses of £428,000 were paid in
the current year (2021: nil).

There were nil (2021: nil) 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

96
55
-
-
58
56
265

Salary
£000

-
-
304
434
-
-
738

Benefits
£000

Annual bonus
£000

Year ended
2 July 2022

£000

Year ended
26 June 2021
£000

-
-
11
11
-
-
22

-
-
300
428
-
-
728

96
55
615
873
58
56
1,753

85
55
310
438
58
55
1,001

During the year awards over 796,858 shares under the long-term incentive plan (LTIP) were granted to Directors in the form of nil cost options
(2021: 1,200,346). The vesting of the awards is conditional upon performance conditions over a three-year period commencing 27 June 2021 and
are subject to a further two-year holding period.

Finsbury Food Group Annual Report and Accounts 2022

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
2 July 2022

Number of
options at
26 June 2021

Exercise
price

Earliest
exercise
date

Exercise
expiry
date

476,364
395,365
266,094
494,458
328,250
655,614
548,780
379,876
705,888
468,608
4,719,297

476,364
395,365
438,015
494,458
-
655,614
548,780
625,310
705,888
-
4,339,794

nil
nil
nil
nil
nil
nil
nil
nil
nil
nil

01/07/2020
28/10/2022
03/07/2024
01/07/2025
30/06/2026
01/07/2020
03/07/2024
01/07/2025
30/06/2026
01/07/2020

04/12/2025
28/10/2029
28/10/2029
22/10/2030
01/11/2031
04/12/2025
28/10/2029
22/10/2030
01/11/2031
04/12/2025

The mid-market price of the ordinary shares on 2 July 2022 was 68.0p (2021: 92.5p) and the range during the 53-week period to 2 July 2022 was
66.5p to 102.0p (2021: 51.2p to 96.0p).

7. Finance Income and Cost

Recognised in the Consolidated Statement of Comprehensive Income

Finance income
Change in fair value of interest rate swaps
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
Change in fair value of interest rate swaps
Lease liabilities
Total finance cost

2022
£000

-
-

(285)
(43)
(531)
(54)
(18)
(18)
(259)
(1,208)

2021
£000

89
89

(224)
(119)
(545)
(105)
(36)
-
(274)
(1,303)

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

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

2022
£000

2021
£000

2,137
(148)
1,989

646
(209)
283
720
2,709

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 19.5% (2021: 20.5%). The tax assessed for the period is lower (2021: lower) than the
hybrid rate of UK and French tax. The UK Corporation Tax rate for the period is 19% (2021: 19%). The differences are explained below:

Profit before taxation

Tax using the UK Corporation Tax rate of 19%, (2021: 19%)

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
R&D reclaim
Adjustments to tax charge in respect of prior periods
Total tax expense

2022
£000
14,297

2,716

265
88
91
(586)
135
2,709

2021
£000
17,013

3,232

151
480
298
(537)
(256)
3,368

The UK Corporation Tax rate increase from 19% to 25% from 1 April 2023 was substantively enacted in March 2021, this decision has been reversed after
the preparation of these Financial Statements, at the mini-budget on 23 September 2022. The deferred tax assets and liabilities at 2 July 2022 have been
calculated based on a rate at which they were expected to crystallise which is likely to be 19% or 25%.

The adjustment of £135,000 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 (2021: £239,000) 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 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 124,265,000 (2021: 125,805,000).

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 2 July 2022, the diluted weighted average number of shares in issue was 132,352,000 (2021: 132,753,000).

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.

Finsbury Food Group Annual Report and Accounts 2022

Notes to the Consolidated Financial Statements/Continued

9. Earnings Per Ordinary Share/Continued

Profit
Profit attributable to equity holders of the 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 per share
Basic and diluted
Adjusted basic and adjusted diluted

53 weeks to
2 July 2022
£000

52 weeks to
26 June 2021
£000

10,472
2,318
574
13,364

Diluted
‘000

124,265
8,087
132,352

Diluted
pence

7.9
10.1

Basic
‘000

125,805
-
125,805

Basic
pence

9.8
9.1

12,347
(1,514)
574
11,407

Diluted
‘000

125,805
6,948
132,753

Diluted
pence

9.3
8.6

Basic
‘000

124,265
-
124,265

Basic
pence

8.4
10.8

Significant non-recurring and other items net of taxation are tabled in the Strategic Report on page 40 and comprise: significant non-recurring
charge £1,700,000 (2021: income £776,000), Defined Benefit Pension Scheme income £99,000 (2021: £187,000), fair value of interest rate swaps,
foreign exchange contracts charge £673,000 (2021: income £636,000), and the unwinding of deferred consideration discounting charge £44,000
(2021: £85,000).

10. Intangibles
Intangible assets comprise customer relationships, brands and goodwill.

Cost at 27 June 2020
Additions
Transfers from tangible fixed assets
Cost at 26 June 2021
Additions
Transfers from tangible fixed assets
Cost at 2 July 2022

Accumulated amortisation at 27 June 2020
Charge for the year
Accumulated amortisation at 26 June 2021
Charge for the year
Accumulated amortisation at 2 July 2022

Net book value at 27 June 2020
Net book value at 26 June 2021
Net book value at 2 July 2022

Goodwill
£000

85,004
-
-
85,004
-
-
85,004

(11,790)
-
(11,790)
-
(11,790)

73,214
73,214
73,214

Business
systems
£000

Brands and
licences
£000

Customer
relationships
£000

10,177
1,045
165
11,387
802
81
12,270

(1,851)
(1,108)
(2,959)
(838)
(3,797)

8,326
8,428
8,473

3,683
-
-
3,683
-
-
3,683

(1,645)
(143)
(1,788)
(143)
(1,931)

2,038
1,895
1,752

7,630
-
-
7,630
-
-
7,630

(2,582)
(566)
(3,148)
(566)
(3,714)

5,048
4,482
3,916

Total
£000

106,494
1,045
165
107,704
802
81
108,587

(17,868)
(1,817)
(19,685)
(1,547)
(21,232)

88,626
88,019
87,355

The customer relationships, brands and licences 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 twenty years for brands and between ten and fifteen 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 2022Financial StatementsStrategic ReportCorporate Governance

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, inflation 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.

