Always
adding
extra
Annual Report & Accounts 2012 Highlights 1
Chairman’s Statement 2
Chief Executive’s Report 4
The Directors 6
Business Review 8
Consolidated Statement of Comprehensive Income 24
Consolidated Statement of Financial Position 25
Consolidated Statement of Changes in Equity 26
Consolidated Cash Flow Statement 27
Notes to the Financial Statements 28
Company Balance Sheet 59
Company Reconciliation of Movements in Shareholders’Funds 60
Notes to the Company Financial Statements 61
Directors’Report 66
Statement of Directors’Responsibilities in Respect of the Annual Report and the Financial Statements 69
Report on Corporate Governance 70
Audit Committee Report 71
Remuneration Committee Report 72
Independent Auditor’s Report to the Members of Finsbury Food Group Plc 74
Notice of Meeting 75
Advisers 77 1
Highlights
2012 2011
£000 £000
Signiﬁcant non-recurring items (refer to Note 4 for detail) - (42)
Share options charge (573) (73)
Diﬀerence between deﬁned beneﬁt pension scheme charges and cash cost 454 233
Movement in the fair value of interest rate swaps 84 564
Movement in the fair value of foreign exchange contracts 152 (316)
Unwinding of the discount on deferred consideration (103) (252)
*Refer to trading results section within the Business Review for further details on the adjusted proﬁts.
Income/(Expenditure)
£207.4m
+9.4%
Grouprevenueup9.4%to£207.4
million (2011:£189.6 million).
£54.9m
+10.0%
Bread & Free From division sales
growth of 10.0% to £54.9 million
(2011:£50.0 million) driven by
strong growth in the fresh gluten
freemarket,Vogel’sbrandgrowth
and fresh Free From own label in
the speciality bread market.
7.8p
Adjusted* diluted EPS
7.8p (2011:7.1p).
£33.9m
Total net debt including deferred
considerationreducedby8.6%to
£33.9million(2011:£37.1million).
£6.5m
+11.6%
Adjusted*proﬁtbeforetaxup11.6%
to£6.5million(2011:£5.8million).
£152.4m
+9.2%
Cake division continues to grow,
up 9.2% to £152.4 million (2011:
£139.6 million) from both UK
and export markets.
Operational Highlights:
• Signiﬁcant organic growth across all divisions,notwithstanding the impact of commodity
and cost inﬂation
• Continued expansion of our 50% owned subsidiary Lightbody Europe
• CreationoffreshFreeFromown-brandingopportunitieswithmajorsupermarketretailers
• Launch of Heston’s Hot Cross buns withWaitrose,supported by EasterTV
marketing campaign
* These ﬁgures have been adjusted to eliminate the impact of the following charges required by IFRS and
signiﬁcant non-recurring items (see Note 4) for the 52 weeks ended 30 June 2012 and ended 2 July 2011:
Growth+
Expansion 2
Chairman’s Statement
Despitetheongoingrealityofarecessionaryenvironment,
ourtradingperformancebearswitnesstothefruitsofhard
work across the Group.
IamdelightedtoreportthatFinsburyFoodshasachieved
an increase in top and bottom line growth in the current
trading period.
For the ﬁrst time in our history,Group sales have
surpassed £200m.Revenue from cakes across UK and
Europehasgrownby9%,BreadandFreeFromregistering
acombineduplift of 10%.
Traditionalareasofstrengthcontinuetoexpandwhileother
sectors oﬀer further encouragement.The introduction
of fresh gluten free bread received a warm welcome in
the marketplace while our expansion into retailers own
brands continues apace.In addition,Vogels speciality
breads enjoyed a successful relaunch and Nicholas &
Harrisotherspecialitybreadproductsperformedstrongly.
One area of notable growth is in our 50% owned
subsidiary Lightbody Europe.Over the last 18 months,
therangeofoﬀeringshascontinuedtoexpand,broadening
beyond cakes into other UK branded products.
While the trading performance is clearly encouraging,
satisfaction must be tempered with concern at events
beyond our power to inﬂuence.
Input price inﬂation continues to impact on operating
margins with prices for commodities such as sugar and
eggs moving steadily upwards.
The situation for consumers shows little sign of
improvement.Our customers are faced with shrinking
disposable incomes and the very real dilemma of trying
to make ends meet while buying good food.
Weoperateinatreatcategory.Peoplewanttocomedown
the cake aisle and purchase our products for themselves
and their families.They are willing to be engaged;they
want to see something new,bakery goods that are
appealing and aﬀordable.
Ourresponsehasbeentoengageandinnovate.Overthe
last 12 months,Finsbury Foods has increased spend on
Category Management initiatives,conducting market
research and trialling new products with the speciﬁc
aim of stimulating consumer awareness.
Our major customers actively value our input.They are
looking to us as a large bakery Group to help them ﬁnd
ways of reﬁning and improving their product range
to generate growth.
Theeﬃcacyofourapproachisborneoutbyrobustlevels
ofcashﬂowgeneration.Havingrenegotiatedourbanking
facilities with HSBC during 2011,the Group paid oﬀ
£3.2 million of deferred consideration with £1.2 million
remaining at the end of the year,an important marker
in terms of how people see the business.
Intoday’senvironment,debtishardlyviewedinapositive
light.Reducingourleveloftotaldebtincludingdeferred
consideration to EBITDA to 2.7 by the 30 June 2012
year end represents another major accomplishment.
Aslongaswecontinuetogeneratecashﬂowatpresent
levels,the Group will break free of self imposed
constraints regarding new investments.
Business has never been more of a challenge.Steering a major
bakery Group through the stormy seas of an economic downturn
was never going to be painless.Navigatingacoursetosafehaven
demandedclarityofvision,collectiveresilience in the face of
setbacks and a team committed to excellence and innovation.
Excellence+
Innovation
Fortheﬁrsttimeinourhistory,Groupsaleshavesurpassed
£200m.RevenuefromcakesacrossUKandEuropehas
grownby9%,BreadandFreeFromregisteringacombined
upliftof10%. 3
“IamdelightedtoreportthatFinsburyFoods
hasachievedanincreaseintopandbottom
linegrowthinthecurrenttradingperiod.”
FinsburyFoodshasasuccessfultrackrecordofacquiring
high-quality,innovative food businesses.Historically,
our acquisition skills have been demonstrated to good
eﬀect, investing in business that provide a strategic ﬁt
andhelpingthosebusinessesgrow.Asandwhenthetime
is appropriate,I feel conﬁdent we will demonstrate
those skills once again.
Finsbury Foods remains a steady food business,
performing wellinadiﬃcultmarket.Therealityis,
however,that the sectorinwhichweoperatewillgrow
atarelativelymodestrate in coming years.
Another testing period lies ahead but I am delighted
with the progress we have made.Our focus has been,
and will continue to be,on doing the right things on
behalf of the shareholders.The formula we’ve pursued
will remain steadfast,maintaining the pattern of growth
in proﬁtability alongside a signiﬁcant level of debt
repayment,underpinned by a commitment to meeting
the needs of our customers and consumers.
MartinLightbody
Non-Executive Chairman 4
Chief Executive’s Report
Transformation does not happen overnight.Nor is change,as
is widely believed,born of sudden shifts in direction,approach
or strategy.Meaningful change is delivered in increments.It is
generatedbyagradualevolution,thesubtlereshapingofthekey
elements of a business.
Progress+
Community
Patience,perseverance and commitment are the unsung
heroes of corporate transformation.Real change
takes time.
Afterthreeyearsofunstintingeﬀortacrossthecompany,
thefruitsofchangearebeginningtoemerge.Itgivesme
greatpleasuretoreportasigniﬁcantriseintopandbottom
line growth for the current ﬁnancial year.
Ourpremiumtraditionalbespokeproductsprovidedthe
engine of progress.In a particularly strong performance
during ﬁrst half of the year,we succeeded in growing
faster than the marketplace that we serve.To achieve
such a degree of growth speaks volumes for the quality
and breadth of our oﬀering.
We cannot make something for nothing.The sheer hard
workandenthusiasmofourstaﬀwasprimarilyresponsible
for maintaining progress in the second half of the year.
This was despite another exacting year of cost inﬂation
and the necessity of having to conduct diﬃcult
conversations with many of our customers.
Trading conditions remain onerous but I am delighted
at the manner in which our business has responded.
Maintainingthepaceofprogressdemandsstayingnimble
onourfeet,adaptingourrangeofproductsinlinewiththe
modiﬁedpurchasinghabitsofourcustomers.Byblending
commitment to value with our core strengths of craft,
innovation and expertise,I feel conﬁdent that we shall
continue to advance.
TradingPerformance
Resultsforthefull52-weekperiodending30thJune2012
are described in greater detail in the Business Review
Section but there are a number of key areas I would
like to take this opportunity to highlight:
• Group revenue up 9.4% to £207.4 million
• Underlyingproﬁtbeforetaxup11.6%to£6.5million
• SalesintheCakedivisionup9.2%to£152.4million
• Sales in the Bread and Free From division up 10.0%
to£54.9milliondrivenbystronggrowthinthefresh
gluten free market,Vogel’s brand growth and fresh
Free From own brand
• Total net debt (excluding bank fees) down 8.6%
to £33.9 million
• Signiﬁcant organic growth across all divisions,
notwithstanding the impact of commodity and
cost inﬂation
• Continued expansion of our 50% owned subsidiary
Lightbody Europe
• Creation of fresh Free From own-branding
opportunities with major supermarket retailers
• Launch of Heston’s Hot Cross buns withWaitrose,
supported by EasterTV marketing campaign
BroaderBrushstrokes
Organic growth in the current environment provides
a ringing endorsement of our products.However,cost
inﬂation continues to exert considerable pressure on
margins,the prospect of further price increases casting
a shadow over our eﬀorts.
Restructuring measures in recent years have generated
exceptional cost savings across the business.Over the
last 12 months,with such savings primarily realised,
eﬃciency measures moved centre stage.
Inaparticularlystrongperformanceduringﬁrsthalf
oftheyear,wesucceededingrowingfasterthanthe
marketplacethatweserve. 5
We are constantly striving to reap the scale beneﬁts
of our businesses,becoming more eﬃcient in the use
ofrawmaterials.Stringenteﬀortshavebeenmadeto
remove non value-added processes in all our factories,
squaring the circle of keeping costs down to oﬀset the
rising price of raw materials.
We have also tried to do things diﬀerently,using
ingredients in a more inventive fashion.One prime
example was the creation of a higher value Disney Car
cake,a distinctive product enjoying prime position
on supermarket shelves.
Inthemidstofsuchatestingperiod,managementteams
across the business have responded with resolve and
expertise.Inparticular,Iwouldliketorecognisethemajor
contributionbynewpeoplecomingintothebusinessover
the past few years.
Thebusinessisemergingfromaperiodofhiatus.Wehave
demonstrated our ability to grow in organic fashion,
tradingourwaythroughdiﬃculttimesinamarketplace.
Much,ofcourse,hasstilltobedone.Aswellascontinuing
to grow our existing businesses,the Board is resolved to
pay down debt,build a balance sheet that is signiﬁcantly
less leveraged and create long-term value.
Thedayjoboﬀersmoreofthesameoverthenexttwelve
months and our mindset is ﬁxed accordingly.No matter
what the timeline may be,I feel conﬁdent that the
pragmatic foundations so carefully laid down in recent
yearsaresettoproduceenduringbeneﬁtsforthebusiness.
JohnDuﬀy
Chief Executive Oﬃcer
“Thesheerhardworkandenthusiasmofour
staﬀwasprimarilyresponsibleformaintaining
progressinthesecondhalfoftheyear.” The Directors
6
MartinLightbody
Chairman
Martin Lightbody joined the Board in February 2007
with the purchase of the Lightbody Group.He was
previously Managing Director of this business and led
its growth from nowhere in 1995 to become the UK's
leading supplier of Celebration cakes 10 years later.
Heisatrainedbakerandconfectionerandisamember
of the British Confectioners’Association.
JohnDuﬀy
ChiefExecutiveOﬃcer
Following an engineering degree and initial career with
Shell International,John Duﬀy completed a full time
MBA and has spent the subsequent 20 years within the
FoodManufacturingsector.ManufacturingandLogistics
Director roles at Mars Inc.were followed by the role
of Operations Director at GoldenWonder in 2000 and
Managing Director ofWT Foods’largest chilled foods
subsidiary,Noon Products,before and after its sale to
KerryFoodsin2005andhehasNon-Executiveexperience
inthebroaderconsumergoodsindustry.Hewasappointed
interimChiefOperatingOﬃceratFinsburyFoodsfrom
September 2008 for 12 months and took over as Chief
Executive Oﬃcer with eﬀect from 30 September 2009.
StephenBoyd
GroupFinanceDirector
Steve was appointed Group Financial Director on
18 January 2010.Steve has spent 18 years in the food
manufacturing sector and previously was Group Finance
Director at GoldenWonder,subsequent to that was
Group Finance Director and Chief Operating Oﬃcer
atWTFoodsGroupPlc.SteveworkedwithJohnDuﬀy
at both GoldenWonder andWT Foods.
CrawfordCurrie
FinanceDirectorofLightbodyGroupLtd
CrawfordCurriewasappointedtotheBoardinFebruary
2007 following the purchase of the Lightbody Group.
BeforejoiningLightbodyin1998,hegainedawiderange
of experience in various accounting roles.After training
withTouche Ross,he took on senior roles in divisions
of Cookson Group Plc and Smith Industries Plc.
EdwardBeale
Non-Executive
Edward Beale was appointed a Director on 29 August
2002.He is a chartered accountant and the Chief
Executive of City Group Plc,the Group's Company
Secretaries.HeisamemberoftheAccountingCouncil
and member and former Chairman of the QCA’s
Corporate Governance Committee.He sits on both
the Audit Committee and Remuneration Committee.
IanFarnsworth
Non-Executive
Ian Farnsworth has been a member of the Board since
1997.He joined NationalWestminster Bank in 1956
and retired in 1997 having held various senior positions
including Chief Executive and Deputy Chairman of
Coutts&Co.HeisChairmanofboththeRemuneration
and Audit Committees.
DavidMarshall
Non-ExecutiveDeputyChairman
David Marshall was educated in South Africa and in
England.He was appointed to the Board in 1979 and
was elected Chairman in March 2008,replacing Lord
Saatchi and following a six-year period as Deputy
Chairman.He is also Chairman of a number of listed
public companies,including London Finance &
InvestmentGroupPlc,whichisasubstantialshareholder
in Finsbury Food Group.In recent years he has taken
a leading role in the reorganisation and development
of a number of medium sized listed companies in the
UK and overseas.
PaulMonk
Non-ExecutiveDeputyChairman
Paul Monk was appointed to the Board on 9 December
2002andelectedasjointDeputyChairmaninFebruary
2007.He has extensive experience in the food
manufacturing industry,was the Chief Executive of
GoldenWonder Ltd and his other experience includes
roles with Marks & Spencer and the Mars Corporation.
He also holds other Non-Executive roles within the
food industry.
Knowledge+
Expertise Toprow,fromlefttoright
1. Martin Lightbody
2. John Duﬀy
3. Stephen Boyd
Middlerow,fromlefttoright
4. Crawford Currie
5. Edward Beale
6. Ian Farnsworth
Bottomrow,fromlefttoright
7. David Marshall
8. Paul Monk
7 Business Review Ourbusinessstrategyistogenerate
returnsforshareholdersbybuilding
a crafted bakery Group within
theCakeandBread&FreeFrom
markets which is focused on
premium,celebration and well
being that delivers for customers
and consumers.
9 10
Whilstourshort-termfocusisonintegratingandgrowing
ourexistingbusinesses,weaimtotakeadvantageofthe
right bolt on acquisitions to drive longer-term value
as opportunities,ﬁnancing and circumstance allow.
OurMarkets
The total annual UK ambient cake market (including
pre-packed cake and in-store bakery) is valued at £1.07
billion(source:KantarWorldpanel).Thepast12months
has seen value growth of 3.4% due principally to growth
in average price with a decline in volume of -0.5%.We
continue to be the second largest supplier of cake to the
UK’s multiple grocers,with an 18.2% share of the total
pre-packedcakemarket(source:IRIInfoscan)andhave
maintained our leading position in the niche areas on
whichwefocus.
Annual bread and morning goods sales are in excess
of£3billion(source:Mintel).Weareasmallerplayerin
this market,with a focus on speciality and organic bread
products and we have continued to beneﬁt from growth
in demand,despite the tough economic climate and
a general decline in organic bread sales.
Moving to the free from part of this segment,the total
glutenfreemarketisaround£231million(source:Kantar),
with growth of c15% in the last year.The area of this
market in which we operate i.e.bread,cake and other
bakeryproducts,accountsforc£48millionofthesesales,
withgrowthof11%yearonyear.Thebakerysectorgrowth
signiﬁcantlyoutstripsthetotalglutenfreemarketgrowth
due to the continued growth of branded and own label
fresh bread.With the bread category growing at 20%,
this growth is being driven by increased frequency of
purchase and new customers coming into the market.
OurBusiness
The Group consists broadly of the following businesses:
Cake
Lightbody of Hamilton Ltd (‘Lightbody’),based in
Hamilton,employs around 1,100 people and is the UK’s
largest supplier of Celebration cake with Disney,Nestlé
andThorntonsproductwithinitsportfolio.Italsoproduces
a wide range of small cakes,slices and in store bakery
(ISB) bites,a number of which are under our licensed
brands includingThorntons,andWeightWatchers.
Memory Lane Cakes Ltd (‘Memory Lane’),based in
Cardiﬀ,employs around 800 people and is the leading
manufacturer of the UK retailers’premium own label
cake ranges.It also produces under a number of brands
notablyNestlé,WeightWatchersandThorntons.Thelast
ﬁnancial year has been one of continued new product
development and launches,factory eﬃciency
improvements,andsomeinevitablepricerisestomitigate
therelentlessriseincommoditypriceinﬂationseenover
recent years.
Sales within the integrated cake businesses were up
9.2% compared with the prior year to £152.4 million.
Growth came from both the UK and export markets
through Lightbody Europe our 50% owned business,
with half of the cake growth coming from Lightbody
Europe.
Bread&FreeFrom
UnitedCentralBakeriesLtd(‘UCB’),basedinBathgate
near Edinburgh,employs around 180 people and
manufactures a range of gluten free bakery products
and morning goods.The year saw signiﬁcant growth
fromthebrandedfreefromfreshbreadbrandincluding
new lines to enhance the range.
Livwell Ltd (‘Livwell’),based in Hull,employs around
90 people.It continues to deliver new products into the
freefrommarket.Thisbusinessoperatesunderacombined
commercial team with UCB.
We will continue to develop our licensed brand portfolio to
complement our core retailer brand relationships.We are still
a modest manufacturer in the total Bakery markets in which
we operate and see exciting organic growth opportunities
in all our businesses.
Saleswithintheintegratedcakebusinesseswereup
9.2%comparedwiththeprioryearto£152.4million.
Business Review  Business Review
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Nicholas & Harris Ltd (‘N&H’),based in Salisbury,
employs around 270 people and produces a range of
speciality bread products to UK retailers.Its focus is
on‘clean label’breads,rolls and buns.This position has
been strengthened following its acquisition of Goswell
Enterprises Ltd (‘Goswells’) in June 2009 and with
it a number of licensed brands includingVogels and
Cranks.These were relaunched in October 2010 and
sales on each have grown in excess of 30%.
BrandsandLicences
TheGroupremainsprimarilyaretailerbrandedbusiness
with sales of retailer own label products accounting for
around 58% of our total revenue compared to 56%
a year ago.The balance represents the strength of the
licensed brands under our control.
WeightWatchers
WeightWatchers is one of the largest food brands in the
UKandweholdthelicencetomanufactureanddistribute
low fat cake to the UK and Ireland’s multiple grocers
under this brand.Since the acquisition of Anthony Alan
in2007,thebrandhasbeendevelopedthroughutilisation
ofthebroadproductioncapabilitywithintheGroupand
ourskillsindevelopingnewproductsthatadheretobrand
guidelines.WeightWatchers now accounts for 83% of
the low fat cake market in terms of value up from 81%.
