SMALL

CHANGES
BIG
DIFFERENCE
Annual Report & Accounts 2014
Highlights 1
Chairman’s Statement 2
Chief Executive’s Report 4
The Directors 6
Strategic Report 8
Consolidated Statement of Profit and Loss and Other 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 68
Report on Corporate Governance 69
Audit Committee Report 70
Remuneration Committee Report 71
Independent Auditor’s Report to the Members of Finsbury Food Group Plc 72
Advisers 73
Highlights

Adjusted* continuing profit before tax up Continuing Group revenue was broadly flat
18% to £6.5 million (2013: £5.5 million). at £175.7 million (52 week period to 29 June
2013 was £176.6 million).

2014 £6.5 million 2014 £175.7 million

2013 £5.5 million 2013 £176.6 million

Continuing adjusted* diluted EPS Capital investment spend up 48%

up 6% to 6.3p (2013: 5.9p). to £6.2million (2013: £4.2 million).

2014 6.3 pence 2014 £6.2 million

2013 5.9 pence 2013 £4.2 million

Total net debt including deferred Proposed final dividend of 0.75 pence per share,
consideration payable was £8.8 million taking the total dividend to 1.00 pence per share
(2013: £7.4 million). (2013: 0.75 pence per share) 33% increase YOY.

2014 £8.8 million 2014 1.00 pence

2013 £7.4 million 2013 0.75 pence

• UK Bakery Supplier of the Year 2013

• Investment in single serve Cake slice ‘snap pack’ successfully completed in the year
as well as the largest cake bites robotic picking installation in the world
• Commissioning of speciality bread facility expansion during the year delivering
60% additional space at Nicholas & Harris
• Peter Baker appointed Non-Executive Director Chairman.

* These figures have been adjusted to eliminate the impact of the following charges required by IFRS and
significant non-recurring items (see Note 5) for the 52 weeks ended 28 June 2014 and ended 29 June 2013:
Income/(Expenditure)
Restated
2014 2013
£000 £000

Adjusted profit on continuing operations before tax 6,470 5,460

Significant non-recurring items (refer to Note 5 for detail) (759) (718)
Share options charge (9) (134)
Difference between defined benefit pension scheme charges and cash cost (61) 775
Movement in the fair value of interest rate swaps 708 855
Movement in the fair value of foreign exchange contracts 81 (179)
Unwinding of the discount on deferred consideration payable (4) (32)
Unwinding of the discount on deferred consideration receivable 150 48
Profit on continuing operations before tax 6,576 6,075

* Refer to trading results section within the Strategic Report for further details on the adjusted profits.

The International Accounting Standards Board (IASB) has made a number of changes to IAS 19 Employee Benefits
that came into force for accounting periods beginning on or after 1 January 2013. As this is the first year of accounting
under this revised standard, the Company is also required to restate the accounts for the year ended 29 June 2013.

1
SUBTLE
INVESTMENT
SIGNIFICANT
BENEFITS

Peter Baker
Non-Executive Chairman

2
 Chairman’s Statement

Some Chairmanships are a sinecure. Others demand

active involvement. Given my preference for the latter form
of engagement, I am delighted to have assumed the role
of Chairman at such a pivotal moment in the history of
Finsbury Foods.
A significant corner has been turned in recent years. I would like to express my gratitude to our shareholders,
We have achieved an The balance sheet is secured, investment in people and to my fellow Directors and to each and every one of our
encouraging degree machinery has begun to bear fruit and scale benefits employees for all their hard work. I would also like to place
of momentum in are being realised across the business. on record our continued appreciation for the enduring
a difficult market.
support and assistance of our bankers.
I am pleased to report that our results for the current
financial year are comfortably in line with the expectations Treading water is not an option. Over the next three
of the markets and our shareholders. to five years, my tenure will be judged by a number
of criteria:
We have achieved an encouraging degree of momentum
in a difficult market against a backdrop of increasing a. Improving shareholder value
commodity costs. There is a new Board, a fresh attitude
and a sharpened appetite for progress. b. Acting justly and fairly towards our employees

I have worked in the Food and (on and off ) the Bakery c. And in a nutshell, growth.
Industry for almost four decades. Throughout that period,
two constants have remained unchanged – people and It is a pivotal time for Finsbury Foods. We can bring about
products. If the product is effective, you have a powerful a degree of organic expansion but growth will primarily
springboard. Add the right people and you are primed be realised through acquisition and mergers.
to succeed.
There is a window of opportunity in the markets and the
Both those two elements are in place at Finsbury; we’re Board is actively exploring investment options. Scale will
producing great products on a consistent basis and have stimulate fresh routes to market, diversification of our
outstanding people in all spheres of the business. customer base and a new perception of the Company
among analysts and stakeholders.
Even in my short time with the Company I have seen
confidence growing across the business; confidence in Is it possible for a relatively small, listed Group like
our relationships, confidence in our approach and strategy, Finsbury to double in size over a relatively short period?
confidence in the direction we’re taking. The management team believes that it is, providing
we can find the right opportunities.
Travelling around our facilities provides further
encouragement. The management team at Cardiff has We’ve done the hard yards. Finsbury has invested in the
exceptional talent and drive while the facility at Hamilton business when others played safe, invested in people when
is equally well run. We have focused on doubling capacity our competitors did not. We are focussed on helping
at our platform at Nicholas & Harris, which has demanded retailers respond to changing consumer needs by offering
internal focus and it is now fully commissioned. solutions that work.

Corporate governance standards have moved on apace The next stage requires foresight, courage and pragmatism.
and our new Board will continue to make significant It demands an ability to sustain the pace of internal
improvements in this important area. There is a lot of transformation while remaining sensitive to external
brainpower around the table with comprehensive sector opportunities. Given the obstacles overcome by the business
experience and a smaller Board will help our decision in recent years, I have every confidence we shall continue
making become more nimble and decisive. to advance.

3
REDUCED
COST BASE
INCREASED
EFFICIENCY

John Duffy
Chief Executive Officer

4
 Chief Executive’s Report

Finsbury Foods had two very different halves during the

financial year. The first half maintained the hard-earned impetus
of previous periods. Sales were marginally down but Profit Before
Tax registered a 50% uplift, principally due to the decrease in
interest charges following the sale of our Free From business.
The second period was more challenging. Commodity price For Finsbury Foods, the situation is delicate. There are
inflation began edging back upwards with escalating costs self-evident sensitivities between our historical customer
in chocolate, butter, energy and labour. Our historical base and the burgeoning new players. Ultimately, you have
customer base was adjusting to meet the threat of value- to follow the consumer but existing relationships must
oriented discounters and we found ourselves squeezed be safeguarded.
on all sides.
Given our recent track record, one area of relative
Refocus was imperative. Around the turn of the year, the disappointment is the speciality bread business which had
We have underlined management team set about eliminating £1m in annualised been enjoying double-digit growth. A flat year was primarily
yet again our ability to overhead costs and implemented a dramatic increase in caused by market dynamics, specifically the impact of the
achieve consistent results
capital spend. Significant projects included the installation so-called ‘Bread Wars’.
under demanding
of leading edge robotics at the cake factory in Scotland
conditions.
and extending space at Nicholas & Harris by 60%. Organic growth will be harder to come by. Acquisitions
signpost the route forward but not at any price. The Board
At the end of another exacting year, it gives me great has been working assiduously to uncover investment
pleasure to report a further rise in bottom line growth. opportunities but is not prepared to meet unrealistic
We have good momentum slightly disguised by a poor valuations. I am confident that value expectations will start
market, underlining yet again our ability to achieve to temper in the near future and we will be ready to step in.
consistent results under demanding conditions.
After years of dedicated service, Martin Lightbody has
Trading Performance relinquished the role of Chairman. Having assumed the
Results for the full 52-week period ending 28 June 2014 mantle under testing circumstances, Martin proved a steady
are described in greater depth in the Strategic Report figurehead during the turnaround phase, carrying out his
but there are a number of areas I would like to take this duties with dedication and resilience. David Marshall and
opportunity to highlight: Crawford Currie have also stepped down from the Board
after many years service and I would like to thank all three
for the support and contribution.
• Group revenue from continuing operations
£175.7 million (2013: £176.6 million)
As of 1 July, the baton passed to the suitably surnamed Peter
• Profit before tax up 18% to £6.5 million Baker. Steeped in industry experience at RHM Consumer
(2013: £5.5 million) Brands, British Bakeries and Rank Hovis Mills, Peter is
committed to taking a proactive role on behalf of Finsbury,
• Total net debt £8.8 million (2013: £7.4 million)
acting as a conduit for change.
• Adjusted diluted EPS 6.3p (2013: 5.9p)
It has taken a lot longer than I hoped or expected to get
• Final proposed dividend 0.75 pence per share, to this stage but recognition is spreading. In 2013, Finsbury
amounting to a total dividend of 1 pence per share Foods received the coveted Bakery Supplier of The Year
(2013: 0.75 pence per share) Award while Martin Lightbody was voted Chairman
of The Year at the Quoted Company Awards.
• Capital investment spend £6.2 million
(2013: £4.2 million)
Finsbury Foods remains driven by a passion to meet
• Investment in single serve cake slice 'snap pack' consumer expectations for affordable quality food. We didn’t
successfully completed during the year as well as the install robots to keep pace with technology but to pass
largest cake bites robotic picking installation in the world efficiencies down to our consumers, enhancing the appeal
of our category and our cake.
• Commissioning of speciality bread facility expansion,
delivering 60% additional space at Nicholas & Harris. Our course is set. The business environment isn’t going
to get any easier but doing the right things is the only
Beyond The Numbers long-term solution. We must persevere with internal
Consumer behaviour has changed, polarising the investment, keep scanning the horizon for acquisitions
marketplace. Having spotted an opportunity on margin, and the right opportunities will come.
Aldi, Lidl and Pound Shops are reporting up to 30%
year-on-year growth. Premium retailers, hindered by low
food inflation, are struggling to retain market share.

5
FOCUSED
EXPERTISE
WIDER
CONTRIBUTION

John Duffy
Chief Executive Officer

Following a Mining and Petroleum engineering

degree and initial exploration and production
career with Shell International, John Duffy
completed a full time MBA and spent the
following 20 years within the Food Manufacturing
Peter Baker
sector. Ten years of Manufacturing and Logistics Stephen Boyd
Non-Executive Chairman
Director roles at Mars Inc. were followed by Group Finance Director
private equity backed roles as Operations Director
Peter Baker joined the Board on 1 July 2014.
at Golden Wonder in 2000 and Managing Steve was appointed Group Finance Director
Peter has over 30 years’ senior CEO and Board
Director of WT Foods’ largest chilled foods in January 2010. Steve has spent 17 years in the
level experience within the global bakery and
subsidiary, Noon Products, before and after food manufacturing sector and previously was
consumer packaged goods industry. Most recently,
its sale to Kerry Foods in 2005. John has Non- Group Finance Director at Golden Wonder,
Peter held the position of Managing Director
Executive experience in the broader consumer subsequent to that was Group Finance Director
of Maple Leaf Bakery between 2009 to 2013,
goods industry with Denby Pottery and several and Chief Operating Officer at WT Foods
moving into this position after the sale of La
smaller start-up businesses. He was appointed Group Plc. Steve worked with John Duffy
Fornaia Bakeries, of which he was the CEO.
interim Chief Operating Officer at Finsbury at both Golden Wonder and WT Foods.
Under his leadership, La Fornaia sales and
Foods in September 2008 and officially took
profits increased significantly, driven by the
over as Chief Executive Officer with effect
introduction and innovation of new products.
from 30 September 2009.
Prior to these roles, Peter held COO and
Divisional Managing Director positions at RHM
in the Consumer Brands, British Bakeries and
Cereals Divisions (including Rank Hovis Mills).
Peter was previously a Non-Executive Director
at Jordan’s Cereals, now a part of Associated
British Foods. He also served as Vice President
of CIAA (a European trade association for
food and drink).

6
 The Directors

Edward Beale
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 Company's Company Secretary. He was
a member of the Accounting Standards Board
and subsequently the Accounting Council of
Paul Monk
the FRC for 6 years to August 2013. He is a
Non-Executive Director
member and former Chairman of the Quoted
Deputy Chairman
Corporate Alliance’s Corporate Governance
Committee. He is Chairman of Marshall
Paul Monk was appointed to the Board on
Monteagle Plc and a Non-Executive Director
9 December 2002 and elected as joint Deputy
of a number of other companies. He sits on
Chairman in February 2007. He has extensive
both the Audit and Remuneration Committee.
experience in the food manufacturing industry,
was the Chief Executive of Golden Wonder 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.
Raymond Duignan
Non-Executive

Raymond Duignan was appointed to the

Board in July 2013. He has extensive industry
experience having set up a specialist investment
bank, Stamford Partners, in the mid-1990’s
advising the European food and drink industries
with clients including many blue chip companies.
He is currently a member of the Advisory Boards
of Tate & Lyle Ventures and Active Private
Equity and Chairman of the Consumer Practice
at Newton, the operations and supply chain
consulting firm. He is Chairman of both the
Audit and Remuneration Committees.

7
RATIONALISED
PROCESS
INCREASED
PRODUCTIVITY

8
 Strategic Report

The Group will continue to invest in production capability and

people, there will be an element of organic expansion but growth
will primarily be realised through acquisition and mergers
which will in turn help us respond to consumer needs through
diversification of products and customer bases. Working with
retailers to meet changing consumer needs is key, in addition
to this the focus will be on growth, improving shareholder
perception of value and investing in employees.
Our Markets Brands and Licences
The total annual UK ambient cake market (including The Group remains primarily a retailer branded business
pre-packed cake and in-store bakery) is valued at £924 million with sales of retailer own label products accounting for
(source: Symphony IRI w/e 21 Juner 2014). The past 12 around 60% of our total revenue. The balance represents
months has seen value sales decline by -2.4% and unit sales the strength of the licensed brands under our control.
decline by -4.9%. We continue to be the second largest
supplier of ambient cake to the UK’s multiple grocers and WeightWatchers
have maintained our leading position in the niche areas WeightWatchers remains one of the largest food brands
on which we focus. in the UK and we hold the licence to manufacture and
distribute low fat cake to the UK and Ireland’s grocers under
Annual bread and morning goods sales are in excess this brand. The Low Fat cake category continues to struggle
We are working with of £3.5 billion (source: Kantar Worldpanel), although in the face of recessionary pressures on household budgets.
retailers to meet changing the market remains flat. We are a niche player in this However, this year WeightWatchers has again successfully
consumer needs, and
market, focusing on speciality breads and rolls. The retail grown its share of this category. Since the summer of 2013
responding by diversifying
our products and
environment remains challenging as consumers struggle we have undertaken a number of significant innovation
customer bases. to stretch household budgets, but Nicholas & Harris projects under the WeightWatcher brand. Initially moving
are trading with key customers that are outperforming the slices into a new individually wrapped snack pack
the market and so are well placed when the economic format to broaden the appeal of the offering and open new
climate improves for UK shoppers. usage occasions, then incorporating a new pack design
onto the slices range in June 2014. This new pack design
Our Business will be rolled out across the remaining products in the
The Group consists broadly of the following businesses: WeightWatchers Cake range later in 2014.

UK Bakery Thorntons
Lightbody of Hamilton Ltd (‘Lightbody’), based in The Group continues to develop its branded offering via its
Hamilton, employs over 1,100 people and is the UK’s licensing arrangement with the Thorntons confectionery
largest supplier of Celebration cakes with Disney, Nestlé, business. Thorntons is the 4th largest brand in the market
WeightWatchers and Thorntons product within its place and continues to grow its unit sales, in so doing
Licenced Portfolio as well as Own Label Cake. It also outperforming the market and all key competitors over the
produces a wide range of sweet snacking products, slices last 52 weeks (Source: Symphony IRI). Thorntons remains
and in store bakery (ISB) bites, a number of which are the dominant player within the Bites market holding
under our licensed brands including Nestlé, Thorntons, a market share in excess of 40%, and 2014 has seen the
and WeightWatchers. introduction of two new products which will further
enhance our position within this key segment.
Memory Lane Cakes Ltd (‘Memory Lane’) is based in
Cardiff and employs around 800 permanent staff as well Nestlé Confectionery
as agency at high promotional and seasonal peak times. We continue to manufacture and distribute Cake Products
It is the leading manufacturer of the UK retailers premium under the Nestlé Confectionary Brands. In 2014 the brand
own label cake ranges. It also produces under a number outperformed the market and has returned to growth
of brands including Nestlé, Thornton’s, WeightWatchers driven by products under the Smarties, Yorkie, Aero
and its own Memory Lane brand. and Funtastic Brands.

