Glisten PLC - Final Results

8 September 2008

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Highlights

 

*        Revenue up 26% to £73.8m (2007: £58.6m) – underlying sales growth up 11% year on year

*        EBITDA before exceptional items up 18% to £9.9m (2007: £8.3m)

*        Profit before tax and exceptional items up 18% to £6.68m (2007: £5.66m)

*        Diluted adjusted earnings per share up 15% to 34.1 pence (2007: 29.7 pence)

*        Strong cash generation from operations at £9.0m (2007: £7.4m)

*        Final dividend of 1.15 pence proposed (2007: 1.1 pence) - annual dividend up 7% to 2.25 pence (2007: 2.1 pence)

*        Excellent performance from acquisitions

*        Solid start to current year’s trading

Commenting on the results, Paul Simmonds, Chief Executive of Glisten plc, said: 

"We have progressively driven our business towards those areas of snacking which we believe have long-term potential - including specifically the healthier and premium sectors. Our progress in these areas often overshadows our absolute focus on being a broadly-based, flexible, low cost producer. This has been one of the core strengths of our business since inception and is evident in the robustness of our margins. 

We do recognise that some consumers' buying habits will adjust during the next financial year but our focus on producing affordable treats, many with a healthier dimension, will underpin our continued ambitions for Glisten as these sectors tend to hold up well during more demanding economic conditions and we remain determined to ensure that our business continues to be the most efficient as well as the most dynamic in our sector."

  

Glisten plc is a fast-growing snack and confectionery food-group operating at the leading edge of health, nutrition, and premium impulse-foods. It serves a wide variety of customers including most high street retailers, many major food manufacturers and the foodservice sector. Glisten also exports to more than 20 countries worldwide.

The principal activities of Glisten are the manufacture of cereal, fruit snack bars and health bars, many of which have a diet-control dimension. Glisten is a leader in organic and natural snacks and premium confectionery.

Glisten also manufactures specialised coatings which it markets to the broader food industry, particularly Europe's largest ice-cream and bakery manufacturers.

Glisten's brands include: 'Fruitus', produced by Lyme Regis Foods, Dormen and 'SunMaid', where Glisten has the Europe-wide confectionery and fruit-snacking rights, and 'Halo', a brand focused on the growing fair-trade sector.

In September 2007, the Group acquired 50% of Skinny Candy, a young branded confectionery business focused on low sugar-low fat confectionery, and Dormen Foods, which became the foundation stone of the Savoury Snacking Division. This was followed in November 2007 by the acquisition of Big Thoughts Ltd, which has been renamed Glisten Snacks Ltd, comprising two subsidiaries active in the low fat/baked savoury snacking marketplace - 'Snacks Unlimited' and 'The Lindum Snack Company Limited'.

In addition to these areas Glisten has well established integrated relationships with some of Europe's biggest brand-name food companies where it produces snacking products under licence.

It listed on the AIM market of the London Stock Exchange in June 2002 with sales of £14.3m. Group turnover for the year ended 30 June 2008 was £73.8m.

The Company now employs approximately 700 people across its nine manufacturing sites around the UK. Some of Glisten's sites are nut-free and have organic-food accreditation.

Head Office and Group Companies

The Head Office is in Harewood, near Leeds, Yorkshire. The Group's operations are set out below:

CHAIRMAN'S STATEMENT

This is our sixth year as an AIM listed company and it is with great pleasure that I announce another record year of turnover and profits for our company. This year has seen strong progress in a number of areas the most notable of which are:- 

• Significant evolution of our product offering 

• The successful launch and re-launch of a number of new and existing branded products 

• Continuing strong operational cash generation and improving operational efficiency

• Strengthening of our senior management team with a number of key appointments

• The completion of 2 acquisitions in the Autumn taking us into savoury snacks for the first time

• The management and absorption of raw material and utility cost increases

Results

During the year to June 2008 Glisten plc achieved revenue up 26% to £73.8m (2007: £58.6m) and on a like for like basis up 11%.  EBITDA before exceptional costs increased by 18% to £9.9m (2007: £8.3m) and our pre exceptional operating profits (see note 3) were ahead by 21% to £8.0m (2007: £6.6m). Profit before tax and exceptionals increased by 18% to £6.68m (2007: £5.66m).  