The brand continues to perform better than the total
Low Fat category which declined by -10.8% in value
terms in the latest year (Source:IRI Infoscan).
Thorntons
The Group continues to develop its branded oﬀering
within the premium cake sector via its licensing
arrangement with theThorntons confectionery business.
Through a combination of new product development,
pack formats and targeted promotional activity,we
continue to invest in theThorntons brand to increase
awareness and drive further proﬁtable growth for both
usandourcustomers.OurbestsellingThorntonsproduct,
caramelshortcake,continuestodominatethepre-packed
Bites market with a 44% value share of this market
(source:IRI Infoscan).
NestléConfectionery
We continue to beneﬁt from the rights to manufacture
and distribute cake products under Nestlé confectionery
brands such as Smarties and JellyTots.
Disney
Our successful range of Disney Celebration cakes
continuestoevolve.Propertieswithintheportfolioinclude
Toy Story,Disney Princess,Cars,WinnieThe Pooh,
Fairies and Avengers.The Disney portfolio is a key part
of our overall Celebration cake business and plays an
important role in retaining our position as the largest
supplierofCelebrationcaketotheUK’smultiplegrocers.
OtherCelebrationCakeLicences
These four major brands are complemented by a range
ofotherlicenceswhichareparticularlyfocusedondriving
Celebration cake sales.Properties such as Peppa Pig,
HelloKittyandSpidermanhavetheirowntargetmarket
andoﬀerexcellentadditionstotherange.MoshiMonsters
hasprovedaverysuccessfulrecentadditiontothisportfolio
registeringsalesinexcessof£1msinceitslaunchin late
2011.In the niche adult premium celebration sector
LittleVeniceCakeCompanyhasperformedparticularly
well recording 25% value sales growth in the last year
(source:IRI Infoscan).
PrincipalOperatingRisks
The Group operates in an environment which is
continually changing and as a result the risks it faces
will also change over time.The assessment of risks and
thedevelopmentofstrategiesfordealingwiththeserisks
are achieved on an ongoing basis through the way in
which the Group is controlled and managed internally.
AformalreviewoftheserisksiscarriedoutbytheGroup
on an annual basis.The review process involves the
identiﬁcation of risks,assessment to determine the
relative likelihood of them impacting the business and
the potential severity of the impact,and determination
of what needs to be done to manage them eﬀectively.
The Directors have identiﬁed the following principal
risks and uncertainties that could have the most
signiﬁcant impact on the Group’s value generation:
PeppaPig,HelloKittyandSpidermanhavetheirown
targetmarketandofferexcellentadditionstotherange.
MoshiMonstershasprovedaverysuccessfulrecentaddition
tothisportfolioregisteringsalesinexcessof£1msince
itslaunchinlate2011. Business Review
14
CompetitiveEnvironmentandCustomerRequirements
Thereisstrongcompetitionbetweenmanufacturersin
the Bakery sector.The monitoring of key performance
indicators at customer level such as service levels and
customer complaints is part of the risk management
processassociatedwiththisspeciﬁcrisk.Strongcustomer
service,quality products,low costs and innovative new
productdevelopmentareareasoffocustosatisfycustomer
needs and remain strong in a competitive environment.
TheGrouphasinvestedheavilyincategorymanagement,
new product development and marketing skills.This
investment has helped create an insight into customers
and consumer demands.
ContinualmonitoringofcustomerKPI’sandproduction
quality measures take place to ensure customer
requirements are being met and issues are identiﬁed
in a timely manner to limit their impact.
ProductQuality
ProductqualityisakeystrengthoftheGroupandfailure
to maintain a high standard of food quality and safety
would have a severe impact on service levels and
customer relationships.
The Group’s quality assurance procedures,managed at
site level,are reviewed continuously with improvements
made as appropriate.The Group’sTechnical Director
helps provide focus to ensure there is continuous
improvementacrossallsitestomeettheincreasinglyhigh
expectationsofourcustomers.Theoperatingsubsidiaries
aresubjecttoregularinternalandindependentfood safety
and quality control audits including those carriedoutby,
or on behalf of,their customers.The Group maintains
product recall insurance cover to mitigate the potential
impact of such an occurrence.
RawMaterials–PricesandSupply
Increasesinthepriceofrawmaterialscanadverselyimpact
the core profitability of the business and any related
shortage in supply will impact the business’ability to
maintainitsservicelevelstocustomers–anotherofits
key performance indicators.The prices of certain key
commodities(e.g.sugar)aretiedtotheEuro–therelative
strength of sterling and future volatility within the
Eurozone will,therefore,have an impact on the cost
of these commodities.
Aﬀordability for consumers is essential and the Group
will focus on internal efficiencies and productivity
initiativestolessentherisingcommoditypriceimpacton
consumers.TheGroupmaintainsahighlevelofexpertise
initsbuyingteamandwillconsiderlong-termcontracts
where appropriate to reduce uncertainty in inputprices.
Theteamalsocultivatesstrongrelationshipswithitsmajor
suppliers to ensure continuity of supply atcompetitive
prices.Regularrenovationandinnovation inourproduct
rangecanhelptomanagemarginpressuresin an eﬀective
manner as far as the competitive environment allows.
The Group also purchases forward foreign currency in
order to minimise the ﬂuctuation of input costs linked
to future currency conversion rates.
EconomicEnvironment
Whilstthepricesensitivityofourproductsisrelativelylow,
therehavebeensomeparticulartrendsinthepremiumand
health sectors of the cake market that have impacted the
demand for products within these sectors.The value-
focusedrecessionaryenvironmenthasresultedindemand
from customers for increased levels of support via
promotional activity as they compete with each other
to oﬀer consumers greater value for money.The Group
will continue to focus on quality and value for money
in periods of reduced spending.
InterestRates
Group funding is linked to either base rate or LIBOR,
any increase in interest rate will increase the funding
costs.The Group has interest rate swap arrangements
in place to hedge its risks associated with interest rate
ﬂuctuations.
BankCovenants
There is potential for the bank to withdraw funding
should there be a breach of covenants.Bank covenants
are reviewed monthly.There are regular and open
communications with the bank to ensure they are
fully aware of the Group’s position.
Strongcustomerservice,qualityproducts,lowcostsand
innovativenewproductdevelopmentareareasoffocusto
satisfycustomerneedsandremainstronginacompetitive
environment.  16
TradingResults
Group revenue for the 52 week period to 30 June 2012
was £207.4 million (52 week period to 2 July 2011:
£189.6 million),an increase of £17.8 million (9.4%)
year on year.
Grossmarginfortheﬁnancialyearwas26.5%representing
a decrease of 0.5% year on year.Key core ingredient
inﬂation on items such as sugar and egg has inevitably
impacted on operating margins.
Administrative expenses have increased year on year.
Asigniﬁcantproportionofadministrationcostsisdirectly
linked to activity levels.In addition there has been an
ongoing investment in marketing and range support
activities.Wage costs and new product development
have increased year on year.The Group continues to
invest heavily in category management,new product
development personnel and marketing skills.
The following analysis is included to show what the
Directors consider to be the underlying performance
of the Group and eliminates the impact of signiﬁcant
non-recurringitemsandcertainchargesrequiredbyIFRS.
52weekperiodended30June2012
Fair value
of interest As per
Non- Deﬁned rate swaps/ Unwinding Consolidated
recurring Share beneﬁt foreign of discount Statement of
Operating signiﬁcant options pension exchange on deferred Comprehensive
performance items charge scheme contracts consideration Income
£000 £000 £000 £000 £000 £000 £000
Revenue 207,360 - - - - - 207,360
Cost of sales (152,461) - - - - - (152,461)
Gross proﬁt 54,899 - - - - - 54,899
Other costs
excluding depreciation
& amortisation (42,543) - (573) 65 152 - (42,899)
EBITDA 12,356 - (573) 65 152 - 12,000
Depreciation
& amortisation (3,211) - - - - - (3,211)
Results from
operating activities 9,145 - (573) 65 152 - 8,789
Financial income 12 - - 1,490 84 - 1,586
Financial expenses (2,642) - - (1,101) - (103) (3,846)
Proﬁt before tax 6,515 - (573) 454 236 (103) 6,529
Taxation (1,610) - 138 (133) (100) 27 (1,678)
Proﬁt after tax 4,905 - (435) 321 136 (76) 4,851
The taxation on IFRS charges include an element of rate change on opening balances from 26% to 24%.
2012
Business Review 17
52weekperiodended2July2011
Fair value
of interest As per
Non- Deﬁned rate swaps/ Unwinding Consolidated
recurring Share beneﬁt foreign of discount Statement of
Operating signiﬁcant options pension exchange on deferred Comprehensive
performance items charge scheme contracts consideration Income
£000 £000 £000 £000 £000 £000 £000
Revenue 189,575 - - - - - 189,575
Cost of sales (138,478) - - - - - (138,478)
Gross proﬁt 51,097 - - - - - 51,097
Other costs
excluding depreciation
& amortisation (39,568) - (73) 11 (316) - (39,946)
EBITDA 11,529 - (73) 11 (316) - 11,151
Depreciation
& amortisation (3,013) - - - - - (3,013)
Results from
operating activities 8,516 - (73) 11 (316) - 8,138
Financial income - - - 1,356 564 - 1,920
Financial expenses (2,677) (42) - (1,134) - (252) (4,105)
Proﬁt before tax 5,839 (42) (73) 233 248 (252) 5,953
Taxation (1,465) 200 19 (133) (111) 73 (1,417)
Proﬁt after tax 4,374 158 (54) 100 137 (179) 4,536
The signiﬁcant non-recurring items in 2011 referred to above relate to £42,000 interest on a prior year tax inquiry
liability,£200,000 under taxation relates to the release of overprovision on the prior year tax inquiry.
The taxation on IFRS charges include an element of rate change on opening balances from 28% to 26%.
TheGroupcontinuestoinvestheavilyincategory
management,newproductdevelopmentpersonnel
andmarketingskills.
2011 Business Review 19
EarningsperShare
EPScomparativestotheprioryearcanbedistortedbysigniﬁcantnon-recurringitemsandIFRSadjustments.
TheBoardisfocusedongrowingadjusteddilutedEPS,whichiscalculatedbyeliminatingtheimpactoftheitems
referredtointhetablesonpages16and17,andincorporatesthedilutiveeﬀectofshareoptions.Adjusteddiluted
EPSis7.8pforthe52weekperiod(2011:7.1p).
2012 2011
Basic EPS 8.0p 7.6p
Adjusted* basic EPS 8.1p 7.3p
Diluted** basic EPS 7.7p 7.4p
Adjusted*diluted**EPS 7.8p 7.1p
* Adjusted EPS measures are calculated by eliminating the impact of signiﬁcant non-recurring items and IFRS adjustments.
Further details can be found in Note 9.
** Diluted EPS incorporates the dilution eﬀect of share options.
FinancialKeyPerformanceIndicators
KPI 2012 2011 2010 2009 2008
Revenue £207.4m £189.6m £168.3m £178.9m £165.1m
Adjusted EBITDA £12.4m £11.5m £11.0m £10.4m £13.3m
Adjusted diluted EPS 7.8p 7.1p 7.0p 6.9p 10.5p
Net bank debt £32.6m £32.7m £36.5m £41.0m £43.7m
Net debt including deferred consideration £33.9m £37.1m £42.6m £48.1m £49.6m
EBITDA is calculated as earnings before interest,taxation,depreciation and amortisation.
Net bank debt is calculated as overdrafts,bank loans,asset ﬁnance and mortgages less cash balances and before unamortised bank fees.
Non-FinancialKeyPerformanceIndicators
A range of non-ﬁnancial key performance indicators are
monitoredatsitelevelcovering,amongstothers,customer
service,quality and health and safety.The Group Board
receives an overview of these on a regular basis.
Acquisitions
There were no acquisitions in the period.
Note 22 details the deferred consideration paid during
the year and the amount outstanding at the year end.
CashFlow
Operating proﬁt of £12.4 million before changes in
working capital,there was an increase in our working
capital requirementof£0.9millioncomparedtothelast
ﬁnancialyearreﬂectingtheorganicgrowthoverthepast
12months.Corporationtax payments made in the
ﬁnancial year totalled £2.2 million (2011:£1.0 million),
the payments in the prior year took account of the
research and development tax relief due to the Group.
Capitalexpenditureintheyearamountedto£3.2million
(2011:£2.2 million).
DebtandBankFacilities
TheGroup’stotalnetdebtincludingdeferredconsideration
is £33.9 million down £3.2 million from prior year.
The Group’s total net bank debt excluding deferred
considerationafterdeductingcashbalancesandincluding
guaranteedloannotesasat30June2012was£32.6million
(2 July 2011:£32.7 million).Within this total net bank
debt,£13.9 million is due within one year,including
cash at bank,invoice ﬁnance and loan notes payable
on demand (2011:£11.3 million).
The Group’s debt facility with HSBC Bank Plc totals
£47.1m,the key features of the facility are as follows:
• Overdraft (£2.75m)
• Conﬁdential invoice discounting facility
(£17.5m ﬂexible)
• Term loan repayable over six years (£14.2m)
• Mortgage facility (£8.2m)
• Rolling asset ﬁnance facility (£4.4m).
Note 18 gives details of the drawn amounts and
maturity dates.
Discounteddeferredconsiderationof£1.2misoutstanding
at the year end and is payable over the next two years
(2011:£4.3m).Of this £1.2m (2011:£3.1m) attracts an
interestof5.2%paand£nil(2011:£1.2m)isinterestfree.
Operatingproﬁtof£12.4millionbeforechanges
inworkingcapital,therewasanincreaseinour
workingcapitalrequirementof£0.9million. 20
The Group is able to oﬀer strong asset backing to secure
itsborrowings.TheGroupownsfreeholdsitesatMemory
Lane in Cardiﬀ,at Lightbody,UCB and Campbells in
Scotland,andatLivwellinHull.Inaddition,theGroup
has a strong trade debtor book to support the invoice
discounting facility,made up primarily of UK’s major
multipleretailers.Thisdebtorbookstoodat£27.2million
(2011:£25.5 million) at the period end date.
TheGrouprecognisestheinherentriskfrominterestrate
rises.Tomitigatetheserisks,theGrouphasthreeinterest
rateswapsinplacewithatotalcoverageof£20.0million
(equivalent to 61% of total net bank debt) at a weighted
average rate of 4.7%.
The eﬀective interest rate for the Group at the year end,
taking account of the interest rate swaps in place and
deferredconsiderationwithbaserateat0.5%andLIBOR
at 1.0%,was 5.21% (2011:5.61%).
FinancialCovenants
TheBoardreviewstheGroup’scashﬂowforecastsandkey
covenantsonaregularbasistoensurethatithasadequate
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.
Interestcover(basedonadjustedEBITDA)forthe52
weeks to 30 June 2012 was 4.7 (2011:4.3).Net bank
debt to EBITDA (based on adjusted EBITDA) for
the year to 30 June 2012 was 2.6 (2011:2.8).
It should be noted that current liabilities exceed current
assets.Having reviewed the Group’s plans and available
ﬁnancial facilities,the Board has reasonable expectations
that the Group has adequate resources to continue in
operationalexistencefortheforeseeablefuture.TheGroup
has stayed within its banking facilities during the year,
meeting covenant requirements.The Group has the
continued support from its bank with renegotiated
facilities of £47.1m extending term loans to 2017.In
addition,theGrouphasastrongassetbackingandstrong
tradedebtorbook.Accordingly,theBoardcontinuestoadopt
thegoingconcernbasisinpreparingtheFinancialStatements
forboththeGroupandtheparentcompany.Furtherdetails
on debt and ﬁnancial risk management canbefoundin
Notes18and24totheGroup’sFinancialStatements.
Taxation
The Group taxation charge for the year was £1.7 million
(2011:£1.4million).Thisrepresentsaneﬀectiverateof
25.7%(2011:23.8%,27.2%aftereliminatingtheprioryear
tax inquiry credit).Further details on the tax charge can
be found in Note 8 to the Group’s Financial Statements.
Environmentalmatters
The Group continues to focus on packaging reduction
throughinnovationandhasdeliveredafurthercardboard
reduction of 17% at the Cardiﬀ site.The Group are now
taking the key learning and successes from the Cake
Category and applying them across other areas of the
businesstodelivercategoryleadinginnovativesolutions.
Mandatory participation in the CRC Energy Eﬃciency
Scheme (formerly known as the Carbon Reduction
Commitment) focuses the Group to reduce its carbon
emissions.
EmployeeSocialandCommunityIssues
All manufacturing sites are active within their local
community supporting local community initiatives.
The Group also supports local and national government
initiatives such as the NewWork programme.
TheCakeCategoryinparticularhavebeenworkingclosely
withlocaluniversitiesonbusinessprojectsandplacements
and plan to continue this partnership work further in
several areas of training,development and project work.
They continue to invest in training and development
of the workforce supporting a programme of vocational
qualiﬁcations.
The Bread Category has established an accredited baker
apprenticeshipschemetocontinuetheirleadintraditional
bakingskillsand alsosponsorstheSalisburyYoungLocal
Hero Award and sponsors a number of local events.
TechnicalMatters
The company continues to drive technical and quality
standards across the business.All sites have achieved
BritishRetailConsortiumAgradestandard.Keytechnical
processes have been standardised across the business
and further work is planned to gain additional beneﬁts.
The Group is taking signiﬁcant steps in the area of data
capturewithacentralisedsupplierapprovalsystemacross
the Group using a web based IT system and a common
system for complaints management and quality
measurement data.These improved systems provides
arealfocusondrivingqualitystandardsandconsistency
across the Group.
Strategic partnerships are being developed with bakery
innovation experts enabling the Group to focus on
strategic product improvements.
Allmanufacturingsitesareactivewithin
theirlocalcommunitysupportinglocal
communityinitiatives.
