TIDMRGD
RNS Number : 2630A
Real Good Food PLC
22 December 2017
Strictly embargoed until 22 December 2017
Real Good Food plc
("the Group" or "Real Good Food")
Interim results for the six months ending 30 September 2017
Further funding agreed by the major shareholders and Board role
changes
Real Good Food plc (AIM: RGD) today announces interim results
for the six months ending 30 September 2017.
Financial Highlights
-- Revenue up 30% on previous year to GBP63.6m (2016: GBP49.0m)
o Revenue up 13.2% excluding Brighter Foods acquired in April
2017.
-- EBITDA loss prior to significant items for the period (GBP1.4m) (2016: +GBP1.2m)
-- Operating loss of GBP(6.0m) (2016: GBP(0.6m))
-- Total loss before tax of GBP(6.7m) (2016: GBP(0.9m))
-- Loss per share of 9.56p (2016: loss per share of 1.34p)
-- Cash outflow from operations of GBP6.0m (2016: outflow of GBP3.3m)
-- Net debt at 30 September 2017 stood at GBP35.8m (30 September 2016: GBP14.3m)
Operational Highlights
-- Major investment programmes at Renshaw and Haydens
implemented following new debt and equity financing
arrangements
-- Several Board changes implemented in August 2017
-- Review of corporate governance underway
Post period event - further funding
As part of a re-forecasting exercise the Board has identified
that further substantial additional funding will be required over
the coming twelve months for working capital and investment
purposes in order to implement the Group's business plan as it
continues to grow. The Board is currently exploring its options as
to how this additional funding will be financed, which include,
inter alia, the issuance of new equity.
The Group's three major shareholders, NB Ingredients Ltd,
Omnicane International Investors Ltd, and certain funds managed by
Downing LLP have continued to express and demonstrate their support
for the Group. They have executed a term sheet, to that end, to
provide an initial tranche of additional funds to support the
Company's working capital requirements, in the form of loan notes
of GBP3.0m in aggregate (the "Loan Notes"), with Omnicane and NB
Ingredients Ltd each providing GBP1.285m and certain funds of
Downing LLP providing GBP0.430m. The provision of these funds is
designed to relieve pressure on cash availability over the coming
months whilst longer term funding arrangements are put in place,
and helps support the Board's preparation of the Group's interim
results on a going concern basis. Completion of the Loan Notes is
subject to documentation and execution of an intercreditor
agreement with the Group's lending bankers, expected in early
January 2018.
The Loan Notes, which are intended to be refinanced by the
issuance of new convertible loan notes or on the future capital
restructuring of the Company, currently anticipated to be in the
form of an equity raise comprise GBP3.0m in aggregate at an
interest rate of 10% payable quarterly in arrears. Further details
of the terms and associated undertakings are disclosed in the
section on Banking agreements and debt position.
The Board considered alternative forms of funding and reviewed
the other options that may be available from other debt providers;
it concluded however that these would take too long to arrange for
the Company's short-term requirements and that the Loan Notes
provide the most appropriate and flexible option to meet the
Company's short-term cash requirements.
Christopher Thomas, Harveen Rai and Hugh Cawley, the Independent
Directors of the Company, having consulted with the Company's
Nominated Adviser, finnCap Ltd, consider the terms of the Loan
Notes to be fair and reasonable insofar as the Company's
shareholders are concerned.
Board role changes
-- Christopher Thomas, Executive Director, will step down from 1
January 2018 and assume the role of Non-Executive Deputy Chairman.
Hugh Cawley, currently Non-Executive Director will assume the role
of Executive Director from 1 January 2018.
Pat Ridgwell, Interim Chairman commented:
"This has been an extremely difficult period for the Company.
The acquisition of Brighter Foods and investments in new capacity
and greater efficiency at both Renshaw and Haydens were pursued in
advance of suitable financing arrangements being completed leading
to cash shortages and delays in the implementation of these
projects. Serious failings in corporate governance under the
previous regime also became apparent as announced in September
2017, have required significant resources and costs to rectify and
resulted in a number of key Board changes in order to strengthen
the efficacy of the Board and improve the Company's internal
processes.
Although we saw a strong sales performance across all divisions,
profits were significantly below last year as a result of increased
costs associated principally with the delays in the major
investment projects, but also the need to react swiftly and
professionally to provide the Group with an adequate corporate
governance structure. A series of new lending arrangements to
secure the business, including the Loan Notes agreed today, have
been put in place by the Group's three major shareholders, who have
again stated and demonstrated their full, continuing support for
the business.
I would like to thank Chris Thomas for his work over the past
six months; Chris has been appointed to the role of Non- Executive
Deputy Chairman from 1 January 2018 and I am pleased to announce
that Hugh Cawley has agreed to take on the Executive role from that
date."
Commenting on outlook and current trading he added:
"The critical Christmas trading period has been largely
satisfactory, although we continue to anticipate, as announced on
23 October, that EBITDA for FY2018 will be materially below our
previous expectation at that time. We expect EBITDA for FY2018 as a
whole to be in the region of break-even, with a consequential
overall loss before tax for the period. We have implemented a
number of overhead and other cost savings initiatives and are
developing plans to ensure that revenue growth starts to translate
into increased profits and shareholder value. We have sound
businesses in the Group with good management teams and we
anticipate the recent investments starting to deliver in FY
2019."