 

Both adjusted basic earnings (note 7) and adjusted diluted earnings per share rose by 15% to 35.2p (2007: 30.5p) and 34.1p (2007: 29.7p) respectively. 

Dividend

The board is pleased to recommend the payment of a final dividend for the year ended June 2008 of 1.15 pence (2007: 1.1 pence) per ordinary share, making 2.25 pence for the year (2007: 2.1 pence), an increase of 7%. It is our intention to grow the dividend distribution sensibly going forward. If approved, the final dividend will be paid on 7 December 2008 to shareholders on the register at the close of business on 6 November 2008.

Management and Board

Our management style continues to place the emphasis on leadership and innovation within a framework of robust cost and capital control. We encourage new ideas in all areas of our operations, test them, evaluate and implement quickly where there are clear benefits. We promote an incentive culture, thus rewarding success and encouraging those who deliver and challenge.

We aim to be a good neighbour in the areas of the country where our businesses are located, helping to create a stable prosperous local economy in which our business can grow while supporting sensible Corporate and Social Responsibility (CSR) and environmental initiatives.

Over the course of the year we have expanded the role of our remuneration committee to encompass the appointment of board members and senior staff within Glisten plc. We believe it is appropriate for a company of our size to bring the responsibility of the nominations and remuneration committees under one umbrella chaired by Angela Megson.

Shareholders and Share Price

Our private shareholder base has increased in number by around 2% to 779 shareholders (2007: 765). It is the Board's intention to communicate fully with all shareholders, current and future, and in so doing continue to build awareness and understanding of Glisten.

This has been a difficult year for shareholders as the credit crunch and inflation concerns have hit confidence across world stock markets. This has been particularly visible on AIM where our share price has fallen nearly 40% during a year in which we have improved adjusted earnings per share by 15%. 

Staff

We really value the contribution of our 694 people, including those who have joined us during the year and we wish to thank them for their continuing hard work and enthusiasm. This year particularly has thrown us a number of major challenges and these results are evidence of the huge energy and ingenuity that our team demonstrates continuously. 

Outlook

We have another ambitious plan for the year ahead and remain excited about the prospects for the business. The first 9 weeks of the current year has started with overall sales ahead 15% whilst showing no like for like growth. With a number of new listings in all parts of the group we look forward to this year with optimism in spite of the challenging economic climate. In summary we remain confident that our portfolio of branded and own label product across the snacking and impulse market leaves us well placed for continuing growth. 

Jeremy Hamer

Chairman

  CHIEF EXECUTIVE'S REVIEW

Review of the Period

Overview

I am once again delighted to report that the Glisten Group has made solid progress and achieved record sales and profits for the sixth year in succession.

Our sales in the year were £73.8m (2007: £58.6m) up 26%, with operating profits before exceptional items of £8.0m (2007: £6.6m) up 21%. Underlying sales increased by 11% versus last year's levels. 

This year has seen more turbulence in the food market generally and most food businesses including our own, have had to contend with widespread increases in raw material costs compounded latterly by rising utilities costs. 

Glisten has coped with the storm well. We have been able to demonstrate that being an efficient manufacturer with a broad and diverse customer base focused on the right parts of the impulse foods market gives us better opportunities for sustained growth and cost recovery than any of our peers. 

This year all of our business units with the exception of Lyme Regis Foods grew both sales and operating profits. 

As advised at the half-year, sales at Lyme Regis reduced as a result of weaker demand for high-protein sports bars to one specific European branded customer but I am pleased to report that this trend has already begun to reverse itself as we start our new financial year.

We have progressively driven our business towards those areas of snacking which we believe have long-term potential - including specifically the healthier and premium sectors. Our progress in these areas often overshadows our absolute focus on being a broadly-based, flexible, low cost producer. This has been one of the core strengths of our business since inception and is evident in the robustness of our margins.

We do expect the current market pressures to remain for some time and as a consequence we have been fine-tuning our business model so that we can continue to progress strongly in the year ahead. We do recognise that some consumers buying habits will adjust during the next financial year but our focus on producing affordable treats, many with a healthier dimension, will underpin our continued ambitions for the Glisten Group as these sectors tend to hold up well during more demanding economic conditions. 

We remain determined to ensure that our business continues to be the most efficient as well as the most dynamic in our sector. Therefore our internal programmes aimed at being best-in-class at buying/sourcing, manufacturing and innovation will continue with added vigour and purpose. 