Business Review Tba GrCJUJI ~011IID18SIO IDCUS 
on pataautu1 redocllan tttroauh 
laoovadoo anlfllas llellvered 
atunner cariiiiDBI'II rell11ctl11 
011~ II tal Carllllf Site.  Financial Statements 23
Consolidated Statement of Comprehensive Income 24
Consolidated Statement of Financial Position 25
Consolidated Statement of Changes in Equity 26
Consolidated Cash Flow Statement 27
Notes to the Financial Statements 28
Company Balance Sheet 59
Company Reconciliation of Movements in Shareholders’Funds 60
Notes to the Company Financial Statements 61
Directors’Report 66
Statement of Directors’Responsibilities in Respect of the Annual Report and the Financial Statements 69
Report on Corporate Governance 70
Audit Committee Report 71
Remuneration Committee Report 72
Independent Auditor’s Report to the Members of Finsbury Food Group Plc 74
Notice of Meeting 75
Advisers 77
Facts+
Figures Consolidated Statement of Comprehensive Income
forthe52weeksended30June2012and2July2011
2012 2011
Before non- Non-
recurring recurring
signiﬁcant signiﬁcant
Total items items Total
Note £000 £000 £000 £000
Revenue 2 207,360 189,575 - 189,575
Cost of sales (152,461) (138,478) - (138,478)
Grossproﬁt 54,899 51,097 - 51,097
Administrative expenses 3 (46,110) (42,959) - (42,959)
Resultsfromoperatingactivities 8,789 8,138 - 8,138
Financial income 7 1,586 1,920 - 1,920
Financial expenses 7 (3,846) (4,063) (42) (4,105)
Netﬁnancingexpense (2,260) (2,143) (42) (2,185)
Proﬁtbeforetax 6,529 5,995 (42) 5,953
Taxation 8 (1,678) (1,617) 200 (1,417)
Proﬁtfortheﬁnancialyear 4,851 4,378 158 4,536
Othercomprehensiveincome
Actuarial (losses)/gains on deﬁned
beneﬁt pension scheme 14 (2,357) 2,224 - 2,224
Movement in deferred taxation
on pension scheme liability 23 566 (578) - (578)
Foreign exchange translation
diﬀerences (187) 207 - 207
Othercomprehensive(expense)/income
fortheﬁnancialyear,netofincometax (1,978) 1,853 - 1,853
Totalcomprehensiveincome
fortheﬁnancialyear 2,873 6,231 158 6,389
Proﬁtattributableto:
Equity holders of the parent 4,277 3,843 158 4,001
Non-controlling interest 574 535 - 535
Proﬁtfortheﬁnancialyear 4,851 4,378 158 4,536
Totalcomprehensiveincome
attributableto:
Equity holders of the parent 2,299 5,696 158 5,854
Non-controlling interest 574 535 - 535
Totalcomprehensiveincome
fortheﬁnancialyear 2,873 6,231 158 6,389
Earningsperordinaryshares
Basic 9 8.0 7.6
Diluted 9 7.7 7.4
24 25
Consolidated Statement of Financial Position
at30June2012and2July2011
2012 2011
Note £000 £000
Non-currentassets
Intangibles 11 61,728 61,892
Property,plant and equipment 12 25,540 25,349
Other ﬁnancial assets – investments 13 28 28
Deferred tax assets 23 1,269 874
88,565 88,143
Currentassets
Inventories 15 5,380 5,844
Trade and other receivables 16 30,715 29,929
Cash and cash equivalents 17 3,793 4,545
Other ﬁnancial assets – fair value of foreign exchange contracts 13 35 -
39,923 40,318
Totalassets 128,488 128,461
Currentliabilities
Other interest-bearing loans and borrowings 18 (17,458) (15,627)
Trade and other payables 20 (35,119) (35,163)
Provisions 21 (410) (532)
Deferred purchase consideration 22 (1,036) (4,117)
Other ﬁnancial liabilities – fair value of interest rate swaps/foreign exchange 13 (1,950) (2,151)
Current tax liabilities (738) (1,287)
(56,711) (58,877)
Non-currentliabilities
Other interest-bearing loans and borrowings 18 (18,459) (21,064)
Provisions and other liabilities 21 (218) (242)
Deferred purchase consideration 22 (203) (204)
Deferred tax liabilities 23 (1,382) (1,550)
Pension fund liability 14 (3,075) (1,172)
(23,337) (24,232)
Totalliabilities (80,048) (83,109)
Netassets 48,440 45,352
Equityattributabletoequityholdersoftheparent
Share capital 26 535 528
Share premium account 25 27,052 26,918
Capital redemption reserve 25 578 578
Retained earnings 25 19,389 16,517
47,554 44,541
Non-controllinginterest 886 811
Totalequity 25 48,440 45,352
These Financial Statements were approved by the Board of Directors on 21 September 2012 and were signed on its behalf by:
StephenBoyd
Director
Registered Number 204368 Consolidated Statement of Changes in Equity
forthe52weeksended30June2012and2July2011
Capital Non-
Share Share redemption Retained controlling Total
capital premium reserve earnings interest equity
Note £000 £000 £000 £000 £000 £000
Balance at 4 July 2010 527 26,918 578 10,590 492 39,105
Proﬁt for the ﬁnancial year - - - 4,001 535 4,536
Othercomprehensiveincome/(expense):
Actuarial gain on deﬁned beneﬁt pension plan 14 - - - 2,224 - 2,224
Deferred tax movement on pension scheme actuarial gain 23 - - - (578) - (578)
Foreign exchange translation diﬀerences - - - 207 - 207
Totalothercomprehensiveincome - - - 1,853 - 1,853
Totalcomprehensiveincomefortheperiod - - - 5,854 535 6,389
Transactionswithowners,recordeddirectlyinequity:
Shares issued during the year 1---- 1
Impact of share based payments - - - 73 - 73
Dividend paid 27 ---- (216) (216)
Balanceat2July2011 528 26,918 578 16,517 811 45,352
Balance at 3 July 2011 528 26,918 578 16,517 811 45,352
Proﬁt for the ﬁnancial year - - - 4,277 574 4,851
Othercomprehensive(expense)/income:
Actuarial loss on deﬁned beneﬁt pension plan 14 - - - (2,357) - (2,357)
Deferred tax movement on pension scheme actuarial loss 23 - - - 566 - 566
Foreign exchange translation diﬀerences - - - (187) - (187)
Totalothercomprehensiveexpense - - - (1,978) - (1,978)
Totalcomprehensiveincomefortheperiod - - - 2,299 574 2,873
Transactionswithowners,recordeddirectlyinequity:
Shares issued during the year 26 7 134--- 141
Impact of share based payments 26 - - - 573 - 573
Dividend paid 27 ---- (499) (499)
Balanceat30June2012 535 27,052 578 19,389 886 48,440
26 Consolidated Cash Flow Statement
forthe52weeksended30June2012and2July2011
2012 2011
Note £000 £000
Cashﬂowsfromoperatingactivities
Proﬁt for the ﬁnancial year 4,851 4,536
Adjustments for:
Taxation 1,678 1,417
Net ﬁnance expenses 2,260 2,185
Depreciation 3,047 2,848
Amortisation of intangibles 164 165
Loss on disposal of plant,equipment and trademark - 8
Share options charge 573 73
Contributions by employer to pension scheme (65) (11)
Fair value (credit)/charge for foreign exchange contracts (152) 316
Operatingproﬁtbeforechangesinworkingcapital 12,356 11,537
Changes in working capital:
Decrease/(Increase) in inventories 403 (1,232)
Increase in trade and other receivables (1,251) (5,648)
Increase in trade and other payables 105 7,030
Cashgeneratedfromoperations 11,613 11,687
Interest paid (2,391) (2,505)
Tax paid (2,201) (1,043)
Netcashfromoperatingactivities 7,021 8,139
Cashﬂowsfrominvestingactivities
Purchase of property,plant and equipment (3,238) (2,224)
Purchase of subsidiary companies 10 (3,185) (1,960)
Increase in investment - (3)
Netcashusedininvestingactivities (6,423) (4,187)
Cashﬂowsfromﬁnancingactivities
Drawdown of invoice discounting 1,192 1,490
Repayment of bank loans (1,624) (3,065)
Repayment of loan notes - (33)
Drawdown of asset ﬁnance facilities 1,026 882
Repayment of asset ﬁnance liabilities (1,433) (1,341)
Issue of ordinary share capital 141 1
Non-controlling interest dividend paid 27 (499) (216)
Netcashusedinﬁnancingactivities (1,197) (2,282)
Net (decrease)/increase in cash and cash equivalents (599) 1,670
Opening cash and cash equivalents 4,545 2,803
Eﬀect of exchange rate ﬂuctuations on cash held (153) 72
Cashandcashequivalentsatendofperiod 17 3,793 4,545
27 Notes to the Financial Statements
(formingpartoftheFinancialStatements)
PresentationofFinancialStatements
BasisofPreparation
These accounts cover the 52 week period ended 30 June 2012 (prior ﬁnancial year is the 52 week period ended 2 July 2011).The Group Financial
Statements consolidate those of the Company and its subsidiaries (together referred to as the“Group”).
The Group Financial Statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards
as adopted by the EU (“Adopted IFRSs”).The Company has elected to prepare its parent company Financial Statements in accordance with UK GAAP;
these are presented on pages 59 to 65.
Itshouldbenotedthatcurrentliabilitiesexceedcurrentassets.HavingreviewedtheGroup’splansandavailableﬁnancialfacilities,theBoardhasreasonable
expectations that the Group has adequate resources to continue in operational existence for the foreseeable future.The Group has stayed within its banking
facilitiesduringtheyear,meetingcovenantrequirements.TheGrouphasthecontinuedsupportfromitsbankwithrenegotiatedfacilitiesof£47.1mextending
term loans to 2017.In addition,the Group has a strong asset backing and strong trade debtor book.Accordingly,the Board continues to adopt the going
concern basis in preparing the Financial Statements for both the Group and the parent company.
TheBoardreviewstheGroup’scashﬂowforecastsandkeycovenantsonaregularbasistoensurethatithasadequatefacilitiestocoveritstradingandbanking
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.All covenant tests were passed at the year end.
Thefollowingaccountingstandardsandinterpretations,issuedbytheInternationalAccountingStandardsBoard(“IASB”)orIFRIC(asendorsedbytheEU),
are eﬀective for the ﬁrst time in the current ﬁnancial year:
• IAS 24 (Revised) Related Party Disclosures
• IFRIC 14 (Amendment) Prepayments of a Minimum Funding Requirement
• IFRS 1 (Amendment) FirstTime Adoption on Hyperinﬂation
• IFRS 7 (Amendment) Financial Instruments:Disclosures –Transfers of Financial Assets
The application of the standards and interpretations has not had a material eﬀect on the net assets,results and disclosures of the Group.
NewStandardsandInterpretationsEndorsedbutnotyetEﬀective
The IASB and the IFRIC have also issued the following standards and interpretations with an eﬀective date after the date of these Financial Statements:
• IAS 12 (Amendment) DeferredTax:Recovery of Underlying Assets – eﬀective 1 January 2012
• IAS 1 (Amendment) Presentation of Items of Other Comprehensive Income – eﬀective 1 July 2012
• IFRS 1 (Amendment) Government Loans – eﬀective 1 January 2013
• IAS 27 Separate Financial Statements – eﬀective 1 January 2014
• IAS 28 Investments in Associates and JointVentures – eﬀective 1 January 2014
• IAS 19 (Amendment) Deﬁned Beneﬁt Plans – eﬀective 1 January 2013
• IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine – eﬀective 1 January 2013
• IFRS 7 (Amendment) Disclosures:Oﬀsetting Financial Assets and Financial Liabilities – eﬀective 1 January 2013
• IAS 32 (Amendment) Oﬀsetting Financial Assets and Financial Liabilities – eﬀective 1 January 2014
NewStandardsandInterpretationsnotyetEndorsedandnotyetEﬀective
The IASB and the IFRIC have also issued the following standards and interpretations that are yet to be endorsed with an eﬀective date after the date
of these Financial Statements:
• IFRS 10 Consolidated Financial Statements – eﬀective 1 January 2014
• IFRS 11 Joint Arrangements – eﬀective 1 January 2014
• IFRS 12 Disclosure of Interests in Other Entities – eﬀective 1 January 2014
• IFRS 13 FairValue Measurement – eﬀective 1 January 2014
• IFRS 9 Financial Instruments – eﬀective 1 January 2015
These standards will be adopted by the Group in future accounting periods.The Directors do not anticipate that the adoption of any of these standards and
interpretations will have a material impact on the Group’s Financial Statements.
28 CriticalAccountingEstimatesandJudgements
The Group is required to make estimates and assumptions concerning the future.These estimates and judgements 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.
Accounting estimates and judgements have been required for the production of these Financial Statements.The following are those that are deemed
to require the most complex judgements about matters that have the most signiﬁcant eﬀect on the amounts recognised in the Financial Statements.
• Impairment of goodwill can signiﬁcantly impact the Group’s Consolidated Statement of Comprehensive Income for the year.The Group estimates
the recoverable amounts based on historical experience of margin,volumes and cost structure and expectations of future events.The Group’s weighted
averagecostofcapitalhasbeeninﬂatedtotakeaccountofthecurrentmarketconditionsandthishasbeenappliedasapre-taxdiscountfactortoobtain
acurrentvalue.Theweightedaveragecostofcapitalisimpactedbyestimatesofinterestrates,equityreturnsandmarketspeciﬁcrisks.RefertoNote11
for further details.
• TheGrouphasonedeﬁnedbeneﬁtpensionscheme.Thenetdeﬁcitorsurplusisthediﬀerencebetweentheplanassetsandplanliabilitiesattheperiod
end date.The valuation of the assets and liabilities is based on a number of judgements.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 assumptions applied are based on advice provided
by the Scheme’s actuary,further detail can be found in Note 14.
• TheGrouprecognisesprovisionswhereanobligationexistsattheperiodenddateandareliableestimatecanbemade.Provisionsforanonerouslease,
employeeclaimsandpensionaugmentationhavebeenrecognisedintheseFinancialStatements.TheonerousleaselapsedApril2012,discussions
ondilapidationareongoing.Estimatesforemployeeclaimsaremadebasedonthenumberofreportedaccidentsandincidentsandthenumberofexpected
claims yet to be reported based on historical evidence,all accrued up to the maximum self insured amount of £10,000per claim.The pension provision
relatestoacontractualliabilityforpensionaugmentationthathasbeenvaluedbythepensionschemeactuaries.SeeNote21forfurtherdetail.
1 SigniﬁcantAccountingPolicies
TheaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedintheseconsolidatedFinancialStatements,exceptasexplained
in the basis of preparation,which addresses any changes in accounting policies resulting from new or revised standards.
BasisofConsolidation
Subsidiaries are entities controlled by the Group.Control exists when the Group has the power,directly or indirectly,to govern the ﬁnancial and operating
policies of an entity so as to obtain beneﬁts from its activities.In assessing control,potential voting rights that are currently exercisable or convertible are
taken into account.The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date that control commences
untilthedatethatcontrolceases.Theaccountingpoliciesofsubsidiarieshavebeenchangedwhennecessarytoalignthemwiththepoliciesadoptedbythe
Group.Intra-group balances and transactions are eliminated in preparing the consolidated Financial Statements.
Lightbody Stretz Limited which is 50% owned by the Group has been consolidated into the Group accounts as a subsidiary with a corresponding
non-controllinginterestonthebasisthattheGrouphasthecontrollinginterest.ControlarisesbyvirtueofthefactthatLightbodyGroup,awhollyowned
subsidiary of Finsbury Food Group,has a majority of voting rights arising from an agreement between Lightbody Group Limited and Philippe Stretz.
ForeignCurrency
TransactionsinforeigncurrenciesaretranslatedtothefunctionalcurrencyofGroupentitiesattheforeignexchangeraterulingatthedateofthetransaction.
Monetary assets and liabilities denominated in foreign currencies at the period end date are retranslated to the functional currency 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 the Group’s
presentational currency,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 the Consolidated Statement of Comprehensive Income.
29 1 SigniﬁcantAccountingPolicies(continued)
DerivativeFinancialInstruments
The Group has derivative ﬁnancial instruments in respect of interest rate swaps and foreign exchange hedges.The Group does not hold derivative ﬁnancia l
instrumentsfortradingpurposes.TheexistinginterestrateswapsandforeignexchangehedgesusedbytheGroupdonotmeetthecriteriaforhedgeaccounting
setoutbyIAS39andhavethusbeentreatedasﬁnancialassetsandliabilitieswhicharecarriedattheirfairvalueintheConsolidatedStatementofFinancial
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 ﬁnancial
income or expense.Changes in the market value of foreign exchange hedges have been recognised through the Consolidated Statement of Comprehensive
Income within administrative costs.
Non-derivativeFinancialInstruments
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.
TradeandotherReceivables
The value of trade and other receivables is deemed to be the amount that would be received if the debt was cleared on the period end date.
TradeandotherPayables
The value of trade and other payables is deemed to be the value that would be payable to settle the liability at the period end date.
CashandCashEquivalents
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-bearingBorrowings
Interest-bearing borrowings are stated at amortised cost using the eﬀective interest method,less any impairment losses.
Property,PlantandEquipment
RecognitionandMeasurement
Itemsofproperty,plantandequipmentaremeasuredatcostorfairvalueatthedateofacquisition,lessaccumulateddepreciationandimpairmentprovisions.
Costs include expenditure that is directly attributable to the acquisition of the asset.The cost of self-constructed assets includes the cost of materialsand
direct labour and any other costs directly attributable to bringing the asset to a working condition for its intended use,and the costs of dismantlingand
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 2% – 20% Plant and equipment 10% – 33%
Leasehold property Up to the remaining life of the lease Assets under construction Nil
Fixtures and ﬁttings 10% – 33% Motor vehicles 25% – 33%
Impairment reviews of ﬁxed assets are undertaken if there are indications that the carrying values may not be recoverable.
LeasedAssets
LeasesunderthetermsofwhichtheGroupassumessubstantiallyalltherisksandrewardsofownershipareclassiﬁedasﬁnanceleases.Uponinitialrecognition
the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments.Subsequent to initial
recognition,the asset is accounted for in accordance with the accounting policy applicable to that asset.
Assets acquired by ﬁnance lease and hire purchase are depreciated over the lease term or their useful lives.
Obligations under ﬁnance leases are included in liabilities net of the ﬁnance charge allocated to future periods.The ﬁnance element of the rental payment
ischargedtotheConsolidatedStatementofComprehensiveIncomeasﬁnanceexpensesoastoproduceaconstantperiodicrateofchargeonthenet
obligationsoutstanding in each period.
Other leases are operating leases and the leased assets are not recognised on the Group’s Consolidated Statement of Financial Position.
30 1 SigniﬁcantAccountingPolicies(continued)
OperatingLeasePayments
Payments made under operating leases are recognised in the Consolidated Statement of Comprehensive Income on a straight-line basis over the term
of the lease.
FinanceLeasePayments
Minimum lease payments are apportioned between the ﬁnance charge and the reduction of the outstanding liability.The ﬁnance charge is allocated
to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
IntangibleAssetsandGoodwill
Goodwill
Goodwillisstatedatcostlessanyaccumulatedimpairmentlosses.Goodwillisallocatedtocash-generatingunitsandisnotamortisedbutistestedannually
for impairment.
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.
IdentiﬁcationofIntangibleAssets
ForallacquisitionsfromtheIFRStransitiondateof1July2006onwards,theGroupcarriesoutareviewoftheacquiredbusinessestodetermineifthereare
any items which are identiﬁable (i.e.separable or arising from contractual or other legal rights),non-monetary and controlled by the entity and expected
toprovidefutureeconomicbeneﬁtstotheentity.Theseitemswouldbeclassedasintangibleassetsandthecarryingvalueofsuchanassetacquiredinabusiness
combinationis its fair value.There may be instances where anintangible asset can be identiﬁed but the asset is deemed to be intrinsically linked to the
businessofwhichitispartanditis,therefore,notpossibletoreliablydetermineitsfairvalue.Insuchinstances,whereitisnotpossibletoseparateitsvalue
from that of the business as a whole,it will remain as part of total goodwill and subject to annual impairment reviews.The value of intangible assets that
are identiﬁable and have a ﬁnite life are amortised on a straight line basis over their estimated useful economic lives.
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.Intangibleassetsandgoodwillareconsideredtobeimpairedifobjectiveevidenceindicatesthatoneormoreeventshavehadanegative
eﬀectontheestimated 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.
CalculationofRecoverableAmount
Therecoverableamountisthegreateroftheassets’fairvalueslesscoststosellanditsvalueinuse.Inassessinganasset’svalueinuse,theestimatedfuture
cash ﬂowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreﬂectscurrentmarketassessmentsofthetimevalueofmoneyandtherisks
speciﬁcto the asset.
DeferredConsideration
The provision for deferred consideration is initially stated at the net present value of the expected future payment and the discount is accrued by increasing
the amount of the provision up to the expected payment date.The charge relating to the unwinding of the discount is recorded within ﬁnance costs.
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.
Speciﬁcprovisionsaremadeagainstoldandobsoletestocktakingthevaluetozerooranestimatedreducedvaluebasedonthemostlikelyroutefordisposal
of each particular item of stock.
EmployeeBeneﬁts
DeﬁnedBeneﬁtPlans
Our wholly owned subsidiary Memory Lane Cakes Ltd operates a deﬁned beneﬁt pension scheme and the pension costs are charged to the Consolidated
Statement of Comprehensive Income in accordance with IAS19,with current and past service cost being recognised as an administrative expense,expected
returnondeﬁnedbeneﬁtpensionplanassetsasﬁnancialincomeandinterestondeﬁnedbeneﬁtpensionplanliabilitiesasaﬁnancialexpenseintheConsolidated
Statement of Comprehensive Income.The actuarial gains or losses are recognised in full in the Consolidated Statement of Comprehensive Income.
Further details on the deﬁned beneﬁt pension scheme are given in Note 14 to the Financial Statements.
31 1 SigniﬁcantAccountingPolicies(continued)
DeﬁnedContributionPlans
The costs of contributing to deﬁned contribution and personal pension schemesare charged to the Consolidated Statement of Comprehensive Income
as an administration cost in the period to which they relate.
Share-basedPaymentTransactions
Thevalue,asatthegrantdate,ofoptionsgrantedtoemployeesisrecognisedasanemployeeexpense,withacorrespondingincreaseinequity,overtheperiod
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.
Provisions
A provision is recognised in the Consolidated Statement of Financial Position when the Group has a present legal or constructive obligation as a result
of a past event,that can be reliably measured and it is probable that an outﬂow of economic beneﬁts will be required to settle the obligation.