In the current climate in which we navigate well-publicised macro challenges, relevant judgements and assumptions must be made. The Group
continues to operate in a complex trading environment with pressure from inflation, supply chain disruptions, labour availability impacted by the
pandemic, political, economic and legislative changes and economic factors linked to the ongoing conflict in Ukraine. The conflict between Russia
and Ukraine continues to develop and is likely to have a broad impact on the global economy.

Forecasts have been built on a bottom-up basis and stress tested to prepare an approved budget used as a basis for considering testing for
impairment. Risks and opportunities have been considered and, plausible downside scenarios have been assessed.

The forecasts have taken in consideration the following key factors:

1. Ongoing challenging macro environment.

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 the 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 1.63% (2021: 1.5%) growth rate for all of the CGUs. 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 2021 to review consumer and competitor insight to prepare the foundations for the
financial forecasts. 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 averages at 7.4% reflecting the
recovery from the lower-base year impacted by the pandemic, inflationary pressures impacting consumer demand, a challenging environment
with staff shortages and supply chain disruption. The forecast periods include the annualisation of commercial negotiations, benefits of our
ongoing Operating Brilliance Programme and organic growth.

A post-tax discount rate of 7.9% (2021: 8.2%) has been used in these calculations. 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 decreased over the prior year rate as a result of a higher
debt to equity ratio position and a decrease 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.

Finsbury Food Group Annual Report and Accounts 2022Notes 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, property, plant 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
2021
2022
£000
£000

Post-tax discount rate
at which headroom is nil
2022
%

2021
%

45,698
20,118
4,046
2,980
372
73,214

22.5
16.0
12.5
37.2
135.1

17.2
12.9
9.6
44.3
122.8

Pre-tax discount rate
at which headroom is nil

2022
%

29.9
21.4
16.7
49.6
180.1

2021
%

22.9
17.2
12.8
59.1
163.7

Impairment
The post-tax discount rate at which the headroom is nil for Fletchers Bakery is 16.0% (2021: 12.9%) an improvement over the previous year. There
are key strategies and plans in place in order to improve the performance of Fletchers. With our development, technical and process knowledge
we can enable them to become a leading player in the buns and rolls category and our scale, new product development and continued good
relationships with our foodservice customers enables us to target growth. Unprecedented inflation and workforce availability have been key
challenges to address, our improved efficiencies, our focus on realising Fletchers as a centre of excellence for the buns and rolls, our continued
success on our Operating Brilliance Programme and our focus on our Strategic Pillar for Growth has enabled us to overcome the challenges.
Development of our own Kara foodservice brand, new product development and investment in core product areas stands us in good stead to
deliver our financial forecasts. Sensitivities have been carried out to exclude any growth, which, 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 2 July 2022.

The post-tax discount rate at which the headroom is nil for Ultrapharm is 12.5% (2021: 9.6%). There are key strategies in place in order to improve
the performance of Ultrapharm. There has been successful new product development during the year, the proven innovation delivery in the current
year provides a solid springboard for growth throughout the strategic periods as we benefit from the annualisation of those launches. Targeted
new product development and a better understanding of intellectual property will continue with new products being launched in the year to 1 July
2023. Avian flu and the Ukraine conflict have had an adverse impact on input prices, however commercial negotiations, value engineering projects,
continued drive in our Operating Brilliance Programme and cost saving activities have been successful in minimising the impact of these pressures.
For our overseas subsidiary home market growth is targeted along with newly formed branded relationships, which will help leverage our available
capacity. Sensitivities have been carried out. It has been concluded that no impairment was necessary on the carrying value of goodwill relating to
Ultrapharm at 2 July 2022.

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.

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% was replaced with zero growth rate; and

• If future growth rate assumption of 1% was replaced with a decline of 1%.

The period under review has been set against the backdrop of exceptional macroeconomic and inflationary headwinds and the Group has been
faced with unprecedented challenges first triggered by the Covid-19 crisis and now by significant input cost inflation and falling consumer
confidence. Despite this, the overall demand for food and drink has remained resilient. Our retail business has performed well, we continue to see a
bounce back in foodservice, our overseas division continued to see strong growth and, our proven resilience and performance enables us to remain
confident in our strategic plans.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

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.

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

Right-Of-Use Assets

Balance at 26 June 2021
Additions
Disposals
Depreciation charge for the year
Balance at 2 July 2022

Lease Liabilities

Lease liability recognised
Current lease liability
Non-current lease liability

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

Amounts recognised in Cash Flow Statement

Total cash outflow for lease rentals

2 July 2022
£000

26 June 2021
£000

Note

12
12

53,221
9,451
62,672

Property
£000

Plant, equipment
and vehicles
£000

9,158
-
-
(1,362)
7,796

1,613
1,902
(49)
(624)
2,842

49,432
9,583
59,015

Total
£000

10,771
1,902
(49)
(1,986)
10,638

At 2 July 2022
£000

At 26 June 2021
£000

9,917
1,805
8,112

10,745
2,039
8,706

At 2 July 2022
£000

At 26 June 2021
£000

(259)
(267)
(13)
(10)

(274)
(203)
(36)
(14)

At 2 July 2022
£000

At 26 June 2021
£000

2,275

2,789

Prior Year Restatement
The lease cash flows have been corrected in the prior year cash flow statement and reclassified in total from operating cash flows to financing cash flows.