Given conditions in the financial markets we do not expect to make major acquisitions over the next 12 months albeit that our acquisition pipeline remains strong. We continue to have significant organic growth momentum and this has always been the primary focus of our planning each year. 

Our 'Drive Brands', including Dormen (nuts), Fruitus (all natural fruit snacks), SunMaid and Weight Watchers (both licensed), have all performed well and we have robust sales and marketing plans for the year ahead. 

Glisten Group is uniquely broadly based. More than 70% of our sales are generated outside the top 5 multiple retailers and whilst we have good relationships with each of them and are ambitious for further growth, we remain committed to supplying a wide range of market channels as we believe this gives us an unusually broad array of growth opportunities as well as real resilience in the face of market pressures. 

Divisional Commentary

  

The following commentary details the performance in each of our 3 sector-focused operating divisions:-

Confectionery Division

This Division comprises our activities at three sites - Blackburn, Skegness, trading as Glisten Confectionery ("GC") and Dolgellau, trading as Nimbus Foods ("Nimbus"). GC is a broadly-based specialist confectionery business focused on all-natural, no trans-fats chocolate/yoghurt coated fruits/nuts, popcorn and gums/jellies. 

Nimbus operates in an adjacent market, producing barrier-coated confectionery 'inclusions' mainly for other food manufacturers in the UK and mainland Europe. 

Sales were £32.8m (2007: £30.3m) up 8.2%, which represents a record year for this Division of our business. Both elements performed well overall, despite some supply shortfalls in GC in the run-up to Christmas 07 and weaker sales than plan in Nimbus during summer 07. Both these factors held the Division back at the half-year. 

In both cases we took the appropriate action to avoid any recurrence including carefully increasing our Christmas 08 stock-build programme in GC and accelerating our drive to reduce dependence on the ice-cream sector in Nimbus. Both businesses performed solidly, built strongly throughout the second half of the year, and finished with record sales. 

This Division saw significant change during 2007/08 and, as this performance indicates, we leave the year with a strong base to continue to build on.

  

Specific initiatives

• Both GC and Nimbus had essentially new senior management teams installed early in 2007. These teams have performed well and have delivered new insight and momentum to the two excellent market positions that we have here. 

• Although we strongly value the breadth of our business in terms of both customer and product 'reach' we felt the need to re-focus our activities and remove cost and complexity in order to increase pace in GC in particular. During the year a number of slower selling and low value-added product lines were removed from our confectionery offering in order to improve supply and efficiency. The number of product lines in this Division therefore reduced by nearly 20% and will reduce further in the year ahead. 

Fruit and Cereal Snacks Division

This Division comprises our activities at three sites - Tywyn and Newport in Wales trading as Halo Foods ("Halo") and also Liphook, Hampshire trading as Lyme Regis Foods ("LRF"). 

Halo is one of the largest manufacturers of cereal, fruit and protein bars in Europe, producing more than 200million bars per annum. LRF has a more specialist, niche position as a producer and marketer of organic, all-natural, 'free-from' (eg. gluten-free), baked products, some of them in bar-format. LRF produces c.30million bars per annum. Both businesses serve the UK and have very active trading relationships in mainland Europe.

Headline Divisional sales were £29.4m (2007: £28.4m) up 3.5%. This result masks the underlying dynamics in what has been another year of progress in Halo with record profits, but as previously advised, a more challenging year for LRF. 

Both operations were strongly profitable but Lyme Regis had lower sales and profits versus its record year last year primarily as a result of lower demand from our primary European customer for protein-based energy bars. 

The 'functional/nutritional-snacks' market (which includes energy/sports bars) is quite specialist but it is an important one for Glisten strategically due to its value and overall growth potential.  

We are pleased to have a much stronger customer sales programme committed for 2009 but despite this we will now actively broaden our sales-base going forward. 

Halo's headline sales performance masks a considerable mix change this year. When we acquired Halo in December 2004 it was largely a contract-manufacturing business working for big-brands but without a well developed market position of its own. As advised in previous reports, over the last 2 years we have been carefully re-shaping the customer and product mix by resigning low value sales contracts, developing defensible product-technology positions and focusing much more on product innovation. 

Halo's one remaining 'big-brand' contract-manufacturing activity of significance was brought to an end in June 2008. Organic sales growth excluding this contract was a very encouraging 21% ahead (2008: £19.2m, 2007: £15.9m). 