Revenue
Revenue represents the amounts derived from the sale of bakery products.Revenue is the invoiced value of consideration received or receivable excluding
valueaddedtax,tradediscounts,transactionswithorbetweensubsidiariesandlessthecostofpricepromotionsandsalesover-riders.Revenueisrecognised
when the signiﬁcant risks and rewards of ownership have been transferred to the buyer,recovery of the consideration is probable,the associated costsand
probablereturnofgoodscanbeestimatedreliably,thereisnocontinuingmanagementinvolvementwiththegoods,andtheamountofrevenuecanbereliably
measured.In practice this is upon despatch.
SegmentalReporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses,including
revenuesandexpensesthatrelatetotransactionswithanyoftheGroup’sothercomponents.Alloperatingsegments’operatingresultsarereviewedregularly
by the Group’s Board of Directors to make decisions about resources to be allocated to each segment and assess its performance,and for which discrete
ﬁnancial information is available.
LicenceFees
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.
FinanceIncomeandExpenses
FinanceexpensescompriseloaninterestpayableandinterestpayableandﬁnancechargesonﬁnanceleasesrecognisedintheConsolidatedStatement
ofComprehensiveIncomeusingtheeﬀectiveinterestmethod,unwindingofthediscountonprovisionsanddeferredconsiderationandinterestondeﬁned
beneﬁt pension plan obligations.
Financeincomecomprisesexpectedreturnondeﬁnedbeneﬁtpensionplanobligationandinterestreceivableonfundsinvested.Interestincomeisrecognised
in Consolidated Statement of Comprehensive Income as it accrues,using the eﬀective interest method.
Taxation
Taxontheproﬁtorlossfortheyearcomprisescurrentanddeferredtax.TaxisrecognisedintheConsolidatedStatementofComprehensiveIncomeexcept
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,usingtax
ratesenactedorsubstantivelyenactedattheperiodenddate.Adeferredtaxassetisrecognisedonlytotheextentthatitisprobablethatfuturetaxableproﬁts
will be available against which the temporary diﬀerence can be utilised.
ResearchandDevelopmentExpenditure
Expenditure on research activities,undertaken with the prospect of gaining new scientiﬁc or technical knowledge and understanding,is recognised
in Consolidated Statement of Comprehensive Income as incurred.
32 2 RevenueandSegmentInformation
Operating segments are identiﬁed on the basis of internal reporting and decision making.The Group’s Chief Operating Decision Maker is considered
to be the Board of Directors as they are primarily responsible for the allocation of resources to segments and the assessment of performance by segment.
The Board uses operating proﬁt,reviewed on a regular basis,as the key measure of the segments’performance.Operating proﬁt in this instance is deﬁned
as proﬁt before the following:
• Net ﬁnancing expense
• Share option charges
• Non-recurring signiﬁcant items
• Fair value adjustments relating to acquisitions
• Pension charges or credits in relation to the diﬀerence between the expected return on pension assets and interest cost on pension liabilities and
• Revaluation of interest rate swaps and forward foreign currency contracts.
The Group’s operating segments are“Cake”and“Bread & Free From”.The primary driver of this segmental structure is the commonality of the product
categories operated in.
The Cake segment sells ambient cakes to the UK’s multiple grocers.This segment primarily comprises the operations of Memory Lane Cakes Ltd,
Lightbody Group Ltd and Campbells Cake Company Ltd,and also includesYumYum’s which are produced at United Central Bakeries.
The Bread & Free From segment sells speciality bread and morning goods into the bakery sectors of the UK’s multiple grocers.This segment is primarily
made up of the operations of United Central Bakeries Ltd,Livwell Ltd and Nicholas & Harris Ltd.In addition to these operations,the‘In Store Bakery’
rangemanufacturedatLightbodyofHamiltonandMemoryLaneCakesLtdisalsoincludedintheBread&FreeFromsegmentasthenatureoftheproduct
and their location in the multiple grocers’product range is similar.
CostsofGroupoperationsplusa10%premiumhavebeenallocatedacrossthesegmentsonthebasisoftheiroperatingproﬁt.Thepremiumhasbeencharged
to reﬂect the synergies achieved from obtaining resources centrally giving beneﬁts across the operating segments.Operating proﬁt levels have been chosen
as the basis,as this reﬂects the underlying performance of the segment and is also the return the Group expects from those segments.
Apurchasingpremiumof2%ischargedfromGroupoperations,andiscalculatedonmaterialsandpackagingspendatsegmentallevel.Thischargeisbased
on the rationale that Group operations,through its Group buyers,optimises the Group’s procurement spend through leveraging its purchasing power.
This has resulted in a proﬁt of £1.9m (2011:£1.9m) being presented within the Group operations segment.
The Group’s ﬁnance income and expenses cannot be meaningfully allocated to the individual operating segments.
33 34
2 RevenueandSegmentInformation(continued)
Bread & Free Group
Cake From Operations Total Group
£000 £000 £000 £000
52 week period ended 30 June 2012
Revenue
External 152,434 54,926 - 207,360
Underlyingoperatingproﬁt 4,470 2,804 1,871 9,145
Fair value foreign exchange contracts 152
Share options charge (573)
Deﬁned beneﬁt pension scheme 65
Resultsfromoperatingactivities 8,789
Financial income 1,574
Financial expenses (3,834)
Proﬁtbeforetaxation 6,529
Taxation (1,678)
Proﬁtaftertaxation 4,851
At 30 June 2012
Segmentassets 91,018 33,016 130 124,164
Unallocated assets 4,324
Consolidatedtotalassets 128,488
Segmentliabilities (30,917) (10,119) (1,136) (42,172)
Unallocated liabilities (37,876)
Consolidatedtotalliabilities (80,048)
Othersegmentinformation
Capital expenditure 1,933 1,305 - 3,238
Depreciation included in segment proﬁt 1,906 1,141 - 3,047
Amortisation - 164 - 164
Analysis of unallocated assets and liabilities:
Assets Liabilities
£’000 £’000
Investments 28 Loans and borrowings (35,917)
Financial instruments 35 Financial instruments (1,950)
Cash and cash equivalents 3,793 Cash and cash equivalents -
Taxation balances 468 Taxation balances (9)
Unallocated assets 4,324 Unallocated liabilities (37,876)
There are no inter-segmental sales.Certain operating costs have been incurred centrally,these costs have been allocated to the reporting segments
on an appropriate basis.
Five customers with sales of £46m,£41m,£26m,£23m and £19m account for 75% of revenue,which is attributable to the Cake and Bread & Free From
segments above. 35
2 RevenueandSegmentInformation(continued)
Bread&Free Group
Cake From Operations Total Group
£000 £000 £000 £000
52 week period ended 2 July 2011
Revenue
External 139,620 49,955 - 189,575
Underlyingoperatingproﬁt 4,278 2,384 1,854 8,516
Fair value foreign exchange contracts (316)
Share options charge (73)
Deﬁned beneﬁt pension scheme 11
Resultsfromoperatingactivities 8,138
Financial income 1,920
Financial expenses (4,105)
Proﬁtbeforetaxation 5,953
Taxation (1,417)
Proﬁtaftertaxation 4,536
At 2 July 2011
Segmentassets 91,500 31,707 121 123,328
Unallocated assets 5,133
Consolidatedtotalassets 128,461
Segmentliabilities (33,383) (9,656) (1,228) (44,267)
Unallocated liabilities (38,842)
Consolidatedtotalliabilities (83,109)
Othersegmentinformation
Capital expenditure 1,519 705 - 2,224
Depreciation included in segment proﬁt 1,791 1,057 - 2,848
Amortisation - 165 - 165
Analysis of unallocated assets and liabilities:
Assets Liabilities
£’000 £’000
Investments 28 Loans and borrowings (36,691)
Financial instruments - Financial instruments (2,151)
Cash and cash equivalents 4,545 Cash and cash equivalents -
Taxation balances 560 Taxation balances -
Unallocated assets 5,133 Unallocated liabilities (38,842)
There are no inter-segmental sales.Certain operating costs have been incurred centrally,these costs have been allocated to the reporting segments
on an appropriate basis.
Five customers with sales of £43m,£41m,£25m,£20m and £20m account for 79% of revenue,which is attributable to the Cake and Bread & Free From
segments above. 2 RevenueandSegmentInformation(continued)
An analysis by geographical segment is shown below:
Geographicalsplitofturnoverbydestination
2012 2011
£000 £000
United Kingdom 177,998 170,149
Europe 28,350 19,036
Rest ofWorld 1,012 390
Total 207,360 189,575
Net asset and margin geographical split would not provide meaningful information owing to the necessity to allocate costs,assets and liabilities.
Capital expenditure on segment assets,on a cash basis,in the year is in relation to the UK segment and is detailed in Note 12.
Geographicalsplitbycountryoforigin
United Kingdom Europe Total
£000 £000 £000
2012
Turnover 183,416 23,944 207,360
Gross proﬁt 50,890 4,009 54,899
Total assets 121,553 6,935 128,488
Total liabilities (74,830) (5,218) (80,048)
Net assets 46,723 1,717 48,440
United Kingdom Europe Total
£000 £000 £000
2011
Turnover 172,837 16,738 189,575
Gross proﬁt 47,390 3,707 51,097
Total assets 121,803 6,658 128,461
Total liabilities (78,209) (4,900) (83,109)
Net assets 43,594 1,758 45,352
3 ExpensesandAuditors’Remuneration
Included in proﬁt are the following:
2012 2011
£000 £000
Depreciation of owned tangible assets 2,312 2,174
Depreciation on assets under ﬁnance leases and hire purchase contracts 735 674
Diﬀerence on foreign exchange 325 207
Hire of plant and machinery – operating leases 414 419
Hire of other assets – operating leases 751 527
Share option charges 573 73
Movement on fair value of interest rate swaps (84) (564)
Movement on fair value of foreign exchange contracts (152) 316
Research and development 2,059 2,022
Amortisation of intangibles 164 165
Amortisation of intangibles for the year was £164,000 (2011:£165,000) relating to the Goswell Enterprises Ltd acquisition during June 2009.
36 3 ExpensesandAuditors’Remuneration(continued)
Auditors’remuneration:
2012 2011
£000 £000
Audit of these Financial Statements 100 99
Amounts receivable by auditors and their associates in respect of:
Other services 17 21
Other services in relation to taxation 16 12
The auditor’s remuneration is in respect of KPMG Audit Plc.The fee for other services relates to pension advisory services.
4 SigniﬁcantNon-RecurringItems
The Group presents certain items as signiﬁcant and non-recurring.These relate to items which,in management’s judgement,need to be disclosed by virtu e
of their size or incidence in order to obtain a more meaningful understanding of the ﬁnancial information.
Within ﬁnancial expenses in 2011 is an amount of £42,000 relating to interest charged on a prior year tax inquiry which was settled during the year
to 30 June 2012.
5 StaﬀNumbersandCosts
The average number of persons employed by the Group including Directors and excluding agency staﬀ during the year,analysed by category,was as follows:
NumberofEmployees
2012 2011
Production 2,189 2,138
Selling and distribution 173 173
Administration,technical,new product development 161 160
2,523 2,471
The aggregate payroll costs of these persons were as follows:
2012 2011
£000 £000
Wages and salaries 48,941 46,137
Share option charges 573 73
Social security costs 4,596 4,506
Charge in respect of deﬁned beneﬁt plans - 11
Charge in respect of deﬁned contribution plans 657 352
54,767 51,079
6 RemunerationofDirectors
2012 2011
£000 £000
Fees 145 153
Company contributions to deﬁned contribution pension plans 47 45
Executive salaries and beneﬁts 650 643
Bonuses 329 225
1,171 1,066
The aggregate of emoluments and amounts receivable under long-term incentive schemes of the highest paid Director was £474,000 (2011:£437,000)
including Company pension contributions of £28,000 (2011:£28,000) that were made to a deﬁned contribution scheme on his behalf.
NumberofDirectors
2012 2011
Retirement beneﬁts were accruing in the year to the following number of Directors under:
Money purchase schemes 3 3
No Directors exercised share options during the current or previous year.
37 6 RemunerationofDirectors(continued)
The emoluments of the Directors were as follows:
Year Year
ended ended
Fees Salary Beneﬁts Other Pension 30June2012 2 July2011
£000 £000 £000 £000 £000 £000 £000
E J Beale 25 ---- 25 25
S A Boyd - 168 11 90 16 285 223
D C Currie - 76 - 38 3 117 110
J G Duﬀy - 285 10 151 28 474 437
IRFarnsworth 30 ---- 30 30
M Lightbody - 100 - 50 - 150 143
D C Marshall 20 ---- 20 20
PJMonk 70---- 70 78
145 629 21 329 47 1,171 1,066
Share options are granted to Directors,whose performances and potential contribution were judged to be important to the operations of the Group,
as incentives to maximise their performance and contribution.During the year 6,471,429 options (2011:nil) were granted to Directors,242,500
were cancelled (2011:22,754).
Directors’rights to subscribe for shares in or debentures of the Company and its subsidiaries are listed below:
Number of Number of
options at options at Earliest Exercise
30 June 2012 2 July 2011 Exercise price exercise date expiry date
S A Boyd 1,650,000 - 20.5p 08/07/2011 30/10/2016
S A Boyd 625,000 - 20.5p 30/06/2012 30/10/2016
S A Boyd 625,000 - 20.5p 30/06/2013 30/10/2016
D C Currie 535,715 - 20.5p 08/07/2011 30/10/2016
D C Currie 267,857 - 20.5p 30/06/2012 30/10/2016
D C Currie 267,857 - 20.5p 30/06/2013 30/10/2016
D C Currie - 27,000 111.0p 18/04/2010 18/04/2017
D C Currie - 173,000 100.0p 18/04/2010 18/04/2017
D C Currie - 42,500 106.0p 05/10/2010 05/10/2017
J G Duﬀy 1,250,000 - 20.5p 08/07/2011 30/10/2016
J G Duﬀy 625,000 - 20.5p 30/06/2012 30/10/2016
J G Duﬀy 625,000 - 20.5p 30/06/2013 30/10/2016
J G Duﬀy 420,000 420,000 20.0p 30/09/2010 30/10/2016
J G Duﬀy 420,000 420,000 20.0p 30/09/2011 30/10/2016
J G Duﬀy 309,000 309,000 20.0p 30/09/2012 30/10/2016
J G Duﬀy 111,000 111,000 27.0p 30/09/2012 30/10/2019
7,731,429 1,502,500
The mid-market price of the ordinary shares on 30 June 2012 was 24p (2011:22p) and the range during the 52 week period to 30 June 2012
was 20p to 30p (2011:14p to 26p).
38 39
7 FinanceIncomeandExpense
RecognisedintheConsolidatedStatementofComprehensiveIncome
2012 2011
£000 £000
Financeincome
Expected return on deﬁned beneﬁt pension plan obligation 1,490 1,356
Change in fair value of interest rate swaps 84 564
Tax related 12 -
Total ﬁnance income 1,586 1,920
Financeexpense
Interest on deﬁned beneﬁt pension plan obligations (1,101) (1,134)
Bank interest payable (1,514) (1,653)
Tax related - (42)
Interest on interest rate swap agreements (940) (1,024)
Interest on deferred consideration (188) -
Unwinding of discount on deferred consideration (103) (252)
Total ﬁnance expense (3,846) (4,105)
8 Taxation
RecognisedintheConsolidatedStatementofComprehensiveIncome
2012 2011
£000 £000
Current tax expense
Current year 1,919 1,766
Adjustments for prior years (244) (523)
Current tax expense 1,675 1,243
Deferred tax expense
Origination and reversal of timing diﬀerences (130) (28)
Retirement beneﬁt deferred tax charge 133 133
Adjustments for prior years - 69
Deferred tax expense 3 174
Tax expense in Consolidated Statement of Comprehensive Income 1,678 1,417
Reconciliationofeﬀectivetaxrate
The tax assessed for the period is higher (2011:lower) than the standard rate of corporation tax in the UK of 26%,24% from 6 April 2012
(28%,26% from 6 April 2011).The hybrid corporation tax rate is 25.5% (2011:27.5%).The diﬀerences are explained below:
2012 2011
£000 £000
Proﬁt per accounts before taxation 6,529 5,953
Tax using the UK corporation tax rate of 25.5%,(2011:27.5%) 1,665 1,637
Non-deductible expenses 11 12
Amortisation of intangible asset 45 45
Timing diﬀerences 99 26
Adjustment to restate opening deferred tax at 26% (52) 4
Diﬀerences on depreciation on IBA’s and allowances claimed 10 47
Adjustments to tax charge in respect of prior periods (244) (454)
Overseas proﬁts charged at diﬀerent taxation rate 144 100
Total tax expense 1,678 1,417 8 Taxation(continued)
The parent company has an unrecognised deferred tax asset of £229,560 (2011:£248,690.This asset has not been recognised in these Financial Statements
as suitable proﬁts to utilise the underlying losses are not expected to arise in the future).
The impact of the reduction in the UK tax rate from 26% to 24% from April 2012 amounts to £96,000 lower charge in the ﬁnancial year to 30 June 2012.
The adjustment in 2012 for prior year relates primarily to utilisation of losses brought forward £150,000 and additional tax relief on qualifying R&D
expenditure for prior periods of £80,000.The adjustment in 2011 in respect of prior year relates to the release of accrual of £200,000 for a prior year tax
inquiry which has been shown as a signiﬁcant non-recurring item in the Consolidated Statement of Comprehensive Income and £254,000 relates
to additional tax relief on qualifying R&D expenditure for the ﬁnancial year to 2 July 2011 and to 4 July 2009.Claim for tax relief on qualifying R&D
expenditure is deemed to be a recurring item.
9 EarningsPerOrdinaryShare
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
53,374,000 (2011:52,746,000).
Basicdilutedearningspershareiscalculatedbyadjustingtheweightedaveragenumberofordinarysharesoutstandingtoassumeconversionofallpotential
dilutive ordinary shares;which for 30 June 2012 the diluted weighted average number is 55,796,000 shares,(2011:54,284,000).
An adjusted earnings per share and an adjusted diluted earnings per share have also been calculated as in the opinion of the Board this will allow
shareholders to gain a clearer understanding of the trading performance of the Group.These adjusted earnings per share exclude:
• Reorganisation and other signiﬁcant non-recurring costs
• IAS 39‘Financial Instruments:Recognition and Measurement’fair value adjustment relating to the Group’s interest rate swaps and foreign
exchange contracts
• IAS 19‘Accounting for retirement beneﬁts’relating to the net income
• IFRS 3‘Business Combinations’discount charge relating to the deferred consideration payable for Anthony Alan Foods Limited,Yorkshire Farm
Bakery and A&P Foods acquisition and Goswell Enterprises Ltd
• The taxation eﬀect at the appropriate rate on the adjustments and in 2011 a prior year taxation inquiry charge.
Yearending Year ending
30June2012 2July2011
Weighted Weighted
average average
numberof Pershare number of Per share
Earnings shares amount Earnings shares amount
£000 000’s Pence £000 000’s Pence
Basicearnings 4,277 53,374 8.0 4,001 52,746 7.6
Share option charge 573 1.1 73 0.1
Movement in the fair value of interest rate swaps/foreign exchange contracts (236) (0.4) (248) (0.5)
Deﬁned beneﬁt pension scheme (454) (0.9) (233) (0.4)
Unwinding of discount relating to acquisitions 103 0.2 252 0.5
Signiﬁcant non-recurring items -- 42 0.1
Prior year tax inquiry -- (200) (0.4)
Taxation on adjustments 68 0.1 152 0.3
Adjustedearnings 4,331 53,374 8.1 3,839 52,746 7.3
Dilutive eﬀect of options 2,422 1,538
Basicdilutedearnings
Basic earnings 4,277 55,796 7.7 4,001 54,284 7.4
Adjusteddilutedearnings 4,331 55,796 7.8 3,839 54,284 7.1
40 41
10 AcquisitionofSubsidiaries
The total cash outﬂow during the current year shown as‘purchase of subsidiary companies’on the face of the Consolidated Cash Flow Statement relates to:
2012 2011
£000 £000
Deferred consideration paid in respect ofYorkshire Farm Bakeries and A&P Foods acquisition 1,600 840
Deferred consideration paid in respect of Anthony Alan Foods Ltd acquisition 1,085 620
Deferred consideration paid in respect of Goswell Enterprises Ltd acquisition 500 500
3,185 1,960
11 Intangibles
Intangible assets comprise licences and goodwill.
a)Licences
The value of the licensing agreements is calculated by reference to the additional cash ﬂow they are expected to generate over unbranded sales.The perio d
over which the value is amortised varies between licences depending on their remaining life.