Nicholas & Harris Ltd. (N&H), based in Salisbury, Disney

employs around 280 people and produces a range of Our successful range of Disney Celebration cakes continues
speciality breads to UK retailers. Its focus is on ‘clean to evolve and has grown by over 20% in the last 52 weeks.
label’ breads, rolls and buns. Within its brand portfolio, Properties within the portfolio include Disney Princess,
N&H has Vogel’s seeded bread, Cranks Organic and Cars, Fairies, Avengers and Spiderman. The Disney portfolio
Village Bakery Rye bread, all of which have outperformed is a core part of our overall Celebration cake business
the bread market. The past year has been one of significant and plays an important role in retaining our position
change in the bakery, with a 60% increase in its footprint as the largest supplier of Celebration cake to the UK’s
to allow more efficient distribution and space for future multiple grocers.
growth. Baking capacity has also been increased by 25%.
The business is now in a strong position to benefit from
improvements in trading conditions in the UK.

9
 Strategic Report

Other Celebration Cake Licences Principal Risks and Uncertainties

These four major brands are complemented by a range The Group operates in an environment which is continually
of other licences which are particularly focused on changing and as a result the risks it faces will also change
driving Celebration cake sales. Evergreen properties over time. The assessment of risks and the development
such as Peppa Pig, Hello Kitty, and Me To You, are of strategies for dealing with these risks are achieved on
complemented by more trend led licenses such as One an ongoing basis through the way in which the Group
Direction and, later this year the new Despicable Me is controlled and managed internally. A formal review of
offer, to provide a compelling offer across all key target these risks is carried out by the Group on an annual basis.
markets. This portfolio of licenses has played a key role The review process involves the identification of risks,
in growing our market share of the UK Celebration assessment to determine the relative likelihood of them
cake market. impacting the business and the potential severity of the
impact, and determination of what needs to be done to
Speciality Bread Licences manage them effectively.
Nicholas & Harris bakery has three brands which it
continues to develop and market under the long-term The Directors have identified the following as the principal
licence agreements, along with LivLife which was developed risks and uncertainties that face the Group.
and launched by Nicholas & Harris. In what has been
a volatile and turbulent year in the bread market with sales Competitive Environment and Customer Requirements
declining 3.4% in value and 2.3% volume, Vogel’s, Crank’s There is currently over capacity in the market place and
and The Village Bakery Rye breads have maintained their competition is strong between manufacturers in the Bakery
position. The repositioning of Vogel’s from ‘Experts in Seeds sector. The monitoring of key performance indicators at
and Grains’ to ‘Crammed to Bursting’ have given additional customer level such as service levels and customer complaints
traction to the PR activity, gaining new followers on is part of the risk management process associated with this
Facebook and now over 2,000 new Twitter followers. specific risk. Strong customer service, quality products, low
Village Bakery continues to demonstrate a loyal customer costs and innovative new product development are areas
following, with further interest being shown in the sector of focus to satisfy customer needs and remain strong in a
where the use of ‘no added wheat’ is a key part of the brand. competitive environment. The Group has invested heavily
Cranks is being relaunched this year with the main focus in category management, new product development and
still being on ‘real bread’ but with the added addition of marketing skills. This investment has helped create an
vegetables. This is being supported by PR and advertising insight into customers and consumer demands. Continual
campaigns later in the year. LivLife having been launched monitoring of customer KPI’s and production quality
in July 2013, is showing continued interest in both people measures take place to ensure customer requirements are
who wish to reduce carbs and people who have diabetes being met and issues are identified in a timely manner
type 2. to limit their impact.

Overseas
The Group’s 50% owned Company Lightbody Stretz Ltd,
supplies and distributes the Group’s UK manufactured
products and third party products primarily to Europe.

10
Strategic Report

Product Quality Economic Environment

Product quality is a key strength of the Group and failure The economic environment remains challenging,
to maintain a high standard of food quality and safety with consumer behaviour changing and a shift toward
would have a severe impact on service levels and customer value-oriented discounters. The Group will continue to
relationships. The Group’s quality assurance procedures, focus on quality and value for money in periods of reduced
managed at site level, are reviewed continuously with spending. The Group manages margins through investing
improvements made as appropriate. The Group’s Technical in site capabilities such as leading edge robotics to increase
Director helps provide focus to ensure there is continuous efficiency and effectively manage capacity. Innovation and
improvement across all sites to meet the increasingly high development of products that stand out from the crowd
expectations of our customers. The operating subsidiaries help maintain strong relationships with customers and
are subject to regular internal and independent food safety licensors. We are driven by a passion to meet consumer
and quality control audits including those carried out by, expectations at affordable quality.
or on behalf of, our customers. The Group maintains
product recall insurance cover to mitigate the potential Trading Results
impact of such an occurrence. Continuing Group revenue for the 52 week period to
28 June 2014 was £175.7 million (2013: £176.6 million).
Prices and Supply
Increases in the price and volatility of price of raw materials Gross margin for the financial year was 27.4% (2013:
along with increasing utility costs can impact the core 26.3%). Commodity price inflation began edging back
profitability of the business and any related shortage in upwards during the second half of the year with escalating
supply of raw materials will impact the business’ ability costs in chocolate, butter, energy and labour. The outlook
to maintain its service levels to customers – another of is that some volatility is expected in key ingredients
its key performance indicators. The prices of certain key driven by market risks.
commodities (e.g. sugar) are tied to the Euro – the relative
strength of sterling and future volatility within the Administrative expenses on continuing activities have
Eurozone will, therefore, have an impact on the cost increased by £1.0 million year on year through increased
of these commodities. marketing support, new product development and range
support. Inflationary increases and employee pay rises
Affordability for consumers is essential and the Group have been offset largely by operational improvements
will focus on internal efficiencies and productivity and returns from capital investment.
initiatives to lessen the rising commodity price impact on
consumers. The Group maintains a high level of expertise
in its buying team and will consider long-term contracts
where appropriate to reduce uncertainty in input prices.
The team also cultivates strong relationships with its major
suppliers to ensure continuity of supply at competitive
prices. Regular renovation and innovation in our product
range can help to manage margin pressures in 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.

13
 Strategic Report

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-recurring items and certain charges required by IFRS.

52 week period ended 28 June 2014

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

Continuing operations
Revenue 175,708 - - - - - 175,708
Cost of sales (127,530) - - - - - (127,530)
Gross profit 48,178 - - - - - 48,178
Other costs excluding
depreciation & amortisation (37,471) (759) (9) 71 81 - (38,087)
EBITDA 10,707 (759) (9) 71 81 - 10,091
Depreciation & amortisation (2,999) - - - - - (2,999)
Results from operating activities 7,708 (759) (9) 71 81 - 7,092
Finance income - - - 862 708 150 1,720
Finance costs (1,238) - - (994) - (4) (2,236)
Profit before tax 6,470 (759) (9) (61) 789 146 6,576
Taxation (1,519) 171 2 (73) (195) (37) (1,651)
Profit after tax 4,951 (588) (7) (134) 594 109 4,925

The taxation on IFRS charges includes an element of rate change on opening balances from 23% to 20%.

52 week period ended 29 June 2013 (restated)

Fair value
Restated* 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

Continuing operations
Revenue 176,595 - - - - - 176,595
Cost of sales (130,150) - - - - - (130,150)
Gross profit 46,445 - - - - - 46,445
Other costs excluding
depreciation & amortisation (36,511) (718) (134) 915 (179) - (36,627)
EBITDA 9,934 (718) (134) 915 (179) - 9,818
Depreciation & amortisation (2,495) - - - - - (2,495)
Results from operating activities 7,439 (718) (134) 915 (179) - 7,323
Finance income 1 - - 826 855 48 1,730
Finance costs (1,980) - - (966) - (32) (2,978)
Profit before tax 5,460 (718) (134) 775 676 16 6,075
Taxation (1,110) 165 31 (209) (174) (3) (1,300)
Profit after tax 4,350 (553) (103) 566 502 13 4,775

Discontinued operations
Profit after tax
– discontinued 1,850 1,184 - - - - 3,034
Profit after tax 6,200 631 (103) 566 502 13 7,809

The taxation on IFRS charges includes an element of rate change on opening balances from 24% to 23%.

* The International Accounting Standards Board (IASB) has made a number of changes to IAS 19 Employee Benefits that came into force for accounting
periods beginning on or after 1 January 2013. As this is the first year of accounting under this revised standard, the Company is also required to restate
the accounts for the year ended 29 June 2013. Details are given in the accounting policies note.

14
Strategic Report

Earnings Per Share (EPS)

EPS comparatives to the prior year can be distorted by significant non-recurring items and IFRS adjustments. The Board
is focused on growing adjusted diluted EPS, which is calculated by eliminating the impact of the items highlighted
above and incorporates the dilutive effect of share options. Continuing adjusted diluted EPS is 6.3p for the 52 week
period (2013: 5.9p).

Continuing
Continuing (restated) Discontinued***
2014 2013 2013
Basic EPS 6.7p 7.2p 5.1p
Adjusted* basic EPS 6.7p 6.5p 3.1p
Diluted** basic EPS 6.3p 6.6p 4.6p
Adjusted* diluted** EPS 6.3p 5.9p 2.8p

* Adjusted EPS measures are calculated by eliminating the impact of significant non-recurring items and IFRS adjustments.
Further details can be found in Note 10.
** Diluted EPS takes basic EPS and incorporates the dilution effect of share options.
*** Discontinued basic and diluted basic includes the profit on the sale of the discontinued business.

Financial Key Performance

KPI 2014 2013 2012 2011 2010

Revenue – continuing £175.7m £176.6m £178.9m - -
Revenue – discontinued - £19.7m £28.5m - -
Revenue - £196.3m £207.4m £189.6m £168.3m
Adjusted EBITDA – continuing £10.7m £9.9m £9.6m - -
Adjusted EBITDA – discontinued - £2.6m £2.8m - -
Adjusted EBITDA - £12.5m £12.4m £11.5m £11.0m
Net bank debt £8.8m £7.2m £32.6m £32.7m £36.5m
Net debt including deferred
consideration payable £8.8m £7.4m £33.9m £37.1m £42.6m
Net debt including deferred
consideration payable and receivable £5.9m £4.7m £33.9m £37.1m £42.6m

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-Financial Key Performance Indicators Cash Flow

A range of non-financial key performance indicators are There was an increase in our working capital requirement
monitored at site level covering, amongst others, customer of £2.2 million compared to the last financial year.
service, quality and health and safety. The Group Board Corporation tax payments made in the financial year totalled
receives an overview of these on a regular basis. £1.7 million (2013: £1.8 million), the payments in the
current year took account of the research and development
Disposals tax relief due to the Group. Capital expenditure in the
In the prior year comparatives on 27 February 2013 year amounted to £6.2 million (2013: £4.2 million).
the Group sold its Free From business for a total value
of approximately £21 million of which £3 million is Debt and Bank Facilities
deferred to 27 February 2015. The Group’s total net debt including deferred consideration
payable is £8.8 million (2013: £7.4 million) up £1.4 million
The Free From business consisted of two subsidiaries, from prior year.
Livwell Limited (“Livwell”) and United Bakeries (Holdings)
Limited (“UBH”) (the holding company of United Central The Group’s total net bank debt excluding deferred
Bakeries Limited (“UCB”)). These subsidiaries, which consideration after deducting cash balances as at 28 June
accounted for approximately 14% of prior year Group 2014 was £8.8 million (2013: £7.2 million). Within this
revenues, were sold to Genius Foods Limited (“Genius”), total net bank debt, £5.1 million is due within one year,
on a debt-free, cash-free basis. including cash at bank and invoice finance (2013: £2.8
million).

17
 Strategic Report

The Group’s debt facility with HSBC Bank Plc totals Interest cover (based on adjusted EBITDA) for the 52
£32.0m, the key features of the facility are as follows: weeks to 28 June 2014 was 8.6 (2013: 6.3). Net bank debt
to EBITDA (based on adjusted EBITDA) for the year
• Overdraft (£3.0m) to 28 June 2014 was 0.8 (2013: 0.6).
• Confidential invoice discounting facility (£15.0m)
• Mortgage facility (£4.0m) Taxation
• Rolling asset finance facility (£2.0m) The Group taxation charge on continuing operations for the
• Revolving credit facility (£8.0m). year was £1.7 million (2013: £1.3 million). This represents
an effective rate of 25.1% (2013: 21.4%). The current year
Note 20 gives details of the drawn amounts and maturity contains a revaluation of net opening deferred tax asset
dates. balances from 23% to 20% amounting to a charge in the year
of £197,000. The effective rate excluding this revaluation
The Group is able to offer strong asset backing to secure would be 22.1%.
its borrowings. The Group owns freehold sites at Memory
Lane in Cardiff and Lightbody and Campbells in Scotland. Further details on the tax charge can be found in Note 9
In addition, the Group has a strong trade debtor book to to the Group’s Financial Statements.
support the invoice discounting facility, made up primarily
of UK’s major multiple retailers. This debtor book stood at Environmental Matters
£22.4 million (2013: £21.9 million) at the period end date. The Group continues to focus on packaging reduction
through innovation and has delivered further reductions
The Group recognises the inherent risk from interest rate across the business. The Group continues to take the key
rises. To mitigate these risks, the Group has three interest learning and successes from the Cake Category and
rate swaps in place with a total coverage of £14.0 million applying them across other areas of the business to deliver
(2013: £18.0 million) equivalent to 159% (2013: 250%) category leading innovative solutions.
of year end net bank at a weighted average rate of 2.5%
(2013: 4.0%). Mandatory participation in the CRC Energy Efficiency
Scheme (formerly known as the Carbon Reduction
The effective interest rate for the Group at the year end, Commitment) focuses the Group to reduce its carbon
taking account of the interest rate swaps in place and emissions. New production capability, which is in the
deferred consideration with base rate at 0.5% and LIBOR process of being commissioned in Hamilton, will further
at 0.69%, was 4.27% (2013: 5.97%). reduce the consumption of cardboard and reduce food
waste. Work with local universities on shelf life of product
Financial Covenants will lead to waste reduction of the coming years. We are
The Board reviews the Group’s cash flow forecasts and key also presently formulating our Environmental Sustainability
covenants on a regular basis to ensure that it has adequate Strategy within Cake.
facilities to cover its trading and banking requirements
with an appropriate level of headroom. The forecasts are Nicholas & Harris remains a ‘landfill-free’ site and all
based on management’s best estimates of future trading. waste materials are recycled.
There has been no breach of covenants during the year.