Finsbury Food Group Annual Report and Accounts 2022

Notes to the Consolidated Financial Statements/Continued

12. Property, Plant and Equipment

Cost
Balance at 28 June 2020
Exchange adjustments
Additions
Disposals
Transfers
Balance at 27 June 2021
Exchange adjustments
Additions
Disposals
Transfers

Balance at 2 July 2022

Accumulated depreciation and impairment
Balance at 28 June 2020
Exchange adjustments
Depreciation charge for the financial period
Impairment (Note 4)
Disposals
Transfers
Balance at 27 June 2021
Exchange adjustments
Depreciation charge for the financial period
Disposals
Balance at 2 July 2022

Net book value
At 28 June 2020
At 27 June 2021
At 2 July 2022

Land and
buildings
£000

Plant and
equipment
£000

Fixtures and
fittings
£000

Assets under
construction
£000

Total
£000

36,851
(138)
3,295
(225)
159
39,942
(67)
347
(87)
-

40,135

(11,636)
-
(2,059)
-
157
205
(13,333)
17
(2,132)
30
(15,418)

25,215
26,609
24,717

87,921
(65)
2,825
(2,143)
(244)
88,294
(137)
12,369
(3,252)
(81)

97,193

(53,623)
(29)
(6,589)
(167)
2,066
(261)
(58,603)
22
(6,995)
2,962
(62,614)

34,298
29,691
34,579

5,689
(218)
252
-
(70)
5,653
(7)
480
(392)
-

5,734

(4,522)
-
(339)
-
-
64
(4,797)
6
(266)
392
(4,665)

1,167
856
1,069

1,056
139
674
-
(10)
1,859
(1)
449
-
-

2,307

-
-
-
-
-
-
-
-
-
-
-

1,056
1,859
2,307

131,517
(282)
7,046
(2,368)
(165)
135,748
(212)
13,645
(3,731)
(81)

145,369

(69,781)
(29)
(8,987)
(167)
2,223
8
(76,733)
45
(9,393)
3,384
(82,697)

61,736
59,015
62,672

Security
HSBC Bank Plc, HSBC Asset Finance (UK) Limited, HSBC Equipment Finance (UK) Limited 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 2022Financial StatementsStrategic ReportCorporate Governance

Notes to the Consolidated Financial Statements/Continued

13. Other Financial Assets and Liabilities

Current assets – derivatives
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

2022
£000

20
20

(139)
(436)
(575)

2021
£000

405
405

(121)
-
(121)

Interest Rate Swaps at Fair Value
The Company has a five-year swap from 3 July 2017 with a coverage of £20.0 million fixed at a rate of 0.455% expiring at the year end date and during the
year the Company held a three-year swap from 28 March 2019 with a coverage of £5.0 million fixed at a rate of 1.002%. There was 72% coverage at year
end (2021: 111%).

A forward-dated swap £10.0 million from 3 July 2022 until 10 June 2027 (fixed) at 2.589% was taken out to limit the risk associated with the variable rate
liabilities. The interest rates for the forward-dated swap is fixed at 2.589% for £10.0 million.

There was £20.0 million coverage in place at the year end (2021: £25.0 million).

A charge of £18,000 (2021: income of £89,000) 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 £821,000 (2021: charge £696,000) 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 £2,405,000 (2021: £2,085,000).

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 (2021: nil), 147 deferred pensioner members (2021: 157) and 239 pensioner members (2021: 235).

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 53 weeks ended 2 July 2022 relating to Defined Benefit Pension are based on a full actuarial valuation dated 31 December 2018.

A £417,000 contribution was paid during the financial year by Memory Lane Cakes Limited (2021: £490,000). 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. An Asset Backed Contribution arrangement was entered into effective 18 May 2022 with the first
payment under the new loan facility arrangement due on 5 July 2022 with a defined income return to the Scheme over a period of 20 years at a rate of
£763,000 per annum. The next full valuation is being prepared as at 31 December 2021.

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 was appointed as fiduciary manager in December 2018.
A 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. 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.

Finsbury Food Group Annual Report and Accounts 2022

Notes to the Consolidated Financial Statements/Continued

14. Pension Schemes/Continued
The full actuarial valuation differs from the financial year end valuation deficit of £6,582,000 (2021: £14,529,000). 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.

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

2022
£000

17,317
(23,899)
(6,582)

2022
£000

4,947
7,276
2,431
1,162
1,011
490
17,317
3,106

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

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
Experience gain
Remeasurement – gain/(loss) from changes to financial assumptions
Remeasurement – gain/(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

2022
£000

2021
£000

(35,332)
-
(695)
797
1,309
9,637
385
(23,899)

20,803
410
(3,516)
(797)
417
17,317

(34,781)
(17)
(515)
845
-
(324)
(540)
(35,332)

19,607
291
1,260
(845)
490
20,803

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 2022Financial StatementsStrategic ReportCorporate Governance

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/(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 – gain/(loss) from changes to financial assumptions
Recognised in the financial year – gain/(loss) 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

2022
£000

-
410
(695)
(285)

2022
£000
(16,545)
(3,516)
1,309
9,637
385
(8,730)

2022
%
2.80
2.80
3.85
3.85

2021
£000

(17)
291
(515)
(241)

2021
£000
(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 1.05% (2021: 0.90%).

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 2 July 2022, 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 negative 15.0% (2021: 8.5%).
The actual return has been impacted by the recovery from the worldwide Covid-19 pandemic that has had a profound impact on the economy as
countries went into lockdown.

Changing the year end 2022 assumptions to those of 2021 year end listed above, the deficit would have been £16,604,000 compared to the
reported deficit of £6,582,000.

Post-retirement
mortality assumption

2022
S3NA tables with CMI 2017 (core parameters) projections
and 1.25% pa long-term rate of improvement

2021
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):

2022

23.5
26.1
22.2
24.7
1.2%

2021

24.1
26.5
22.7
25.1
1.2%

Finsbury Food Group Annual Report and Accounts 2022

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

2022

(£1.6 million)
£1.8 million
£1.3 million
(£1.1 million)
£0.8 million
(£0.8 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 15 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 Company entered into an Asset Backed Contribution (ABC) arrangement on 18 May 2022 to improve the funding of the Scheme. An investment of
£16.0 million will be invested by the Company to the Scheme, the trustees have purchased a loan note from the Group via a Scottish Limited Partnership
(SLP) structure, which will pay a defined income return to the Scheme over 20 years. The fixed repayment plan amounts to an income of £763,000 being
paid to the Scheme annually. The estimated duration of the liabilities is around 15 years.