The licenses recognised were purchased as part of the acquisition of Goswell Enterprises Ltd in June 2009 and relate to the exclusive licensing agreements
for Cranks,Doves Farm breads andVogels.The period over which the value is amortised is the life of the license which is ﬁve years.
Total
£000
Costat2July2011and30June2012 822
Amortisation at 2 July 2011 (329)
Charge for the year 30 June 2012 (164)
Amortisationat30June2012 (493)
NBV at 2 July 2011 493
NBVat30June2012 329
b)Goodwill
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 utilisation of the Group’s existing
distribution channels and customer relationships in the cake and Bread & Free From sector.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.
Total
£000
Balanceat2July2011and30June2012 61,399
The carrying amount of goodwill has been allocated to cash generating units or groups of cash generating units as follows:
2012 2011
£000 £000
Nicholas & Harris 2,980 2,980
United Central Bakeries 8,431 8,431
Lightbody of Hamilton 48,474 48,474
Memory Lane Cakes 1,514 1,514
61,399 61,399 11 Intangibles(continued)
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
rateusedforfuturecashﬂowsandtheanticipatedfuturechangesinrevenue,directcostsandindirectcosts.Theassumptionsusedreﬂectthepastexperience
of management and future expectations.
A pre-tax discount rate of 10% (2011:10%) has been used in these calculations.The Group has considered the impact of the deterioration in the economic
climateandhigherlevelofreturnexpectedbyequityholdersduetotheperceivedriskinequitymarkets.TheGroup’sactualweightedaveragecostofcapital
is signiﬁcantly less than this at the period end date.
TheGrouppreparescashﬂowforecastsbasedonthemostrecentﬁnancialbudgetsapprovedbymanagementandextrapolatestheseforwardforthenextﬁve
years with a residual value at the end of the ﬁve years.Changes in revenue and direct costs are based on past experience and expectations of future changes
in the market.
Therevenuegrowthrateusedforimpairmenttestsat30June2012wasnil(2011:3%)forNicholas&Harris,UnitedCentralBakeries,LivwellandGoswells.
This growth rate was applied to the 2013 budget for the following 5 years,indirect costs are inﬂated over the same period by nil (2011:3%),a residual value
was then taken after this date.
The revenue growth rate and indirect cost increase used in Campbells,Memory Lane and Lightbody of Hamilton was nil (2011:nil) from the budget 2013
position.This growth rate has been taken as a prudent approach.Gross margins and distribution cost as a percentage of revenue are forecast to be in line
with budget 2013.The ﬁve year cashﬂow is taken along with a residual value at the end of the ﬁve year period.
Growth rates do not reﬂect the ambitions of the Group and have been prepared in a conservative manner.
Thediscountrateusedforeachcashgeneratingunithasbeenkeptconstantasthemarketriskisdeemednottobemateriallydiﬀerentbetweenthediﬀerent
segments of the bakery sector,nor over time.
Sensitivities have been carried out by the Directors and they are comfortable that at reasonable discount levels there are no indications of impairment.
42 12 Property,PlantandEquipment
Landand Plantand Fixturesand Assetsunder
buildings equipment ﬁttings Vehicles construction Total
£000 £000 £000 £000 £000 £000
Cost
Balance at 4 July 2010 14,504 32,368 2,038 8 150 49,068
Exchange adjustments - - 7 - - 7
Additions 1 1,512 77 - 634 2,224
Transfers 170 500 42 - (712) -
Disposals (234) (8,303) (99) - - (8,636)
Balance at 2 July 2011 14,441 26,077 2,065 8 72 42,663
Balance at 3 July 2011 14,441 26,077 2,065 8 72 42,663
Exchange adjustments - - (13) - - (13)
Additions 62 2,283 155 - 738 3,238
Transfers - 435 3 - (470) (32)
Disposals ------
Balanceat30June2012 14,503 28,795 2,210 8 340 45,856
Depreciationandimpairment
Balance at 4 July 2010 (3,462) (18,291) (1,334) (3) - (23,090)
Exchange adjustments - - (4) - - (4)
Depreciation charge for the ﬁnancial period (325) (2,330) (191) (2) - (2,848)
Disposals 234 8,298 96 - - 8,628
Balance at 2 July 2011 (3,553) (12,323) (1,433) (5) - (17,314)
Balance at 3 July 2011 (3,553) (12,323) (1,433) (5) - (17,314)
Exchange adjustments - - 13 - - 13
Depreciation charge for the ﬁnancial period (321) (2,535) (191) - - (3,047)
Transfers - 62 (30) - - 32
Disposals ------
Balanceat30June2012 (3,874) (14,796) (1,641) (5) - (20,316)
Netbookvalue
At 3 July 2010 11,042 14,077 704 5 150 25,978
At 2 July 2011 10,888 13,754 632 3 72 25,349
At30June2012 10,629 13,999 569 3 340 25,540
LeasedPlantandMachinery
The net book value of assets held under ﬁnance lease or hire purchase contracts included above are as follows:
2012 2011
£000 £000
Plant and equipment 6,031 4,113
Security
HSBC Bank Plc,HSBC Asset Finance (UK) Ltd and HSBC Equipment Finance (UK) Ltd 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.A breakdown
of the ﬁnancial liabilities is shown in Note 18.
Hire purchase obligations are secured on the underlying assets.
The lease obligations are secured on leased equipment (see Note 18).
43 13 OtherFinancialAssetsandLiabilities
2012 2011
£000 £000
Non-current
Investments 28 28
Currentassets
Fair value of foreign exchange contracts 35 -
Currentliabilities
Fair value of interest rate swaps (1,950) (2,034)
Fair value of foreign exchange contracts - (117)
(1,950) (2,151)
Investments
TheunlistedinvestmentsacquiredaspartoftheLightbodyacquisitionon23February2007andheldat30June2012consistofpreferencesharesinMurray
Traders Limited (10.5% of the issued capital of that company).There is no active market in these shares,therefore the fair value cannot be determined and
the investments are held at cost.
InterestRateSwapsatFairValue
The Group has entered into three interest rate swap arrangements to hedge its risks associated with interest rate ﬂuctuations:
£5.0m for ﬁve years from 1 May 2008 (ﬁxed) at 5.5%
£10.0m for four years from 1 June 2010 (ﬁxed) at 4.9%
£5.0m for ﬁve years from 1 July 2011 (ﬁxed) at 3.6%
There are two forward dated swaps:
£3.0m for four years from 22 May 2013 (ﬁxed) at 1.7%
£6.0m for three years from 2 June 2014 (ﬁxed) at 1.9%
In addition one interest rate swap matured during the year:
£11.0m over ﬁve years from 23 February 2007 (reducing to £3.5m over 5 years) at 5.8% matured February 2012
Changes in their fair value are recognised immediately in the Consolidated Statement of Comprehensive Income resulting in a credit of £84,000
(2011:£564,000) as indicated above.
They are shown as liabilities as a result of the current low levels of base and LIBOR interest rates.
ForwardForeignExchangeContractsatFairValue
The Group has entered into a number of forward foreign exchange contracts to minimise the impact of ﬂuctuations in exchange rates,changes in their
fair value are recognised immediately in the Consolidated Statement of Comprehensive Income.
44 14 PensionSchemes
A number of companies within the Group operate deﬁned contribution pension schemes with one company also operating a deﬁned beneﬁt scheme.
DeﬁnedContributionScheme
The Group made contributions in respect of its deﬁned contribution pension arrangements of £447,000 (2011:£328,000).
DeﬁnedBeneﬁtScheme
Thedeﬁnedbeneﬁtschemewasclosedtofutureaccrualon31May2010.Theassetsoftheschemesareheldseparatelyfromthoseofthecompany.Theamounts
intheFinancialStatementsforthe52weeksended30June2012relatingtodeﬁnedbeneﬁtpensionarebasedonafullactuarialvaluationdated31May2010,
which was updated at the end of the ﬁnancial year 2012.
The Group’s funded deﬁned beneﬁt scheme is the Memory Lane Cakes Pension Scheme,which is a separately administered plan.At the ﬁnancial year end
2012,theschemehadnoactivemembersaccruingbeneﬁts(2011:nil),260deferredpensionermembers(2011:275)and171pensionermembers(2011:158).
A £65,000 contribution was paid during the ﬁnancial year 2012 from Memory Lane Cakes (2011:£11,000).The Group’s contribution has been agreed
based on the outcome of the full actuarial valuation dated 31 May 2010.The valuation of the Scheme on an equity/bond basis and projected unit method,
showed that there was a deﬁcit of £170,000 equivalent to a 1% deﬁcit of liabilities over assets.The valuation was conducted by a qualiﬁed independent
actuary.This deﬁcit is payable over a three year period at a rate of £65,000 pa.The full actuarial valuation diﬀers from the ﬁnancial year end valuation
deﬁcit of £3,075,000.
2012 2011
£000 £000
Fair value of plan assets 18,349 19,102
Present value of deﬁned beneﬁt obligations (21,424) (20,274)
Deﬁcit recognised (3,075) (1,172)
The fair value of plan assets and the return on those assets were as follows:
2012 2011
£000 £000
Equities/target return fund 16,801 17,627
Property 1,513 1,465
Cash 35 10
Fair value of plan assets 18,349 19,102
Actual return on plan assets 282 2,000
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.
Movementsinpresentvalueofdeﬁnedbeneﬁtobligation
2012 2011
£000 £000
At beginning of ﬁnancial year (20,274) (21,287)
Interest cost (1,101) (1,134)
Beneﬁts paid 536 567
Actuarial (losses)/gains (585) 1,580
At end of ﬁnancial year (21,424) (20,274)
Movementsinfairvalueofplanassets
2012 2011
£000 £000
At beginning of ﬁnancial year 19,102 17,658
Expected return on plan assets 1,490 1,356
Beneﬁts paid (536) (567)
Actuarial (losses)/gains (1,772) 644
Contributions by employer 65 11
At end of ﬁnancial year 18,349 19,102
45 14 PensionSchemes(continued)
Actuarial gains and losses arise due to changes in the key assumptions such as inﬂation,mortality rates and discount rates as well as experience gains and
losses.The actuarial gain for the prior period includes the impact of the change in the inﬂationary measure from RPI to CPI which has acted to reduce
the liabilities of the Scheme by around £2,630,000 at the review date.
Income/(expense)recognisedintheConsolidatedStatementofComprehensiveIncome
2012 2011
£000 £000
Expected return on deﬁned beneﬁt pension plan assets/ﬁnance income 1,490 1,356
Interest on deﬁned beneﬁt pension plan obligation/ﬁnance expense (1,101) (1,134)
Total income 389 222
Actuarial gains and losses recognised directly in equity in the statement of recognised income and expense since 1 July 2006,the transition date
to Adopted IFRSs:
2012 2011
£000 £000
Cumulative amount at beginning of ﬁnancial year (2,226) (4,450)
Recognised in the ﬁnancial year (2,357) 2,224
Cumulative amount at end of ﬁnancial year (4,583) (2,226)
Principal long-term actuarial assumptions at the year end were as follows:
2012 2011
CPI price inﬂation assumption 2.1% 2.9%
Increases to pensions in payment 2.1% 2.9%
Discount rate for liabilities 4.6% 5.5%
Expected rate of return for plan assets 7.8% 7.9%
The ﬁnancial assumptions are based on market conditions as at the review date of 30 June 2012 with discount rates based on the yields on long-dated high
quality corporate bonds.The discount rate is lower than the discount rate used last year reﬂecting the decrease in bond yields over this period.
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 expected rate of return takes into consideration the fact that over 90% of theplan assets are held in a target return fund which targets three month
LIBOR +3% pa (which is assumed long-term to be broadly equivalent to RPI +5%).This expected return rate has decreased by 0.1% since year end 2011
reﬂecting a slightly diﬀerent mix of investment.The expected return on cash is based on the current Bank of England base rate rather than long-term
deposit rates.
2012 2011
Pre-retirement mortality assumption
S1N[M/F]A92mediumcohort S1N[M/F] A92 medium cohort
yearofbirthtableswith1.25%pa year of birth tables with 1.5% pa
minimumimprovements minimum improvements
Post-retirement mortality assumption
S1N[M/F]A92mediumcohort S1N[M/F] A92 medium cohort
yearofbirthtableswith1.25%pa year of birth tables with 1.5% pa
minimumimprovements minimum improvements
Under the mortality tables adopted,the assumed future life expectancy at age 65 is as follows:
Male currently at age 45 24.2 24.8
Female currently at age 45 27.0 27.8
Male currently at age 65 21.8 21.9
Female currently at age 65 24.7 24.9
46 14 PensionSchemes(continued)
CPI Inﬂation is assumed to be at 2.1% (2011:2.9%) per annum.The diﬀerential between the assumed rate of inﬂation and the discount rate for liabilities
is 2.5% (2011:2.6%).
Changing the year end 2012 assumptions to those of 2011 year end listed above,the deﬁcit would have been £2,490,000 compared to the reported deﬁcit
of £3,075,000.
Thehistoryoftheplansforthecurrentandpriorperiodsisasfollows:
Consolidated Statement of Financial Position
2012 2011 2010 2009 2008
£000 £000 £000 £000 £000
Fair value of plan assets 18,349 19,102 17,658 15,672 16,516
Present value of the deﬁned beneﬁt obligation (21,424) (20,274) (21,287) (16,963) (16,339)
(Deﬁcit)/surplus (3,075) (1,172) (3,629) (1,291) 177
2012 2011 2010 2009 2008
£000/% £000/% £000/% £000/% £000/%
Experience adjustments on plan assets (1,772) 644 682 (2,364) (980)
as a percentage of plan assets 9.7% 3.4% 3.9% 15.1% 5.9%
Experience adjustments on plan liabilities - (561) (-) (-) (556)
as a percentage of plan liabilities 0.0% 2.8% 0.0% 0.0% 3.4%
Total actuarial gains/(losses) (2,357) 2,224 (3,046) (1,634) (2,682)
as a percentage of plan liabilities 11.0% 11.0% 14.3% 9.6% 16.4%
15 Inventories
2012 2011
£000 £000
Raw materials and consumables 3,784 3,210
Finished goods 1,596 2,634
5,380 5,844
Inventoriesrecognisedasanexpense
2012 2011
£000 £000
Opening inventories 5,844 4,531
Purchases 99,589 90,214
Increase in stock provisions 587 681
Closing inventories (5,380) (5,844)
Expensed during the period 100,640 89,582
16 TradeandOtherReceivables
2012 2011
£000 £000
Trade receivables due from third parties 27,223 25,531
Other debtors 1,329 1,705
Prepayments and accrued income 2,163 2,693
30,715 29,929
Within prepayments above is an amount for £300,000 (2011:£500,000) relating to contract renewal fees,£100,000 (2011:£300,000) of which are not due
withinoneyearandalsoprepaidpensioncostsof£36,000(2011:£71,000).Speciﬁcprovisionsaremadeagainstdoubtfuldebtstakingthevaluetoanestimated
value based on the most likely outcome.
Cash received under the invoice discounting facility,amounting to £14,042,000 (2011:£12,879,000) is shown within current liabilities and is secured
on the trade receivables above.All the risks and rewards of the trade debtors lie with the Group.
47 17 CashandCashEquivalentsincludingBankOverdrafts
2012 2011
£000 £000
Cash at bank and on hand 23,953 26,205
Bank overdraft (20,160) (21,660)
3,793 4,545
18 OtherInterest-BearingLoansandBorrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings,which are measured at amortised cost,
using the eﬀective interest rate method.
2012 2011
£000 £000
Currentliabilities
Current portion of secured bank loans 2,260 1,410
Current portion of ﬁnance lease liabilities 1,153 1,335
Cash advanced under the invoice discounting facility 14,042 12,879
Loan notes 3 3
17,458 15,627
Non-currentliabilities
Secured bank loans 16,678 19,058
Finance lease liabilities 1,781 2,006
18,459 21,064
Non-current secured bank loans are repayable as follows:
2012 2011
£000 £000
Bank loans and mortgages:
Between one and two years 2,564 2,345
Between two and ﬁve years 9,150 8,770
Between ﬁve and ten years 4,451 7,379
Between ten and ﬁfteen years 513 564
16,678 19,058
Finance lease liabilities are payable as follows:
Minimum Minimum
lease lease
payments Interest Principal payments Interest Principal
2012 2012 2012 2011 2011 2011
£000 £000 £000 £000 £000 £000
Less than one year 1,221 68 1,153 1,423 88 1,335
Between one and ﬁve years 1,849 68 1,781 2,076 70 2,006
3,070 136 2,934 3,499 158 3,341
48 18 OtherInterest-BearingLoansandBorrowings(continued)
Terms and debt repayment schedule
2012 2012 2011 2011
Margin/above Frequencyof Yearof Facility Drawn Facility Drawn
(below) repayments maturity £000 £000 £000 £000
Mortgage 1.750%/base Monthly 2022 7,430 6,095 7,430 6,095
Mortgage 1.750%/base Monthly 2023 769 638 769 638
Term Loan 3.70% LIBOR Monthly 2017 14,238 12,702 14,238 14,139
Invoice Discounting 1.870%/base On demand Revolving* 17,500 14,042 17,500 12,879
Loan secured on assets 1.270%/base Monthly 2013 -- 187 187
Finance lease liabilities 2.125%/base Monthly Various 4,375 2,934 4,188 3,341
Loan notes 1%/(base) On demand 2012 -3 -3
Overdraft 2.250%/base On demand - 2,750 - 2,750 -
47,062 36,414 47,062 37,282
Amounts falling due within one year 17,695 15,842
Unamortised transaction costs within one year (237) (215)
17,458 15,627
Amounts falling due after more than one year 18,719 21,440
Unamortised transaction costs more than one year (260) (376)
18,459 21,064
Total amounts falling due 36,414 37,282
Total unamortised bank fees (497) (591)
35,917 36,691
*Revolving above relates to the payment terms on the invoice discounting which is up to 90 days from the date of invoice.
Group’sBorrowingFacilities
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.
HSBCBankPlc,HSBCAssetFinance(UK)LtdandHSBCEquipmentFinance(UK)Ltdhavedebenturesincorporatingﬁxedandﬂoatingchargesover
the undertaking and all property and assets including goodwill,book debts,uncalled capital,buildings,ﬁxtures,ﬁxed plant and machinery.
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 as follows:-
Net bank debt:EBITDA
Interest cover
Debt service cover
The HSBC facilities (excluding overdraft) available for drawdown are £44.3m (2011:£44.3m).At the period end date the facility utilised was £36.4m
(2011:£37.3m),giving £7.9m (2011:£7.0m) headroom.
49 19 AnalysisofNetDebt
At At
year ended yearended
2July 30June
2011 Cash ﬂow 2012
Note £000 £000 £000
Cash at bank 4,545 (752) 3,793
Loan notes (3) - (3)
4,542 (752) 3,790
Debt due within one year (1,625) (872) (2,497)
Debt due after one year (19,434) 2,496 (16,938)
Invoice discounting due within one year (12,879) (1,163) (14,042)
Hire purchase obligations due within one year (1,335) 182 (1,153)
Hire purchase obligations due after one year (2,006) 225 (1,781)
Total net bank debt (32,737) 116 (32,621)
Debt as per Note 18 18 (36,691) (35,917)
Cash at bank 4,545 3,793
Unamortised transaction costs (591) (497)
Total net bank debt (32,737) (32,621)
Deferred consideration (4,321) (1,239)
Total net debt including deferred consideration (37,058) (33,860)
Cash at banks 4,545 3,793
Total debt including deferred consideration,excluding cash 24 (41,603) (37,653)
20 TradeandOtherPayables
2012 2011
£000 £000
Current
Trade creditors 23,528 24,206
Other creditors including taxes and social security 1,137 1,449
Accruals and deferred income 10,454 9,508
35,119 35,163
21 Provisions
Onerous Employee
lease claims Pension Total
£000 £000 £000 £000
Balance at beginning of ﬁnancial year 263 254 257 774
Made during the ﬁnancial year -67 - 67
Utilised during the ﬁnancial year (118) (77) (18) (213)
Balanceatendofﬁnancialyear 145 244 239 628
Current provisions 145 244 21 410
Non-current provisions - - 218 218
The onerous lease provision relates to a warehouse at the former California CakeCompany site which expired April 2012.This provision is based on a level
of dilapidation assumption.The amount utilised during the year comprises lease payments of £80,000 and dilapidation costs of £38,000.