*-ends-*
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
ENQUIRIES:
Real Good Food plc Tel: 020 3857 3900
Chris Thomas, Executive Director
Harveen Rai, Finance Director
Andrew Brown, Marketing Director
finnCap Limited (Nomad and Tel: 020 7220 0500
Joint Broker)
Matt Goode (Corporate Finance)
Carl Holmes
Belvedere Communications Tel: 020 3567 0510
(PR)
John West
Kim van Beeck
About Real Good Food
Real Good Food plc is a diversified food business
serving a number of market sectors including retail,
manufacturing, wholesale, foodservice and export.
The Group focuses on three main markets: Cake Decoration
(Renshaw and Rainbow Dust Colours), Food Ingredients
(Garrett Ingredients, R&W Scott and Brighter Foods)
and Premium Bakery (Haydens and Chantilly Patisserie).
The Company makes the majority of its profits in
the second half of the year which includes the important
Q3 trading period for Cake Decoration and Premium
Bakery in particular in the run up to Christmas.
REAL GOOD FOOD PLC
INTERIM RESULTS FOR THE SIX MONTHSING 30 SEPTEMBER 2017
Overview
This has been an extremely difficult period for the Company. The
acquisition of Brighter Foods and investments in new capacity and
greater efficiency at both Renshaw and Haydens were pursued in
advance of suitable financing arrangements having been completed
leading to cash shortages and delays in the implementation of these
projects. Serious past failings in corporate governance also became
apparent and have required significant resources and costs to
rectify.
A strong sales performance across all divisions did not
translate into profits. EBITDA prior to significant items, at a
loss of GBP1.4m, was significantly behind prior year by GBP2.6m as
a result of margin mix, increased costs associated principally with
the delays in the major investment projects, but also the need to
react swiftly and professionally to the corporate governance
failings. Administrative expenses increased by GBP2.6m and
significant items increased by GBP2.3m over the previous year. A
breakdown of significant items is detailed later in this
announcement.
Divisional Business Reviews
Cake Decoration
Renshaw and Rainbow Dust Colours manufacture and sell cake
decoration products and ingredients for the baking sector across
the UK and abroad. Renshaw Europe and Renshaw Americas sell these
products in their respective territories.
GBP'000s Six months ending 30 September 2017 30 September
2016
Revenue 22,460
21,039
EBITDA prior to significant items 1,317 3,145
Total sales were up 6.8% on the previous year with growth in
both America and Europe. EBITDA fell by GBP(1.8m) due to adverse
gross margin. Several factors contributed to the dilution in margin
mix including under recovery on unfavourable commodity price
increases, currency impact and a one-off gain for a claim
settlement.
Delays to the implementation of new investments in an automated
icing disc line and frostings capacity caused both cost overruns
and constraints on sales. The new lines, both of which target sales
of the growing number of 'novice' consumers, are due to be fully
commissioned during Q4 and the benefits should be seen from the
next fiscal year. A major relaunch of the Rainbow Dust brand is
also planned at the start of FY 2019.
Food Ingredients
Garrett Ingredients supplies a range of food ingredients
including bagged sugars and dairy ingredients to food
manufacturers. R&W Scott manufactures and supplies chocolate
coatings, jams, fruit fillings and sauces to food manufacturers,
wholesalers and retailers. Brighter Foods manufactures snack bars,
both branded and own label, targeted at the growing health and
'healthy lifestyle' markets.
GBP'000s Six months ending 30 September 2017 30 September
2016
Revenue 24,020 12,347
EBITDA prior to significant items 991 (477)
Garrett Ingredients saw both volumes and revenues grow as dairy
prices increased. R&W Scott's sales were in line with the
previous year though the business suffered a number of operational
difficulties which led to lower gross margins. However, it gained a
major private label jam contract late in the period and has now
implemented a new management structure to streamline its operation.
The acquisition of Brighter Foods has contributed significantly to
favourable YOY revenue & EBITDA performance for the division
and continues to benefit from growth in health markets.
Premium Bakery
Haydens and Chantilly Patisserie manufacture, sell and
distribute added value bakery and dessert products to UK retailers
and foodservice customers
GBP'000s Six months ending 30 September 2017 30 September
2016
Revenue 17,160 15,568
EBITDA prior to significant items (219) 571
Sales revenue grew by 10% on the previous year, however EBITDA
in the period suffered as a consequence of adverse operational
costs as the business adapted to the new product mix and the site
underwent significant reconfiguration. The dramatic increase in the
price of butter has again reduced gross margins with delays in
price recovery. The new, automated Yum Yum line came into operation
in September and full commissioning is expected to be completed
during Q4 of the current financial year.
The business is increasingly focusing on three main product
categories: tarts, Danish and croissants, and Yum Yums. The
business gained two major new retail customers from the third
quarter so the year on year sales trend is anticipated to continue
to be strongly positive. Meanwhile the focus will be on operational
costs following the completion of what has been a transformational
site investment plan.