18
 Strategic Report

Employee Social and Community Issues Technical Matters

All manufacturing sites are active within their local The focus in 2014 has been improving the strength of
community supporting local community initiatives. the teams to be able to deliver the challenging strategic
The Group also supports local and national government objectives for the next three years. In particular this has
initiatives such as the New Work programme. focussed on strong Process and Compliance resource
to drive root cause analysis and embed a continuous
We donate regularly to local and national charities in terms improvement culture.
of both product and fund raising activities at all sites.
Retail customers have placed a much stronger focus on
We work closely with local universities business projects unannounced audits across the whole supply base in the
All manufacturing sites and placements and plan to continue this partnership work wake of ‘Horsegate’. All Finsbury sites have performed
are active within their further in several areas of training, development and project well against these requirements and end the year
local community. work. They continue to invest in training and development maintaining strong BRC A and A* grades.
of the workforce supporting a programme of vocational
qualifications. Strengthening the Development teams and processes
at the front end of the business has started to improve
Eight Bakers have qualified from the Nicholas & Harris the quality of products launched which in turn is driving
bakers’ apprenticeship scheme this year, with City and down complaints. The Development teams have made
Guilds’ qualifications, adding to the 13 that qualified in significant progress in translating the category priorities
2013. Nicholas & Harris have continued in their support into innovation and new products and this has been key
of the local community, including sponsorship of the to cementing customer relationships.
internationally renowned Salisbury Arts Festival.
The Strategic Report was approved by the Board of
Directors on 19 September 2014 and was signed on
its behalf by:

Stephen Boyd
Director

21
SMALL
DETAILS
BIG
PICTURE

22
Financial Statements

Consolidated Statement of Profit and Loss and Other 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 68
Report on Corporate Governance 69
Audit Committee Report 70
Remuneration Committee Report 71
Independent Auditor’s Report to the Members of Finsbury Food Group Plc 72
Advisers 73

23
Consolidated Statement of Profit and Loss and Other Comprehensive Income
for the 52 weeks ended 28 June 2014 and 29 June 2013

Restated
2014 2013
Note £000 £000

Continuing operations
Revenue 3 175,708 176,595
Cost of sales (127,530) (130,150)
Gross profit 48,178 46,445

Administrative expenses 4 (41,086) (39,122)

Results from operating activities 7,092 7,323

Finance income 8 1,720 1,730

Finance cost 8 (2,236) (2,978)
Net finance cost (516) (1,248)

Profit before tax from continuing operations 6,576 6,075

Taxation 9 (1,651) (1,300)
Profit from continuing operations 4,925 4,775

Profit from discontinued operations net of tax 2 - 1,850

Profit from sale of business 2 - 1,184

Profit for the year 4,925 7,809

Other comprehensive (expense)/income

Items that will not be reclassified to profit and loss
Remeasurement on defined benefit pension scheme 16 (726) (543)
Movement in deferred taxation on pension scheme liability 24 145 125
Total items that will not be reclassified to profit and loss (581) (418)

Items that are or maybe reclassified to profit and loss

Foreign exchange translation differences - 69
Other comprehensive expense for the financial year, net of tax (581) (349)

Total comprehensive income for the financial year 4,344 7,460

Profit attributable to:

Equity holders of the parent 4,400 7,345
Non-controlling interest 525 464

Profit for the financial year 4,925 7,809

Total comprehensive income attributable to:

Equity holders of the parent 3,819 6,996
Non-controlling interest 525 464

Total comprehensive income for the financial year 4,344 7,460

Earnings per ordinary shares

Basic 10 6.7 12.3
Diluted 10 6.3 11.2

Adjusted earnings per ordinary shares

Basic 10 6.7 6.5
Diluted 10 6.3 5.9

Continuing
Basic 10 6.7 7.2
Diluted 10 6.3 6.6

Discontinued
Basic 10 - 5.1
Diluted 10 - 4.6
24
Consolidated Statement of Financial Position
at 28 June 2014 and 29 June 2013

2014 2013
Note £000 £000

Non-current assets
Intangibles 12 52,968 53,133
Property, plant and equipment 13 21,541 18,209
Other financial assets – investments 14 28 28
Deferred tax assets 24 1,350 1,917
Deferred consideration receivable 15 - 2,745
75,887 76,032

Current assets
Deferred consideration receivable 15 2,895 -
Inventories 17 4,530 4,400
Trade and other receivables 18 24,832 25,337
Cash and cash equivalents 19 592 1,310
32,849 31,047
Total assets 108,736 107,079

Current liabilities
Other interest-bearing loans and borrowings 20 (5,718) (3,921)
Trade and other payables 22 (30,736) (33,054)
Provisions 23 (237) (501)
Deferred purchase consideration - (216)
Other financial liabilities – fair value of interest rate swaps/foreign exchange 14 (451) (1,240)
Current tax liabilities (28) (456)
(37,170) (39,388)

Non-current liabilities
Other interest-bearing loans and borrowings 20 (3,612) (4,342)
Provisions and other liabilities 23 (199) (218)
Deferred tax liabilities 24 (422) (405)
Pension fund liability 16 (3,630) (2,843)
(7,863) (7,808)
Total liabilities (45,033) (47,196)
Net assets 63,703 59,883

Equity attributable to equity holders of the parent

Share capital 27 669 642
Share premium account 26 31,480 30,779
Capital redemption reserve 26 578 578
Retained earnings 26 29,849 26,865
62,576 58,864
Non-controlling interest 1,127 1,019
Total equity 26 63,703 59,883

These Financial Statements were approved by the Board of Directors on 19 September 2014 and were signed on its behalf by:

Stephen Boyd
Director

Registered Number 204368

25
Consolidated Statement of Changes in Equity
for the 52 weeks ended 28 June 2014 and 29 June 2013

Capital Non-
Share Share redemption Retained controlling Total
capital premium reserve earnings interest equity
Note £000 £000 £000 £000 £000 £000

Balance at 1 July 2012 535 27,052 578 19,389 886 48,440

Profit for the financial year - - - 7,788 464 8,252

Effect of change in accounting policy on adoption of IAS19 (revised) - - - (443) - (443)
Profit for the financial year (restated) - - - 7,345 464 7,809

Other comprehensive income/(expense):

Remeasurement of defined benefit pension 16 - - - (1,118) - (1,118)
Deferred tax movement on pension scheme remeasurement 24 - - - 257 - 257
Foreign exchange translation differences - - - 69 - 69
Total other comprehensive expense - - - (792) - (792)

Effect of change in accounting policy on adoption of IAS19 (revised) - - - 443 - 443

Total other comprehensive expense (restated) - - - (349) - (349)

Total comprehensive income for the period - - - 6,996 464 7,460

Transactions with owners, recorded directly in equity:

Shares issued during the year 27 107 3,727 - - - 3,834
Impact of share based payments 27 - - - 134 - 134
Deferred tax on share options - - - 506 - 506
Dividend paid 28 - - - (160) (331) (491)
Balance at 29 June 2013 642 30,779 578 26,865 1,019 59,883

Balance at 30 June 2013 642 30,779 578 26,865 1,019 59,883

Profit for the financial year - - - 4,400 525 4,925

Other comprehensive (expense)/income:

Remeasurement on defined benefit pension 16 - - - (726) - (726)
Deferred tax movement on pension scheme remeasurement 24 - - - 145 - 145
Foreign exchange translation differences - - - - - -
Total other comprehensive expense - - - (581) - (581)
Total comprehensive income for the period - - - 3,819 525 4,344

Transactions with owners, recorded directly in equity:

Shares issued during the year 27 27 701 - - - 728
Impact of share based payments 27 - - - 9 - 9
Deferred tax on share options - - - (350) - (350)
Dividend paid 28 - - - (494) (417) (911)

Balance at 28 June 2014 669 31,480 578 29,849 1,127 63,703

26
Consolidated Cash Flow Statement
for the 52 weeks ended 28 June 2014 and 29 June 2013

Restated
2014 2013
Note £000 £000

Cash flows from operating activities

Profit for the financial year 4,925 7,809
Adjustments for:
Taxation 1,651 1,523
Net finance costs 516 1,248
Depreciation 2,834 2,888
Amortisation of intangibles 165 164
Share options charge 9 134
Contributions by employer to pension scheme (71) (65)
Pension scheme past service costs - (850)
Fair value charge/(credit) for foreign exchange contracts (81) 179
Profit on disposal of business - (1,184)
Operating profit before changes in working capital 9,948 11,846

Changes in working capital:

(Increase)/decrease in inventories (197) 51
(Increase)/decrease in trade and other receivables (6) 1,243
(Decrease)/increase in trade and other payables (2,032) 884
Cash generated from operations 7,713 14,024

Interest paid (1,084) (2,022)

Tax paid (1,700) (1,776)
Net cash from operating activities 4,929 10,226

Cash flows from investing activities

Purchase of property, plant and equipment (6,167) (4,204)
Purchase of subsidiary companies 11 (217) (1,055)
Disposal of operation - 17,072
Net cash (used in)/generated from investing activities (6,384) 11,813

Cash flows from financing activities

(Repayment)/drawdown of invoice discounting (300) (10,828)
Drawdown of revolving credit 2,000 -
Repayment of bank loans (338) (15,503)
Repayment of loan notes - (3)
Drawdown of asset finance facilities - 326
Repayment of asset finance liabilities (478) (1,928)
Issue of ordinary share capital 728 3,834
Dividend paid to non-controlling interest 28 (417) (331)
Dividend paid to shareholder (494) (160)
Net cash generated from/(used in) financing activities 701 (24,593)

Net decrease in cash and cash equivalents (754) (2,554)

Opening cash and cash equivalents 1,310 3,793
Effect of exchange rate fluctuations on cash held 36 71
Cash and cash equivalents at end of period 19 592 1,310

27
Notes to the Financial Statements
(forming part of the Financial Statements)

Presentation of Financial Statements

Basis of Preparation
These accounts cover the 52 week period ended 28 June 2014 (prior financial year is the 52 week period ended 29 June 2013). 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 64.

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 operational existence for the foreseeable future. The Group has stayed within its banking
facilities during the year, meeting covenant requirements. The Group has the continued support from its bank with facilities of £32m. 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.

The Board reviews the Group’s cash flow forecasts and key covenants on a regular basis to ensure that it has adequate facilities to cover its trading and
banking requirements with an appropriate level of headroom. The forecasts are based on management’s best estimates of future trading. There has been
no breach of covenants during the year. All covenant tests were passed at the year end.

Critical Accounting Estimates and Judgements

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 Profit and Loss 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 discount rate takes account of the
current market conditions and this has been applied as a pre-tax discount factor to obtain a current value. Refer to Note 12 for further details.

• The Group has one defined benefit pension scheme. The net deficit or surplus is the difference between the plan assets and plan liabilities at the period
end date. The valuation of the assets and liabilities is based on a number of 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 16.

• The Group recognises provisions where an obligation exists at the period end date and a reliable estimate can be made. Provisions for employee claims
and pension augmentation have been recognised in these Financial Statements. Estimates for employee claims are made 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 up to the maximum self-insured
amount of £10,000 per claim. The pension provision relates to a contractual liability for pension augmentation that has been valued by the pension
scheme actuaries. See Note 23 for further detail.

28
1 Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated Financial Statements, except as explained
in the basis of preparation, which addresses any changes in accounting policies resulting from new or revised standards.

Basis of Consolidation
Subsidiaries are entities controlled by the Group. 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
until the date that control ceases. The accounting policies of new subsidiaries are changed when necessary to align them with the policies adopted by the
Group. Intra-group balances and transactions are eliminated in preparing the consolidated Financial Statements.

Lightbody Stretz Limited which is 50% owned by the Group has been consolidated into the Group accounts as a subsidiary with a corresponding non-controlling
interest on the basis that the Group has the controlling interest. Control arises by virtue of the fact that Lightbody Group, a wholly owned subsidiary
of Finsbury Food Group, has a majority of voting rights arising from an agreement between Lightbody Group Limited and Philippe Stretz.

Change in Accounting Policy

The Group adopted IAS 19 (revised) Employee Benefits from January 2013. As a result of IAS 19 (revised), the key change to these Statements is the
“finance cost” which was previously the difference between the interest on liabilities and expected return on assets, the expected return on assets is effectively
based on the discount rate with no allowances made for any outperformance expected from the Scheme’s actual asset holding.

As a result of these amendments, the comparative financial information in the Consolidated Statement of Profit and Loss and Other Comprehensive Income
(OCI) have been restated for the year ending 29 June 2013. The effect of the above was to decrease finance income in the Consolidated Statement of Profit
and Loss by £575,000 from £1,401,000 to £826,000 and decrease the remeasurements of the net defined benefit pension liability in OCI by £575,000
from £1,118,000 to £543,000.

As a result of the above, the tax expense in the Consolidated Statement of Profit and Loss has decreased by £132,000 for the year ending 29 June 2013
and the deferred tax credit in the OCI has decreased by £132,000. The effect on the cashflow statement of the amended standard was an adjustment to profit
before tax and the operating reconciling items. There was no effect on the net cash from operating activities. The effect on the statement of changes in equity
of the amended standard was an adjustment to retained earnings, as explained above.

Foreign Currency
Transactions in foreign currencies are translated to the functional currency of Group entities at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the period end date are retranslated to 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 Profit and Loss 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 Other
Comprehensive Income.

Derivative Financial Instruments

The Group has derivative financial instruments in respect of interest rate swaps and foreign exchange hedges. The Group does not hold derivative financial
instruments for trading purposes. The existing interest rate swaps and foreign exchange hedges used by the Group do not meet the criteria for hedge accounting
set out by IAS 39 and have thus been treated as financial assets and liabilities which are carried at their fair value in the Consolidated Statement of Financial
Position. Fair value is deemed to be market value, which is provided by the counterparty at the year end date.

Changes in the market value of interest rate swaps have been recognised through the Consolidated Statement of Profit and Loss as finance income
or cost. Changes in the market value of foreign exchange hedges have been recognised through the Consolidated Statement of Profit and Loss within
administrative costs.

29
1 Significant Accounting Policies (continued)

Non-derivative Financial Instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans
and borrowings, and trade and other payables.

Unless otherwise indicated, the carrying amounts of the Group’s financial assets and liabilities are a reasonable approximation of their fair values.

Trade and other Receivables

The value of trade and other receivables is the amount that would be received if the debt was cleared on the period end date which is a close approximation
to amortised cost.

Trade and other Payables

The value of trade and other payables is the value that would be payable to settle the liability at the period end date.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances. Bank overdrafts that are repayable on demand and which form an integral part of the Group’s cash
management are included as a component of cash and cash equivalents.

Interest-bearing Borrowings
Interest-bearing borrowings are stated at amortised cost using the effective interest method.

Property, Plant and Equipment

Recognition and Measurement
Items of property, plant and equipment are measured at cost or fair value at the date of acquisition, less accumulated depreciation and impairment provisions.
Costs include expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and
direct labour and any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and
removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment
is capitalised as part of that equipment.

Depreciation
Depreciation is provided to write off the cost, less estimated residual value, of the property, plant and equipment by equal instalments over their estimated
useful economic lives to the Consolidated Statement of Profit and Loss. 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.

Leased Assets
Leases under the terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition
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
is charged to the Consolidated Statement of Profit and Loss as finance expense so as to produce a constant periodic rate of charge on the net obligations
outstanding in each period.

Other leases are operating leases and the leased assets are not recognised on the Group’s Consolidated Statement of Financial Position.

Operating Lease Payments

Payments made under operating leases are recognised in the Consolidated Statement of Profit and Loss on a straight-line basis over the term of the lease.

Finance Lease Payments

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.

30
1 Significant Accounting Policies (continued)

Intangible Assets and Goodwill

Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested
annually for impairment.

Goodwill arises when the fair value of the consideration for the business exceeds the fair value of the net assets acquired. Where the excess is negative
(negative goodwill), the amount is taken to retained earnings. Goodwill is capitalised and subject to impairment reviews both annually and where there
are indications that the carrying value may not be recoverable.

Impairment
The carrying amounts of the Group’s intangible assets and goodwill are reviewed at each period end date to determine whether there is an indication
of impairment. Intangible assets and goodwill are considered to be impaired if objective evidence indicates that one or more events have had a negative
effect on the estimated future cash flows of that asset. If any such indication exists, the asset’s recoverable amount is estimated.

For goodwill and intangible assets that have an indefinite useful life, the recoverable amount is estimated at each period end date.

An impairment loss would be recognised whenever the carrying amount of an intangible asset, goodwill or its cash generating unit exceeds its recoverable
amount. Impairment losses are recognised in the Consolidated Statement of Profit and Loss.

Calculation of Recoverable Amount

The recoverable amount is the greater of the assets’ fair values less costs to sell and its value in use. In assessing an asset’s value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset.

Deferred Consideration
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
or decreasing the amount of the provision or debtor up to the expected payment or receipt date. The charge or credit relating to the unwinding of the discount
is recorded within finance costs or finance income.

Inventories
Inventories are measured at the lower of cost and net realisable value. Cost is determined on the first-in first-out basis, and includes all direct costs incurred
and attributable production overheads. Net realisable value is based upon estimated selling price allowing for all further costs of completion and disposal.
Specific provisions are made against old and obsolete stock taking the value to zero or an estimated reduced value based on the most likely route for disposal
of each particular item of stock.