The employee claims provision is based on the number of reported accidents and incidents and the number of expected claims yet to be reported based
on historical evidence,all accrued at amounts up to the maximum self insured amount of £10,000 per claim.
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 17 years.
50 22 DeferredPurchaseConsideration
YorkshireFarm Goswel Total
Bakeriesand AnthonyAlan Enterprises deferred
A&PFoods FoodsLtd Ltd consideration
£000 £000 £000 £000
Balance at beginning of ﬁnancial year 1,559 1,576 1,186 4,321
Payment during the ﬁnancial year (1,600) (1,085) (500) (3,185)
Unwinding of discount 41 58 4 103
Balanceatendofﬁnancialyear - 549 690 1,239
Current discounted deferred consideration - 549 487 1,036
Non-current discounted deferred consideration - - 203 203
The repayments for Anthony Alan Foods Ltd are payable during the next ﬁnancial year and attract an interest charge of 6%.The repayments for Goswell
Enterprises Ltd are payable over the next two years and attract interest of 5%.
23 DeferredTaxAssetsandLiabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities
2012 2011 2012 2011
£000 £000 £000 £000
Property,plant and equipment - - (996) (1,234)
Short-term timing diﬀerences - - (369) (280)
Employee share scheme charges 63 9 - -
Pension scheme charges 738 305 - -
Interest rate swaps 468 529 - -
Foreign exchange contracts - 31 (9) -
IFRS fair value adjustments on deferred consideration - - (8) (36)
Tax assets/(liabilities) 1,269 874 (1,382) (1550)
Net tax (liability)/asset (113) (676)
Short-term timing diﬀerences relate to general provisions which will be allowed when utilised.
Movementindeferredtaxduringtheyear
Recognised Recognised
3July2011 inincome inequity 30June2012
£000 £000 £000 £000
Property,plant and equipment (1,234) 238 - (996)
Short-term timing diﬀerences (280) (89) - (369)
Employee share scheme 954 - 63
Pension scheme 305 (133) 566 738
Interest rate swaps 529 (61) - 468
Foreign exchange contracts 31 (40) - (9)
IFRS fair value adjustments deferred consideration (36) 28 - (8)
(676) (3) 566 (113)
Movementindeferredtaxduringtheprioryear
Recognised Recognised
4July2010 inincome inequity 2July2011
£000 £000 £000 £000
Property,plant and equipment (1,402) 168 - (1,234)
Short-term timing diﬀerences (109) (171) - (280)
Employee share scheme 9-- 9
Pension scheme 1,016 (133) (578) 305
Interest rate swaps 727 (198) - 529
Foreign exchange contracts (56) 87 - 31
IFRS fair value adjustments on deferred consideration (109) 73 - (36)
76 (174) (578) (676)
51 24 FinancialRiskManagement
ThemainpurposeoftheGroup’sﬁnancialinstrumentswhichcompriseofbanktermloans,invoicediscountingfacility,hirepurchase,ﬁnanceleases,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,istoﬁnancetheGroup’soperations.ThemainriskarisingfromtheGroup’sﬁnancialinstrumentsareinterestrateriskandliquidityrisk.TheGroup’s
policies on the management of liquidity,credit,interest rate and foreign currency risks are set out below and also referred to in the Business Review.
a)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
bankfacilitiesandthenettingoﬀofsurplusfunds.Thecarryingamountsaretheamountsdueifsettledattheperiodenddate.Thecontractualundiscoun ted
cash ﬂows include estimated interest payments over the life of these facilities.The estimated interest payments are based on interest rates prevailing at the
30 June 2012.
At yearended30June2012
Contractual
Carrying cash ﬂows 1 year 1 to 2 2 to 5 5 years
amount Total or less years years and over
£000 £000 £000 £000 £000 £000
Non-derivativeﬁnancialliabilities
Secured bank loans (18,938) (22,022) (3,194) (3,340) (10,273) (5,215)
Finance lease liabilities (2,934) (3,070) (1,221) (870) (979) -
Invoice discounting (14,042) (14,042) (14,042) - - -
Deferred consideration (1,239) (1,366) (1,143) (223) - -
(37,153) (40,500) (19,600) (4,433) (11,252) (5,215)
Trade creditors (23,528) (23,528) (23,528) - - -
Derivativeﬁnancialliabilities
Interest rate swaps liabilities (1,950) (1,996) (801) (580) (615) -
(1,950) (1,996) (801) (580) (615) -
The carrying amount relating to interest rate swaps is the fair value.
Atyearended2July2011
Contractual
Carrying cash ﬂows 1 year 1 to 2 2 to 5 5 years
amount Total or less years years and over
£000 £000 £000 £000 £000 £000
Non-derivativeﬁnancialliabilities
Secured bank loans (20,468) (24,333) (2,396) (3,248) (10,327) (8,362)
Finance lease liabilities (3,341) (3,501) (1,423) (990) (1,088) -
Invoice discounting (12,879) (12,879) (12,879) - - -
Deferred consideration (4,321) (4,676) (4,456) (220) - -
(41,009) (45,389) (21,154) (4,458) (11,415) (8,362)
Trade creditors (24,206) (24,206) (24,206) - - -
Derivativeﬁnancialliabilities
Interest rate swaps liabilities (2,034) (2,571) (949) (801) (821) -
Foreign exchange contracts (117) (117) (117) - - -
(2,151) (2,688) (1,066) (801) (821) -
The information relating to the interest rate swaps shown in the tables above indicate the cash ﬂows associated with these instruments.This also reﬂect s
the expected eﬀect on the 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.
52 24 FinancialRiskManagement(continued)
b)Credit
CreditriskistheriskofﬁnanciallosstotheGroupifacustomerorcounterpartytoaﬁnancialinstrumentfailstomeetitscontractualobligations,andarises
principally from the Group’s receivables from customers.These trading exposures are monitored and managed at operating level and are also monitored
atGrouplevel.Attheperiodenddatetherewerenosigniﬁcantconcentrationsofcreditrisk.Thecarryingamountoftheﬁnancialassetsrepresentsthemaximum
credit exposure.Therefore,the maximum exposure to credit risk for the trade receivables at the period end date was £27.2 million (2011:£25.5 million)
and the ageing of trade receivables at the period end date was:
2012 2011
£000 £000
Not past due 23,672 23,141
Pastdue0–30days 2,942 1,958
Past due 31 – 120 days 329 310
Past due more than 120 days 280 122
27,223 25,531
The above numbers are net of impairment.Group policy is to provide in full against all receivable balances whose full recovery is signiﬁcantly in doubt.
The provision is netted oﬀ the gross receivable.
The Group’s strategy is to focus on supplying UK multiple grocers,the nature of these customers is such that there is 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
creditnoteprovisionandbaddebtprovisionheldattheyearend.Thebalanceof£0.6millionpastduebymorethan30daysisequivalenttolessthan1day
sales (2011:£0.4 million,equivalent to 1 day).
c)MarketRisk
i)InterestRateRisk
The Group’s interest rate risk exposure is primarily to changes in variable interest rates.The Group has entered into three interest rate swap arrangem ents
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 including deferred consideration and overdraft at the period end date were split as follows:
2012 2011
£000 £000
Fixed rate liabilities 549 3,135
Variable rate liabilities 37,104 37,282
Non interest-bearing liabilities - 1,186
37,653 41,603
Swaps amounting to £20,000,000 (2011:£24,321,000) limit the risk associated with the variable rate liabilities,the weighted average interest rate
at 30 June 2012 is 4.7% (2011:4.9%).
Sensitivity
A 1% increase in the base rate or LIBOR would have the following impact on interest charges and associated net assets for the Group,this sensitivity
relates to interest-bearing bank borrowings and interest rate swaps only and excludes possible changes in pension ﬁnancing costs.
2012 2011
£000 £000
Proﬁt decrease 206 199
Decrease in net assets 206 199
A 1% decrease in the base rate or LIBOR would have an equal and opposite impact to those listed above.
The above movement is not equal to 1% of interest-bearing loans because of interest rate swap cover that is in place.
53 24 FinancialRiskManagement(continued)
ii)CommodityPrices
Anyrisesincommoditypricescanadverselyimpactthecoreproﬁtabilityofthebusiness.TheGroupwillaimtopassonitsincreasedcoststoitscustomers
asfarasisreasonableinthecircumstanceswhilstmaintainingitstightcontroloveroverheadcoststomitigatetheimpactonconsumers.TheGroupmaintains
ahighexpertiseinitsbuyingteamandwillconsiderlong-termcontractswhereappropriatetoreduceuncertaintyincommodityprices.Furtherinformation
oninputpricesandrisksiscontainedintheBusinessReview.
iii)ForeignExchangeRisk
The Group currently supplies UK manufactured products to Lightbody Stretz Ltd,its 50% owned selling and distribution business trading primarily
inEurope.TheGroupalsopurchasessomerawmaterialsinforeigncurrency.TheconsequenceofthisisthattheGroupisexposedtomovementinforeign
currency rates.Forward foreign exchanges contracts are used to manage the foreign exchange exposure.
d)DebtandCapitalManagement
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 Directors do not recommend paying a dividend as with
limited funding currently available they believe that it is more appropriate to invest to grow the business.They remain conﬁdent about the future prospects
and intend to re-establish the dividend as soon as cash ﬂow and debt levels allow.
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 bank every 6 months.There have been no breaches of covenant tests during the year and the gearing ratio has fallen during the year to 0.7
(2011:0.8).The gearing ratio is calculated taking 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 CapitalandReserves
The reconciliation of movement in capital and reserves is shown as a primary statement Consolidated Statement of Changes in Equity.Within retained
earnings is the net exchange diﬀerence balance at the year end of £6,000 loss (2011:£181,000 gain).
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
• Retained earnings represent retained proﬁts.
26 ShareCapital
2012 2011
000’s 000’s
In issue at beginning of the ﬁnancial year 52,788 52,688
Shares issued 714 100
In issue at end of the ﬁnancial year – fully paid 53,502 52,788
2012 2011
£000 £000
Allotted,called up and fully paid
Ordinary shares of 1p each 535 528
TheholdersofordinarysharesareentitledtoreceivedividendsasdeclaredfromtimetotimeandareentitledtoonevotepershareatmeetingsoftheCompany.
54 26 ShareCapital(continued)
Share-BasedPayments
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.
Uponexerciseoftheshareoptionstheproceedsreceivednetofattributabletransactioncostsarecreditedtosharecapitalandwhereappropriatesharepremium.
There have been a number of options granted during the course of the ﬁnancial year to 30 June 2012 with further details given below.
Amount
expensedinyear
Numberofoptions Exercise Fairvalue to30June2012 Periodof
Dateofgrant granted price £000 £000 expense
8 Jul 2011 3,435,715 20.5p 283 283 Immediately
8 Jul 2011 1,517,857 20.5p 125 120 1 years
8 Jul 2011 1,517,857 20.5p 125 61 2 years
15 Dec 2011 529,920 20.0p 55 10 3 years
Charge relating to options granted in the current year 474
Charge relating to options granted in the previous year 99
ChargeincludedinAdministrationexpenses 573
The options granted on 8 July 2011 have been granted in terms of the Finsbury Food Group Long-Term Incentive Plan dated June 2006,1,071,429
of the options granted were replacement options.
There were a number of options granted during the course of the ﬁnancial year to 2 July 2011 with further details given below.
Amount
expensedinyear
Numberofoptions Exercise Fairvalue to2July2011 Periodof
Dateofgrant granted price £000 £000 expense
7 Dec 2010 520,200 18.0p 60 12 3 years
29 Jul 2010 544,362 17.5p 42 13 3 years
29 Jul 2010 1,177,338 17.5p 91 28 3 years
Charge relating to options granted in the current year 53
Charge relating to options granted in the previous year 20
Charge included in Administration expenses 73
A summary of share options outstanding and movements for the year to 30 June 2012 is shown below:
At 2 July 2011 Granted Forfeited Cancelled Exercised At30June2012
Number of options 5,898,155 7,001,349 (1,075,002) (242,500) (142,460) 11,439,542
55 26 ShareCapital(continued)
Details of share options outstanding at 30 June 2012 and movements during the year by exercise price is shown below:
First Last
Exercise exercise exercise At 2 July At30June
price date date 2011 Granted Forfeited Cancelled Exercised 2012
111.0p Apr 2010 Apr 2017 27,000 - - (27,000) - -
106.0p Apr 2012 Oct 2019 42,500 - - (42,500) - -
106.0p Sep 2008 Mar 2014 42,500 - - - - 42,500
100.0p Apr 2010 Apr 2017 173,000 - - (173,000) - -
88.0p Sep 2008 Mar 2014 17,500 - - - - 17,500
67.5p Jan 2011 Jul 2011 319,899 - (319,899) - - -
52.5p Sep 2008 Mar 2014 40,000 - - - - 40,000
34.0p Oct 2009 Mar 2014 52,848 - - - - 52,848
32.0p Nov 2011 Jul 2012 204,480 - (196,800) - (960) 6,720
29.0p Dec 2005 Mar 2014 500,000 - - - - 500,000
27.0p Sep 2012 Oct 2019 111,000 - - - - 111,000
20.5p Jun 2011 Oct 2016 - 3,435,715 - - - 3,435,715
20.5p Jun 2012 Oct 2016 - 1,517,857 - - - 1,517,857
20.5p Jun 2013 Oct 2016 - 1,517,857 - - - 1,517,857
20.0p Feb 2015 Aug 2015 - 529,920 (30,240) - - 499,680
20.0p Dec 2012 Jul 2013 382,228 - (133,763) - - 248,465
20.0p Sep 2010 Oct 2019 420,000 - - - - 420,000
20.0p Sep 2011 Oct 2019 420,000 - - - - 420,000
20.0p Sep 2012 Oct 2016 309,000 - - - - 309,000
18.0p Jan 2014 Jul 2014 520,200 - (116,000) - - 404,200
17.5p Jul 2013 Jul 2017 544,362 - (78,575) - - 465,787
17.5p Jul 2013 Jul 2020 1,177,338 - (171,425) - - 1,005,913
14.0p Mar 2012 Mar 2019 594,300 - (28,300) - (141,500) 424,500
5,898,155 7,001,349 (1,075,002) (242,500) (142,460) 11,439,542
There were 6,877,640 (2011:1,172,747) options exercisable at the period end date.
There were 142,460 options exercised during the year (2011:100,000).
The options outstanding at the year end have weighted average exercise price of 20.7p (2011:24.9p) and a weighted average contractual life of 4.8 years
(2011:5.8 years).
The Company has used the QCA-IRS option valuerTM (based on the Black-Scholes-Merton based option pricing model) to calculate the fair value
of the outstanding options.This model was developed byThe QCA partnered with Independent Remuneration Solutions (IRS) and City Group Plc.
The development was led by Mr Edward Beale,a Director of the Group and Chief Executive of City Group Plc.
TheinputsintotheBlack-Scholes-Mertonbasedoptionpricingmodeltocalculatethechargeforshareoptionsgrantedintheﬁnancialyearwereasfollows:
2012 2011
Expected life of option 3.1–5.3years 3years
Volatility of share price 47% 79.2% – 81.0%
Dividend yield 0% 0%
Risk-free interest rate 2.18% 1.39% – 1.56%
Share price at date of grant 21.5p–27.5p 17.0p – 23.0p
Exercise price 20.0p–20.5p 17.5p – 18.0p
Bid price discount 10% 10%
Estimated conversion rate 100% 100%
Fair value per option 8.3p–10.4p 8.0p – 11.0p
Volatilityiscalculatedonaconsistentbasisforeachgrantofoptionsandisbasedonthehistoricannualisedstandarddeviationofcontinuouslycompounded
rates of return.
56 57
27 Dividends
During the year a dividend of £499,000 (2011:£216,000) was paid to the non-controlling interest in Lightbody Stretz Ltd.
28 OperatingLeases
The Group has annual commitments under non-cancellable operating leases relating primarily to land and buildings,fork lift trucks and oﬃce equipment.
Landandbuildingshavebeenconsideredseparatelyforleaseclassiﬁcation.LandandbuildingsamountsrelatetoleaseholdpropertiesattheNicholas&Harris
site,part of the Lightbody of Hamilton site and the California Cake Company site.
During the year £1,165,000 was recognised as an expense in the Consolidated Statement of Comprehensive Income in respect of operating leases
(2011:£946,000).
Future minimum lease repayments under non-cancellable operating leases at the end of the ﬁnancial periods are as follows:
LandandBuildings Other
2012 2011 2012 2011
£000 £000 £000 £000
On leases which expire in:
Less than one year 201 86 90 122
Between one and ﬁve years 957 729 1,514 1,552
More than ﬁve years 8,458 4,705 157 25
9,616 5,520 1,761 1,699
29 CapitalCommitments
At the ﬁnancial year ended 30 June 2012,the Group had capital expenditure commitments of £472,000 (2011:£512,000).
30 RelatedParties
RelatedPartyTransactionsandDirectors’MaterialInterestsinTransactions
The Group paid £78,506 (2011:£78,864) in the year to City Group Plc,a subsidiary of London Finance and Investment Group Plc,which is a substantial
shareholder in Finsbury Food Group.At 30 June 2012,£18,820 (2011:£21,161) was due to City Group Plc.Details of fees are as follows:
• MrDCMarshall and MrEJBealeareDirectors of City Group Plc,and received Directors’fees for the year of £45,000 (2011:£45,000).The services
of Mr Marshall are supplied by an overseas company in which none of the Directors has an interest.Directors’fees for Mr Beale are surrendered to his
primary employer.
• The amount paid for the provision of company secretarial services and oﬃce services was £33,506 (2011:£33,864).
MrACunninghamisaManagingDirectorofUnitedCentralBakeriesLtd.£41,000waspaidtoafamilymemberfortheprovisionofengineeringservices
for the prior year.
A Group subsidiary paid Mr MW Lightbody,a Group Director,£185,000 (2011:£180,000) in respect of rent of a property at the Lightbody of Hamilton
site.No balances were outstanding at either year end relating to rent.
A 50% owned subsidiary,Lightbody Stretz Ltd,paid Mr P Stretz,the Managing Director of Lightbody Stretz Ltd,£25,000 (2011:£26,000) in respect
of rent for oﬃces.No balances were outstanding at either year end.
The Group paid £414,000 (2011:£331,000) for the supply of ﬁnished products from and received £51,000 (2011:£86,000) for the sale of ﬁnished products
to Party Fizz,a company 50% owned by Mr MW Lightbody,a Group Director,and 50% owned by Mr P Stretz.The amount payable and receivable at the
year end was £90,000 (2011:£299,000) and £2,000 (2011:£9,000) respectively.
A Group subsidiary sold ﬁnished goods with a value of £323,000 (2011:£203,000) to LightbodyVentures Ltd,a company wholly owned by Mr MW
Lightbody,a Group Director.The amount receivable at year end was £115,000 (2011:£39,000).
Transactions with the Memory Lane pension scheme are detailed in Note 14. 30 RelatedParties(continued)
TransactionswithKeyManagementPersonnel
Directors of the Company and their immediate relatives control 30% (2011:29%) of the voting shares of the Company.
Thecompensationofkeymanagementpersonnel(i.e.keyGroupDirectors,GroupCommercialDirector,BrandDirector,TechnicalDirectorandOperating
Subsidiary Managing Directors) is as follows:
Restated
2012 2011
£000 £000
Fees 70 78
Company contributions to money purchase pension schemes 130 167
Executive salaries and beneﬁts 1,370 1,315
Executive bonuses 379 261
1,949 1,821
Detailsofshareoptionsoutstandingat30June2012forkeypersonnelbyexercisepriceisshowninthetablebelow.ShareoptionsheldbyGroupDirectors
are set out in Note 6.