Head Office and Consolidation
The Group functions of Finance, Human Resources, Information
Services, Technical, Marketing and the Innovation Centre provide
support to all the businesses on specific strategic projects as
well as promoting best practice.
GBP'000s Six months ending 30 September 2017 30 September
2016
EBITDA prior to significant items (3,479) (2,054)
Underlying Head Office costs for the period remained broadly in
line with the prior year at GBP3.5m. The prior year costs were
adjusted to take account of anticipated capitalised development
costs which were subsequently removed in the second half of the
year.
Banking agreements and debt position
Lloyds Banking Group ("LBG") has confirmed its intention to
agree the resetting of the financial covenants on the Group's term
debt by 28 February 2018, subject to LBG being satisfied of the
Group's funding position. LBG has also agreed the deferral of the
Groups financial covenant tests due to be completed as at 31
December 2017.
Net Debt at 30 September 2017 was GBP35.8m (2016: GBP14.3m) made
up principally from loans from shareholders of GBP16.1m, asset
financing of GBP7.0m, revolving credit facilities of GBP11m and a
term loan of GBP2.25m offset by unrestricted cash balances of
GBP0.8m.
The Group's financial instruments as at 30 September 2017
comprised cash, a term loan, hire purchase and finance leases, a
revolving credit facility and an overdraft.
-- The Group has an invoice finance facility of GBP20m
-- A Term loan of which GBP2.25m remains outstanding as at 30
September 2017; this is repayable in quarterly instalments of
GBP250k per quarter
-- Facilities secured against specific items of plant and
machinery with Lloyds and ABN Amro Lease nv bank totalling
GBP10.2m
-- An overdraft facility of up to GBP2.0m with two major
shareholders (Napier Brown Holdings and Omnicane Limited) each
putting GBP1.0m into an account as security.
In addition, as previously noted, the Group's three major
shareholders, NB Ingredients Ltd, Omnicane International Investors
Ltd, and certain funds managed by Downing LLP have today agreed to
provide additional Loan Notes of GBP3.0m in aggregate, with
Omnicane and NB Ingredients Ltd each providing GBP1.285m and
certain funds of Downing LLP providing GBP0.430m. The provision of
these funds is designed to relieve pressure on cash availability
over the coming months whilst longer term funding arrangements are
put in place, and helps support the Board's preparation of the
Group's interim results on a going concern basis. Shareholders'
attention is drawn to note 2 to the financial statements in this
regard.
The terms and conditions of the Loan Notes are as follows:
Principal: GBP3.0m in aggregate
Interest: 10% per annum, payable quarterly in arrears
Redemption: Redemption of the Loan Notes will be 30 September 2019 or earlier upon the occurrence of certain
events of default.
Transferability: The Loan Notes shall be transferable.
Undertakings: The Company undertakes to use all reasonable endeavours to refinance the Loan Notes with new
equity or convertible loan notes on such terms as to be agreed at the date of redemption and
to obtain grant of a waiver from The Panel on Takeovers and Mergers from any obligation that
might arise under Rule 9 of the City Code from the raising of new equity or the conversion
of the new convertible loan notes by the Subscribers ("Whitewash").
In the event that the Loan Notes are not refinanced with new equity or convertible loan notes
as a result of the Whitewash not being received, the Company will be responsible for the costs
associated with the Whitewash procedure and the Subscribers shall be entitled to payment of
a penalty rate of interest, in cash, equivalent to 20% of the principal and interest due.
The Company undertakes to use all reasonable endeavours to obtain such authorisations as may
be necessary from shareholders in due course to facilitate the refinance of the Loan Notes
via new equity or convertible loan notes.
The Company undertakes to use all reasonable endeavours to agree with the Subscribers a future
capital restructuring (the "Capital Restructuring"). The Capital Restructuring will be in
a form such that the Directors will be in a position to make a working capital statement in
form set out in Schedule Two (c) of the AIM Rules for Companies.
Financial Review
Group revenue for the 6 months ending 30 September 2017 was
GBP63.6 million (2016: GBP49.0 million) which is an increase of 30%
on the revenue to 30 September 2016. This is as a result of the
growth in the Food Ingredients business of GBP11.7m, Premium Bakery
GBP1.6m and Cake Decorations GBP1.4m. The increase of revenue in
Food Ingredients includes a six month effect of acquisition of
Brighter Foods which amounted to GBP8.2m in the six months.
Gross profit on the continuing business for the overall group
was GBP12.4m (2016: GBP13m). At 19.5% of revenue, gross margin was
lower than the 26.7% reported in the six months to September 2016.
Gross Margin for the six months to September 2017 is however
broadly in line with prior financial year ending March 2017 which
was reported at 19.8%. This reduction in margin compared to the
prior year period reflects higher than anticipated commodity
ingredient costs and currency volatility, compounded in some cases
by a later than expected price recovery from customers following
the increase in raw materials.
Total Group Administrative Expenses increased by GBP2.6m to
GBP12.8m (2016: GBP10.2m) and significant costs increased by
GBP2.3m to GBP3.0m (2016: GBP0.7m), of which GBP1.7m relates to
impairment of goodwill in the Food Ingredients division. The Board
recognised the previously poor financial control of costs and
corporate governance which led to a number of corrective actions
being taken resulting in additional significant costs of GBP0.6m
while acquisitions costs amounted to GBP0.4m in the period.
