More annual reports from Finsbury Food Group Plc:
2023 ReportFinsbury Food Group plc Full Year Results Year ended 1 July 2023 John Duffy Chief Executive Officer Steve Boyd Finance Director One of the largest speciality bakery groups in the UK Diversified by category, channel and geography Operating in large markets Broad range of customers across channels Diversified manufacturing capabilities Strong and evolving brand portfolio #1 in a number of speciality categories including Celebration Cakes, Artisan Bread & Premium Round Cakes 2 Successful navigation of sector headwinds has enabled a robust performance for the year Group revenue up 16.0% to £413.7m, driven by price and volume with: • A robust performance in UK retail, up 11.8% • Ongoing recovery in foodservice, up 25.1% • Continued growth in Overseas division, up 25.0% Lees acquisition earnings enhancing and performing in line with expectations Acquisition is in line with carefully calibrated M&A strategy to diversify product capability into areas with high growth potential Continued focus on and delivery of Operating Brilliance Program Group EBITDA up 8.8% to £31.3m Profit before tax up 4.2% to £17.7m Diluted adjusted EPS 10.1p Proposed final dividend of 1.73 pence per share, which will take total dividend for the year to 2.60 pence per share Now a stronger Group able to leverage scale, diversified product range and channels Recommended cash offer by Frisbee Bidco Limited of 110 pence in cash per Scheme Share 3 Market Overview Current macro-economic challenges A lot of the challenges from last year persist, or have evolved into new challenges Complex & Inter-connected issues High Interest rates • Macro-economic environment remains volatile • UK interest rates are at the highest level since with challenges creating: 2008 resulting in: • • Headwinds and uncertainty Complexity and higher costs • • Increased strain on UK households Borrowing and debt now more expensive Food Inflation & Standard of Living stagnation Labour Market • • Food inflation continues to be a large contributor to overall cost of living increases Concern over food inflation now matching that of future energy price rises • Recruitment and retention remains a challenge • UK unemployment remains low • • High level of vacancies High wage inflation 5 Inflation indicators CPIH (Consumer Prices Index including owner occupiers' housing costs) is at 6.4%, vs. the October 2022 peak of 9.6% • • Other than transport there is no deflation, only reduced inflation • Food and non-alcoholic beverage is the second largest contributor to overall CPIH 6 Source: ONS to July 2023 Grocery Inflation indicators Volume remains a challenge in the face of high price inflation. Shoppers buying smaller baskets, and less often to manage their spending +8.2% Growth -1.8% Volume +12.7% Price Inflation +0.5% -0.5% Frequency Frequency -2.0% Basket Size +0.7% Population +9.7% Own Label +6.4% Own Brand -0.6% NPD +1.4% Vol on Deal 7 Source: Kantar Worldpanel to 6 August 2023 A robust performance Retail Bread and Morning Goods Retail Cake Foodservice Bread & Morning Goods Foodservice Cake Overseas Finsbury Finsbury Finsbury Finsbury Finsbury +6.4%^ +10.4%^ +27.1%^ +19.7%^ +25.2%^ VS VS VS VS VS Market Market +18.1%* ^ +8.8%* ^ Market N/A Market N/A Market N/A *Cricana 52 w/e 15 July 2023 ^52 week data 9 Figures exclude Lees A diversified, well invested and innovative Bakery Group Well diversified across category, channel and customers By Business By Channel (UK Bakery) By Customers (UK Bakery) 15% 37% 48% Foodservice 22% 2% 20% 21% Cake Bread Overseas Cake Bread Cake 57% Retail 78% 11 Figures include Lees Tesco 27% Other foodservice customers 12% Waitrose 8% Brakes 6% Discounters 4% M&S 4% Co-op 12% Asda 11% Morrisons 6% Sainsburys 6% Bidfood 4% Financial Review Financial summary The resilient full year figures reflect another period of persistent significant cost inflation and macroeconomic uncertainty. A strong performance was delivered with growth driven primarily by price, the incremental volume from Lees and overseas. Revenue +16.0% Gross margin -2.4% Operating profit1 +10.9% Operating margin1 -0.2% FY 2023 FY 2022 FY 2023 FY 2022 FY 2023 FY 2022 FY 2023 FY 2022 £413.7m £356.8m 30.0% 32.4% £19.8m £17.8m 4.8% 5.0% EBITDA1 +8.8% PBT1 +4.2% Diluted EPS2 flat FY 2023 FY 2022 FY 2023 FY 2022 FY 2023 FY 2022 Bank debt3 Increase of +£0.8m FY 2023 FY 2022 £31.3m £28.7m £17.7m £17.0m 10.1p 10.1p £21.4m £20.6m 1 Profit is before significant non-recurring and other items. 2 Profit before significant non-recurring and other items and amortisation of intangibles. 3 Bank debt excludes £4.9m selective receivables financing 13 Sector revenue and operating profit UK Bakery Overseas FY 2022 FY 2023 Change FY 2022 FY 2023 Change Revenue (£’000) 306.7 351.1 14.5% 50.1 62.7 25.0% Gross margin (% of NSV) 34.5% 32.0% -2.5% 19.0% 19.4% 0.4% Operating profit (£’000) 14.9 15.4 3.7% 2.9 4.3 48.0% Operating margin 4.9% 4.4% -0.5% 5.8% 6.9% 1.1% 14 Cashflow EBITDA Net working capital movement Lease payments* Capex Interest Tax Free Cashflow Minority interest dividend (FY22 £2.5m, FY23 £0.4m) and FX Free Cashflow after MI dividend Dividend paid (FY22 1.67p final, FY23 0.87p interim) Shares (purchased for employee benefit trust) Decrease in Debt before closure and acquisition costs Acquisition consideration SNR items Decrease / (increase) in debt 15 FY 2022 £m FY 2023 £m 28.7 (2.5) (2.2) (12.5) (0.7) (2.0) 8.8 (2.5) 6.3 (4.0) (0.5) 1.8 (7.1) (2.3) (7.5) 31.3 (3.3) (2.1) (8.8) (2.1) (3.9) 11.1 (0.9) 10.2 (3.2) (0.5) 6.5 (5.7) (1.6) (0.8) Strong balance sheet supporting investments and growth Debt • Acquired 100% share capital of Lees for £6.2m Pensions • IAS19 Deficit - £6.5m (FY21 - £6.6m) (incl £0.5m costs) • Capex of £8.8m • Net bank debt is up £0.8m to £21.4m • Actuarial valuation as at 31 December 2021 complete with deficit of £13.6m • Annual contribution to deficit of £763k. • Debt: EBITDA is 0.7x (pre-IFRS measure in line SNR items with banking covenants) Facilities • A four year £120m credit facility (£60m core + £60m accordion) from June 2022 • Credit facilities provide financial flexibility for the Group to pursue its significant growth ambitions • £3.1m in the year relating to litigation, acquisition costs and restructuring. 