Numberof Number of
optionsat options at Earliest Exercise
30June 2 July Exercise exercise expiry
2012 2011 price date date
I Chree 28,300 28,300 14.0p 25/05/2012 25/05/2019
148,788 148,788 17.5p 29/07/2013 29/07/2020
72,912 72,912 17.5p 29/07/2013 29/07/2017
A Cunningham 171,425 171,425 17.5p 29/07/2013 29/07/2020
78,575 78,575 17.5p 29/07/2013 29/07/2017
S Staddon 171,425 171,425 17.5p 29/07/2013 29/07/2020
78,575 78,575 17.5p 29/07/2013 29/07/2017
K Smith - 171,425 17.5p 29/07/2013 29/07/2020
- 78,575 17.5p 29/07/2013 29/07/2017
P Graddon 171,425 171,425 17.5p 29/07/2013 29/07/2020
78,575 78,575 17.5p 29/07/2013 29/07/2017
LTrist 171,425 171,425 17.5p 29/07/2013 29/07/2020
78,575 78,575 17.5p 29/07/2013 29/07/2017
F Swallow 171,425 171,425 17.5p 29/07/2013 29/07/2020
78,575 78,575 17.5p 29/07/2013 29/07/2017
1,500,000 1,750,000
31 PostConsolidatedStatementofFinancialPositionEvents
Since the period end date there have been no signiﬁcant events.
32 UltimateParentCompany
Finsbury Food Group Plc is the ultimate parent company.
58 59
2012 2011
Note £000 £000
Fixedassets
Investments 40 64,389 64,434
64,389 64,434
Currentassets
Debtors 41 10,075 12,807
10,075 12,807
Creditors: amounts falling due within one year 42 (26,107) (27,050)
Netcurrentliabilities (16,032) (14,243)
Totalassetslesscurrentliabilities 48,357 50,191
Creditors: amounts falling due after more than one year 43 (16,091) (18,420)
Netassets 32,266 31,771
Capitalandreserves
Called up share capital 45 535 528
Share premium account 46 27,052 26,918
Capital redemption reserve 46 578 578
Proﬁt and loss account 46 4,101 3,747
Shareholders’funds 46 32,266 31,771
These Financial Statements were approved by the Board of Directors on 21 September 2012 and were signed on its behalf by:
StephenBoyd
Director
Registered Number 204368
Company Balance Sheet
at30June2012and2July2011 Company Reconciliation of Movements in Shareholders’Funds
forthe52weeksended30June2012and2July2011
2012 2011
£000 £000
Lossfortheﬁnancialyear (98) (322)
Retainedloss (98) (322)
Impact of share based payments current year charge 573 73
Impact of share based payments credit to subsidiaries (121) (256)
New share capital subscribed (net of issue costs) 141 1
Foreign exchange translation diﬀerences - (2)
Netreductiontoshareholders’funds 495 (506)
Opening shareholders’funds 31,771 32,277
Closingshareholders’funds 32,266 31,771
60 61
Notes to the Company Financial Statements
(formingpartoftheFinancialStatements)
33 AccountingPolicies
ThefollowingaccountingpolicieshavebeenappliedconsistentlyindealingwithitemswhichareconsideredmaterialinrelationtotheFinancialStatements.
BasisofPreparation
The ﬁnancial year was the 52 weeks ended 30 June 2012 (prior ﬁnancial year 52 weeks ended 2 July 2011).The Financial Statements for the Company have
been prepared in accordance with applicable accounting standards,and under the historical cost accounting rules and in accordance with applicable United
Kingdom Generally Accepted Accounting Principles (UK GAAP) and law.
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 Reconciliation of Movements in Shareholders’Funds.
Under Financial Reporting Standard 1 the Company is exempt from the requirement to prepare a cash ﬂow statement on the grounds that it is included
within the consolidated accounts.
The accounting policies of the Company are the sameas for the Group except for the following:
Investments
Investments are stated at cost less provision for any permanent diminution in value.
Taxation
The credit for taxation is based on the loss for the year and takes into account taxation deferred because of timing diﬀerences between the treatment
of certain items for taxation and accounting purposes.
Deferred tax is recognised,without discounting,in respect of all timing diﬀerences between the treatment of certain items for taxation and accounting
purposes which have arisen but not reversed by the balance sheet date,except as otherwise required by FRS 19.
34 RemunerationofDirectors
Details of Directors’remuneration are set out in Note 6 of the Group’s Financial Statements.
35 StaﬀNumbersandCosts
The average number of persons employed by the Company (including Directors) during the year,analysed by category,was as follows:
NumberofEmployees
2012 2011
Directors and administrative staﬀ 38 30
The aggregate payroll costs of these persons were as follows:
2012 2011
£000 £000
Wages and salaries 2,459 2,191
Social security costs 313 271
Other pension costs 154 107
2,926 2,569
36 EmployeeShareSchemes
Under the ShareSave scheme,529,920 share options were granted to Group employees on 15 December 2011 at an option price of 20.0p.(2011:520,200
shares were granted to Group employees on 7 December 2010 at an option price of 18.0p).Details of Directors share options are set out in Note 6 of the
Group’s Financial Statements.
37 ShareBasedPayments
As set out in Note 26 to the Group Financial Statements,6,505,089 (2011:853,200) of the total 7,001,349 (2011:2,241,900) share options granted during
the year were issued to employees of the Company resulting in a charge to the Company proﬁt and loss account of £499,000 (£111,000).The remaining
optionsweregrantedtoemployeesofthesubsidiarycompanieswithcorrespondingchargestotherelevantproﬁtandlossaccounts.Creditsrelatingtooptions
exercised,cancelled or lapsed after vesting have also been passed to the subsidiaries during the year.The credit totalled £45,000 (2011:credit £294,000)
and has resulted in a reduction (2011:reduction) in the total cost of investments in the Company balance sheet. 38 Dividends
There were no dividends paid during the year.
The Directors do not recommend paying a dividend as with limited funding currently available they believe that it is more appropriate to invest to grow
the business.They remain conﬁdent about the future prospects and intend to re-establish the dividend as soon as cash ﬂow and debt levels allow.
39 InvestmentinSubsidiaries
Set out below are the signiﬁcant subsidiary undertakings of the Company whose results are included in the consolidated Financial Statements for the period
ended 30 June 2012.
Direct/Indirect Countryof Classof Ownership Ownership
ownership incorporation sharesheld 2012 2011
Anthony Alan Foods Ltd Direct England andWales Ordinary £1 100% 100%
California Cake Company Ltd Indirect Scotland Ordinary £1 100% 100%
Campbells Cake Company Ltd Indirect Scotland Ordinary £1 100% 100%
Goswell Enterprises Ltd Indirect England andWales Ordinary £1 100% 100%
Lightbody Group Ltd Indirect Scotland Ordinary £1 100% 100%
Livwell Ltd Direct England andWales Ordinary £1 100% 100%
Memory Lane Cakes Ltd Direct England andWales Ordinary 1p 100% 100%
Nicholas & Harris Ltd Direct England andWales Ordinary £1 100% 100%
United Central Bakeries Ltd Indirect Scotland Ordinary £1 100% 100%
Lightbody-Stretz Ltd Indirect Scotland Ordinary £1 50% 50%
Lightbody Stretz Ltd which is 50% owned by the Group has been consolidated into the Group accounts as a subsidiary with a corresponding minority
interest on the basis that the Group has the controlling interest.Control arises by virtue of the fact that Lightbody Group Ltd which is ultimately a wholly
owned subsidiary of Finsbury Food Group has a majority of voting rights arising from an agreement between Lightbody Group Ltd and Philippe Stretz.
40 FixedAssetInvestments
£000
Cost
At beginning of ﬁnancial year 64,434
Disposals (45)
At end of ﬁnancial year 64,389
Netbookvalue
At30June2012 64,389
At 2 July 2011 64,434
The disposals to investments during the year relate to the share option credits of £45,000 (2011:credit £294,000) passed down to individual subsidiaries.
41 Debtors
2012 2011
£000 £000
Amounts owed by Group undertakings 9,893 12,658
Other taxation 23 7
Deferred taxation 116 39
Prepayments and accrued income 43 103
10,075 12,807
62 63
42 Creditors:AmountsFallingDueWithinOneYear
2012 2011
£000 £000
Loan notes 3 3
Bank overdraft 13,919 15,702
Bank loan 2,209 1,410
Trade creditors 42 51
Deferred purchase consideration 556 3,240
Amounts due to Group undertakings 8,289 5,473
Other taxes and social security 89 82
Accruals and deferred income 1,000 1,089
26,107 27,050
The deferred consideration relates to Anthony Alan Foods Limited of £556,000 payable by instalments over the next ﬁnancial year.
43 Creditors:AmountsFallingDueAfterMoreThanOneYear
2012 2011
£000 £000
Bank loans and mortgages
Between one and two years 2,513 2,291
Between two and ﬁve years 8,999 8,605
Between ﬁve and ten years 4,198 7,104
Between ten and ﬁfteen years 381 420
Total bank loans and mortgages 16,091 18,420
HSBC Bank Plc,HSBC Asset Finance (UK) Ltd and HSBC Equipment Finance (UK) Ltd 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.
44 Interest-BearingLoansandBorrowings
This note provides information about the contractual terms 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.
2012 2011
£000 £000
Currentliabilities
Current portion of secured bank loans 2,209 1,410
Loan notes 3 3
2,212 1,413
Non-currentliabilities
Secured bank loans 16,091 18,420
18,303 19,833 44 Interest-BearingLoansandBorrowings(continued)
Terms and debt repayment schedule
Frequencyof Yearof 2012
Currency Margin Above repayments maturity £000
Mortgage GBP 1.750% Base Monthly 2022 6,095
Term loan GBP 3.700% LIBOR Quarterly 2017 12,702
Loan notes GBP 1% below Base On demand 2012 3
18,800
Amounts falling due within one year 2,449
Amounts falling due after more than one year 16,351
18,800
Unamortised transaction costs (497)
18,303
Frequencyof Yearof 2011
Currency Margin Above repayments maturity £000
Mortgage GBP 1.750% Base Monthly 2022 6,095
Term loan GBP 3.700% LIBOR Quarterly 2017 14,139
Loan secured on assets GBP 1.270% Base Monthly 2013 187
Loan notes GBP 1% below Base On demand 2012 3
20,424
Amounts falling due within one year 1,628
Amounts falling due after more than one year 18,796
20,424
Unamortised transaction costs (591)
19,833
The base rate at the balance sheet date was 0.5% (2011:0.5%) and LIBOR rate 1.0% (2011:0.8%).
45 CalledUpShareCapital
Note 26 in the Group Financial Statements gives details of called up share capital.
46 CapitalandReserves
Reconciliationofmovementincapitalandreserves
Capital
Share Share redemption Retained Total
capital premium reserve earnings equity
£000 £000 £000 £000 £000
Balance at 4 July 2010 527 26,918 578 4,254 32,277
Shares issued 1--- 1
Impact of share based payments - - - (183) (183)
Retained loss for the ﬁnancial year - - - (322) (322)
Foreign exchange translation diﬀerences - - - (2) (2)
Balanceat2July2011 528 26,918 578 3,747 31,771
Balance at 3 July 2011 528 26,918 578 3,747 31,771
Shares issued 7 134 - - 141
Impact of share based payments - - - 452 452
Retained loss for the ﬁnancial year - - - (98) (98)
Foreign exchange translation diﬀerences -----
Balanceat30June2012 535 27,052 578 4,101 32,266
64 65
47 ContingentLiabilities
The Company has guaranteed the overdrafts of its subsidiaries;there was a net cash position at the year end of £3,793,000 (2011:£4,545,000).
48 RelatedPartyDisclosures
Note 30 in the Group’s Financial Statements gives details of related party disclosures.
49 FinancialRiskManagement
TheCompany’spoliciesonthemanagementofliquidity,creditandinterestraterisksaremanagedataGrouplevelandaresetoutinNote24intheGroup’s
Financial Statements and also referred to in the Business Review. 66
Background
The Group operates in the cake,Bread & Free From markets which is focused on premium,celebration and well being.These products are supplied
predominantly under the retailers’own brands but also through a number of licensed brands to which the Group has access.
A review of the activities and prospects of the Group is given in the Chairman’s Statement,Chief Executive’s Report and the Business Review
on pages 2 to 21.
Dividend
The Directors do not recommend paying a dividend as with limited funding currently available we believe that it is more appropriate to invest to grow
our business.We remain conﬁdent about our future prospects and intend to re-establish the dividend as soon as cash ﬂow and debt levels allow.
DirectorsandtheirInterestsintheCompany
The present Directors and brief biographies are detailed on pages 6 to 7.
In accordance with the Articles of Association J G Duﬀy and E J Beale retire by rotation and being eligible oﬀer themselves for re-election.
The beneﬁcial interests of the Directors on 30 June 2012 and 2 July 2011 are set out below:
OrdinaryShares
30June2012 2 July 2011
E J Beale 40,000 40,000
SABoyd 476,190 Nil
D C Currie 95,238 Nil
JGDuﬀy 1,250,781 1,250,781
I R Farnsworth 83,866 83,866
MW Lightbody 13,700,000 13,700,000
D C Marshall Nil Nil
PJMonk 362,600 362,600
Mr D C Marshall is deemed to be interested in 8,000,000 (2011:8,000,000) ordinary shares by virtue of his directorship and shareholding in London
Finance & Investment Group Plc.
Details of Directors' share options are set out in Note 6 to the Financial Statements.
Details of the emoluments of the Directors are given in Note 6 to the Financial Statements.
ShareCapital
Details of the changes in the share capital of the Company during the year are set out in Note 26 to the accounts.
SubstantialInterests
The following substantial interests (3 per cent or more) in the Company’s issued share capital have been notiﬁed to the Company as at 22 September 2012:
Number %ofissued
ofshares sharecapital
Mr Martin Lightbody 13,700,000 25.6%
London Finance & Investment Group P.L.C. 8,000,000 14.9%
MAM Funds P.L.C. 1,991,677 3.7%
Aviva Investors 1,634,688 3.1%
ResearchandDevelopment
Research and development expenditure is written oﬀ in the year in which it is incurred.
Directors’Report 67
PaymentofSuppliers
The Group does not follow any code or statement on payment practice but the policy of the Group is to abide by such payment terms as are agreed with
suppliers within the terms of supply.At the Consolidated Statement of ﬁnancial position date there were 67 days’purchases outstanding (2011:68)
calculated on the ratio of trade creditors to total purchases.
LegalIndemnity
The Company maintains a Directors and Oﬃcers liability insurance policy.
FinancialInstruments
The Group’s ﬁnancial instruments comprise two mortgages,one bank term loan,asset ﬁnance facilities,a conﬁdential invoicing facility,loan notes,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,and has been throughout the year under review,the Group’s policy that no trading in ﬁnancial instruments
shall be undertaken.
The main risks arising from the Group’s ﬁnancial instruments are interest rate risk and liquidity risk.The Board reviews and agrees policies for managi ng
these risks,which have remained substantially unchanged for the year under review.The policies are summarised below:
InterestRateRisk
The Group ﬁnances its operations by retained proﬁts and bank borrowings.A suite of borrowing facilities totalling £47.1 million is available.This inc ludes
an overdraft facility of £2.8 million,undrawn invoice discounting facility of £3.5 million and unused asset ﬁnance of £1.4 million.The interest raterisk
is managed through three interest rate swap transactions.The total balance of these swaps was £20.0 million at the period end date.The counterparty
to these transactions is HSBC Bank Plc.
LiquidityRisk
Short-term ﬂexibility is available through existing bank facilities and the netting oﬀ of surplus funds.Full details of the Group ﬁnancial assets and liabilities
are given in Note 24.
EmployeeInvolvement
The Group aims to improve the performance of the organisation through the development of its employees.Their involvement is encouraged by means
of team working,team brieﬁngs,consultative committees and working parties
DisabledEmployees
The Group is committed to equality of employment and its policies reﬂect a disregard of factors such as disability in the selection and development
of employees.
PoliticalandCharitableContributions
During the year charitable donations amounting to £3,000 (2011:£17,000) were made,primarily to local charities.
GoingConcern
Onthebasisofcurrentﬁnancialprojectionsandavailablefundsandfacilities,theDirectorsaresatisﬁedthattheGrouphasadequateresourcestocontinue
inoperationfortheforeseeablefutureand,therefore,consideritappropriatetopreparetheFinancialStatementsonthegoingconcernbasis.Refertothebasis
ofpreparationforfurtherdetails.
Auditors
In accordance with Section 489 of the Companies Act 2006,a resolution for the re-appointment of KPMG Audit Plc as auditors is to be proposed
at the forthcoming Annual General Meeting.
• So far as the Directors are aware,there is no relevant audit information of which the company’s auditors are unaware;and
• They have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information
and to establish that the company’s auditors are aware of that information.
SpecialBusinessattheAnnualGeneralMeeting
In addition to the ordinary business to be transacted at the Annual General Meeting of the Company,referred to in resolutions 1 to 5 of the Notice
of Meeting,the Directors propose certain special business as set out in Resolutions 6 to 8 for the purposes summarised below:
AuthoritytoAllotShares–OrdinaryResolution
Resolution6willrenewthepowersoftheBoardtoallot,pursuanttosection551 oftheCompaniesAct2006,theunissuedordinarysharesoftheCompany.
The authority sought by this resolution will replace the existing powers of the Directors which expire on the date of the Annual General Meeting and will
provide the Directors with the ﬂexibility to issue further ordinary shares if they deem it appropriate to do so. 68
Pre-emptionRights–SpecialResolution
Resolution7will,ifpassed,dis-applyshareholders’pre-emptionrightsandgrantauthoritytotheDirectors,withouttheneedforfurtherspeciﬁcshareholder
approval,to make allotments of equity securities for cash by way of bonus,rights or similar issues.The Directors consider it desirable for shareholders
toapprovethisdisapplicationuntilthenextAnnualGeneralMeeting,inordertopermittheallotmentofsharesforcashinlimitedcircumstancestopersons
other than shareholders.This limited disapplication will be in respect of 10,700,471 shares equal to 20% of the issued share capital of the Company.
The Directors have no present intention of issuing any part of the unissued share capital and no issue will be made which would eﬀectively alter the control
of the Company without the approval of the shareholders in general meeting.
PurchaseofOwnShares–SpecialResolution
Resolution8,ifpassed,willrenewthecurrentauthorityfortheDirectorstomakelimitedmarketpurchasesoftheCompany’sordinaryshares,subjecttothe
constraints set out in the resolution.The Directors believe that in certain circumstances it may be in the interests of shareholders as a whole to buy inshares
if the discount between the share price and net asset value is suﬃciently large.Any shares purchased may be held inTreasury and may be resold at any time. 69
The Directors are responsible for preparing the Annual Report and the Group and parent company Financial Statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare Group and parent company Financial Statements for each ﬁnancial year.As required by the AIM Rules
oftheLondonStockExchangetheyarerequiredtopreparetheGroupFinancialStatementsinaccordancewithIFRSsasadoptedbytheEUandapplicable
law and have elected to prepare the parent company Financial Statements in accordance with UK Accounting Standards and applicable law (UK Generally
Accepted Accounting Practice).
UndercompanylawtheDirectorsmustnotapprovetheFinancialStatementsunlesstheyaresatisﬁedthattheygiveatrueandfairviewofthestateofaﬀairs
of the Group and parent company and of their proﬁt or loss for that period.In preparing each of the Group and parent company Financial Statements,
the Directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgments and estimates that are reasonable and prudent;
• For the Group Financial Statements,state whether they have been prepared in accordance with IFRSs as adopted by the EU;
• FortheparentcompanyFinancialStatements,statewhetherapplicableUKAccountingStandardshavebeenfollowed,subjecttoanymaterialdepartures
disclosed and explained in the Financial Statements;and
• Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue
in business.