The Operating loss for the six months to 30 September 2017 was
GBP(6.0m) which is GBP(5.3m) adverse to the prior year loss (2016:
Loss GBP(0.6m)).
Given the factors described above, the significant capital
investments made totalling GBP11.2m in the period and the Brighter
Foods acquisition, insufficient cash was generated and further
borrowings were secured. Net Debt at 30 September 2017 was GBP35.8m
(2016: GBP14.3m) made up principally from loans from shareholders
of GBP16.1m, asset financing of GBP7.0m, revolving credit
facilities of GBP11m and a term loan of GBP2.25m offset by
unrestricted cash balances of GBP0.8m.
Dividend
No dividend is proposed for the six months ended 30 September
2017 (2016: 0.04 pence per share paid in January 2017).
Pension Scheme
In common with most UK pension schemes the continuing reduction
in Government and corporate bond rates has had an effect on the NBF
Pension deficit. However, in the 6 months to September 2017 the
deficit in the scheme reduced by GBP196k compared to March 2017
mainly due to higher than expected returns on the assets and
contributions made into the scheme.
Board Changes
Christopher Thomas, Executive Director, will step down from 1
January 2018 and assume the role of Non-Executive Deputy Chairman.
Hugh Cawley, currently Non-Executive Director, will assume the role
of Executive Director from 1 January 2018.
Outlook and Current Trading
Prospects for the second half of the year are much improved and
we are setting about stabilising the company's debt position. The
critical Christmas trading period has been satisfactory though we
continue to anticipate, as we announced on 23 October, that EBITDA
for FY 2018 will be materially below previous expectations at that
time. We anticipate that this year will see EBITDA close to
break-even for the period, with a consequential loss before tax. We
have implemented a number of overhead savings initiatives and are
developing plans designed to ensure that strong revenue growth is
translated into increased profits and shareholder value. We have
sound businesses, with good management teams and we see the recent
investments starting to deliver in FY 2019.
Pat Ridgwell
Interim Chairman
REAL GOOD FOOD PLC
INDEPENT REVIEW REPORT TO REAL GOOD FOOD PLC FOR THE
SIX MONTHS TO 30 SEPTEMBER 2017
-- Introduction
We have been engaged by the company to review the condensed set
of financial statements in the six monthly interim financial report
for the six months ended 30 September 2017, which comprises the
consolidated statement of comprehensive income, consolidated
statement of financial position, consolidated statement of changes
in equity, consolidated statement of cashflows and the related
notes. We have read the other information contained in the six
monthly interim financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the company, as a body, in
accordance with our instructions. Our review has been undertaken so
that we might state to the company those matters we are required to
state to them in a review 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, for our work, for
this report, or for the conclusions we have formed.
-- Directors' Responsibilities
The six monthly interim financial report is the responsibility
of, and has been approved by, the directors.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this six monthly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
-- Our Responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the six monthly
interim financial report based on our review.
-- Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, Review of
Interim Financial Information performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
-- Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the six monthly interim financial report for the six months
ended 30 September 2017 is not prepared, in all material respects,
in accordance with International Accounting Standard 34 as adopted
by the European Union.
-- Material uncertainty related to going concern
We draw attention to Note 2 which set out conditions related to
going concern.
These conditions indicate the existence of a material
uncertainty and may cast doubt on the Group and Company's ability
to continue as a going concern. Our conclusion is not modified in
respect of this matter. The financial statements do not include
adjustments that would result if the Group and Company were unable
to continue as a going concern.