16 Strategic update Overview of three strategic pillars Excellence Growth Responsibility Invest in our people and our operating sites to form a strong foundation to underpin our strategy. Create innovative high-quality bakery products that anticipate key market trends. Ensure that customer and consumer needs are at the heart of our decision making. Drive growth through a combination of organic growth and targeted acquisitions. Aim to succeed in both the retail grocery and out-of-home channels in the UK and Europe. Develop 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. 18 Progress on three strategic pillars Excellence • Implementation and full commissioning of a new Buns and Rolls line. • • Continuation of our Systems Excellence strategy and the commencement of our People system implementation. Commencement of our five- year automation capex strategy across multiple locations. Growth • Growth and new business wins driven by category expertise, longstanding customer relationships and market insight. • • Lees acquisition performing in line with expectations. Created refined Group commercial structure to improve focus. Responsibility • Continued to invest in developing key skills and capability. • • • Employee Engagement survey demonstrated increased engagement. Reduced ‘‘Scope 1 and 2’’ emissions against our 2016 base line by 43%. Further developed D&I strategy as well as Health and Wellbeing and Community Engagement programmes. 19 Outlook Opportunity for significant sales growth Organic growth through: • Gaining market share in existing areas, such as licenced celebration cakes (UK and overseas), artisan bread and free from • Further diversifying existing product capability into new channels and customers such as foodservice, food-to-go and discounters • Improving competitiveness and ability to fulfil customers and consumer needs Targeted acquisitions with a clear strategic fit: • Accelerate market consolidation in our core product areas • Further diversify the business through new product, category, customer, channels by geography • Recent successful track record of bolt on acquisitions in Lees and Lightbody Europe Future acquisition timing dependent on meeting our returns criteria Current market rating makes transformational acquisitions difficult 22 A resilient & agile business despite persistent challenges Outlook: • Macro-economic and inflationary headwinds set to persist • Focus remains on managing these challenges through operational improvements, capital investment and product re-engineering • Steady ongoing demand for our product range whilst we will continue to make progress in line with the Group’s three strategic pillars • Proven model and strong track record of dealing with adversity and emerging a stronger business • Remain aligned with the consumer trends within the sector and to ensure that our proposition is as competitive as possible “Over the past six years our Group has faced a series of unprecedented challenges. Notwithstanding the scale of these challenges, we have been able to deliver strong growth and continued financial progress. This is possible due to the resilience and agility achieved on the back of consistent investment strategies over many years” 23 Q&A Appendices One of the largest speciality bakery groups in the UK Diversified by category, channel and geography • UK and Europe • Cake, bread and morning goods • Retail and Foodservice Operating in large markets Diversified manufacturing capabilities in cake, bread and morning goods* • Cake, bread and morning goods Celebration, sharing and snacking cakes, retailer own label, artisan loaves, buns Range of Free from products in bread and cake • UK bread and cake retail market of Foodservice over £6.3bn • UK Foodservice channel serving a UK market of over £1.6bn Broad range of channels and blue chip customers • UK retail Supermarkets, discounters, convenience • UK foodservice • Sweet and savoury baked goods Floured baps, brioche buns, bite style cakes *Increasingly products available in free from and vegan offerings A strong and evolving branded portfolio • Longstanding relationships with many license brands Mars, Thorntons, Mary Berry, Disney, Baileys, Xbox Hotels, pubs, restaurants, high-street chains, fast food outlets, contract caterers • Brand portfolio including Kara foodservice and Wiso Free From • International markets France, Belgium, Netherlands, Ireland, Switzerland and Scandinavia 26 Significant shareholders at 1 September 2023 DBAY Advisors Ruffer Fidelity Worldwide Investment Investec Wealth & Investment Finsbury Food Group Employee Benefit Trust Janus Henderson Investors Otus Capital Management Close Asset Management 27 Amount % Holding 17,714,799 15,982,000 13,038,336 12,683,798 6,308,728 5,600,000 4,562,633 4,435,485 13.59% 12.26% 10.00% 9.73% 4.84% 4.30% 3.50% 3.40%
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