Employee Benefits
Defined Benefit Plans
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 Profit and Loss and Other Comprehensive Income in accordance with IAS 19 (revised), with current and past service cost being recognised
as an administrative expense, interest on assets and liabilities is shown as finance income or a finance cost in the Consolidated Statement of Profit and Loss.
The remeasurements are recognised in full in Other Comprehensive Income. Further details on the defined benefit pension scheme are given in Note 16
to the Financial Statements.

Defined Contribution Plans

The costs of contributing to defined contribution and personal pension schemes are charged to the Consolidated Statement of Profit and Loss
as an administration cost in the period to which they relate.

Share-based Payment Transactions

The value, as at the grant date, of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period
in which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using an option valuation model,
taking into account the terms and conditions upon which the options were granted.

Revenue
Revenue represents the amounts derived from the sale of bakery products. Revenue is the invoiced value of consideration received or receivable excluding
value added tax, trade discounts, transactions with or between subsidiaries and less the cost of price promotions and sales over-riders. Revenue is recognised
upon despatch of goods.

Segmental Reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues
and expenses that relate to transactions with any of the Group’s other components. All segments’ operating results are reviewed regularly by the Group’s
Board of Directors. The Group’s Chief Operating Decision Maker is considered to be the Board.

31
1 Significant Accounting Policies (continued)

Licence Fees
Payments made for licence fee charges are recognised under cost of sales in the Consolidated Statement of Profit and Loss in the period to which they relate.
Any charges relating to future years are deferred and recognised in the Consolidated Statement of Profit and Loss under cost of sales over the life of the contract.

Finance Income and Cost

Finance costs comprise loan interest payable, interest payable and finance charges on finance leases recognised using the effective interest method, unwinding
of the discount on provisions and deferred consideration, interest on defined benefit pension plan obligations and changes in the fair value of interest rate swaps.

Finance income comprise expected return on defined benefit pension plan funds invested, interest receivable on funds invested and changes in the fair
value of interest rate swaps. Interest income is recognised in Consolidated Statement of Profit and Loss as it accrues, using the effective interest method.

Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the Consolidated Statement of Profit and Loss except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the period end date,
and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not provided for:

• The initial recognition of goodwill;

• The initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and
• The differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantively enacted at the period end date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits
will be available against which the temporary difference can be utilised.

Research and Development Expenditure

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised
in Consolidated Statement of Profit and Loss as incurred.

32
2 Discontinued Operations

In the prior year comparatives on 27 February 2013 the Group sold its Free From business for a total undiscounted value £21,257,000 and a pre-tax gain
of £1,184,000 was recorded.

The Free From business consisted of two subsidiaries, Livwell Limited (“Livwell”) and United Bakeries (Holdings) Limited (“UBH”) (the holding company
of United Central Bakeries Limited (“UCB”)).

2013
£000

Results of the discontinued operation

Revenue 19,749
Expenses (17,676)
Profit before tax 2,073
Gain recognised on disposal 1,184
Profit before tax 3,257
Tax on profit* (223)
Profit for the year 3,034

Cash flows from (used in) discontinued operations

Net cash from operating activities 884
Net cash used in investing activities (141)
Net cash from financing activities (1,089)
Net cash from (used in) discontinued operations (346)

Effect of the disposals on individual assets and liabilities

Intangibles (8,431)
Property, plant and equipment (8,648)
Inventories (984)
Trade receivables (4,345)
Other receivables (538)
Trade payables 4,378
Other payables (17)
Net identifiable assets and liabilities (18,585)

Consideration:
Cash consideration 18,257
Settlement of inter-company debt (401)
Disposal costs (583)
Cash and cash equivalents at completion date (201)
Cashflow on disposal of operation 17,072
Deferred consideration (discounted) 2,697
Net consideration 19,769
Profit on disposal 1,184

* Tax on profit relates to tax on discontinued operations.

33
3 Revenue and Segment Information

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 as they are primarily responsible for the allocation of resources to segments and the assessment of performance by segment.

The Board uses adjusted 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 Board regularly reviews along with operating profit, the segmental revenue from the sale of bakery products, direct and indirect costs, ebitda, and return
on capital employed.

The UK cake and bread business is viewed as one segment – UK Bakery, whilst the 50% owned business Lightbody Stretz Limited is viewed as a separate
segment – Overseas.

The UK Bakery segment manufactures and sells bakery products to the UK’s multiple grocers. This segment primarily comprises the operations of Memory
Lane Cakes Ltd, Lightbody Group Ltd, Campbells Cake Company Ltd and Nicholas & Harris Ltd. These subsidiaries were aggregated into a single segment
after considering the following criteria:

• The nature of the products – products are similar in nature and are classed as manufactured bakery products, the products sit side by side
in the retailers’ bakery aisles
• The production process – the production processes have the same or similar characteristics
• The economic characteristics – the average gross margins are expected to be similar
• The customers – five customers account for approximately 70-75% of total revenue, these customers are common throughout the subsidiaries
• The distribution methods – the same methods of distribution apply to all subsidiaries.

The core operation of the Overseas segment is the distribution of the Group’s UK manufactured product along with the sale of third party products
primarily to Europe.

Costs of Group operations plus a 10% premium have been allocated across the segments on the basis of their operating profit. The premium has been charged
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.

A purchasing premium of 2% is charged from Group operations, and is calculated on materials and packaging spends at segmental level. This charge is based
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 from continuing operations of £0.5m (2013: £0.8m) being presented within the Group Operations segment.

The Group’s finance income and expenses cannot be meaningfully allocated to the individual operating segments.

34
3 Revenue and Segment Information (continued)

Group
UK Bakery Overseas Operations Total Group
£000 £000 £000 £000

52 week period ended 28 June 2014

Continuing
Revenue
External 153,740 21,968 - 175,708
Underlying operating profit 6,094 1,139 475 7,708
Fair value foreign exchange contracts 81
Share options charge (9)
Defined benefit pension scheme 71
Significant non-recurring items (759)
Results from operating activities 7,092
Finance income 1,720
Finance cost (2,236)
Profit before taxation 6,576
Taxation (1,651)
Profit after taxation 4,925

At 28 June 2014

Segment assets 99,891 4,522 3,613 108,026

Unallocated assets 710
Consolidated total assets 108,736

Segment liabilities (30,588) (3,312) (1,352) (35,252)

Unallocated liabilities (9,781)
Consolidated total liabilities (45,033)

Other segment information

Capital expenditure 6,121 46 - 6,167
Depreciation included in segment profit 2,813 21 - 2,834
Amortisation 165 - - 165
Inter-segmental sale/(purchases) 6,039 (6,039) - -

Analysis of unallocated assets and liabilities:

Assets Liabilities
£’000 £’000
Investments 28 Loans and borrowings (9,330)
Financial instruments - Financial instruments (451)
Cash and cash equivalents 592 Cash and cash equivalents -
Taxation balances 90 Taxation balances -
Unallocated assets 710 Unallocated liabilities (9,781)

Certain operating costs have been incurred centrally, these costs have been allocated to the reporting segments on an appropriate basis.

With regard to continuing revenue, five customers with sales of £35m, £35m, £26m, £17m and £16m account for 73% of revenue, which is attributable
to the UK Bakery and Overseas segments above.

35
3 Revenue and Segment Information (continued)

Group
UK Bakery Overseas Operations Total Group
£000 £000 £000 £000

52 week period ended 29 June 2013 restated

Continuing
Revenue
External 154,364 22,231 - 176,595
Underlying operating profit 5,642 1,001 796 7,439
Fair value foreign exchange contracts (179)
Share options charge (134)
Defined benefit pension scheme 915
Significant non-recurring items (718)
Results from operating activities 7,323
Finance income 1,730
Finance cost (2,978)
Profit before taxation 6,075
Profit on sale of business 1,184
Results from discontinued operations 2,073
Taxation (1,523)
Profit after taxation 7,809

At 29 June 2013

Segment assets 96,170 4,987 4,299 105,456

Unallocated assets 1,623
Consolidated total assets 107,079

Segment liabilities (31,230) (3,864) (2,599) (37,693)

Unallocated liabilities (9,503)
Consolidated total liabilities (47,196)

Other segment information

Capital expenditure 4,201 3 - 4,204
Depreciation included in segment profit 2,872 16 - 2,888
Amortisation 164 - - 164
Inter-segmental sale/(purchases) 5,999 (5,999) - -

Analysis of unallocated assets and liabilities:

Assets Liabilities
£’000 £’000
Investments 28 Loans and borrowings (8,263)
Financial instruments - Financial instruments (1,240)
Cash and cash equivalents 1,310 Cash and cash equivalents -
Taxation balances 285 Taxation balances -
Unallocated assets 1,623 Unallocated liabilities (9,503)

Certain operating costs have been incurred centrally, these costs have been allocated to the reporting segments on an appropriate basis.

With regard to continuing revenue, five customers with sales of £36m, £34m, £24m, £18m and £16m account for 73% of revenue, which is attributable
to the UK Bakery and Overseas segments above.

36
3 Revenue and Segment Information (continued)

An analysis by geographical segment is shown below:

Geographical split of turnover by destination

2014 2013
£000 £000
Continuing
United Kingdom 151,587 152,105
Europe 23,832 24,118
Rest of World 289 372
Total continuing 175,708 176,595
Discontinued - 19,749

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 is detailed in Note 3.

Geographical split by country of origin

United Kingdom Europe Total

£000 £000 £000

2014
Continuing
Turnover 153,740 21,968 175,708
Operating profit 6,569 1,139 7,708

Total assets 104,214 4,522 108,736

Total liabilities (41,721) (3,312) (45,033)
Net assets 62,493 1,210 63,703

United Kingdom Europe Total

£000 £000 £000

2013
Continuing
Turnover 154,364 22,231 176,595
Operating profit 6,438 1,001 7,439
Discontinued
Turnover 19,749 - 19,749
Operating profit 2,073 - 2,073

Total assets 102,092 4,987 107,079

Total liabilities (43,332) (3,864) (47,196)
Net assets 58,760 1,123 59,883

4 Expenses and Auditors’ Remuneration

Included in profit are the following:

2014 2013
£000 £000

Depreciation of owned tangible assets 2,498 2,310

Depreciation on assets under finance leases and hire purchase contracts 336 578
Difference on foreign exchange (132) (30)
Hire of plant and machinery – operating leases 480 473
Hire of other assets – operating leases 803 718
Share option charges 9 134
Movement on fair value of interest rate swaps (708) (855)
Movement on fair value of foreign exchange contracts (81) 179
Research and development 1,759 1,793
Amortisation of intangibles 165 164

37
4 Expenses and Auditors’ Remuneration (continued)

Amortisation of intangibles for the year was £165,000 (2013: £164,000) relating to the Goswell Enterprises Ltd acquisition during June 2009.

Auditors’ remuneration:

2014 2013
£000 £000

Audit of these Financial Statements 25 24

Amounts receivable by auditors and their associates in respect of:

Audit of the Financial Statements of subsidiaries of the Company 57 59
Taxation compliance services 13 15
Services related to corporate finance transactions - 121
Other services in relation to taxation 11 14
Other services 137 10

The auditor’s remuneration is in respect of KPMG LLP. Fee for other services relates to pension advisory services, services relating to information
technology and services relating to remuneration.

5 Non-Recurring Significant Items

The Group presents certain items as non-recurring and significant. These relate to items which, in management’s judgement, need to be disclosed by virtue
of their size or incidence in order to obtain a more meaningful understanding of the financial information.

Costs of £643,000 relate to redundancy and restructuring (2013: £247,000) and £116,000 relate to due diligence and consultancy expenses associated with
an aborted acquisition. A further £471,000 in 2013 related to costs associated with the cancellation of unapproved share options and the issue of ordinary
shares in exchange for this cancellation.

A pre-tax gain of £1,184,000 was recorded as non-recurring significant income under discontinued operations, this gain relates to the sale of the Free From
business on 27 February 2013.

6 Staff Numbers and Costs

The average number of persons employed by the Group including Directors and excluding agency staff during the year, analysed by category, was as follows:

Number of Employees
2014 2013

Production 2,000 2,099

Selling and distribution 146 159
Administration, technical, new product development 143 156
2,289 2,414

The aggregate payroll costs of these persons were as follows:

2014 2013
£000 £000

Wages and salaries 44,756 48,599

Share option charges 9 134
Social security costs 3,856 4,212
Charge in respect of defined contribution plans 688 648
49,309 53,593

7 Remuneration of Directors

2014 2013
£000 £000

Fees 206 145

Executive salaries and benefits 653 673
Bonuses 324 267
Company contributions to defined contribution pension plans 38 49
1,221 1,134

38
7 Remuneration of Directors (continued)

The aggregate of emoluments and amounts receivable under long-term incentive schemes of the highest paid Director was £483,000 (2013: £452,000)
including Company pension contributions of £22,000 (2013: £29,000) that were made to a defined contribution scheme on his behalf. In addition to
bonuses above is a payment of £198,000 paid during the year to J G Duffy in consideration for the settlement of income taxes arising on the grant of
361,804 shares issued in exchange for cancellation of 1,149,000 unapproved share options.

Number of Directors
2014 2013

Retirement benefits were accruing in the year to the following number of Directors under:
Money purchase schemes 2 3

One Director exercised 111,000 share options during the current year at an exercise price of 27 pence per share (2013: nil).

The emoluments paid to Directors were as follows:

Year Year
ended ended
Fees Salary Benefits Other Pension 28 June 2014 29 June 2013
£000 £000 £000 £000 £000 £000 £000

E J Beale 45 - - - - 45 25
S A Boyd - 192 12 90 15 309 281
D C Currie - 33 - 39 1 73 113
R Duignan 48 - - - - 48 -
J G Duffy - 304 12 145 22 483 452
I R Farnsworth 3 - - - - 3 30
M Lightbody - 100 - 50 - 150 143
D C Marshall 40 - - - - 40 20
P J Monk 70 - - - - 70 70
206 629 24 324 38 1,221 1,134

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 no options (2013: nil) were granted to Directors. On 16 July 2013 1,149,000
unapproved options previously issued to J G Duffy were cancelled in return for 361,804 shares and the settlement of taxes amounting to £198,000 arising
on the grant of the shares which was paid during the year (2013: nil).

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
28 June 2014 29 June 2013 Exercise price exercise date expiry date

S A Boyd 1,650,000 1,650,000 20.5p 08/07/2014 30/10/2016

S A Boyd 625,000 625,000 20.5p 08/07/2014 30/10/2016
S A Boyd 625,000 625,000 20.5p 08/07/2014 30/10/2016
J G Duffy 1,250,000 1,250,000 20.5p 08/07/2014 30/10/2016
J G Duffy 625,000 625,000 20.5p 08/07/2014 30/10/2016
J G Duffy 625,000 625,000 20.5p 08/07/2014 30/10/2016
J G Duffy - 420,000 20.0p 30/09/2012 30/10/2016
J G Duffy - 420,000 20.0p 30/09/2012 30/10/2016
J G Duffy - 309,000 20.0p 30/09/2012 30/10/2016
J G Duffy - 111,000 27.0p 30/09/2012 30/10/2019
5,400,000 6,660,000

The mid-market price of the ordinary shares on 28 June 2014 was 55p (2013: 62p) and the range during the 52 week period to 28 June 2014
was 47p to 77p (2013: 25p to 64p).