Crowe Clark Whitehill LLP
Chartered Accountants
Riverside House
40-46 High Street
Maidstone
Kent
ME14 1JH
REAL GOOD FOOD PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSING 30 SEPTEMBER 2017
(UNAUDITED)
--------------------------------------------------------------------------------------------------
30 Sept 30 Sept
CONTINUING OPERATIONS Notes 2017 2016
GBP'000 GBP'000
REVENUE 63,639 48,954
Cost of sales (51,253) (35,878)
------------------------- --------------------------
GROSS PROFIT 12,386 13,076
Distribution costs (2,596) (2,796)
Administration expenses (12,798) (10,234)
Significant items 9 (2,985) (694)
------------------------- --------------------------
OPERATING LOSS (5,993) (648)
Finance costs (583) (193)
Other finance costs (82) (108)
------------------------- --------------------------
LOSS BEFORE TAXATION (6,658) (949)
Taxation (231) 7
------------------------- --------------------------
LOSS ATTRIBUTABLE TO:
Owners of the Company (7,065) (942)
Non-Controlling Interest 176 -
(6,889) (942)
========================= ==========================
OTHER COMPREHENSIVE (LOSS)/INCOME
Foreign exchange differences
on translation 27 -
Actuarial gains/(losses) on
defined benefit plans 112 (3,307)
Income tax relating to components
of other comprehensive income (21) 628
------------------------- --------------------------
118 (2,679)
TOTAL COMPREHENSIVE (LOSS)/INCOME
ATTRIBUTABLE TO:
Owners of the Company (6,947) (3,621)
Non-Controlling Interest 176 -
(6,771) (3,621)
========================= ==========================
EARNINGS PER SHARE
Basic 4 (9.56)p (1.34)p
Diluted 4 (9.56)p (1.34)p
REAL GOOD FOOD PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 SEPTEMBER 2017
(UNAUDITED)
------------------------------------------------------------------------------------------------------------------
30 Sept 30 Mar 30 Sept
Notes 2017 2017 2016
ASSETS GBP'000 GBP'000 GBP'000
NON CURRENT ASSETS
Goodwill 12 75,564 69,416 71,005
Other Intangible
Assets 1,133 1,155 1,088
Investments 82 - -
Property, plant
and equipment 35,557 23,932 20,886
Deferred tax asset 1,471 1,435 2,324
113,807 95,938 95,303
------------------------- ------------------------- -------------------------
CURRENT ASSETS
Inventory 16,620 13,323 14,749
Trade and other
receivables 19,890 16,016 17,377
Current tax assets - 233 -
Cash held as Security 10 2,000 - -
Cash and cash
equivalents 1,423 464 1,460
39,933 30,036 33,586
------------------------- ------------------------- -------------------------
TOTAL ASSETS 153,740 125,974 128,889
========================= ========================= =========================
LIABILITIES
CURRENT LIABILITIES
Bank Overdraft 669 619 196
Trade and other
payables 21,054 15,243 12,301
Borrowings 10 13,999 11,375 14,015
Financial Instrument - 146 -
Current tax liabilities 28 - 128
35,750 27,383 26,640
------------------------- ------------------------- -------------------------
NON CURRENT LIABILITIES
Borrowings 10 22,587 4,701 36
Deferred tax 1,736 1,278 2,055
Contingent Consideration 11 4,520 - -
Retirement benefit
obligations 7 5,698 5,894 9,346
34,541 11,873 11,437
------------------------- ------------------------- -------------------------
NET ASSETS 83,449 86,718 90,812
========================= ========================= =========================
SHAREHOLDERS' EQUITY
Issued share capital 1,568 1,411 1,402
Share premium account 2,721 122 103
Share option reserve 415 415 607
Foreign exchange (21) (48) -
Retained earnings 77,844 84,818 88,700
------------------------- ------------------------- -------------------------
Equity Attributable
to Owners of the
Company 82,527 86,718 90,812
Non controlling
interest 922 - -
TOTAL EQUITY 83,449 86,718 90,812
========================= ========================= =========================
REAL GOOD FOOD PLC
STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHSING 30 SEPTEMBER 2017
(UNAUDITED)
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ATTRIBUTABLE TO THE OWNERS OF REAL GOOD
FOOD PLC
-------------------------------------------------------------------------------------------------------------------------------------------------------------
Issued Share Share Non
Share Premium Option Foreign Retained Controlling Total
Capital Account Reserve Exchange Earnings Total Interest Equity
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Balance at 1
April
2016 1,402 71,375 592 - 21,049 94,418 - 94,418
Loss for the
period - - - - (942) (942) - (942)
Other
comprehensive
loss for the
period - - - - (2,679) (2,679) - (2,679)
Total
comprehensive
loss for the
period - - - - (3,621) (3,621) - (3,621)
------------------------ ------------------------ ------------------------ ------------------------- ------------------------- ------------------------- ------------------------ -------------------------
Shares issued in
period - - - - - - - -
Shares to be
issued
(net of deferred
tax) - - 15 - - 15 - 15
Capital Reduction
Transfer - (71,272) - - 71,272 - - -
Balances as at 30
September 2016 1,402 103 607 - 88,700 90,812 - 90,812
======================== ======================== ======================== ========================= ========================= ========================= ======================== =========================
ATTRIBUTABLE TO THE OWNERS OF REAL GOOD
FOOD PLC
-------------------------------------------------------------------------------------------------------------------------------------------------------------
Issued Share Share Non
Share Premium Option Foreign Retained Controlling Total
Capital Account Reserve Exchange Earnings Total Interest Equity
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Balance at 1
April
2017 1,411 122 415 (48) 84,818 86,718 - 86,718
Loss for the
period - - - - (7,065) (7,065) 176 (6,889)
Other
comprehensive
income for the
period - - - 27 91 118 - 118
Total
comprehensive
loss for the
period - - - 27 (6,974) (6,947) 176 (6,771)
------------------------ ------------------------ ------------------------ ------------------------- ------------------------- ------------------------- ------------------------ -------------------------
Shares issued in
the period 157 2,599 - - - 2,756 - 2,756
Acquisition of
non
controlling
interest - - - - - - 746 746
Balances as at 30