The projected net interest charge to the Consolidated Statement of Comprehensive Income for the year to 1 July 2023 is £239,000. 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

2022
£000

2021
£000

2020
£000

2019
£000

17,317
(23,899)
(6,582)

(3,516)
(20.3%)
1,309
(0.5%)
7,815
(32.7%)

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%

2018
£000

18,834
(29,370)
(10,536)

(779)
(4.1%)
-
0.0%
(172)
0.6%

The Group has an interest in a partnership, the Finsbury ABC Partnership LP, which is fully consolidated into these Group Financial Statements. The Group
has taken advantage of the exemption conferred by regulation 7 of the Partnerships (Accounts) Regulations 2008 and has therefore not appended the
accounts of this qualifying partnership to these Financial Statements. Separate accounts of the partnership are not required to be, and have not been,
filed at Companies House.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

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 £1,009,000 (2021: £865,000).

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 £967,000 (2021: £1,094,000).

17. Cash and Cash Equivalents Including Bank Overdrafts

Cash at bank and on hand
Bank overdraft

2022
£000

8,332
14,949
23,281

2021
£000

6,715
8,312
15,027

2022
£000

2021
£000

15,027
147,795
251
(23,281)
139,792

14,618
123,394
(320)
(15,027)
122,665

2022
£000

51,311
3,639
3,198
58,148

2022
£000

22,915
(15,534)
7,381

2021
£000

45,799
4,051
1,136
50,986

2021
£000

24,227
(14,704)
9,523

Finsbury Food Group Annual Report and Accounts 2022

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.

2022 Statutory

Margin

Frequency of
repayments

Year of
maturity

Facility
£000

Drawn
£000

Current
£000

Non-current
£000

Revolving credit
Leases*
Unamortised transaction costs

1.95%/SONIA
Various

Varies
Monthly

2027
Various

60,000

27,875
9,917
(799)
36,993

-
1,805
(200)
1,605

27,875
8,112
(599)
35,388

* 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.

2022
Revolving credit
Finance lease (under IAS 17)
Unamortised transaction costs
Total bank debt
Operating leases (under IAS 17)
Total debt

Margin
1.95%/SONIA
Various

Frequency of
repayments
Varies
Monthly

Year of
maturity
2027
Various

Facility
£000
60,000

2.2%

Varies

Drawn
£000
27,875
151
(799)
27,227
9,766
36,993

Current
£000
-
76
(200)
(124)
1,729
1,605

Non-current
£000
27,875
75
(599)
27,351
8,037
35,388

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

2021
Revolving credit
Finance lease (under IAS 17)
Unamortised transaction costs
Total bank debt
Operating leases (under IAS 17)
Total debt

Margin
1.50%/LIBOR
Various

Frequency of
repayments
Varies
Monthly

Year of
maturity
2023
Various

Facility
£000
55,000

2.2%

Varies

Drawn
£000
22,431
220
(108)
22,543
10,525
33,068

Current
£000
-
128
-
128
1,911
2,039

Non-current
£000
22,431
92
(108)
22,415
8,614
31,029

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 and interest cover.

The revolving credit bank facility available for drawdown is £60.0 million plus a further £60.0 million accordion facility (2021: £55.0 million plus a
further £35.0 million accordion). At the period end date, the facility utilised was £27.9 million (2021: £22.4 million), giving £32.1 million (2021: £32.6
million) headroom plus a further £60.0 million (2021: £35.0 million) accordion.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

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
Made/(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 2021
£000

9,523
(22,431)
(128)
(92)
(13,128)

Cash flow
£000

(2,142)
(5,444)
52
17
(7,517)

At year ended
2 July 2022
£000

7,381
(27,875)
(76)
(75)
(20,645)

2022
£000

2021
£000

46,588
2,714
24,982
74,284

Litigation
£000

Site closure
£000

Pension
£000

-
679
-
679
679
-

204
(130)
(74)
-
-
-

178
-
(142)
36
18
18

38,943
2,409
21,138
62,490

Total
£000

382
549
(216)
715
697
18

The litigation provision relates to an ongoing legal claim that is expected to be concluded within the next financial year.

The site closure provision relating to the closure of the Grain D’Or site in October 2017 was fully utilised and released during the year. All units have been
successfully re-let during the year with the closure project now concluded.

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 with two years remaining.

22. Acquisitions
The Company acquired a further 35% of the issued share capital of Lightbody-Stretz Limited from Phaste S.a.r.l. in February 2022 for a
consideration of £6.1 million, bringing its holding up from 50% to 85%.

Deferred consideration of £1.0 million paid relates to the acquisition of Ultrapharm Limited (Ultrapharm) for £16.9 million plus up to £3.0 million,
£0.5 million of which is outstanding at 2 July 2022 with the final quarterly instalment payable in October 2022.

Discounted amounts payable within one year of the Consolidated Statement of Financial Position date is £496,000 (2021: £976,000) and amounts
due beyond one year is £nil (2021: £466,000). Amounts charged to finance expenses during the year for the unwinding of the discounting is
£54,000 (2021: £105,000).

Finsbury Food Group Annual Report and Accounts 2022

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
Employee Share Scheme
Losses acquired
Tax assets/(liabilities)
Net tax assets/(liabilities)

Assets

Liabilities

2022
£000

-
-
79
42
33
-
1,645
1,019
1,254
4,072
373

2021
£000

-
-
-
38
23
-
3,632
669
1,599
5,961
3,017

2022
£000

2021
£000

(1,415)
(2,283)
-
-
-
(1)
-
-
-
(3,699)
-

(1,594)
(1,262)
(77)
-
-
(11)
-
-
-
(2,944)
-

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

27 June
2021
£000

Recognised in
minority interest
£000

Recognised
in income
£000

Recognised
in equity
£000

(1,594)
(1,262)
(77)
38
23
(11)
3,632
669
1,599
3,017

-
-
30
-
-
-
-
-
-
30

178
(1,021)
126
4
10
11
(33)
350
(345)
(720)

-
-
-
-
-
-
(1,954)
-
-
(1,954)

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

-
-
(35)
-
-
-
-
-
-
(35)

(248)
(522)
(97)
-
(17)
20
(62)
189
383
(354)

-
-
-
-
-
-
811
89
-
900

2 July
2022
£000

(1,416)
(2,283)
79
42
33
-
1,645
1,019
1,254
373

26 June
2021
£000

(1,594)
(1,262)
(77)
38
23
(11)
3,632
669
1,599
3,017

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 2022Financial StatementsStrategic ReportCorporate Governance

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 36 to 39.