39
8 Finance Income and Costs

Recognised in the Consolidated Statement of Profit and Loss

Restated
2014 2013
£000 £000

Finance income
Expected net return on defined benefit pension plan 862 826
Change in fair value of interest rate swaps 708 855
Tax related - 1
Unwinding of discount of deferred consideration receivable 150 48
Total finance income 1,720 1,730

Finance costs
Interest on defined benefit plan obligations (994) (966)
Bank interest payable (643) (1,115)
Interest on interest rate swap agreements (595) (812)
Interest on deferred consideration - (53)
Unwinding of discount on deferred consideration payable (4) (32)
Total finance costs (2,236) (2,978)

9 Taxation

Recognised in the Consolidated Statement of Profit and Loss

Restated
Continuing continuing Discontinued Discontinued
2014 2013 2014 2013
£000 £000 £000 £000
Current tax
Current year 1,254 1,513 - 239
Adjustments for prior years 22 (217) - (16)
Total current tax 1,276 1,296 - 223

Deferred tax
Origination and reversal of temporary differences 309 (233) - -
Retirement benefit deferred tax charge 73 209 - -
Adjustments for prior years (7) 28 - -
Total deferred tax 375 4 - -
Total tax expense 1,651 1,300 - 223

Reconciliation of effective tax rate

The tax assessed for the period is higher (2013: lower) than the standard rate of corporation tax in the UK of 21%, (2013: 23%).
The hybrid corporation tax rate is 22.50% (2013: 23.75%). The differences are explained below:
2014 2013
£000 £000

Profit before taxation from continuing operations 6,576 6,075

Tax using the UK corporation tax rate of 22.50%, (2013: 23.75%) 1,480 1,443
Non-deductible expenses 36 10
Amortisation of intangible asset 34 34
Temporary differences* (179) (338)
Adjustment to restate opening deferred tax and differences in rates 107 (25)
Differences on depreciation on IBA’s and allowances claimed 49 45
R&D uplift current year (97) (87)
Adjustments to tax charge in respect of prior periods 15 (189)
Overseas profits charged at different taxation rate 206 132
Group relief from discontinued - 275
Total tax expense 1,651 1,300

*Temporary differences in the current year relate to share based payments.

40
9 Taxation (continued)

Reductions in the corporation tax rate from 24% to 23% (effective from 1 April 2013) and to 21% (effective 1 April 2014) were substantially enacted
on 3 July 2012 and 2 July 2013 respectively. Further reduction to 20% (effective from 1 April 2015) was substantially enacted on 2 July 2013. This will
reduce the company’s future current tax charge accordingly. The deferred tax asset at 28 June 2014 has been calculated based on the 20% rate.

The impact of the reduction in the UK corporation tax rate from 23% to 21% from April 2014 amounts to £82,000 lower charge in the financial year
to 28 June 2014. The rate change on deferred tax has had an adverse impact on the current year tax charge amounting to £197,000. The adjustment
for prior year in 2013 relates to additional tax relief on qualifying R&D expenditure for prior periods.

The parent company has an unrecognised deferred tax asset of £191,300 (2013: £219,995). 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.

10 Earnings Per Ordinary Share

Basic earnings per share for the period is calculated on the basis of profit for the year after tax, divided by the weighted average number of shares in issue
65,635,000 (2013: 59,904,000).

Basic diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential
dilutive ordinary shares; which for 28 June 2014 the diluted weighted average number is 70,169,000 shares, (2013: 65,653,000).

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 (revised) ‘Accounting for retirement benefits’ relating to the net income
• IFRS 3 ‘Business Combinations’ discount charge relating to the deferred consideration payable and receivable
• The taxation effect at the appropriate rate on the adjustments.

Year ending 28 June 2014 Year ending 29 June 2013

Weighted Weighted
average average
number of Per share number of Per share
Earnings shares amount Earnings shares amount
£000 000’s Pence £000 000’s Pence

Continued 4,400 - 6.7 4,311 - 7.2

Discontinued - - - 3,034 - 5.1
Basic earnings 4,400 65,635 6.7 7,345 59,904 12.3
Significant non-recurring and other items 26 - - (1,629) - (2.7)
Adjusted earnings 4,426 65,635 6.7 5,716 59,904 9.6
Profit on discontinued operations - - - (2,073) - (3.5)
Taxation on discontinued operations - - - 223 - 0.4
Discontinued earnings - - - (1,850) - (3.1)
Continuing adjusted earnings 4,426 65,635 6.7 3,866 59,904 6.5

Dilutive effect of options - 4,534 - - 5,749 -

- 70,169 - - 65,653 -
Continued 4,400 - 6.3 4,311 - 6.6
Discontinued - - - 3,034 - 4.6
Basic diluted earnings 4,400 - 6.3 7,345 - 11.2

Adjusted diluted earnings 4,426 - 6.3 5,716 - 8.7

Discontinued diluted earnings - - - (1,850) - (2.8)
Continuing adjusted diluted earnings 4,426 70,169 6.3 3,866 65,653 5.9

41
11 Deferred Consideration Cashflow

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:

2014 2013
£000 £000

Deferred consideration paid in respect of Anthony Alan Foods Ltd acquisition - 555
Deferred consideration paid in respect of Goswell Enterprises Ltd acquisition 217 500
217 1,055

12 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 period
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 and Vogels. The period over which the value is amortised is the life of the license which is five years to June 2014.
These licences have been renewed at no up front cost.

Total
£000

Cost at 29 June 2013 and 28 June 2014 822

Amortisation at 29 June 2013 (657)

Charge for the year 28 June 2014 (165)
Amortisation at 28 June 2014 (822)

NBV at 29 June 2013 165

NBV at 28 June 2014 -

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 bakery 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

Balance at 29 June 2013 and at 28 June 2014 52,968

The carrying amount of goodwill has been allocated to cash generating units or groups of cash generating units as follows:

2014 2013
£000 £000

Nicholas & Harris 2,980 2,980

Lightbody of Hamilton 48,474 48,474
Memory Lane Cakes 1,514 1,514
52,968 52,968

42
12 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
rate used for future cash flows and the anticipated future changes in revenue, direct costs and indirect costs. The assumptions used reflect the past experience
of management and future expectations.

The Group prepares cash flow forecasts based on the most recent financial budgets approved by management and extrapolates these forward for the next
five 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.

The revenue growth rate used for impairment tests at 28 June 2014 was 3% (2013: nil) for all cash generating units. This inflation rate of 3% (2013: nil)
has been applied to the 2015 budget and for the following 5 years on costs of sales, variable costs and indirect costs. The five year cashflow is taken along
with a residual value at the end of the five year period.

A pre-tax discount rate of 10% (2013: 10%) has been used in these calculations. The Group has considered the economic environment and higher level
of return expected by equity holders due to the perceived risk in equity markets when selecting the discount rate.

The discount rate used for each cash generating unit has been kept constant as the market risk is deemed not to be materially different between the different
segments of the bakery sector, nor over time.

Sensitivities have been carried out by the Directors and they are comfortable that at reasonable discount levels there are no indications of impairment.

13 Property, Plant and Equipment

Land and Plant and Fixtures and Assets under

buildings equipment fittings Vehicles construction Total
£000 £000 £000 £000 £000 £000
Cost
Balance at 1 July 2012 14,503 28,795 2,210 8 340 45,856
Exchange adjustments - - 8 - - 8
Additions 74 3,282 177 - 671 4,204
Transfers - 91 - - (91) -
Disposals (4,531) (11,134) (155) (8) - (15,828)
Balance at 29 June 2013 10,046 21,034 2,240 - 920 34,240

Balance at 30 June 2013 10,046 21,034 2,240 - 920 34,240

Exchange adjustments - - (11) - - (11)
Additions 894 5,050 194 - 29 6,167
Transfers - 226 - - (226) -
Disposals - (185) (122) - - (307)
Balance at 28 June 2014 10,940 26,125 2,301 - 723 40,089

Depreciation and impairment

Balance at 1 July 2012 (3,874) (14,796) (1,641) (5) - (20,316)
Exchange adjustments - - (2) - - (2)
Depreciation charge for the financial period (290) (2,375) (223) - - (2,888)
Disposals 1,058 5,963 149 5 - 7,175
Balance at 29 June 2013 (3,106) (11,208) (1,717) - - (16,031)

Balance at 30 June 2013 (3,106) (11,208) (1,717) - - (16,031)

Exchange adjustments - - 12 - - 12
Depreciation charge for the financial period (233) (2,390) (211) - - (2,834)
Disposals - 185 120 - - 305
Balance at 28 June 2014 (3,339) (13,413) (1,796) - - (18,548)

Net book value

30 June 2012 10,629 13,999 569 3 340 25,540
At 29 June 2013 6,940 9,826 523 - 920 18,209
At 28 June 2014 7,601 12,712 505 - 723 21,541

43
13 Property, Plant and Equipment (continued)

Leased Plant and Machinery

The net book value of assets held under finance lease or hire purchase contracts included above are as follows:

2014 2013
£000 £000
Plant and equipment 1,834 2,169

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 20.

Hire purchase obligations are secured on the underlying assets.

The lease obligations are secured on leased equipment (see Note 20).

14 Other Financial Assets and Liabilities

2014 2013
£000 £000
Non-current
Investments 28 28

Current assets
Fair value of foreign exchange contracts - -

Current liabilities
Fair value of interest rate swaps (387) (1,095)
Fair value of foreign exchange contracts (64) (145)
(451) (1,240)

Investments
The unlisted investments acquired as part of the Lightbody acquisition on 23 February 2007 and held at 28 June 2014 consist of preference shares in Murray
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.

Interest Rate Swaps at Fair Value

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 July 2011 (fixed) at 3.6%

£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%

One four year interest rate swap of £10.0m (fixed) at 4.9% matured during the year in June 2014.

The total coverage at the year end of £14.0 million (2013: £18.0 million) is equivalent to 159% (2013: 250%) of total net bank debt at a weighted average
rate of 2.5% (2013: 4.0%).

A credit of £708,000 (2013: credit £855,000) is shown in finance income for the periods reflecting changes in the fair values of interest rate swaps.
The fair values are liabilities as a result of the current low levels of base and LIBOR interest rates.

Forward Foreign Exchange Contracts at Fair Value

The Group has entered into a number of forward foreign exchange contracts to minimise the impact of fluctuations in exchange rates. A credit of £81,000
(2013: charge £179,000) is shown in administration expenses for the periods reflecting changes in their fair value.

44
15 Deferred Consideration Receivable

On 27 February 2013 the Group sold its Free From business to Genius Foods for a total value of £21,257,000, £3,000,000 of which has been deferred
and is payable 27 February 2015. Deferred consideration is shown as a current asset in the Consolidated Statement of Financial Position.

£000

Balance at 29 June 2013 2,745

Unwinding of discount 150
Balance at 28 June 2014 2,895

16 Pension Schemes

A number of companies within the Group operate defined contribution pension schemes with one company also operating a defined benefit scheme.

Defined Contribution Scheme

The Group made contributions in respect of its defined contribution pension arrangements of £688,000 (2013: £648,000).

Defined Benefit Scheme

The Group’s defined benefit scheme is the Memory Lane Cakes Pension Scheme, which is a separately administered plan. At the financial year end 2014,
the scheme had no active members accruing benefits (2013: nil), 227 deferred pensioner members (2013: 240) and 200 pensioner members (2013: 189).

The scheme was closed to future accrual on 31 May 2010. The assets of the schemes are held separately from those of the company. The amounts in the
Financial Statements for the 52 weeks ended 28 June 2014 relating to defined benefit pension are based on a full actuarial valuation dated 31 December
2012, which was updated at the end of the financial year 2013.

A £70,834 contribution was paid during the financial year 2014 from Memory Lane Cakes (2013: £65,000). The Group’s contribution has been agreed
based on the outcome of the full actuarial valuation dated 31 December 2012. The valuation of the Scheme on an equity/bond basis and projected unit
method, showed that there was a deficit of £1,910,000 equivalent to a 10% deficit of liabilities over assets. The valuation was conducted by a qualified
independent actuary. This deficit is payable at a rate of £100,000 per annum until September 2020, a full valuation is due by 31 December 2015 which
will challenge the appropriateness of this recovery plan taking into consideration the deficit recovery contributions and actual returns realised on the
pension scheme assets.

A revised version of IAS 19 Defined Benefit Plans applies to accounting periods on or after 1 January 2013. The year to 28 June 2014 is the first year end
for which the revised standard will apply, comparatives have been restated under the new standard.

During the year over 90% of the plan assets previously held in a target return fund targeting three month LIBOR +3% pa were moved to two diversified
growth funds which targets 6 month LIBOR +5% and CPI + 5%. This move followed a review of the investment strategy. The expected return on cash
balances held is based on the current Bank of England base rate rather than long-term deposit rates as cash is held to cover short-term requirements.

The full actuarial valuation differs from the financial year end valuation deficit of £3,630,000 (2013: £2,843,000). No allowance is made in the financial year
end valuation for any outperformance expected from the Scheme’s actual asset holding over and above high quality corporate bonds. The weighted average
expected return is 6.3% compared to the expected return in the year end valuation of 4.3%.
Restated
2014 2013
£000 £000

Fair value of plan assets 19,741 18,728

Present value of defined benefit obligations (23,371) (21,571)
Deficit recognised (3,630) (2,843)

The fair value of plan assets and the return on those assets were as follows:

2014 2013
£000 £000

Equities/target return fund 17,973 17,072

Property 1,755 1,573
Cash 13 83
Fair value of plan assets 19,741 18,728
Actual return on plan assets 1,789 1,158

45
16 Pension Schemes (continued)

None of the fair values of the assets shown on the previous page includes any of the Company’s own financial instruments or any property occupied by,
or any other assets used by, the Company.

Restated
2014 2013
£000 £000

Movements in present value of defined benefit obligation

At beginning of financial year (21,571) (21,424)

Interest on plan obligations (994) (966)
Benefits paid 847 844
Remeasurement (loss)/gain (1,653) (875)
Past service credit - 850
At end of financial year (23,371) (21,571)

Movements in fair value of plan assets

At beginning of financial year 18,728 18,349

Expected return on plan assets 862 826
Additional return on plan assets over expected return 927 332
Benefits paid (847) (844)
Contributions by employer 71 65
At end of financial year 19,741 18,728

Past service credit relates to discretionary increases that are no longer being awarded. Remeasurement 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.

Restated
2014 2013
£000 £000

(Expense)/income recognised in the Consolidated Statement of Profit and Loss

Expected return on defined benefit pension plan assets/finance income 862 826
Interest on defined benefit pension plan obligation/finance expense (994) (966)
Past service cost - 850
Total (expense)/income (132) 710

Remeasurement 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:

Cumulative amount at beginning of financial year (5,126) (4,583)

Recognised in the financial year – gain on scheme assets in excess of expected return 927 332
Recognised in the financial year – loss from changes to financial assumptions (1,653) (518)
Recognised in the financial year – experience losses - (339)
Recognised in the financial year – loss from changes to demographic assumptions - (18)
Cumulative amount at end of financial year (5,852) (5,126)

Restated
2014 2013

Principal long-term actuarial assumptions at the year end were as follows:

CPI price inflation assumption 2.5% 2.5%

Increases to pensions in payment 2.5% 2.5%
Discount rate for liabilities 4.3% 4.7%
Expected rate of return for plan assets 4.3% 4.7%

46
16 Pension Schemes (continued)

The differential between the assumed rate of inflation and the discount rate for liabilities is 1.8% (2013: 2.2%).

Salary inflation assumptions are as determined by the Board with regard to price inflation. The salary inflation from 31 May 2010 when the Scheme closed
to future accrual was assumed to be in line with inflation.

The financial assumptions are based on market conditions as at the review date of 28 June 2014 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 change in bond yields over this period. The expected
rate of return for plan assets is the long-term rate that reflects the yield on high quality corporate bonds as required under changes to IAS 19. The expected
rate of return is effectively based on the discount rate with no allowance made for any outperformance expected from the Scheme’s actual asset holding.

2014 2013

Pre-retirement mortality assumption

S1N[M/F] A year of birth tables with S1N[M/F] A year of birth tables with
CMI 2012 projections and 1.25% pa CMI 2012 projections and 1.25% pa
long-term rate of improvement long-term rate of improvement

Post-retirement mortality assumption

S1N[M/F] A year of birth tables with S1N[M/F] A year of birth tables with
CMI 2012 projections and 1.25% pa CMI 2012 projections and 1.25% pa
long-term rate of improvement long-term rate of improvement

Under the mortality tables adopted, the assumed future life expectancy at age 65 is as follows:

2014 2013

Male currently at age 45 24.2 24.1

Female currently at age 45 26.9 26.8
Male currently at age 65 22.5 22.4
Female currently at age 65 25.0 24.9

Changing the year end 2014 assumptions to those of 2013 year end listed above, the deficit would have been £1,977,000 compared to the reported deficit
of £3,630,000.

Sensitivity Analysis
The calculation of the defined benefit obligation is sensitive to the assumptions set out above. The following table summarises changes in these assumptions
and their approximate (decrease)/increase on liabilities.