September 2017 1,568 2,721 415 (21) 77,844 82,527 922 83,449
======================== ======================== ======================== ========================= ========================= ========================= ======================== =========================
REAL GOOD FOOD PLC
STATEMENT OF CASH FLOWS FOR THE SIX MONTHSING
30 SEPTEMBER 2017
(UNAUDITED)
----------------------------------------------------------------------------------------------
6 months 6 months
to to
30 Sept 30 Sept
2017 2016
CASH FLOW FROM OPERATING ACTIVITIES GBP'000 GBP'000
Profit/(loss) before taxation (6,658) (949)
Adjusted for:
Finance costs 583 193
Other finance cost 82 108
Depreciation of property, plant
& equipment 1,502 1,031
Amortisation of intangibles 117 108
Impairment charge 1,724 -
Unrealised currency translation
(gains)/losses 27 -
------------------------- -------------------------
Operating Cash Flow (2,623) 491
(Increase)/decrease in inventories (2,248) (2,389)
(Increase)/decrease in receivables (2,747) (439)
Pension contributions (366) (150)
(Decrease)/increase in payables 1,936 (826)
------------------------- -------------------------
Cash outflow from operations (6,048) (3,313)
Income tax received/(paid) (100) -
Interest paid (583) (193)
Net cash used in operating activities (6,731) (3,506)
------------------------- -------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of intangible assets (93) (362)
Purchase of property, plant
& equipment (11,227) (3,851)
Net cash outflow on acquisition
of subsidiaries (1,782) -
Net cash used in investing activities (13,102) (4,213)
------------------------- -------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Shares issued 2,756 -
Repayment of loans (627) -
Proceeds from borrowings 20,870 -
Repayment of borrowings (3,658) -
Net movements on revolving
credit facilities 1,585 6,962
Increase in obligations under
finance leases 1,816 24
Net cash used in financing activities 22,742 6,986
------------------------- -------------------------
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS 2,909 (733)
========================= =========================
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at
beginning of period (155) 1,997
Net movement in cash and cash
equivalents 2,909 (733)
Cash and cash equivalents at end
of period 2,754 1,264
========================= =========================
Cash and cash equivalents comprise:
Cash And Cash Equivalents 1,423 1,460
Cash Held in Escrow 2,000 -
Bank Overdrafts (669) (196)
2,754 1,264
========================= =========================
REAL GOOD FOOD PLC
NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER
2017
1. General Information
Real Good Food Plc is a public limited company ("company")
incorporated in the United Kingdom under the Companies Act
(registration number 4666282). The company is domiciled in the
United Kingdom and its registered address is International House, 1
St Katharine's Way, London, E1W 1XB. The company's shares are
traded on the Alternative Investment Market ("AIM").
The principal activities of the Group are the sourcing,
manufacture, marketing and distribution of food and industrial
ingredients.
The interim report will be posted on the company's website and
will be released via the Stock Exchange. Further copies of the
interim report and Annual Report and Accounts may be obtained from
the address above.
2. Basis of preparation
These condensed consolidated financial statements are presented
on the basis of International Financial Reporting Standards (IFRS)
as adopted by the European Union and interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC)
and have been prepared in accordance with AIM rules and the
Companies Act 2006, as applicable to companies reporting under
IFRS.
The same accounting policies and methods of computation are
followed within these interim financial statements as adopted in
the most recent annual financial statements.
As part of a re-forecasting exercise we have identified that
substantial further funding will be required over the coming twelve
months for working capital and investment purposes as the business
continues to grow. The Board is currently exploring its options as
to how the funding shortfall will be financed, which include inter
alia the issuance of new equity. An additional GBP3m funding agreed
to be provided by NB Ingredients Ltd, Omnicane International
Investors Ltd and certain funds managed by Downing LLP on 22
December 2017 will ensure that the Group remains a going concern
until the end of the first quarter based upon current forecasts and
the Board believes this will provide sufficient time to source the
additional funding. In the event that the Board is unable to source
this additional finance, and in the unlikely event that the major
shareholders, whose support has thus far been strong and
continuing, decide not to provide further support, then the
Directors cannot be certain that the Group will be able to continue
as a going concern.
New IFRS standards and interpretations adopted
A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective and in
some cases have not been adopted by the European Union.
The Directors have assessed the potential impact of IFRS 15 and
do not expect that the adoption of this standard will have a
material impact on the financial statements of the Group in future
periods. IFRS 16 may have an impact on the measurement and
treatment of operating leases and the related disclosures. As at 30
September 2017 the estimated impact of the transition to IFRS 16
would be to increase tangible fixed assets and liabilities by
approximately GBP1.9m. The impact on the profit and loss account is
not expected to be material to the financial statements.
REAL GOOD FOOD PLC
NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER
2017
3. Segment analysis
Business segments
The divisional structure reflects the management teams in place
and also ensures all aspects of trading activity have the specific
focus that they need in order to achieve our growth plans.
The following table shows the Group's revenue and results for
the period under review analysed by operating segment. Segment
profit represents the trading profit after depreciation and
amortization but before significant items.