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 2 July 2022.

At 2 July 2022

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

(27,875)
(46,587)
(9,917)
(2)
(84,381)

-
(46,587)
(1,805)
(2)
(48,394)

-
-
(1,563)
-
(1,563)

(27,875)
-
(2,938)
-
(30,813)

-
-
(3,611)
-
(3,611)

At 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)

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.

Finsbury Food Group Annual Report and Accounts 2022

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 (ECL) 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 £51.3 million (2021: £45.8 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

2022
£000

47,361
3,085
769
96
51,311

2021
£000

42,176
2,610
824
189
45,799

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 £0.9 million past due by
more than 30 days is equivalent to less than one days sales (2021: £1.0 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
Our Group has been faced with unprecedented challenges first triggered by the Covid-19 crisis and now by significant input cost inflation and falling
consumer confidence. Despite this, the overall demand for food and drink has remained resilient and we have achieved record revenue levels for the
year to 2 July 2022. Our retail business performed well, we continued to see a bounce back in foodservice, and our overseas division continued to see
strong growth. We are expecting the headwinds to persist, however we have a proven track record of resilience in challenging times.

i) Interest Rate Risk
The Group’s interest rate risk exposure is primarily to changes in variable interest rates. The Group has entered into one interest rate swap
arrangement 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

2022
£000

2021
£000

(27,875)

(22,431)

The Company has a five-year swap from 3 July 2017 with a coverage of £20.0 million fixed at a rate of 0.455% expiring at the year end date and
during the year the Company held a three-year swap from 28 March 2019 with a coverage of £5.0 million fixed at a rate of 1.002%. There was 72%
coverage at year end (2021: 111%). A forward-dated swap £10.0 million from 3 July 2022 until 10 June 2027 (fixed) at 2.589% was taken out to limit
the risk associated with the variable rate liabilities. The interest rates for the forward-dated swap is fixed at 2.589% for £10.0 million.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

100

Notes to the Consolidated Financial Statements/Continued

24. Financial Risk Management/Continued

Sensitivity
A 1% increase in the base rate, SONIA 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 increase/(decrease)
Decrease in net assets

2022
£000

(9)
(9)

A 1% decrease in the base rate, SONIA or LIBOR would have the following impact on interest charges and associated net assets for the Group.

Profit increase/(decrease)
Increase/(decrease) in net assets

2022
£000

3
3

2021
£000

(34)
(34)

2021
£000

(233)
(233)

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 Limited, our 85% 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 dividend payment was reinstated for the year to 26 June 2021 and a dividend of 2.4p per share was paid on 21 December 2021 to shareholders
on the register at the close of business on 26 November 2021. An interim dividend for the year ending 2 July 2022 of 0.8p per share (H1 2020: nil)
was paid on 21 April 2022 to shareholders on the register at the close of business on 25 March 2022. The Company paid a £1.1 million dividend to
the 50% minority shareholder in Lightbody-Stretz Limited and a pre-sale dividend of £1.4 million immediately prior to the acquisition of a further
35% shareholding from Phaste S.a.r.l taking the shareholding up from 50% to 85%.

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
0.3 (2021: 0.2). The gearing ratio is calculated by 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 71.

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.

Finsbury Food Group Annual Report and Accounts 2022

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

101

2022
000s

2021
000s

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 (6,668,718
shares were held at the year-end). All shares are the same class with equal rights. During the year the EBT purchased 679,731 ordinary shares of 1p
each in the capital of the Company (“ordinary shares”) at a price of £0.7341 per ordinary share.

At the 2021 Annual General Meeting held on 18 November 2021, 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 17 November 2022.

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 2 July 2022 with further details given below.

Date of grant

1 November 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

1,636,005

nil

964

Amount
expensed in
year to
2 July 2022
£000

247
247
1,277
1,524

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
1 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

Period of
expense

3.0 years

Period of
expense

3.0 years
3.0 years

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

102

Notes to the Consolidated Financial Statements/Continued

26. Share Capital/Continued
Details of share options outstanding at 2 July 2022 and movements during the year by exercise price is shown below:

Exercise
price

First
exercise
date

Last
exercise
date

At 27 June
2021

Granted

Forfeited

Cancelled/
lapsed

Exercised

At 2 July
2022

nil
nil
nil
nil
nil
nil
nil
nil
nil
nil

Sep 2018
Jul 2020
Sep 2022
Feb 2023
Jul 2024
Oct 2023
Jan 2024
Jul 2025
Nov 2024
Nov 2026

Dec 2025
Dec 2025
Oct 2029
Feb 2030
Oct 2029
Oct 2030
Oct 2030
Oct 2030
Nov 2031
Nov 2031

50,304
1,131,978
3,333,287
32,836
1,063,325
991,929
91,538
1,200,346
-
-
7,895,543

-
-
-
-
-
-
-
-
839,148
796,857
1,636,005

-
-
(165,616)
-
-
(42,130)
-
-
-
-
(207,746)

-
-
(241,804)
(12,888)
(417,355)
-
-
-
-
-
(672,047)

-
-
-
-
-
-
-
-
-
-
-

50,304
1,131,978
2,925,867
19,948
645,970
949,799
91,538
1,200,346
839,148
796,857
8,651,755

A summary of share options outstanding and movements for the year to 26 June 2021 is shown below:

At 28 June
2020

Granted

Forfeited

Cancelled

Exercised

At 26 June

2021

Number of options

7,231,297

2,283,813

(581,915)

(1,037,652)

7,895,543

There were 1,182,282 options exercisable at the period end date (2021: 1,182,282). There were no options exercised during the year (2021: nil).
There were 672,047 options (2021: 1,037,652) that lapsed during the year where performance conditions have not been met in full.