Savoury Snacking Division

This Division also operates on three sites - Swindon, Wilts trading as Dormen Foods, Park Royal London trading as Snacks Unlimited and Boston, Lincolnshire trading as Lindum Foods.

These businesses were acquired in 2007/08 and we therefore have part-year's trading (42 weeks Dormen, 34 weeks Snacks Unlimited), included in these results. The combined initial consideration paid was £8.95m with further earn-out payments payable subject to performance in Dormen Foods only.

Divisional sales for the part-year were £11.75m, strongly up from both businesses previous year in private ownership. Both delivered strong operating profits in line with our plans at acquisition.

We are delighted with the performance and potential of both these young businesses and we feel that they have integrated into Glisten Plc's approach and culture perfectly. We are also pleased with the fresh insights and market positions that we have acquired. As an example, Dormen brand is present in virtually every garage forecourt in the UK and this sets a great example for our other branded products such as Fruitus, Sunmaid and Skinny Candy, none of which currently sell in this area of the market. 

 

'Dormen' became the No.2 brand in the UK snacking-nut market this year and the fastest growing brand in its market (source: Neilsen). Dormen sales in the 42 weeks since acquisition were £6.25million. 

We do feel that Dormen has a fast emerging position and is becoming synonymous with high quality, interesting savoury snacks. During the year we launched a Wasabi Nut range, an Organic Baked range and an Olive Oil Baked range into our pub, delicatessen and hotel/travel customers which represent 30% of Dormen sales, however the main growth this year has come from the major retail sector where sales have grown 50%. 

Despite this growth Dormen's range does not have full distribution throughout the main retailers. As a young brand it is still listed in less than 50% of potential stores in the Top 5 multiple retailers and our target in 2009 is to substantially fill these distribution gaps.

Snacks Unlimited ("SULtd") and its sister company Lindum Foods joined the Group at the end of October 07 and both businesses have accelerated since acquisition. Sales in the 34 weeks since acquisition were £5.6million.

SULtd holds the licence for Weight Watcher branded savoury snacks and also produces some own label bagged-snack products for the multiple retailers. All products produced are either lower fat or 'baked-not-fried'. During the year several new Weight Watchers-brand products were launched and achieved high levels of distribution and strong rates-of-sale in certain retailers such as Asda, Morrisons and Sainsbury, but there is considerable room for further distribution gains. Weight Watchers lower-fat Tortillas, Baked Potato Hoops and Puffs, all launched this year will be followed by 2 exciting new baked-not-fried product ranges which have been developed by the SULtd food technology team in only 4 months for launch in Autumn 08.

This is a sector of the market where product quality has improved considerably in recent years and as a result, consumer demand has been switching steadily to the better-for-you equivalents of the brand leaders. There is real room for a specialist producer focused on innovation and we are very optimistic about our opportunities for further organic growth. 

Our Brands

We are obviously placing much more emphasis on our desire to grow a strong and worthwhile branded business than we did in our first few years as a PLC albeit that this has always been a clearly stated part of our strategy. The branded element of our business more than doubled in the year and now represents more than 25% of total Group sales at £19.5m (2007: £7.1m) due in part to the acquisition of Dormen and Snacks Unlimited.

In 2007/08 we spent £780,000 (2007: £320,000) advertising and promoting our brands and we expect this level of spend to grow slightly in the year ahead.

Other than the launches highlighted in the Divisional Reviews the most significant activities this year were the complete redesign and re-launch of Lyme Regis market leading fruit snacking range under one umbrella brand, "Fruitus", and the creation and launch of a unique technology and brand proposition, "Fruit Fingers" under the Sun-Maid brand. 

Since re-launch in May 08 Fruitus rate of sale has risen strongly and Fruit Fingers have achieved good initial distribution in retailers ranging from Tesco, Aldi, Spar and Boots ready for their launch in September 08.

People

Following the acquisition of Dormen, Snacks Unlimited and Lindum Foods Glisten Group now has 694 employees (2007: 616) spread across 11 locations.

We place huge emphasis in 'doing what we said we would do' and I am very proud of the fact that our Group has delivered consistently and grown strongly over the last six years. As always I would like to express my thanks for the support and the will to win of all our people who have made this possible. 

Together we are building an exciting and fast-moving business operating in parts of the market which have sustainable growth potential and good prospects. 