PREMIUM
Notes CAKE DECORATION FOOD INGREDIENTS BAKERY UNALLOCATED TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
TOTAL INCOME 26,604 26,422 17,160 - 70,186
Intercompany Sales (4,144) (2,402) - - (6,546)
------------------------------- --------------------------------- -------------------------------- -------------------------------- --------------------------------
EXTERNAL REVENUE 22,460 24,020 17,160 - 63,640
OPERATING (LOSS)/PROFIT BEFORE
HEAD OFFICE AND SIGNIFICANT
COSTS 881 569 (726) - 724
Head office and unallocated - - - (3,733) (3,733)
Significant Items 9 - (1,724) (252) (1,008) (2,985)
------------------------------- --------------------------------- -------------------------------- -------------------------------- --------------------------------
OPERATING (LOSS)/PROFIT 881 (1,155) (978) (4,741) (5,993)
Net Finance Costs (110) (65) (112) (296) (583)
Pension Finance Costs - - - (82) (82)
Profit/(Loss) before tax 771 (1,220) (1,090) (5,119) (6,658)
------------------------------- --------------------------------- -------------------------------- -------------------------------- --------------------------------
Tax (173) (5) (23) (30) (231)
(Loss)/Profit after tax as per
statement of comprehensive income 598 (1,225) (1,113) (5,149) (6,889)
=============================== ================================= ================================ ================================ ================================
Inter-segment sales are charged at prevailing market rates.
REAL GOOD FOOD PLC
NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER
2017
3. Segment reporting (continued)
CAKE FOOD PREMIUM
DECORATION INGREDIENTS BAKERY UNALLOCATED TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
SEGMENT ASSETS 92,970 30,301 23,871 147,142
UNALLOCATED
ASSETS
Other
Intangible
Assets 241 241
Property,
plant
and equipment 2,196 2,196
Deferred tax
asset 3,041 3,041
Trade and
other
receivables 522 522
Cash held in
security 2,000 2,000
Cash and cash
equivalents 169 169
TOTAL ASSETS 92,970 30,301 23,871 8,169 155,311
------------------ ------------------ ------------------ --------------------- ---------------------
SEGMENT
LIABILITIES 14,976 11,972 11,237 38,185
UNALLOCATED
LIABILITIES
Trade and
other
payables 3,166 3,166
Borrowings 18,304 18,304
Deferred tax 1,989 1,989
Deferred
Consideration 4,520 4,520
Retirement
benefit
obligations 5,698 5,698
TOTAL
LIABILITIES 14,976 11,972 11,237 33,677 71,862
------------------ ------------------ ------------------ --------------------- ---------------------
NET OPERATING
ASSETS 77,994 18,329 12,634 (25,508) 83,449
================== ================== ================== ===================== =====================
-- Corporation tax asset in Head Office which nets off to become
a corporation tax liability for the group overall
REAL GOOD FOOD PLC
NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER
2017
3. Segment reporting (continued)
Business segments
Geographical Segments
The Group earns revenue from countries outside the United
Kingdom, this amounts to 12.3% of the total revenue of the group,
but as no individual country is considered to be material,
segmental reporting of a geographical nature is not considered
necessary in accordance with the provisions of IFRS 8.
4. Earnings per ordinary share
Earnings per share is calculated on the basis of the profit for
the period after tax, divided by the weighted average number of
shares in issue for the six-month period of 73,882,759 (2016:
70,066,903).
The number of shares calculated as above is compared with the
number of shares that would have been issued assuming the exercise
of all outstanding share options. The potential ordinary shares are
considered antidilutive as they decrease the loss per share.
Therefore diluted EPS is the same as basic EPS.
6 months to 30 6 months to 30
Sept 2017 Sept 2016
Significant Significant
Basic Items Adjusted Basic Items Adjusted
BASIC
EARNINGS PER
SHARE
Loss
attributable
to owners of
the
company (7,065) 2,985 (4,080) (942) 694 (248)
Weighted
average
number of
shares
in issue 73,883 73,883 70,067 70,067
Basic loss
per share (9.56)p (5.52)p (1.34)p (0.35)p
--------------- --------------- --------------- --------------- ---------------- ---------------
-- As the group is loss making in the period under review the
diluted earnings per share is the same as basic earnings per
share
5. Dividends
The Board is not recommending an interim dividend: (2016: 0.04
pence per share paid in January 2017).
REAL GOOD FOOD PLC
NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER
2017
6. Taxation
The charge for taxation is based on the results for the period
and takes into account taxation deferred because of timing
differences between the treatment of certain items for taxation and
accounting purposes.
Provision is made in full for taxation deferred in respect of
timing differences that have originated but not reversed by the
balance sheet date, except for gains on disposal of fixed assets
which will be rolled over into replacement assets. No provision is
made for taxation on permanent differences. Deferred tax is not
discounted.
Deferred tax assets are recognised to the extent that it is more
likely than not that they will be recovered.
7. Pension arrangements
The Group operates a defined benefit pension scheme, the Napier
Brown Retirement Benefits Scheme. The assets of the scheme are held
separately from those of the Group in an independently administered
fund. The contributions made by the employer over the six month
period have been GBP366,000.