The options outstanding at the year end have a weighted average exercise price of nil (2021: nil) and a weighted average remaining contractual life
of 1.2 years (2021: 1.4 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

2022

2021

3.0 years
37%
3.1%
0.7%
91.0p
nil

3.0 years
29%
4.3%
0.5%
82.0p
nil

27. Dividends
The dividend was reinstated during the year. For the full year to 26 June 2021 a dividend of 2.4p per share was paid on 21 December 2021 to
shareholders on the register at the close of business on 26 November 2021.

An interim dividend for the year ending 2 July 2022 of 0.83p per share (2021: nil). The interim dividend was paid on 21 April 2022 to shareholders on
the register at the close of business on 25 March 2022.

The Company paid a £1,084,000 dividend to the non-controlling interest in Lightbody-Stretz Limited and a pre-sale dividend of £1,441,426 was
paid immediately prior to the acquisition of a further 35% shareholding from Phaste S.a.r.l, taking the shareholding up from 50% to 85%.

28. Commitments
At the financial year ended 2 July 2022, the Group had capital expenditure commitments of £1,649,000 (2021: £6,000).

The Company entered into an Asset Backed Contribution (ABC) arrangement on 18 May 2022 to improve the funding of the Scheme. An investment
of £9.7 million will be invested by the Company to the Scheme, the trustees have purchased a loan note from the Group via a Scottish Limited
Partnership (SLP) structure, which will pay a defined income return to the Scheme over 20 years. The fixed repayment plan amounts to an income of
£763,000 being paid to the Scheme annually.

Finsbury Food Group Annual Report and Accounts 2022

Notes to the Consolidated Financial Statements/Continued

103

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 2022 and for 2021 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

30. Related Parties

Other

2022
£000

2
-
2

2021
£000

18
1
19

Related Party Transactions and Directors’ Material Interests in Transactions
An 85% owned subsidiary, Lightbody-Stretz Limited, paid SCI Coysevox £65,000 (2021: £66,000) in respect of rent for offices. No balances were
outstanding at either year end. Lightbody Europe received £11,469 for accountancy and administration services (2021: £36,563) from FoodHub
and an additional £4,160 for royalties (2021: £11,310). £2,043 was outstanding at the year end (2021: £nil). Mr P Stretz, the Managing Director of
Lightbody-Stretz Limited, being the related party.

The Group paid £nil (2021: £nil) for the supply of finished products from and received £141,371 (2021: £nil) for the sale of finished products to FoodHub, a
company 15% owned by Mr P Stretz. The amount payable and receivable at the year end was £nil (2021: £nil) and £8,671 (2021: £9,590) 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% (2021: 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

2022
£000

70
3,741
3,811

2021
£000

65
2,416
2,481

Share options held by Group Directors are set out in Note 6. Details of share options outstanding at 2 July 2022 for other key management personnel
by exercise price is shown in the table below. Following various internal promotions to the Group Executive Committee, the number of key
management personnel included in the table below has increased.

Exercise price

nil
nil
nil
nil
nil
nil

Number of
options at
2 July 2022

Number of
options at
26 June 2021

Earliest
exercise date

Exercise
expiry date

599,198
91,538
675,787
32,836
1,599,552
50,303
3,049,214

-
-
598,176
-
1,205,745
50,303
1,854,224

01/11/2024
07/01/2024
28/10/2023
26/02/2023
28/10/2022
30/09/2018

01/11/2031
07/01/2031
22/10/2030
26/02/2030
28/10/2029
04/12/2025

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

104

Notes to the Consolidated Financial Statements/Continued

31. Non-Controlling interests
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are material to the Group.
The amounts disclosed are before inter-Company eliminations.

Summarised balance sheet

Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
Accumulated NCI

Summarised statement of comprehensive income

Revenue
Profit for the period
Other comprehensive income
Total comprehensive income
Profit allocated to NCI
Dividends paid to NCI

2 July 2022
£000

26 June 2021
£000

11,531
(8,537)
2,994
150
(18)
132
3,126
255

11,358
(6,219)
5,139
189
(7)
182
5,321
2,786

2 July 2022
£000

26 June 2021
£000

45,373
1,973
-
1,973
1,116
2,525

35,250
1,903
-
1,903
1,298
722

On 22 February 2022, the Group acquired an additional 35% of the issued share capital of Lightbody-Stretz Limited for £6.1 million. The Group
recognised a decrease in non-controlling interest of £1.1 million and a decrease in equity attributable to the owner of the Parent of Lightbody-
Stretz Limited. The effect on the equity attributable to the owners of Lightbody-Stretz Limited during the year is summarised as follows:

Carrying amount of non-controlling interest acquired
Consideration paid to non-controlling interest
Acquisition costs
Excess of consideration paid recognised in the transactions with
non-controlling interest reserves within equity

Summarised cash flows

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents

32. Ultimate Parent Company
Finsbury Food Group Plc is the ultimate Parent Company and there is no ultimate controlling party.

2 July 2022
£000

26 June 2021
£000

1,121
(6,083)
(375)

(5,337)

-
-
-

2 July 2022
£000

26 June 2021
£000

3,260
(216)
(5,052)
(2,007)

1,997
(13)
(1,444)
539

Finsbury Food Group Annual Report and Accounts 2022

Company Balance Sheet
at 2 July 2022

Fixed assets
Investments
Intangible assets
Financial assets
Deferred taxation

Current assets
Debtors
Other financial assets – fair value contracts
Cash and cash equivalents

Creditors: Amounts falling due within one year
Other interest-bearing loans and borrowings
Trade and other payables
Provisions

Net current assets

Total assets less current liabilities

Creditors: Amounts falling due after more than one year
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
Total shareholders’ funds

105

Note

2022
£000

2021
£000

40
41

43
44

46
45

46
47

48
48
48

118,769
217
16,000
1,074
136,060

55,292
20
6,078
61,390

-
(9,158)
(679)
(9,837)

112,053
36
-
701
112,790

54,516
42
5,037
59,595

(345)
(10,181)
-
(10,526)

51,553

49,069

187,613

161,859

(27,076)
(16,005)
(43,081)

(22,678)
(606)
(23,284)

144,532

138,575

1,304
64,956
578
(5,696)
83,390
144,532

1,304
64,956
578
(5,374)
77,111
138,575

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 £1,754,000 (2021: loss £31,000).