TheDirectorsareresponsibleforkeepingadequateaccountingrecordsthataresuﬃcienttoshowandexplaintheparentcompany'stransactionsanddisclose
with reasonable accuracy at any time the ﬁnancial position of the parent company and enable them to ensure that its Financial Statements comply with the
CompaniesAct2006.TheyhavegeneralresponsibilityfortakingsuchstepsasarereasonablyopentothemtosafeguardtheassetsoftheGroupandtoprevent
and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and ﬁnancial information included on the company's website.Legislation
in the UK governing the preparation and dissemination of Financial Statements may diﬀer from legislation in other jurisdictions.
Consideration is given to character,judgement and business relationships when considering the Directors’independence.
By Order of the Board
City Group Plc
Secretaries
30 City Road
London EC1Y 2AG
21 September 2012
Statement of Directors’Responsibilities
in Respect of the Annual Report and the Financial Statements 70
Report on Corporate Governance
Although not formally required to do so,the Directors have sought to embrace the principles contained in the UK Corporate Governance Code (2011),
applicable to fully listed companies,in formulating and applying the Group’s corporate governance policies.These policies are monitored to ensurethat
they are appropriate to the Company’s circumstances and comply as far as possible with the provisions of the Code given the size of the Company.
The Board operates as an eﬀective Board in directing the activities of the Group.The Board meets at least six times during the year and all the Directors
make every eﬀort to attend these meetings.The Board maintains a schedule of matters which are reserved to it for decision,including acquisition policy,
approval of major capital expenditure and approval of annual budgets.
TheBoardconsistsoftheNon-ExecutiveChairman(MartinLightbody),twofulltimeExecutiveDirectors(JohnDuﬀyandStephenBoyd),aparttime
Executive Director (Crawford Currie) and four Non-Executive Directors (Paul Monk,David Marshall,Ian Farnsworth and Edward Beale of whom
the last three are independent).Consideration is given to character,judgement and business relationships when considering the Directors’independence.
The role of the Chairman and the Chief Executive Oﬃcer are separate.The Chairman is responsible for running the Board and he meets regularly
and separately with the Chief Executive and the other Non-Executive Directors to discuss matters for the Board.
Edward Beale is the Chief Executive of City Group and David Marshall is a Director of City Group.City Group is a subsidiary of London Finance
and Investment Group Plc,a substantial shareholder in the Company.City Group provides a full set of company secretarial services to the Board
on an outsourced basis and its fees are set out in the related party note,Note 30.The Company is not yet large enough to justify the employment
of a full time Company Secretary.
BoardCommittees
The Board has separate Remuneration and Audit Committees which meet on a timely basis.
The Audit Committee is chaired by Ian Farnsworth with Edward Beale as the other member.Edward Beale is a chartered accountant and a member
of the Accounting Council.
Further details are given in the Audit Committee Report on page 71.
The Remuneration Committee is chaired by Ian Farnsworth with Edward Beale as the other member.
Further details are given in the Remuneration Committee Report on pages 72 to 73.
InternalControls
TheBoardisresponsibleformaintainingasoundsystemofinternalcontrolstosafeguardshareholders’investmentandtheGroup’sassets,aswellasreviewing
its eﬀectiveness.The system of internal controls is designed to manage rather than eliminate the risks of failure to achieve the Group’s objectives andcan
only provide reasonable,rather than absolute,assurance against material loss and mis-statement.
DialoguewithShareholders
The Board maintains a general policy of keeping all interested parties informed by regular announcements and update statements.
In implementing this policy the Board keeps in mind the distribution of shareholders between direct,nominee and institutional shareholders.
Communications are then distributed between these groups accordingly.
Speciﬁc methods of communication are:
• Annual general and extraordinary meetings with shareholders
• Broker brieﬁngs
• Broker and analysts visits to operating sites
• Letters to shareholders when appropriate
• Corporate website (www.ﬁnsburyfoods.co.uk)
• One to one meetings with investors.
Care is taken to ensure that information is made available to all shareholders at the same time. 71
Responsibilities
The Audit Committee has delegated responsibility from the Board to monitor and review areas such as risk management,internal controls and ﬁnancial
reporting.The Audit Committee is also responsible for maintaining an objective and professional relationship with the Group’s auditors,monitoringtheir
eﬀectiveness and agreeing their fees.It receives reports on these issues from the relevant Executive Directors and external advisers and reports back to the
Boardontheactionpointswithinthosereportsandanyrecommendationsarising.Aspartoftheseresponsibilitiesitconsiderstherequirementforaninternal
audit function.
The terms of reference of the Audit Committee can be found on the Company’s website www.ﬁnsburyfoods.co.uk.
Membership
The Audit Committee is chaired by me,Ian Farnsworth.Edward Beale,a Non-Executive Director,is the other member.Both of us are considered
to be independent Directors.Edward Beale is a member of the Accounting Council and is able to provide technical input to committee discussions.
Procedures
The Audit Committee has met three times in the year.The Group Finance Director is invited to attend Committee meetings and the external auditors
are invited to attend any meetings involving Financial Statements.Time is set aside during at least one meeting each year for the Committee to hold
discussions in private with the external auditors in the absence of management and Executive Directors.A representative of City Group Plc attends
Committee meetings and prepares and circulates minutes of the meetings.
RisksandControls
GroupmanagementprepareanannualreportfortheAuditCommittee,identifyingtheriskstowhichtheGroupisexposed,theproceduresinplacetomitigate
the risks and the potential impact on the Group.The Audit Committee reviews this report and any concerns that it has over the adequacy of the controls
inplace,orthelevelofriskacceptedbytheGroup,arereportedtotheBoard.TheprincipaloperatingriskstowhichtheGroupisexposedaresetoutinthe
Business Review on page 8.
The committee reviews the need for an internal audit function on an annual basis.At present,due to the limited size of the Group and lack of complexity
inthebusinessmodel,theCommitteedoesnotbelievethatadedicatedfulltimeinternalauditfunctioniswarranted.Additionalresourcehasbeenrecruited
to assist with the reporting of risks,policies and procedures.A programme of rolling internal audit reviews is in place.
ExternalReporting
TheBoarddelegatesprimaryresponsibilityforthepreparationofcomplete,balancedandaccurateFinancialStatementsanddisclosures,inaccordancewith
FinancialReportingStandardsandregulations,totheGroupFinanceDirector.TheresponsibilityoftheAuditCommitteeistoconsidersigniﬁcantaccounting
policies,any changes in policies and signiﬁcant estimates and judgements,taking into account the external auditors’view,and to report back to the Board
anyconcernsthatitmighthave.TheAuditCommitteereviewsandcommentsontheclarityandcompletenessofdisclosureswithintheFinancialStatements.
UltimateresponsibilityforreviewingandapprovingtheannualreportandaccountsandhalfyearlyreportsremainswiththeBoard.
TheAuditCommitteealsoreviewsandcommentsonrelatedinformationpresentedwiththeFinancialStatements,inparticulartheBusinessReview
andtheReportonCorporateGovernance.
KeyAgendaItems
During the year,the Committee speciﬁcally discussed issues arising from:
• Interest rate and currency hedging
• Review of risks and appropriate level of internal controls
• Impairment reviews.
Certain tax and pension advice has been received from the auditors and the use of auditors was approved in advance.This advice was of limited nature
and we do not believe it compromises the auditors’independence.
If any readers of these accounts have suggestions for improvement in the content or the presentation of the Financial Statements,please can they let
me know by writing to info@ﬁnsburyfoods.co.uk.
IanFarnsworth
Chairman of the Audit Committee
Audit Committee Report 72
Remuneration Committee Report
Responsibilities
The Remuneration Committee is constituted to provide advice and recommendations to the Board on the policy for remuneration of the Executive
Directors of the Company and other senior managers,to agree within that policy the salary and beneﬁts packages for Executive Directors and Managing
Directorsofsubsidiaries,toagreebusinessunitcashbonusschemesandequityrelatedremunerationandincentiveschemes.TheRemunerationCommittee
is also responsible for consideration of succession planning and when necessary for agreeing any termination beneﬁts.
The full terms of reference of the Remuneration Committee are reviewed periodically by the Board and updated as necessary.A copy can be found
on the Company’s website at www.ﬁnsburyfoods.co.uk.
Membership
TheRemunerationCommitteeischairedbyme,IanFarnsworth,theothermemberbeingEdwardBeale,aNon-ExecutiveDirector.Bothofusareconsidered
to be independent Directors.
Procedures
The Remuneration Committee met twice in the year.The Group Chief Executive is invited to attend Committee meetings.
Papers for Committee meetings are collated by a representative of City Group Plc and circulated to Committee members in advance of each meeting.
A representative of City Group Plc attends Committee meetings and prepares and circulates minutes of those meetings.
ExecutiveDirectors
The remuneration packages for full time Executive Directors are structured to attract,motivate and retain Directors with the experience,capabilities
and ambition required to achieve the Group’s strategic aims.
The main elements of their remuneration packages are:
• Basic annual salary
• Annual cash bonus payments
• Pension contributions
• Share related incentives.
The salaries of Executive Directors are set by the Committee and reviewed annually,taking into account the performance of the Group,the individual
and salary increases given to other Group employees.
Annual bonuses are paid to Executive Directors dependent upon Group proﬁtability targets being achieved and individual objectives,as agreed with
theCommittee,beingmet.ExecutiveDirectorshavetheoptionoftakinganybonuspaymentsincashorasincreasedcompanycontributionstoapension
scheme.Bonus payments for the year to 30 June 2012 are disclosed in Note 6 to the Accounts.
Pension contributions for full time Executive Directors are set at up to 10% of basic annual salary excluding additional amounts arising from bonuses
or salary sacriﬁce.
No Director has a service contract incorporating a notice period of more than 12 months.
ChairmanandotherNon-ExecutiveDirectors
Corporate Governance best practice is that Non-Executive Directors should not be rewarded with share options and so the Group’s share related incentive
plans are restricted to Executive Directors and senior managers of the Group.Non-Executive Directors receive a basic fee plus additional amounts relating
totimespentoncommitteemeetingsandinprovidingadviceandsupporttoExecutiveDirectorsandSeniorGroupManagement.Theremunerationofthe
Chairman is determined by the Board and the remuneration of Non-Executive Directors is determined by the Chairman and the Group Chief Executive.
AnnualCashBonusSchemes
The Remuneration Committee reviews and approves proposed annual cash bonus schemes within the Group.The main characteristics of these schemes
arethatpaymentstoindividualsdependontheproﬁtabilityofthebusinessunitrelativetoitsbudgetandtheachievementofrelevantpersonalordepartmental
performance conditions.Maximum payments under these schemes are set at levels that are meaningful,but not excessive,relative to individuals’salaries. 73
Long-TermIncentiveScheme
TheCompanyhasaLong-TermIncentivePlanforExecutiveDirectors.Aspreviouslyannounced,inJuly2011thecommitteerecommendedandtheBoard
agreed substantial award of share options to the Executive Directors as set out in Note 6 to the Accounts.This grant of share options is a reward for past
performance and an incentive for future performance.
GroupSAYEScheme
The Group SAYE ShareSave Scheme was introduced in January 2008,and a ﬁfth tranche of options was granted following an invitation to qualifying
employeesinDecember2011.Demandfortheoptionswashigherthancouldbemetandgrantswerescaledbackto53%oftheapplication.529,920options
weregrantedunderthisSchemeto84employeeswithanexercisepriceof20.0ppershare,givingrisetoachargeintheyearof£9,553andanannualcharge
of £17,611 to November 2012.Annual awards under this Scheme are limited to approximately 1% of the shares in issue.
IanFarnsworth
Chairman of the Remuneration Committee 74
Independent Auditor’s Report
to the Members of Finsbury Food Group Plc
We have audited the Financial Statements of Finsbury Food Group Plc for the 52 weeks ended 30 June 2012 set out on pages 24 to 65.The ﬁnancial
reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the EU.The ﬁnancial reporting framework that has been applied in the preparation of the parent company Financial
Statements is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).
This report is made solely to the company's members,as a body,in accordance with Chapter 3 of Part 16 of the Companies Act 2006.Our audit work has
been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor’s report and for no other
purpose.To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the company and the company's members,
as a body,for our audit work,for this report,or for the opinions we have formed.
RespectiveResponsibilitiesofDirectorsandAuditor
As explained more fully in the Directors' Responsibilities Statement set out on page 69,the Directors are responsible for the preparation of the Financial
Statements and for being satisﬁed that they give a true and fair view.Our responsibility is to audit and express an opinion on the Financial Statements
in accordance with applicable law and International Standards on Auditing (UK and Ireland).Those standards require us to comply with the Auditing
Practices Board's (APB's) Ethical Standards for Auditors.
ScopeoftheAuditoftheFinancialStatements
A description of the scope of an audit of Financial Statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm
OpiniononFinancialStatements
In our opinion:
• The Financial Statements give a true and fair view of the state of the Group's and of the parent company's aﬀairs as at 30 June 2012
and of the Group's proﬁt for the ﬁnancial year then ended;
• The Group Financial Statements have been properly prepared in accordance with IFRSs as adopted by the EU;
• The parent company Financial Statements have been properly prepared in accordance with UK Generally Accepted Accounting Practice;
• The Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
OpiniononotherMatterPrescribedbytheCompaniesAct2006
In our opinion the information given in the Directors' Report for the ﬁnancial year for which the Financial Statements are prepared is consistent
with the Financial Statements.
MattersonwhichweareRequiredtoReportbyException
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if,in our opinion:
• Adequate accounting records have not been kept by the parent company,or returns adequate for our audit have not been received
from branches not visited by us;or
• The parent company Financial Statements are not in agreement with the accounting records and returns;or
• Certain disclosures of Directors' remuneration speciﬁed by law are not made;or
• We have not received all the information and explanations we require for our audit.
VirginiaStevens
Senior Statutory Auditor
for and on behalf of KPMG Audit Plc,Statutory Auditor
Chartered Accountants
3 Assembly Square
Britannia Quay
Cardiﬀ Bay
CF10 4AX
21 September 2012 75
Noticeisherebygiventhatthe88
th
AnnualGeneralMeetingofFinsburyFoodGroupPlcwillbeheldattheoﬃcesofRedleafPolhill,11-33StJohnStreet,
London,EC1M 4AA commencing at 9:30 a.m.onThursday 22
nd
November 2012 for the following purposes:-
OrdinaryBusiness
1. To receive the Directors' Report and Financial Statements for the year ended 30 June 2012.
2. To re-elect as a Director Mr John Duﬀy who retires in accordance with of the Company's Articles of Association and being eligible oﬀers himself
for re-election.
3. To re-elect as a Director Mr Edward Beale who retires in accordance with the Company's Articles of Association and being eligible oﬀers himself
for re-election.
4. Tore-appointKPMGAuditPlcasauditorsoftheCompanyfromtheconclusionofthisAnnualGeneralMeetinguntiltheconclusionofthenext
AnnualGeneralMeetingatwhichtheaccountsarelaidbeforetheCompany.
5. To permit the Directors to determine the fees payable to KPMG Audit Plc.
SpecialBusiness
6. To consider the following Ordinary Resolution:
THATtheBoardbeandisherebygenerallyandunconditionallyauthorised,pursuanttoSection551oftheCompaniesAct2006toexerciseallpowersofthe
Companytoallot,makeoﬀersoragreementstoallotorgrantrightstosubscribefororconvertothersecuritiesinto,relevantsecuritiesoftheAct,providedthat:
(i) such authority shall be limited to an aggregate nominal amount of £464,976;
(ii) this authority shall expire at the sooner of the close of the following Annual General Meeting or the expiry of 15 months from the date
of the passing of this resolution;and
(iii) theCompanymaybeforesuchexpirydatemakeanoﬀeroragreementwhichwouldormightrequirerelevantsecuritiestobeallottedaftersuchexpiry.
7. To consider the following Special Resolution:
THATtheDirectorsbeandareherebygenerallyempowered(insubstitutionforanyspeciﬁcauthorityconferredupontheDirectorspursuanttoSection570
oftheAct)toallotequitysecuritiespursuanttoSection570oftheActwhollyforcashpursuanttotheauthorityreferredtoinresolution6asifSection563
of the Act did not apply to any such allotment provided that such power shall be limited to the allotment of equity securities:
(i) in connection with a bonus,rights or similar issue;
(ii) the allotment of Ordinary Shares in the capital of the Company pursuant to the Company's existing Long-Term Incentive Plan 2006,
Enterprise Management Incentive Contracts and the Finsbury Food Group Save AsYou Earn Scheme;and.
(iii) to the allotment (otherwise than pursuant to sub-paragraphs (i) and (ii) above) of equity securities up to an aggregate nominal amount
of £107,005 representing 20 per cent of the issued share capital;and
(iv) such authority shall expire on the earlier of the conclusion of the next Annual General Meeting of the Company or the date falling 15 months
after the date of the passing of this resolution.
8. To consider the following Special Resolution:
That subject to the Company’s Articles of Association and Section 701 of theCompanies Act 2006,the Company be and is hereby generally and
unconditionally authorised to make one or more market purchases of its own Ordinary shares on such terms and in such manner as the Directors
of the Company shall determine,provided that:
(i) the maximum aggregate number of Ordinary shares hereby authorised to be acquired is 10,700,471 representing 20% of the present issued
share capital of the Company;
(ii) the maximum price which may be paid for each Ordinary Share is no more than 5% above the average of the price of the Ordinary Shares
of the Company (derived from the London Stock Exchange Daily Oﬃcial List) for the ﬁve business days prior to the date of purchase and
the minimum price per Ordinary Share is the nominal value thereof in each case exclusive of any expenses payable by the Company;
(iii) the authority hereby given shall expire at the conclusion of the nextAnnual General Meeting of the Company save that the Company may
make a purchase of Ordinary shares after expiry of such authority in execution of a contract of purchase that was made under and before
the expiry of such authority;and
(iv) any shares purchased may be held in treasury and may be resold at any time.
By Order of the Board Maes-y-coed Road
CITYGROUPP.L.C. Cardiﬀ CF14 4XR
Secretaries 21 September 2012
Notice of Meeting 76
Notes:
A member entitled to attend and vote at the meeting may appoint one or more proxies to attend and,on a poll,to vote instead of such member.A proxy
need not be a member of the Company.
A form of proxy is enclosed.To be valid,forms of proxy must be lodged with the Company’s registrars,Capita Registrars not less than 48 hours before
the time ﬁxed for the meeting.Completion of a form of proxy does not preclude a member from subsequently attending and voting in person.
The Register of Directors' shareholdings and copies of all service and management contracts and the Share Save Scheme will be available for inspection
by members at the registered oﬃce of the Company during usual business hours on any weekday (Saturdays excepted) from the date of this notice until
the date of the Annual General Meeting and at the place of the meeting from 9.15 a.m.until the conclusion thereof.
Pursuant to Regulation 41 of the Uncertiﬁcated Securities Regulations 2001,the Company speciﬁes that only those members registered in the Register
of Members at 6.00 p.m.onTuesday,20 November 2012 or,if the Meeting is adjourned,no later than 48 hours before the time of the adjourned Meeting,
shall be entitled to attend and/or vote at the Meeting.
Members are requested to advise the registrars of any change of address. 77
Advisers
RegisteredOﬃce
Maes-y-coed Road
Cardiﬀ
CF14 4XR
Tel:029 20 357 500
Secretaries
City Group Plc
30 City Road
London
EC1Y 2AG
Tel:020 7448 8950
NominatedAdvisor&Broker
Cenkos Securities Plc
6.7.8TokenhouseYard
London
EC2R 7AS
RegisteredNumber
204368
Registrars
Capita Registrars
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Auditors
KPMG Audit Plc
Chartered Accountants
3 Assembly Square
Britannia Quay
Cardiﬀ Bay
CF10 4AX 78
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Photography by David Hares
ProductswithaMixedSourceslabelsupportthedevelopmentofresponsible
forest management worldwide.The wood comes from FSC certiﬁed well
managed forests,company controlled sources and/or recycled material.
Companycontrolledsourcesarecontrolled,inaccordancewithFSCstandards,
to exclude illegally harvested timber,forests where high conservation values
are threatened,genetically modiﬁed organisms,violation of people’s civil
and traditional rights and wood from forests harvested for the purpose
of converting the land to plantations or other non-forest use.  ﬁnsburyfoods.co.uk