2014

Discount rate plus 0.5% (£2.1 million)

Discount rate minus 0.5% £2.4 million
Inflation plus 0.5% £2.0 million
Inflation minus 0.5% (£2.0 million)
Life expectancy plus 1.0 years £0.4 million
Life expectancy minus 1.0 years (£0.4 million)

The above sensitivities are approximate and only show the likely effect of an assumption being adjusted whilst all other assumptions remain the same.

The weighted average duration of the defined benefit obligation is around 19 years.

Risk Mitigation Strategies

Whilst the Scheme does not explicitly hold risk mitigation strategies such as swaps, annuities or liability driven investments, the investment strategy
is dominated by diversified growth funds which are intended to reduce the investment risk through diversification.

47
16 Pension Schemes (continued)

Effect of the Scheme on the Company’s Future Cashflows

The Company is required to agree a Schedule of contributions with the Trustees of the Scheme following a valuation which must be carried out at least once
every three years. The next valuation of the Scheme is due as at 31 December 2015. In the event that the valuation reveals a larger deficit than expected the
Company may be required to increase contributions above those set out in the existing Schedule of Contributions. Conversely, if the position is better than
expected contributions may be reduced. The Company expects to pay contributions of £100,000 in the year to 30 June 2015. The projected net interest charge
to the Consolidated Statement of Profit and Loss for the year to 30 June 2015 is £154,000, this projection assumes cashflows to and from the scheme are
broadly unchanged from the current year figures and that there will be no events that would give rise to a settlement/curtailment/past service cost.

The history of the plans for the current and prior periods is as follows:

Consolidated Statement of Financial Position

2014 2013 2012 2011 2010

£000 £000 £000 £000 £000

Fair value of plan assets 19,741 18,728 18,349 19,102 17,658

Present value of the defined benefit obligation (23,371) (21,571) (21,424) (20,274) (21,287)
Deficit (3,630) (2,843) (3,075) (1,172) (3,629)

Experience adjustments on plan assets 927 332 (1,772) 644 682

as a percentage of plan assets 4.7% 1.8% 9.7% 3.4% 3.9%
Experience adjustments on plan liabilities - 339 - (561) -
as a percentage of plan liabilities 0.0% 1.6% 0.0% 2.8% 0.0%
Total remeasurement (losses)/gains (726) (543) (2,357) 2,224 (3,046)
as a percentage of plan liabilities 3.1% 2.5% 11.0% 11.0% 14.3%

Projected costs to the Consolidated Statement of Profit and Loss for the year to 30 June 2015 is estimated to be a net interest cost of £154,000. This is
assuming that the cashflows to and from the Scheme are broadly unchanged from the current year’s figures and that there will be no events that will give
rise to settlement, curtailment or past service cost or credit.

17 Inventories

2014 2013
£000 £000

Raw materials and consumables 2,612 2,662

Finished goods 1,918 1,738
4,530 4,400

Inventories recognised as an expense

Opening inventories 4,400 5,380

Purchases 84,621 90,183
(Decrease)/Increase in stock provisions (352) 670
Closing inventories (4,530) (4,400)
Expensed during the period 84,139 91,833

18 Trade and Other Receivables

2014 2013
£000 £000

Trade receivables due from third parties 22,410 21,864

Other debtors 1,125 1,566
Prepayments and accrued income 1,297 1,907
24,832 25,337

Within prepayments above is an amount for £nil (2013: £10,000) relating to contract renewal fees and prepaid pension costs of £33,000 (2013: £43,000).
Specific provisions are made against doubtful debts taking the value of trade receivables to an estimated value based on the most likely outcome.

Cash received under the invoice discounting facility, amounting to £2,959,000 (2013: £3,259,000) 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.

48
19 Cash and Cash Equivalents including Bank Overdrafts

2014 2013
£000 £000

Cash at bank and on hand 5,574 5,771

Bank overdraft (4,982) (4,461)
592 1,310

20 Other Interest-Bearing Loans and Borrowings

This note provides information about the contractual terms and repayment terms of the Group’s interest-bearing loans and borrowings, which are measured
at amortised cost, using the effective interest rate method.

Frequency of Year of Facility Drawn Current Non-Current

2014 Margin repayments maturity £000 £000 £000 £000

Invoice discounting 1.50%/base On demand Revolving* 15,000 2,959 2,959 -

Revolving credit 2.00%/LIBOR Monthly 2017 8,000 2,000 2,000 -
Mortgage 1.75%/base Monthly 2023 4,000 3,593 399 3,194
Finance lease liabilities 1.76%/base Monthly Various 2,000 854 382 472
Overdraft 2.00%/base On demand - 3,000 - - -
32,000 9,406 5,740 3,666
Unamortised transaction costs (76) (22) (54)
9,330 5,718 3,612

Secured bank loans and mortgages over one year (included above) 3,194
Unamortised transaction costs (54)
3,140

Repayments are as follows:

Between one and two years 347
Between two and five years 1,073
Between five and ten years 1,720
Between ten and fifteen years -
3,140
Frequency of Year of Facility Drawn Current Non-Current
2013 Margin repayments maturity £000 £000 £000 £000

Invoice discounting 1.50%/base On demand Revolving* 15,000 3,259 3,259 -

Revolving credit 2.00%/LIBOR Monthly 2017 8,000 - - -
Mortgage 1.75%/base Monthly 2023 4,000 3,932 369 3,563
Finance lease liabilities 1.83%/base Monthly Various 2,000 1,332 476 856
Overdraft 2.00%/base On demand - 3,000 - - -
32,000 8,523 4,104 4,419
Unamortised transaction costs (260) (183) (77)
8,263 3,921 4,342

Secured bank loans and mortgages over one year (included above) 3,563
Unamortised transaction costs (77)
3,486

Repayments are as follows:

Between one and two years 347
Between two and five years 1,051
Between five and ten years 1,842
Between ten and fifteen years 246
3,486

* Revolving maturity above relates to the payment terms on the invoice discounting which is up to 90 days from the date of invoice.
The invoice discounting facility renewal date is December 2017.

49
20 Other Interest-Bearing Loans and Borrowings (continued)

Finance lease liabilities are payable as follows:

2014 2013

Minimum Minimum
lease lease
payments Interest Principal payments Interest Principal
£000 £000 £000 £000 £000 £000

Less than one year 403 21 382 509 33 476

Between one and five years 486 14 472 891 35 856
889 35 854 1,400 68 1,332

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 25.

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.

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 £29.0m (2013: £29.0m). At the period end date the facility utilised was £9.4m
(2013: £8.5m), giving £19.6m (2013: £20.5m) headroom.

21 Analysis of Net Debt

At At
year ended year ended
29 June 28 June
2013 Cash flow 2014
Note £000 £000 £000

Cash at bank 1,310 (718) 592

Loan notes - - -
1,310 (718) 592
Debt due within one year (369) (2,030) (2,399)
Debt due after one year (3,563) 369 (3,194)
Invoice discounting due within one year (3,259) 300 (2,959)
Hire purchase obligations due within one year (476) 94 (382)
Hire purchase obligations due after one year (856) 384 (472)
Total net bank debt (7,213) (1,601) (8,814)

Debt 20 (8,263) - (9,330)

Cash at bank 1,310 - 592
Unamortised transaction costs (260) - (76)
Total net bank debt (7,213) - (8,814)

Deferred consideration payable (216) - -

Total net debt including deferred consideration payable (7,429) - (8,814)

Cash at banks 1,310 - 592

Total debt including deferred consideration payable excluding cash (8,739) - (9,406)
Deferred consideration receivable 2,745 - 2,895
Total debt including deferred consideration payable and receivable excluding cash (5,994) - (6,511)

50
22 Trade and Other Payables

2014 2013
£000 £000

Current
Trade creditors 20,254 20,510
Other creditors including taxes and social security 1,245 1,699
Accruals and deferred income 9,237 10,845
30,736 33,054

23 Provisions

Onerous Employee
lease claims Pension Total
£000 £000 £000 £000

Balance at beginning of financial year 251 250 218 719

Made during the financial year - - - -
Utilised during the financial year (251) (13) (19) (283)
Balance at end of financial year - 237 199 436
Current provisions - 237 - 237
Non-current provisions - - 199 199

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 15 years.

24 Deferred Tax Assets and Liabilities

Recognised deferred tax assets and liabilities.

Deferred tax assets and liabilities are attributable to the following:

Assets Liabilities
2014 2013 2014 2013
£000 £000 £000 £000

Property, plant and equipment - - (318) (323)

Short-term temporary differences - - (104) (82)
Employee share scheme charges 513 920 - -
Pension scheme charges 726 654 - -
Interest rate swaps 77 252 - -
Foreign exchange contracts 13 33 - -
IFRS fair value adjustments on deferred consideration 21 58 - -
Tax assets/(liabilities) 1,350 1,917 (422) (405)

Net tax assets/(liabilities) 928 1,512 - -

Short-term temporary differences relate to general provisions which will be allowed when utilised.

51
24 Deferred Tax Assets and Liabilities (continued)

Movement in deferred tax during the year

Recognised Recognised
29 June 2013 in income in equity Disposal 28 June 2014
£000 £000 £000 £000 £000

Property, plant and equipment (323) 5 - - (318)

Short-term temporary differences (82) (22) - - (104)
Employee share scheme 920 (53) (354) - 513
Pension scheme 654 (73) 145 - 726
Interest rate swaps 252 (175) - - 77
Foreign exchange contracts 33 (20) - - 13
IFRS fair value adjustments deferred consideration 58 (37) - - 21
1,512 (375) (209) - 928

Movement in deferred tax during the prior year

Recognised Recognised
30 June 2012 in income in equity Disposal 29 June 2013
£000 £000 £000 £000 £000

Property, plant and equipment (996) (5) - 678 (323)

Short-term temporary differences (369) (33) - 320 (82)
Employee share scheme 63 351 506 - 920
Pension scheme 738 (341) 257 - 654
Interest rate swaps 468 (216) - - 252
Foreign exchange contracts (9) 42 - - 33
IFRS fair value adjustments deferred consideration (8) 66 - - 58
(113) (136) 763 998 1,512

25 Financial Risk Management

The main purpose of the Group’s financial instruments which comprise of bank term loans, invoice discounting facility, hire purchase, finance leases, interest
rate swaps, foreign currency forwards, cash and liquid resources and various items arising directly from its operations, such as trade receivables and trade
payables, is to finance the Group’s operations. The main risk arising from the Group’s financial instruments are interest rate risk and liquidity risk. The Group’s
policies on the management of liquidity, credit, interest rate and foreign currency risks are set out below and also referred to in the Strategic Report.

a) Fair Values of Financial Instruments

All financial assets and liabilities are held at amortised cost apart from forward exchange contracts, interest rate swaps and deferred consideration receivable,
which are held at fair value, with changes going through the Consolidated Statement of Profit and Loss. The Group has not disclosed the fair values for
financial instruments such as short-term trade receivables and payables, because their carrying amounts are a reasonable approximation of fair values.

The fair values of forward exchange contracts and interest rate swaps are determined using a market comparison valuation technique. The fair values are
based on broker quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments. The fair values
relating to these instruments represent level 2 in the fair value hierarchy which relates to the extent the fair value can be determined by reference to comparable
market values. The classifications range from level 1 where instruments are quoted on an active market through to level 3 where the assumptions used
to arrive at fair value do not have comparable market data.

52
25 Financial Risk Management (continued)

b) Liquidity
The Group’s policy is to ensure that it has sufficient facilities to cover its future funding requirements. Short-term flexibility is available through the
existing bank facilities and the netting off of surplus funds. The carrying amounts are the amounts due if settled at the period end date. The contractual
undiscounted cash flows include estimated interest payments over the life of these facilities. The estimated interest payments are based on interest rates
prevailing at the 28 June 2014.

Contractual cashflows including estimated interest

Carrying 1 year 1 to 2 2 to 5 5 years

amount Total or less years years and over
At year ended 28 June 2014 £000 £000 £000 £000 £000 £000

Non-derivative financial liabilities

Secured bank loans (5,517) (5,990) (2,487) (436) (1,258) (1,809)
Finance lease liabilities (854) (892) (403) (294) (195) -
Invoice discounting (2,959) (2,959) (2,959) - - -
Deferred consideration - - - - - -
Trade creditors (20,254) (20,253) (20,253) - - -
Derivative financial liabilities
Interest rate swaps liabilities (387) (650) (271) (271) (108) -
(29,971) (30,744) (26,373) (1,001) (1,561) (1,809)

Contractual cashflows including estimated interest

Carrying 1 year 1 to 2 2 to 5 5 years

amount Total or less years years and over
At year ended 29 June 2013 £000 £000 £000 £000 £000 £000

Non-derivative financial liabilities

Secured bank loans (3,672) (4,443) (453) (444) (1,283) (2,263)
Finance lease liabilities (1,332) (1,401) (510) (403) (488) -
Invoice discounting (3,259) (3,259) (3,259) - - -
Deferred consideration (216) (223) (223) - - -
Trade creditors (20,510) (20,510) (20,510) - - -
Derivative financial liabilities
Interest rate swaps liabilities (1,095) (1,253) (599) (273) (381) -
(30,084) (31,089) (25,554) (1,120) (2,152) (2,263)

The carrying amount relating to interest rate swaps is the fair value.

The information relating to the interest rate swaps shown in the tables above indicate the cash flows associated with these instruments. This also reflects
the expected effect on the future profit. These amounts will change as interest rates change.

Short-term flexibility is available through existing bank facilities and the netting off of surplus funds.

c) Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises
principally from the Group’s receivables from customers. These trading exposures are monitored and managed at operating level and are also monitored at
Group level. Whilst there is a concentration of credit risk arising from the profile of five customers accounting for 73% of total revenue, the Group deems
this to be low risk due to the nature of these customers. The carrying amount of the financial assets represents the maximum credit exposure. Therefore, the
maximum exposure to credit risk for the trade receivables at the period end date was £22.4 million (2013: £21.9 million) and the ageing of trade receivables
at the period end date was:
2014 2013
£000 £000

Not past due 21,052 19,297

Past due 0 – 30 days 1,167 2,082
Past due 31 – 120 days 144 427
Past due more than 120 days 47 58
22,410 21,864

The above numbers are net of impairment provisions. 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.

53
25 Financial Risk Management (continued)

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
credit note provision and bad debt provision held at the year end. The balance of £0.2 million past due by more than 30 days is equivalent to less than
1 day sales (2013: £0.5 million, equivalent to 1 day).

Deferred consideration amounting to £3 million is due from Genius Foods Ltd on 27 February 2015, there is deemed not to be an issue over recoverability of
this receivable.

d) Market Risk

i) Interest Rate Risk

The Group’s interest rate risk exposure is primarily to changes in variable interest rates. The Group has entered into three interest rate swap arrangements
in order to hedge its risks associated with any fluctuations. Details of swaps are given in Note 14.

The profile of the Group’s loans including deferred consideration and overdraft at the period end date were split as follows:

2014 2013
£000 £000

Variable rate liabilities 9,406 8,739

Swaps amounting to £14,000,000 (2013: £18,000,000) limit the risk associated with the variable rate liabilities, the weighted average interest rate
at 28 June 2014 is 2.5% (2013: 4.0%).

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.

2014 2013
£000 £000

Profit decrease 160 70

Decrease in net assets 160 70

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.

ii) Commodity Prices

Any rises in commodity prices can adversely impact the core profitability of the business. The Group will aim to pass on its increased costs to its customers
as far as is reasonable in the circumstances whilst maintaining its tight control over overhead costs to mitigate the impact on consumers. The Group maintains
a high expertise in its buying team and will consider long-term contracts where appropriate to reduce uncertainty in commodity prices. Further information
on input prices and risks is contained in the Strategic Report.

iii) Foreign Exchange Risk

The Group currently supplies UK manufactured products to Lightbody Stretz Ltd, its 50% owned selling and distribution business trading primarily
in Europe. The Group also purchases some raw materials in foreign currency. The consequence of this is that the Group is exposed to movement in foreign
currency rates. Forward foreign exchanges contracts are used to manage the foreign exchange exposure.

e) Debt and Capital Management

The Group’s objective is to maximise the return on net invested capital while maintaining its ongoing ability to operate and guaranteeing adequate returns
for shareholders and benefits for other stakeholders, within a sustainable financial structure. On 21 March 2014, the Board approved an interim dividend
for the six months to 28 December 2013 of 0.25p per share paid on 25 April 2014 to shareholders on the register at the close of business on 4 April 2014.
A final dividend of 0.75p per share has been proposed. It is the Company's intention, to pay dividends at an affordable rate so that the Company can
continue to invest in the business in order to grow profits.