The Financial Statements on pages 105 to 106 were approved by the Board of Directors on 23 September 2022 and were signed on its behalf by:

Stephen Boyd
Director

Registration number: 00204368

The Notes on pages 107 to 113 form an integral part of these Financial Statements.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

106

Company Statement of Changes in Equity
for the 53 weeks ended 2 July 2022

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
Balance at 26 June 2021

Balance at 27 June 2021
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
Dividend received
Dividend paid
Balance at 2 July 2022

Called up
share
capital
£000

Share
premium
£000

Capital
redemption
reserve
£000

Employee
share
reserve
£000

Note

Retained
earnings
£000

Total
equity
£000

1,304
-
-

-
-
-
-
-
-
1,304

1,304
-
-

64,956
-
-

-
-
-
-
-
-
64,956

64,956
-
-

-
-
-
-
1,304

-
-
-
-
64,956

26
26

578
-
-

-
-
-
-
-
-
578

578
-
-

-
-
-
-
578

(3,378)
-
-

66,191
(31)
(31)

129,651
(31)
(31)

(1,996)
-
-
-
-
-
(5,374)

(5,374)
-
-

(322)
-
-
-
(5,696)

-
(61)
1,001
89
10,644
(722)
77,111

(1,996)
(61)
1,001
89
10,644
(722)
138,575

77,111
(1,754)
(1,754)

138,575
(1,754)
(1,754)

-
1,524
10,526
(4,017)
83,390

(322)
1,524
10,526
(4,017)
144,532

The Notes on pages 107 to 113 form an integral part of these Financial Statements.

Finsbury Food Group Annual Report and Accounts 2022

Notes to the Company’s Financial Statements
(forming part of the Financial Statements)

107

33. 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 53 weeks ended 2 July 2022 (prior financial year 52 weeks ended 26 June 2021). 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 UK-adopted 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 Financial Statements have been prepared on a historic cost basis, except for the following:

• Certain financial assets and liabilities (including derivative instruments), certain classes of property, plant and equipment – measured at fair value

or revalued amount;

• Assets held for sale – measured at the lower of carrying amount and fair value less costs to sell; and

• Defined Benefit Pension plans – plan assets measured at fair value.

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.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance108

Notes to the Company’s Financial Statements/Continued

33. Accounting Policies/Continued
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.

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.

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 Group has delivered a resilient trading performance and achieved record revenues against a continued challenging backdrop in an
unprecedented period of inflation, political instability, a contracting UK economy and Ukraine conflict adversely impacting labour availability and
input prices and supply. 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, forecast assumptions have been critically assessed and financial forecasts have been compared against historical performance to
understand the movements. The Board, having reviewed the Group’s short and medium-term plans and new financing arrangements from June
2022 to June 2027, 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 the full support
of our banking partners with a renewed facility and increase in headroom on the debt: EBITDA covenant test.

Having due consideration of the financial projections, the level of debt and available facilities, it is the opinion of the Directors that the Group has
adequate resources to continue in operation for the foreseeable future and, therefore, consider it appropriate to prepare the Financial Statements
on the going concern basis. Further details are set out in the Basis of Preparation.

Shares held by Employee Share Trusts
Shares held to satisfy options are accounted for in accordance with IAS 32 ‘Financial Instruments’. All differences between the purchase price of the
shares held to satisfy options granted and the proceeds received for the shares, whether on exercise or lapse, are charged to reserves.

34. Remuneration of Directors
Details of Directors’ remuneration are set out in Note 6 of the Group’s Financial Statements.

Finsbury Food Group Annual Report and Accounts 2022Notes to the Company’s Financial Statements/Continued

109

35. Staff Numbers and Costs
The average number of persons employed on a monthly basis by the Company (including Directors) during the year, analysed by category, was as follows:

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

2022

122

2022
£000

11,583
1,316
689
13,588

2021

103

2021
£000

9,172
1,008
512
10,692

36. 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 1,316,671 (2021: 1,200,346) of the total 1,636,005 (2021: 2,283,813) 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
£1,266,000 (2021: £499,000). Charges have been passed to the subsidiaries during the year, the charge totalled £258,000 (2021: charge £111,000) and
has resulted in an increase (2021: increase) 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.

37. 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
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

2022
£000

120
-
120

(487)
(43)
(54)
(18)
(18)
(339)
(959)
(839)

2021
£000

351
89
440

(545)
(119)
(105)
(36)
-
(547)
(1,352)
(912)

38. Dividends
The dividend was reinstated during the year. For the full year to 26 June 2021 a dividend of 2.40p per share was paid on 21 December 2021 to
shareholders on the register at the close of business on 26 November 2021.

The Company paid a £1,084,000 dividend to the non-controlling interest in Lightbody-Stretz Limited and a pre-sale dividend of £1,441,426 was paid
immediately prior to the acquisition of a further 35% shareholding from Phaste S.a.r.l, taking the shareholding up from 50% to 85%.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

110

Notes to the Company’s Financial Statements/Continued

39. 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 2 July 2022.