Paul Simmonds

Chief Executive

FINANCE DIRECTOR'S REPORT

Results

Our results for the year ended 30 June 2008 show another significant improvement in our financial performance with revenue, profit before tax and exceptionals, adjusted earnings per share, operating cash and dividends per share reaching record levels for the sixth successive year. 

Net finance costs during the year pre exceptionals (note 3) were £1,331,000 (2007: £955,000) reflecting the impact of this year's acquisitions. Interest was covered on a pre exceptional basis 6.0 times (2007: 6.9 times). Interest costs were assisted by a foreign currency denominated interest rate swap which reduced the interest charge in the period by £347,000. This currency swap was hedged in full against the Group's available tax capacity. In the period, the group incurred an exchange loss of £2,589,000 on this swap (see note 3 Exceptional Items) which was offset by an equal reduction in taxation payable. The resulting tax credit of £2,589,000 which is allowable to offset against the group taxation charge is included in taxation arising on exceptional items in note 3.

Earnings per Share 

The IAS 33 basic earnings per share in the year as per note 7 was 27.7p (2007: 25.5p), whilst diluted earnings per share was 26.9p (2007: 24.9p). 

The adjusted basic earnings per share has increased by 15% to 35.2p (2007: 30.5p) and the adjusted diluted earnings per share by 15% to 34.1p (2007: 29.7p). We are this year reporting the adjusted earnings per share after share based payment for the first time and this increased by 14% to 32.7p (2007: 28.6p) and on a diluted basis by 14% to 31.7p (2007: 27.9p). 

Taxation

The effective rate of taxation in the year on profit after exceptionals is a recovery of 42.9% (2007 cost: 26.9%). The deferred taxation liability carried forward at the 30 June 2008 was £877,000 (2007: £1,067,000). 

Equity Funding

During the year employees exercised options over 10,700 ordinary shares raising a further £26,000 and 19,532 ordinary shares were issued to the vendor of Skinny Candy as part of her consideration amounting to £75,000. 

Skinny Candy 

In September 2007 Glisten acquired 50% of Skinny Candy from its founder Sahar Hashimi for a sum of £150,000, satisfied by cash of £75,000 and ordinary shares in Glisten plc of £75,000. 

Acquisition of Dormen Foods Limited

In September 2007 the group acquired the entire share capital of Dormen Foods Limited for an initial consideration of £10,200,000 of which £7,450,000 was satisfied in cash and £2,750,000 in fixed deferred consideration and loan notes backed by a bank guarantee. The fixed deferred consideration and loan notes of £1,500,000 and £1,250,000 are payable in October 2008 and October 2009. A further additional consideration is £1,750,000 is payable based upon the achievement of a certain level of profit in the year to August 2008. The directors believe it is prudent to provide for this amount in full. The profit contingent deferred consideration of £1,750,000 is payable in October 2008. Costs of this transaction were £355,000. 

Acquisition of the Big Thoughts Group (renamed Glisten Snacks Limited)

In November 2007 the group acquired 100% of the share capital of Glisten Snacks Limited (formerly Big Thoughts Holdings Limited) for £1,500,000. Costs in relation to this transaction were £185,000. 

Acquisition of Halo Foods Limited (Halo) and Lyme Regis Fine Foods Limited (Lyme Regis)

The final instalments of deferred consideration in respect of Halo (£2,500,000) and Lyme Regis (£1,166,000) were paid during March 2008. 

Cash Flow

The cash generated from operating activities during the year was £8,987,000 (2007: £7,445,000) and arose due to a strong operating cash performance before interest, taxation and working capital movements of £9,875,000 (2007: £8,045,000). Increases in working capital during the year accounted for the difference of £888,000 (2007: £600,000). This reflects a strong conversion of profits to cash. 

During the period under review the Group incurred £1,614,000 (2007: £1,271,000) of capital expenditure. We have concentrated our investment programme on increasing capacity and efficiency in our factories. The results of this targeted programme will benefit all our business units and give us confidence that Glisten is equipping itself for continued growth in the years ahead.

Before acquisitions and disposals the Group generated free cash of £2,355,000 (2007: £3,208,000) which was used to part fund deferred consideration of £3,666,000. The balance was funded by an increase in net debt. The group spent £10,335,000 on acquisitions leaving net debt at 30 June 2008 at £25,119,000 (2007: £12,878,000) representing gearing of 89% (2007: 53%).