54
25 Financial Risk Management (continued)

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 stands at 0.1 (2013: 0.1).
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.

26 Capital and Reserves

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 £63,000 gain (2013: £63,000 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.

27 Share Capital

2014 2013
000’s 000’s

In issue at beginning of the financial year 64,155 53,502

Shares issued 2,739 10,653
In issue at end of the financial year – fully paid 66,894 64,155

2014 2013
£000 £000

Allotted, called up and fully paid

Ordinary shares of 1p each 669 642

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

Share-Based Payments

The Group operates both approved and unapproved share option schemes.

The fair value is calculated at the grant date and ultimately expensed in the Consolidated Statement of Profit and Loss over the vesting period, based
on the best available estimate of the number of share options expected to vest, with a corresponding credit to reserves.

Upon exercise of the share options the proceeds received net of attributable transaction costs are credited to share capital and where appropriate share premium.

There have been a number of options granted during the course of the financial year to 28 June 2014 with further details given below.

Amount
expensed in year
Number of options Exercise Fair value to 28 June 2014 Period of
Date of grant granted price £000 £000 expense

16 May 2014 302,758 58.0p 3 1 3 years

Charge relating to options granted in the current year 1
Charge relating to options granted in prior years 8
Charge included in Administration expenses 9

55
27 Share Capital (continued)

There were a number of options granted during the course of the financial year to 29 June 2013 with further details given below.

Amount
expensed in year
Number of options Exercise Fair value to 29 June 2013 Period of
Date of grant granted price £000 £000 expense

7 Jul 2012 121,605 24.7p 7 2 3 years

7 Jul 2012 128,395 24.7p 7 3 3 years
Charge relating to options granted in the current year 5
Charge relating to options granted in prior years 129
Charge included in Administration expenses 134

Details of share options outstanding at 28 June 2014 and movements during the year by exercise price is shown below:

First Last
Exercise exercise exercise At 29 June At 28 June
price date date 2013 Granted Forfeited Cancelled Exercised 2014

106.0p Sep 2008 Mar 2014 42,500 - (42,500) - - -

88.0p Sep 2008 Mar 2014 17,500 - (17,500) - - -
58.0p May 2017 May 2027 - 302,758 - - - 302,758
52.5p Sep 2008 Mar 2014 40,000 - - - (40,000) -
34.0p Oct 2009 Mar 2014 52,848 - - - (52,848) -
29.0p Dec 2005 Mar 2014 500,000 - - - (500,000) -
27.0p Sep 2012 Oct 2019 111,000 - - - (111,000) -
24.7p Jul 2015 Jul 2019 128,395 - - (128,395) - -
24.7p Jul 2015 Jul 2022 121,605 - - (121,605) - -
20.5p Jul 2014 Oct 2016 3,435,715 - - - (146,341) 3,289,374
20.5p Jul 2014 Oct 2016 1,517,857 - - - - 1,517,857
20.5p Jul 2014 Oct 2016 1,517,857 - - - - 1,517,857
20.0p Feb 2015 Aug 2015 439,020 - (38,000) (35,640) (24,100) 341,280
20.0p Dec 2012 Jul 2013 23,775 - (20,690) - (3,085) -
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 345,400 - (12,623) (15,000) (288,577) 29,200
17.5p Jul 2013 Jul 2017 465,787 - (78,575) (230,062) (157,150) -
17.5p Jul 2013 Jul 2020 1,005,913 - (171,425) - (834,488) -
14.0p Mar 2012 Mar 2019 311,300 - (28,300) - (226,400) 56,600
11,225,472 302,758 (409,613) (1,679,702) (2,383,989) 7,054,926

The Company announced on 16 July 2013 the cancellation of 1,149,000 unapproved share options held by Mr Duffy and the issue of 361,804 ordinary
shares and settlement of taxes arising on the grant in exchange for this cancellation.

A summary of share options outstanding and movements for the year to 29 June 2013 is shown below:

At 30 June At 29 June
2012 Granted Forfeited Cancelled Exercised 2013

Number of options 11,439,542 250,000 (96,583) (75,627) (291,860) 11,225,472

There were 85,800 (2013: 2,408,265) options exercisable at the period end date. There were 2,383,989 options exercised during the year (2013: 291,860).
On 16 July 2013 1,149,000 unapproved options previously issued to J G Duffy were cancelled and a cash bonus and 361,804 shares were issued.

The options outstanding at the year end have weighted average exercise price of 22.0p (2013: 20.9p) and a weighted average contractual life of 4.5 years
(2013: 4.6 years).

The Company has used the QCA-IRS option valuer TM (based on the Black-Scholes-Merton based option pricing model) to calculate the fair value
of the outstanding options. This model was developed by The 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.

56
27 Share Capital (continued)

The inputs into the Black-Scholes-Merton based option pricing model to calculate the charge for share options granted in the financial year were as follows:

2014 2013

Expected life of option 3.0 years 3.0 years

Volatility of share price 33% 43%
Dividend yield 1.3% 0%
Risk-free interest rate 1.18% 0.41%
Share price at date of grant 58.0p 22.1p
Exercise price 58.0p 25.0p
Bid price discount 10% 10%
Estimated conversion rate 100% 100%
Fair value per option 9.3p 5.6p

Volatility is calculated on a consistent basis for each grant of options and is based on the historic annualised standard deviation of continuously compounded
rates of return.

28 Dividends

On 21 March 2014, the Board approved an interim dividend for the six months to 28 December 2013 of 0.25p per share which was paid on 25 April 2014
to shareholders on the register at the close of business on 4 April 2014. The amount paid was £166,052. A final dividend of 0.75p per share has been
proposed taking the total dividend to 1.00p per share.

During the year a dividend of £417,000 (2013: £331,000) was paid to the non-controlling interest in Lightbody Stretz Ltd.

29 Operating Leases

The Group has annual commitments under non-cancellable operating leases relating primarily to land and buildings, fork lift trucks and office equipment.

Land and buildings have been considered separately for lease classification. Land and buildings amounts relate to leasehold properties at the Nicholas & Harris
site, part of the Lightbody of Hamilton site and the California Cake Company site.

During the year £1,283,000 was recognised as an expense in the Consolidated Statement of Profit and Loss in respect of operating leases (2013: £1,191,000).

Future minimum lease repayments under non-cancellable operating leases at the end of the financial periods are as follows:
Land and Buildings Other
2014 2013 2014 2013
£000 £000 £000 £000

On leases which expire in:

Less than one year 55 248 121 134
Between one and five years 474 1,162 1,042 1,145
More than five years 11,537 9,648 15 -
12,066 11,058 1,178 1,279

30 Capital Commitments

At the financial year ended 28 June 2014, the Group had capital expenditure commitments of £523,000 (2013: £983,000).

31 Related Parties

Related Party Transactions and Directors’ Material Interests in Transactions

The Group received services to the value of £124,589 (2013: £80,907) in the year from City Group Plc, a subsidiary of London Finance & Investment
Group Plc, which is a substantial shareholder in Finsbury Food Group. At 28 June 2014, £31,001 (2013: £36,075) was due to City Group Plc. Details
of fees are as follows:

• Mr D C Marshall and Mr E J Beale are Directors of City Group Plc, and received Directors’ fees for the year of £85,000 (2013: £45,000).
The services of Mr Marshall are supplied by a 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 and VAT was £39,589 (2013: £35,907).

57
31 Related Parties (continued)

A Group subsidiary paid Mr M W Lightbody, £198,000 (2013: £190,000) 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, £57,000 (2013: £26,000) in respect
of rent for offices. No balances were outstanding at either year end.

The Group paid £187,000 (2013: £294,000) for the supply of finished products from and received £105,000 (2013: £62,000) for the sale of finished products
to Party Fizz, a company 50% owned by Mr M W Lightbody, a Group Director, and 50% owned by Mr P Stretz. The amount payable and receivable at the
year end was £22,000 (2013: £75,000) and £10,000 (2013: £10,000) respectively.

A Group subsidiary sold finished goods with a value of £2,151,000 (2013: £2,954,000) to Lightbody Ventures Ltd, a company wholly owned by Mr M W
Lightbody. The amount receivable at year end was £710,000 (2013: £460,000).

Transactions with the Memory Lane Pension Scheme are detailed in Note 16.

Transactions with Key Management Personnel

Directors of the Company and their immediate relatives control 16% (2013: 25%) of the voting shares of the Company.

The aggregate compensation of key management personnel (i.e. key Group Directors, Group Commercial Director, Brand Director, Technical Director
and Operating Subsidiary Managing Directors) is as follows:

2014 2013
£000 £000
Fees 75 70
Company contributions to money purchase pension schemes 82 148
Executive salaries and benefits 1,240 1,561
Executive bonuses 481 359
1,878 2,138

Share options held by Group Directors are set out in Note 7.

Details of share options outstanding at 28 June 2014 for other key personnel by exercise price is shown in the table below:
Number of Number of
options at options at Earliest Exercise
28 June 29 June Exercise exercise expiry
2014 2013 price date date

- 28,300 14.0p 25/03/2012 25/03/2019

- 663,063 17.5p 29/07/2013 29/07/2020
- 308,637 17.5p 29/07/2013 29/07/2017
- 128,395 24.7p 02/07/2015 02/07/2019
- 121,605 24.7p 02/07/2015 02/07/2022
155,172 - 58.0p 16/05/2014 16/05/2017
155,172 1,250,000

32 Post Consolidated Statement of Financial Position Events

Since the period end date there have been no significant events.

33 Ultimate Parent Company

Finsbury Food Group Plc is the ultimate parent company.

58
Company Balance Sheet
at 28 June 2014 and 29 June 2013

2014 2013
Note £000 £000

Fixed assets
Investments 41 61,587 61,723
Deferred consideration receivable 42 - 3,000
61,587 64,723

Current assets
Deferred consideration receivable 42 3,000 -
Debtors 43 3,401 3,888
Cash and cash equivalents 3,582 -
9,983 3,888

Creditors: amounts falling due within one year 44 (3,766) (4,693)

Net current assets/(liabilities) 6,217 (805)

Total assets less current liabilities 67,804 63,918

Creditors: amounts falling due after more than one year 45 (3,140) (3,486)

Net assets 64,664 60,432

Capital and reserves

Called up share capital 47 669 642
Share premium account 47 31,480 30,779
Capital redemption reserve 48 578 578
Profit and loss account 48 31,937 28,433
Shareholders’ funds 48 64,664 60,432

These Financial Statements were approved by the Board of Directors on 19 September 2014 and were signed on its behalf by:

Stephen Boyd
Director

Registered Number 204368

59
Company Reconciliation of Movements in Shareholders’ Funds
for the 52 weeks ended 28 June 2014 and 29 June 2013

2014 2013
£000 £000

Loss for the financial year – continuing (827) (206)

Dividends received 4,958 16,580
Profit from sale of Free From – discontinued - 8,005
Retained Profit/(loss) 4,131 24,379

Impact of share based payments current year charge 3 134

Impact of share based payments credit to subsidiaries (136) (21)
New share capital subscribed (net of issue costs) 728 3,834
Dividends paid (494) (160)
Net increase to shareholders’ funds 4,232 28,166
Opening shareholders’ funds 60,432 32,266
Closing shareholders’ funds 64,664 60,432

60
Notes to the Company Financial Statements
(forming part of the Financial Statements)

34 Accounting Policies

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Financial Statements.

Basis of Preparation
The financial year was the 52 weeks ended 28 June 2014 (prior financial year 52 weeks ended 29 June 2013). 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 same as 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 temporary differences between the treatment
of certain items for taxation and accounting purposes.

Deferred tax is recognised, without discounting, in respect of all temporary differences between the treatment of certain items for taxation and accounting
purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19.

35 Remuneration of Directors

Details of Directors’ remuneration are set out in Note 7 of the Group’s Financial Statements.

36 Staff Numbers and Costs

The average number of persons employed by the Company (including Directors) during the year, analysed by category, was as follows:

Number of Employees
2014 2013

Directors and administrative staff 35 36

The aggregate payroll costs of these persons were as follows:
2014 2013
£000 £000

Wages and salaries 2,669 2,595

Social security costs 343 338
Other pension costs 145 179
3,157 3,112

37 Employee Share Schemes

No share options were granted during the year to 28 June 2014 under the ShareSave scheme, (2013: nil). Details of Directors share options are set out
in Note 7 of the Group’s Financial Statements.

38 Share Based Payments

As set out in Note 27 to the Group Financial Statements, 251,034 (2013: 250,000) of the total 302,758 (2013: 250,000) 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 £3,000 (£85,000). The remaining options
were granted to employees of the subsidiary companies with corresponding charges to the relevant profit and loss accounts. Credits relating to options
exercised, cancelled or lapsed after vesting have also been passed to the subsidiaries during the year. The credit totalled £136,000 (2013: debit £27,000)
and has resulted in a reduction (2013: increase) in the total cost of investments in the Company balance sheet.

61
39 Dividends

On 11 December a final dividend was paid to shareholders on the register at the close of business on 22 November 2013.

On 21 March 2014, the Board approved an interim dividend for the six months to 28 December 2013 of 0.25p per share which was paid on 25 April 2014
to shareholders on the register at the close of business on 4 April 2014. The amount paid was £166,052. A final dividend of 0.75p per share has been proposed
taking the total dividend to 1.00p per share.

40 Investment in Subsidiaries

Set out below are the significant subsidiary undertakings of the Company whose results are included in the consolidated Financial Statements for the period
ended 28 June 2014.

Direct/Indirect Country of Class of Ownership Ownership

ownership incorporation shares held 2014 2013

Continuing
Anthony Alan Foods Ltd Direct England and Wales 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 and Wales Ordinary £1 100% 100%
Lightbody Group Ltd Indirect Scotland Ordinary £1 100% 100%
Memory Lane Cakes Ltd Direct England and Wales Ordinary 1p 100% 100%
Nicholas & Harris Ltd Direct England and Wales 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.

41 Fixed Asset Investments

£000

Cost
At beginning of financial year 61,723
Additions (136)
Disposals -
At end of financial year 61,587

Net book value

At 28 June 2014 61,587
At 29 June 2013 61,723

The additions relate to share option credit of £136,000 (2013: charge £27,000) passed down to individual subsidiaries.

42 Deferred Consideration Receivable

On 27 February 2013 the Group sold its Free From business to Genius Foods for a total value of £21,257,000, £3,000,000 of which has been deferred
and is payable 27 February 2015. This is shown as a current asset in the Company Balance Sheet.

43 Debtors
2014 2013
£000 £000

Amounts owed by Group undertakings 2,945 3,128

Other taxation 15 266
Deferred taxation 362 414
Prepayments and accrued income 79 80
3,401 3,888

62
44 Creditors: Amounts Falling Due Within One Year

2014 2013
£000 £000

Bank overdraft - 2,112

Bank loan 2,377 186
Trade creditors 43 183
Amounts due to Group undertakings 22 50
Other taxes and social security 84 95
Accruals and deferred income 1,240 2,067
3,766 4,693

45 Creditors: Amounts Falling Due After More Than One Year

2014 2013
£000 £000

Total bank loans and mortgages 3,140 3,486

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.

46 Interest-Bearing Loans and Borrowings

This note provides information about the contractual terms and repayment schedule of the Company’s interest-bearing loans and borrowings, which are
measured at amortised cost. For more information about the Group’s exposure to interest rate risk, see Note 25.