Subsidiary

Registered address

Direct/
indirect
ownership

Country of
incorporation

Class of
shares held

2022

2021

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

Scotland

Ordinary

£1 100% 100%

England and
Wales

Ordinary

£1 100% 100%

Finsbury ABC Partnership LP

73 Bothwell Rd, Hamilton ML3 0DW

Indirect

Scotland

Ordinary

£1 100%

Finsbury General Partner Limited

73 Bothwell Rd, Hamilton ML3 0DW

Finsbury Trustee Company Limited

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%

Ordinary

£1 100%

England and
Wales

Ordinary

£1 100% 100%

Ordinary

£1 100% 100%

Ordinary

£1 100% 100%

Ordinary

£1 100% 100%

Johnstone’s 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 Limited

73 Bothwell Rd, Hamilton, ML3 0DW

Indirect

Scotland

Ordinary

Lightbody Europe SAS

14 Allée Coysevox, CS 56939, 35069
Rennes Cedex France

Indirect

France

Ordinary

£1

85% 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

Maes-y-coed Rd, Cardiff, CF14 4XR

Direct

Ultrapharm Limited

Maes-y-coed Rd, Cardiff, CF14 4XR

Direct

England and
Wales

Ordinary

1p 100% 100%

Ordinary

£1 100% 100%

Ordinary

£1 100% 100%

Ordinary

£1 100% 100%

Ultraeuropa SP. z o.o.

Christopher Street SAS

Maes-y-coed Rd, Cardiff, CF14 4XR

Indirect

Poland

Ordinary

£1 100% 100%

1 Rue Bourgault Ducoudray, 35000
Rennes Cedex France

Indirect

France

Ordinary

£1

17%

Finsbury Food Group Annual Report and Accounts 2022Notes to the Company’s Financial Statements/Continued

40. Investments

Cost
At beginning of financial year
Additions
At end of financial year

Net book value
At 2 July 2022
At 26 June 2021

111

£000

112,053
6,716
118,769

118,769
112,053

The additions relate to an increase of 35% shareholding of Lightbody-Stretz Limited of £6,083,000, acquisition costs of £375,000 and a share
option charge of £258,000 (2021: £51,000 charge) passed down to individual subsidiaries.

41. 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.

42. Deferred Tax

Recognised Deferred Tax Assets and Liabilities

Employee Share Scheme
Interest rate swaps
Discounting of deferred consideration
Forward foreign exchange contracts
Short-term temporary differences
Tax assets/(liabilities)
Net tax assets

Assets

Liabilities

2022
£000

1,019
33
-
-
22
1,074
1,069

2021
£000

669
23
-
-
9
701
682

2022
£000

-
-
(1)
(4)
-
(5)
-

2021
£000

-
-
(11)
(8)
-
(19)
-

The deferred tax asset at 2 July 2022 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
Forward foreign exchange contracts
Short-term timing differences

27 June
2021
£000

Recognised
in income
£000

Recognised
in equity
£000

669
23
(11)
(8)
9
682

350
10
10
4
13
387

-
-
-
-
-
-

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

2 July
2022
£000

1,019
33
(1)
(4)
22
1,069

26 June
2021
£000

669
23
(11)
(8)
9
682

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

112

Notes to the Company’s Financial Statements/Continued

43. Debtors

Amounts owed by Group undertakings
Other taxation
Prepayments and accrued income

2022
£000

54,647
103
542
55,292

2021
£000

54,113
175
228
54,516

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 2.3% (2021: 2.4%).

44. Forward Foreign Exchange Contracts at Fair Value
At the year ended 2 July 2022 the Company had entered into a number of forward foreign exchange contracts to minimise the impact of fluctuations in
exchange rates. A charge of £22,000 (2021: income £42,000) is included in administrative expenses for the period reflecting changes in their fair value.

45. 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*
Financial liability – fair value swaps
Provisions closure of Grain D’Or site

2022
£000

240
517
62
269
7,435
496
139
-
9,158

2021
£000

393
519
62
232
7,795
976
-
204
10,181

*Deferred consideration is the consideration payable for the Ultrapharm Limited acquisition, payable in quarterly instalments to 1 October 2022.

Other Financial Liabilities – Fair Value Interest Rate Swaps
The Company has a five-year swap from 3 July 2017 with a coverage of £20.0 million fixed at a rate of 0.455% expiring at the year end date and during the
year the Company held a three-year swap from 28 March 2019 with a coverage of £5.0 million fixed at a rate of 1.002%. There was 72% coverage at year
end (2021: 111%). A forward-dated (3 July 2022) swap amounting to £10.0 million was taken out to limit the risk associated with the variable rate liabilities.
The interest rates for the forward-dated swap is fixed at 2.589% for £10.0 million.

A charge of £18,000 (2021: £89,000 income) is shown in finance income (2021: income) for the year reflecting changes in the fair values of interest rate swaps.

46. Other 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.

2022

Currency

Margin

Frequency of
repayments

Year of
maturity

Facility
£000

Total
£000

Current
£000

Non-current
£000

Revolving credit
Unamortised transaction costs

GBP 1.95%/SONIA

Varies

2027

60,000

27,875
(799)
27,076

-
-
-

27,875
(799)
27,076

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

*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.

Finsbury Food Group Annual Report and Accounts 2022

Notes to the Company’s Financial Statements/Continued

47. Creditors: Amounts Falling Due After More Than One Year

Financial liability
Deferred consideration
Provisions closure of Grain D’Or site
Fair value derivatives
Deferred tax liability

113

2021
£000

-
466
-
121
19
606

2022
£000

16,000
-
-
-
5
16,005

The financial liability relates to the Asset Backed Contribution arrangement for the Memory Lane Cakes Pension Scheme, within the Financial
Statement there is a financial asset of £16,000,000, the net impact on the net assets of the Company is nil.

48. Called Up Share Capital
Note 26 in the Group Financial Statements gives details of called up share capital.

49. 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 106 with definition details in Note 25 to the Consolidated Financial Statements.

50. Contingent Liabilities
The Company has guaranteed the overdrafts of its subsidiaries; there was a net cash position at the year end of £15,534,000 (2021 £9,523,000).

51. Related Party Disclosures
Note 30 in the Group’s Financial Statements gives details of related party transactions.

52. 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.

Finsbury Food Group Annual Report and Accounts 2022Financial StatementsStrategic ReportCorporate Governance

114

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 Brindley Place
Birmingham
B1 2HZ

Registered Number
00204368

Finsbury Food Group Annual Report and Accounts 2022
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