The Group expects to make a £3,250,000 payment in respect of deferred consideration during the current financial year to the vendors of Dormen Foods Limited.

  

Bank Facilities

The Group has total loan facilities of £31,750,000 which are renewable on 30 June 2012 comprising 2 loan facilities amounting to £23,000,000 and £2,750,000, a revolving credit / overdraft facility of £6,000,000 provided by Barclays Bank at variable rates which currently average 1.85% (2007: 1.36%) over base rate and LIBOR. £5,000,000 of this loan is repayable in quarterly instalments between December 2009 and June 2012. The costs of raising these loans is being written off over the life of the loan and during the year a sum of £126,000 (2007: £91,000) was charged.

At 30 June 2008 the group had headroom in its existing borrowing facilities of £4,002,000 (2007: £8,673,000) after taking account of its cash balances.

In September 2007 the group entered into an interest hedge at rates between 4.47% and 6% with a minimum interest rate of 5.43% should LIBOR fall below 4.47% against £23m of its borrowing. This hedge replaced the previous interest hedge of £15m. Under IFRS this hedge is marked to fair value at 30 June 2008, a time of continuing uncertainty in credit markets, resulting in a charge of £435,000. This is a non-cash accounting provision which does not affect the functioning of the hedge in bringing major certainty to our financing costs. 

International Financial Reporting Standards ("IFRS")

This is the first year for which the Group has been required to present financial statements prepared under IFRS. As set out in more detail in the notes to the financial statements and previously in the December 2007 interim report, results and net assets previously reported under UK Generally Accepted Accounting Principles ("UK GAAP") for the comparative periods since 1 July 2006 have been restated with reconciliations between UK GAAP and IFRS presentations set out in the notes. It should be emphasised that the amended presentation of results and net assets under IFRS has had no impact on the Group's reported pre exceptionals operating profit.

Net assets at 30 June 2007 have been increased under IFRS presentation to £24,083,000 (previously reported under UK GAAP £23,174,000). This is principally as a result of the reversal of prior year amortisation of goodwill arising on acquisitions.

Robert Davies

Finance Director

CONSOLIDATED INCOME STATEMENT

YEAR ended 30 june 2008

  Consolidated balance sheet

30 June 2008

		30 June 2008	30 June 2007
		£’000	£’000
Non-CURRENT assets
Goodwill		37,268	26,112
Other intangible assets – Brands		2,211	-
Property plant and equipment		13,310	12,589
		52,789	38,701
current assets
Inventories		7,666	5,052
Trade and other receivables		13,151	8,714
Cash at bank and in hand		1,202	1,672
		22,019	15,438
TOTAL ASSETS		74,808	54,139
CURRENT LIABILITIES
Trade and other payables		(14,086)	(9,387)
Deferred grant income		(14)	(178)
Fixed deferred consideration		(1,808)	(2,812)
Performance related deferred consideration		(1,750)	(1,166)
Current tax liabilities		(170)	(941)
Other financial liabilities		(367)	68
Obligations under finance leases		(100)	(253)
Loan notes		(993)	(2,165)
Borrowings		-	(1,650)
		(19,288)	(18,484)
Net CURRENT AsSETS/(liabilities)		2,731	(3,046)
LONG TERM LIABILITIES
Deferred grant income		(105)	(6)
Fixed deferred consideration		(1,216)	-
Obligations under finance leases		(8)	(32)
Borrowings		(24,730)	(10,224)
Deferred taxation		(877)	(1,067)
Dilapidation provision		(354)	(243)
		(27,290)	(11,572)
TotAL LIABILITIES		(46,578)	(30,056)
net assets		28,230	24,083
EQUITY
Called up share capital		1,744	1,741
Share premium account		14,499	14,401
Equity reserve		1,053	567
Profit and loss account		10,933	7,374
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT		28,229	24,083
Equity attributable to minority interest		1	-
total EQUITY		28,230	24,083

  

Consolidated Statement of changes in shareholders' equity

Within the share premium account is an amount of £1,044,000 (2007: £1,044,000) of merger reserve.

  

  NOTES TO THE FINANCIAL STATEMENTS

YEAR ended 30 june 2008

1.            BASIS OF PREPARATION

The preliminary financial information has been prepared using the recognition and measurement principles of International Financial Reporting Standards ("IFRS") and in accordance with IFRS1, "First-time adoption of International Financial Reporting Standards". The previous accounts were prepared under UK GAAP.