Frequency of Year of Total Current Non-current

2014 Currency Margin Above repayments maturity £000 £000 £000

Revolving credit GBP 2.00% LIBOR Quarterly 2017 2,000 2,000 -

Mortgage GBP 1.75% Base Monthly 2023 3,593 399 3,194
Unamortised transaction costs (76) (22) (54)
5,517 2,377 3,140

Repayments are as follows:

Between one and two years 347
Between two and five years 1,073
Between five and ten years 1,720
Between 10 and fifteen years -
3,140

Frequency of Year of Total Current Non-current

2013 Currency Margin Above repayments maturity £000 £000 £000

Mortgage GBP 1.75% Base Monthly 2023 3,932 369 3,563

Unamortised transaction costs (260) (183) (77)
3,672 186 3,486

Repayments are as follows:

Between one and two years 347
Between two and five years 1,051
Between five and ten years 1,842
Between 10 and fifteen years 246
3,486

63
47 Called Up Share Capital

Note 27 in the Group Financial Statements gives details of called up share capital.

48 Capital and Reserves

Reconciliation of movement in capital and reserves

Capital
Share Share redemption Retained Total
capital premium reserve earnings equity
£000 £000 £000 £000 £000

Balance at 1 July 2012 535 27,052 578 4,101 32,266

Shares issued 107 3,727 - - 3,834
Impact of share based payments - - - 113 113
Retained loss for the financial year - - - 24,379 24,379
Dividends payable - - - (160) (160)
Balance at 29 June 2013 642 30,779 578 28,433 60,432

Balance at 30 June 2013 642 30,779 578 28,433 60,432

Shares issued 27 701 - - 728
Impact of share based payments - - - (133) (133)
Retained profit for the financial year - - - 4,131 4,131
Dividends payable - - - (494) (494)
Balance at 28 June 2014 669 31,480 578 31,937 64,664

49 Contingent Liabilities

The Company has guaranteed the overdrafts of its subsidiaries; there was a net cash position at the year end of £592,000 (2013: £1,310,000).

50 Related Party Disclosures

Note 31 in the Group’s Financial Statements gives details of related party transactions.

51 Financial Risk Management

The Company’s policies on the management of liquidity, credit and interest rate risks are managed at a Group level and are set out in Note 25 in the Group’s
Financial Statements and also referred to in the Strategic Report.

64
Notes to the Financial Statements
(forming part of the Financial Statements)

Presentation of Financial Statements

Basis of Preparation of Consolidated Financial Statements

The following accounting standards and interpretations, issued by the International Accounting Standards Board (“IASB”) or IFRIC (as endorsed
by the EU), are effective for the first time in the current financial year:

• IAS 32 (Amendment) Offsetting Financial Assets and Financial Liabilities – effective 1 January 2014
• IAS 36 (Amendments) Recoverable amount disclosures for non-financial assets – effective 1 January 2014
• IFRIC 21 Levies – effective 1 January 2014.

The application of the standards and interpretations has not had a material effect on the net assets, results and disclosures of the Group.

New Standards and Interpretations Endorsed but not yet Effective

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 19 (Amendment) Defined Benefit Plans – effective 1 July 2014

It is not anticipated that the adoption of any of these standards and interpretations will have a material impact on the Group’s Financial Statements.

New Standards and Interpretations not yet Endorsed and not yet Effective
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 9 Financial Instruments – effective 1 January 2018

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.

65
Directors’ Report

Background
The Group operates in the cake and bread markets which is focused on premium, celebration and well-being. These products are supplied both under
the retailers’ own brands and through a number of licensed brands to which the Group has access.

A review of the activities and any likely future developments in the business of the Group is given in the Chairman’s Statement, Chief Executive’s Report
and the Strategic Report on pages 8 to 21.

Dividend
On 21 March 2014, the Board approved an interim dividend for the six months to 28 December 2013 of 0.25p per share which was paid on 25 April 2014.
The Directors have recommended a final dividend of 0.75p per share.

Directors and their Interests in the Company

The Directors and brief biographies are detailed on pages 6 to 7.

In accordance with the Articles of Association E J Beale retires by rotation and being eligible offer himself for re-election.

The beneficial interests of the Directors in the Ordinary Shares of the Company on 28 June 2014 and 29 June 2013 are set out below:

Ordinary Shares

28 June 2014 or date of

ceasing to be a Director 29 June 2013

E J Beale 40,000 40,000

S A Boyd 555,137 555,137
D C Currie (d) 136,238 136,238
J G Duffy 1,855,163 1,382,359
I R Farnsworth (c) Nil 83,866
M W Lightbody (a) 7,200,000 13,700,000
D C Marshall (b) Nil Nil
P J Monk 291,547 441,547

(a) On 30 June 2014 M W Lightbody stepped down as Chairman.

(b) On 30 June 2014 D C Marshall stepped down as a Non-Executive Director.

(c) On 15 July 2013 I R Farnsworth stepped down as a Non-Executive Director.

(d) On 31 December 2013 D C Currie stepped down as a Director.

Details of Directors' share options are set out in Note 7 to the Financial Statements.

Details of the emoluments of the Directors are given in Note 7 to the Financial Statements.

There have been no changes in the interests of Directors as set out above since 28 June 2014.

Share Capital
Details of the changes in the share capital of the Company during the year are set out in Note 27 to the accounts.

Substantial Interests
The following substantial interests (3 per cent or more) in the Company’s issued share capital have been notified to the Company as at 29 August 2014:
Number % of issued
of shares share capital

Ruffer LLP 10,438,689 15.6%

London Finance & Investment Group P.L.C. 9,000,000 13.5%
M W Lightbody 7,200,000 10.8%
Hargreave Hale 5,471,385 8.2%
Barclays Wealth 3,171,554 4.7%
Miton Group P.L.C 2,121,070 3.2%

66
Research and Development
Research and development expenditure is written off in the year in which it is incurred.

Directors and Officers’ Liability Insurance

The Company maintains a Directors and Officers liability insurance policy.

Financial Instruments
The Group’s financial instruments comprise mortgage, asset finance facilities, a confidential invoicing facility, revolving credit facility, cash and liquid
resources, and various items arising directly from its operations, such as trade creditors. The main purpose of these financial instruments is to finance
the Group’s acquisitions and operations, 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 managing
these risks, which have remained substantially unchanged for the year under review. The policies are summarised below:

Interest Rate Risk

The Group finances its operations by retained profits and bank borrowings. A suite of borrowing facilities totalling £32 million is available. This includes an
overdraft facility of £3 million, undrawn invoice discounting facility of £12.0 million, undrawn revolving credit of £6 million and unused asset finance
of £1.1 million. The interest rate risk is managed through three interest rate swap transactions. The total balance of these swaps was £14.0 million at the
period end date. The counterparty to these transactions is HSBC Bank Plc.

Liquidity Risk
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 25.

Employee Involvement
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.

Disabled Employees
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.

Political and Charitable Contributions

During the year charitable donations amounting to £1,000 (2013: £3,000) were made, primarily to local charities.

Going Concern
On the basis of current financial projections and available funds and facilities, the Directors are satisfied that the Group has adequate resources to continue
in operation for the foreseeable future and, therefore, consider it appropriate to prepare the Financial Statements on the going concern basis. Refer to the
basis of preparation for further details.

Auditors
In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG LLP as auditors is to be proposed at the
forthcoming Annual General Meeting.

• So far as each Directors is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
• Each Director has taken all the steps that they ought to have taken as a Directors in order to make himself aware of any relevant audit information
and to establish that the Company’s auditor is aware of that information.

The Directors’ Report was approved by the Board of Directors on 19 September 2014 and was signed on its behalf by:

Stephen Boyd
Director

67
Statement of Directors’ Responsibilities in Respect
of the Annual Report and the Financial Statements

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
of the London Stock Exchange they are required to prepare the Group Financial Statements in accordance with IFRSs as adopted by the EU and applicable
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).

Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs
of the Group and parent company and of 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;
• For the parent company Financial Statements, state whether applicable UK Accounting Standards have been followed, subject to any material
departures 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.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose
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
Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent
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.

By Order of the Board

City Group Plc
Company Secretary

19 September 2014

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Report on Corporate Governance

Although not required to do so, the Directors have sought to embrace the principles contained in the UK Corporate Governance Code (2012), applicable
to fully listed companies, in formulating and applying the Group’s corporate governance policies. These policies are monitored to ensure that 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.

The Board consists of the Non-Executive Chairman, Peter Baker who was appointed on 1 July 2014, succeeding Martin Lightbody who stood down from
the Board on 30 June 2014, two Executive Directors ( John Duffy, Chief Executive and Stephen Boyd, Finance Director), and three Non-Executive Directors
(Paul Monk, Edward Beale and Raymond Duignan. David Marshall who retired from the Board with effect 30 June 2014 had served as a Non-Executive
Director up until that date). Consideration is given to character, judgement and business relationships when considering a Director’s independence.

The role of the Chairman and the Chief Executive 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 Plc and David Marshall is a Director of that company. City Group Plc is a subsidiary of London
Finance & Investment Group Plc, a substantial shareholder in the Company. City Group Plc provides a full company secretarial service to the Company
on an outsourced basis and its fees are set out in Note 31 of the Financial Statements. The Company is not large enough to justify the employment of a full
time Company Secretary.

Board Committees
The Board has separate Audit, Nominations and Remuneration Committees.

The Audit Committee is chaired by Raymond Duignan with Edward Beale, a chartered accountant, as the other member.

Further details are given in the Audit Committee Report on page 70.

The Remuneration Committee is chaired by Raymond Duignan with Edward Beale as the other member.

Further details are given in the Remuneration Committee Report on page 71.

The Nominations Committee comprised of David Marshall up until 30 June 2014. Peter Baker now chairs the Nominations Committee and Raymond
Duignan is the other member of that Committee. The Committee’s main responsibilities include:

• Advising the Board on the appointment of Directors

• Reviewing the composition and size of the Board
• Evaluating the balance of skills, knowledge, experience and diversity of the Board
• Making recommendations on succession planning.

Internal Controls
The Board is responsible for maintaining a sound system of internal controls to safeguard shareholders’ investment and the Group’s assets, as well as reviewing
the effectiveness of those controls. The system of internal controls is designed to manage rather than eliminate the risks of failure to achieve the Group’s
objectives and can only provide reasonable, rather than absolute, assurance against material loss and mis-statement. Additional resource has been employed
to review current policies and procedures and to test the systems.

Dialogue with Shareholders

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 meetings

• 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.

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Audit Committee Report

Responsibilities
The Audit Committee monitors and reviews areas such as risk management, internal controls and the integrity of financial reporting both internally and
externally. The Audit Committee is also responsible for making recommendations to the Board on the appointment of the external auditor and assessing
the auditor’s independence and objectivity. The Committee is also responsible for monitoring the auditor’s effectiveness and agreeing the terms of the auditor’s
engagement. It receives reports on these issues from the relevant Executive Directors and reports back to the Board on the action points within those
reports and any recommendations arising. As part of these responsibilities it considers the requirement for an internal audit function.

The full terms of reference of the Audit 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
The Audit Committee is chaired by me, Raymond Duignan, the other member being Edward Beale, a Non-Executive Director. Both committee members
are considered by the Board to be independent Directors. Edward Beale, a chartered accountant, was a member of the Accounting Council of the FRC
until August 2013 and therefore has recent and relevant financial experience.

Procedures
The Audit Committee met three times during the year. The Finance Director is invited to attend Committee meetings and the external auditors are invited
to attend any meetings involving the Financial Statements, the annual audit and other significant matters. 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.

Risks and Controls

Group management prepare an Annual Report for the Audit Committee’s consideration that identifies the risks and uncertainties to which the Group is exposed,
the procedures in place to mitigate those risks and uncertainties 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 in place, or the level of risk accepted by the Group, are reported to the Board. The principal risks and
uncertainties to which the Group is exposed are considered by the Board and are set out in the Strategic Report on page 8.

The Committee reviews the need for an internal audit function on an annual basis. At present, due to the size of the Group and lack of complexity in the
business model, the Committee does not believe that a dedicated full time internal audit function is warranted. Additional resource has been recruited to assist
with the reporting of risks, policies and procedures. A programme of rolling internal control and risk reviews is monitored by the Committee which considers
reports on these reviews at each meeting.

External Reporting
The Board delegates primary responsibility for the preparation of complete, balanced and accurate Financial Statements and disclosures, in accordance with
Financial Reporting Standards and regulations, to the Finance Director. The responsibility of the Audit Committee is to consider significant accounting
policies, any changes in policies and significant estimates and judgements, taking into account the external auditors’ view, and to report back to the Board
on any concerns that it might have. The Audit Committee reviews and comments on the clarity and completeness of disclosures within the Financial Statements.
Ultimate responsibility for reviewing and approving the annual Financial Statements and half yearly reports remains with the Board.

The Audit Committee also reviews and comments on related information presented with the Financial Statements, in particular the Strategic Report,
the Directors’ Report and the Report on Corporate Governance.

Key Agenda Items

During the year, the Committee specifically discussed issues arising from:

• Interest rate and currency hedging

• Review of risks and appropriate level of internal controls
• Systems, purchasing and IT security review
• Impairment reviews
• Dividend policy
• Group insurance renewal
• Pension disclosures.

Certain services relating to taxation, pension, due diligence and IT systems review advice has been received and/or is proposed to be received by the Group’s
auditor. All non-audit services are subject to and have been approved in advance by the Audit Committee Chairman. The Audit Committee does not believe
it compromises the auditor’s independence as the Auditor’s ethics and independence policies and procedures are fully consistent with the requirements
of the APB Ethical Standards.

If any reader of these accounts has 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.

Raymond Duignan
Chairman of the Audit Committee

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Remuneration Committee Report

Responsibilities
The Remuneration Committee provides 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 executive management and, to agree
business unit cash bonus schemes and equity related remuneration and incentive schemes. The Remuneration Committee is also responsible 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
The Remuneration Committee is chaired by me, Raymond Duignan, the other member being Edward Beale, a Non-Executive Director. Both of us are
considered to be independent Directors.

Procedures
The Remuneration Committee met three times during the year. The Chief Executive is normally invited to attend Committee meetings.

Executive Directors
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
• Share related incentives.

The salaries of Executive Directors are set by the Committee in accordance with the policy agreed by the Board 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 the
Committee, being met. Bonus payments for the year to 28 June 2014 are disclosed in Note 7 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.

Chairman and other Non-Executive Directors

Non-Executive Directors are not 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 fee. The remuneration of the Chairman is determined by the Board and the remuneration
of Non-Executive Directors is determined by the Chairman and the Group Chief Executive.

Annual Cash Bonus Schemes

The Remuneration Committee reviews and approves proposed annual cash bonus schemes within the Group. The main characteristics of these schemes
are that payments to individuals depend on the profitability of the business unit relative to its budget and the achievement of relevant personal or departmental
performance conditions. Maximum payments under these schemes are set at levels that are meaningful, but not excessive, relative to individuals’ salaries.

Long-Term Incentive Scheme

A new incentive scheme was agreed for the CEO and CFO of the Group in order to align their remuneration more closely with the performance of the Group
and shareholder returns. The scheme provides for a bonus to be paid, 50% in cash and 50% in equity, in the event that the EBITDA achieved by the Group
is in excess of the Group's business plan as communicated to shareholders. All cash elements, including costs and tax, must be self funding ie must not impact
negatively the Group plan as communicated. Any shares issued may not be sold without prior consultation and it is noteworthy that neither the CEO or CFO
have sold shares or options, other than to pay tax thereon, since they joined the Group.

In respect of the 2014 financial year the bonuses payable to the CEO and CFO and the equity issued are set out in the table on Board remuneration in Note 7.

Raymond Duignan
Chairman of the Remuneration Committee

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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 28 June 2014 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.

Respective Responsibilities of Directors and Auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 68, 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 Ethical Standards for Auditors.

Scope of the Audit of the Financial Statements

A description of the scope of an audit of Financial Statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

Opinion on Financial Statements

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 28 June 2014
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.

Opinion on other Matter Prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and Directors' Report for the financial year for which the Financial Statements are prepared
is consistent with the Financial Statements.

Matters on which we are Required to Report by Exception

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.

Ian Brokenshire
Senior Statutory Auditor
for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants
3 Assembly Square
Britannia Quay
Cardiff Bay
CF10 4AX

19 September 2014

72
Advisers

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CF14 4XR Registrars
Tel: 029 20 357 500 Capita Registrars
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City Group Plc Kent
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London
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KPMG LLP
Nominated Advisor & Broker Chartered Accountants
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London Cardiff Bay
EC2R 7AS CF10 4AX

73
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