Exceptional items are those items which the directors consider should be separately disclosed in order to assist users in their understanding of the financial statements. Items included in the income statement under this heading are charges in respect of share based payment, impairment charges, unwinding of discounts in respect of deferred consideration, interest in respect of unwinding of finance costs, financing charges in respect of interest and currency charges and any other one off items outside the normal course of trading together with any taxation thereon.

The directors consider that the group's primary reporting segment is to be business segment. There is only one business segment and as such there is no requirement for a segmental analysis. 

 

The group's secondary reporting segment is geographic segments and these results are show below. All assets are held in the UK.

3.         Exceptional ITEMS

 

The directors consider that the above items do not form part of the underlying operating activities of the business and have shown them separately in order to aid the readers understanding of its performance. 

 

Administrative expenses in the prior year relate to the closure of the International Office of £44,000 and management re-organisation in the confectionery division of £250,000. 

 

During the year the company entered into a Yen denominated swap financing arrangement to lower the borrowing costs of the group of certain borrowings. The above exchange loss and associated tax movement) of £2,589k arose due to adverse currency movements in the year. The group closed out its exposure in January 2008.

 

The group holds an interest hedge over £23m of its debt. The marked to market fair value of this hedge at the year end was a liability of £367,000 which gave rise to an adverse movement in market value of £435,000 which does not reflect the actual movements in the group's finance costs for the year.

    

  4.         FINANCE COSTS

   

5.           TAXATION

 

The taxation assessed for the year is different than the standard rate of corporation tax in the United Kingdom of 28% (2007: 30%). The differences are explained below.

6.         DIVIDENDS

7.           EARNINGS PER SHARE

 

Earnings per share is calculated on the basis of profit for the year of £3,866,000 (2007: £3,517,000) divided by the weighted average number of shares in issue for the year to 30 June 2008 of 13,945,960 (2007: 13,782,464). The diluted earnings per share is calculated on the assumption all options vested were exercised, this would give rise to a total weighted average number of ordinary shares in issue of 14,360,731 (2007: 14,150,635). 

 

The directors consider that another measure for basic earnings per share is arrived at by using the profit for the financial year set out in the consolidated income statement under the column headed pre exceptional items of £4,904,000 (2007: £4,206,000) divided by the relevant weighted average number of shares. This is described as the adjusted earnings per share. It is this measure of earnings per share that the directors believe demonstrates the progress of the business. 

 

The directors also believe it is appropriate to measure the adjusted earnings per share after charging share based payment. The relevant profit numbers are £4,554,000 (£4,904,000 less £486,000 plus the taxation effect of £136,000 (note 3)) (2007: £3,944,000; £4,206,000 less £374,000 plus the taxation effect of £112,000).

 

Share options granted to employees could potentially dilute basic earnings per share in the future, but as these have not yet vested they have not been included in the below calculations.

8.          PURCHASE OF SUBSIDIARY UNDERTAKINGS AND BUSINESSes

 

On 7 September 2007 Glisten acquired 100% of the share capital of Dormen Foods Limited and on 2 November 2007 FDS Informal Foods Limited and Lindum Snacks Limited together with their holding company renamed Glisten Snacks Limited. 

 

Below is a summary of the consolidated income statement showing information separated between continuing operations and acquisitions.

 

The table below sets out the book values of the identifiable assets acquired. 

  

 The total amount of the profit related deferred consideration payable of £1,750,000 has been provided in these accounts. This is based on one year's profits to August 2008. The directors' believe this target will be met. This amount of £1,750,000 together with £1,500,000 of the fixed deferred consideration is payable in October 2008 with the remaining fixed deferred consideration of £1,250,000 payable in October 2009, one year later. The value in the balance sheet in respect of this is £4,363,000.

In the year the group acquired a 50% stake in Skinny Candy. This has led to the brand name being identified and valued at £211,000, a further deferred tax liability of £59,000 was identified in relation to this brand name.

 

In the year ended 31 August 2007 Dormen Foods Limited made a profit after tax of £454,000.

 

The directors consider it impractical to restate the results as if those acquisitions occurred at 1July 2007. 

9.         ANALYSIS OF WORKING CAPITAL MOVEMENT

10.          GROSS CASH FLOWS

  

11.        ANALYSIS OF CHANGES IN NET DEBT