Assumptions
The assets of the scheme have been included at market value and
the liabilities have been calculated using the following principal
actuarial assumptions:
30 September 31 March 30 September
2017 2017 2016
% per annum % per annum % per annum
-------------------------------- --------------- --------------- ---------------
Rate of increase in pensions
in payment 3.00 3.10 2.90
Discount rate 2.85 2.85 2.55
Inflation assumption 3.10 3.20 3.00
Revaluation rate for
deferred pensions 2.10 2.20 2.00
The fair value of the assets in the scheme and the present value
of the liabilities in the scheme are:
30 September 31 March 30 September
2017 2017 2016
GBP'000s GBP'000s GBP'000's
--------------------------- --------------- ------------ ---------------
Total fair value of
assets 13,870 13,946 15,527
Present value of scheme
liabilities (19,568) (19,840) (24,873)
--------------- ------------ ---------------
(Deficit) in the scheme (5,698) (5,894) (9,346)
The scheme is a closed scheme and therefore under the projected
unit method the current service cost would be expected to increase
as the members of the scheme approach retirement.
8. Seasonality
Most of the trading divisions of RGF are seasonal, creating a
large proportion of their EBITDA in the October to December
period.
REAL GOOD FOOD PLC
NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER
2017
9. Significant Items
During the period the group incurred significant additional
costs from; professional advisors as a result of needing to respond
to its Corporate Governance and regulatory shortcomings,
acquisition costs for Brighter Foods, one time costs of capital
projects and impairment of Goodwill in the Food Ingredients
division
6 months
ended
30 September
2017
Goodwill impairment 1,724
Capital projects 253
Brighter Foods acquisition costs 369
Corporate governance & professional advisors 639
Total Significant items 2,985
--------------
10. Borrowings
During the period, the Company entered into the following
arrangements:
-- The company secured two GBP2.0m one year term loan facilities
from existing shareholders of the company, Napier Brown Holdings
Ltd and Omnicane Ltd.
-- Lloyds Bank agreed to provide the Company with an overdraft
facility of up to GBP2.0m with two major shareholders (Napier Brown
Holdings and Omnicane Limited) each putting GBP1.0m into an
account, as security.
-- GBP4.0m additional short term debt facilities were secured
from the Group's major shareholders (NB Ingredients Ltd, Omnicane
International Investors Ltd and certain funds managed by Downing
LLP). Each of the shareholders participated equally. The facility
and the loan notes are secured on unencumbered chattel assets of
the company with a 10% coupon. A premium of 10% payable on
redemption if not repaid on or before 30 September 2018.
-- A new injection of capital was raised by way of the issue of
a secured loan note instrument of up to GBP8.75m from certain funds
managed and controlled by Downing LLP. The Loan notes are
redeemable after three years.
-- The Company continued to secure funds from ABN Amro Lease nv
bank against investment assets.
Post period end, the Company entered into the following
arrangement:
-- The three major shareholders, NB Ingredients Ltd, Omnicane
International Investors Ltd, and certain funds managed by Downing
LLP have executed a term sheet to provide an initial tranche of
additional funds in the form of loan notes of GBP3.0m in aggregate
(the "Loan Notes"), with Omnicane and NB Ingredients Ltd each
providing GBP1.285m and certain funds of Downing LLP providing
GBP0.430m.
REAL GOOD FOOD PLC
NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER
2017
11. Acquisitions
Real Good Food plc (AIM: RGD) and Tywyn based Brighter Foods
announced on 5 April 2017 a new partnership to build on the success
of the Wales based food manufacturing company, with Robin Williams
remaining as CEO. Real Good Food plc acquired an 84.33% interest in
Brighter Foods for total consideration of up to GBP9 million, on a
cash and debt free basis, to be paid in two equal instalments, 50%
on completion and 50% upon finalisation of the Company's 2017/18
audited accounts. The consideration will be satisfied from the
Group's existing debt facilities. The acquisition is expected to be
immediately earnings enhancing to the Group.
GBP'000
NON CURRENT ASSETS
Tangible Assets 1,899
Investments 82
1,981
-------------------------
CURRENT ASSETS
Inventories 1,048
Trade and Other Receivables 1,127
2,175
-------------------------
CURRENT LIABILITIES
Trade and Other Payables (4,076)
Income tax (361)
Amounts Falling Due After One Year (377)
Provision of Liabilities (167)
NET CURRENT LIABILITIES (825)
=========================
GOODWILL ARISING ON ACQUISITION
Cash Paid 7,338
Less cash balances acquired (5,557)
-------------------------
Net cash outflow on acquisition of subsidiaries 1,781
Contingent Consideration (payable upon
completion of 17/18 audited accounts) 4,520
Non Controlling Interests 746
Add fair value of identifiable net liabilities
acquired 825
-------------------------
Goodwill arising on acquisition 7,872
=========================
The Directors consider that the value of assets and liabilities
is equal to the fair value of these items and that all receivables
are fully recoverable. Senior management of Brighter Foods has
retained 15.67% stake in the business. The value of this
non-controlling stake on completion was GBP746k. The Group has also
entered into a separate shareholder agreement regarding the
Management Stake whereby the senior management of Brighter Foods
can elect to sell 50 per cent of the Management Stake to the Group
after March 2020 and 50 per cent after March 2021. The
consideration for the entire Management Stake will be based upon an
agreed valuation formula, linked to profit before interest and tax
of Brighter Foods in the years ending 31 March 2020 and 31 March
2021 respectively, and is capped at GBP8 million in aggregate.
Additionally the Group can elect to acquire the Management Stake
after March 2021 based upon the same valuation formula. The
deferred consideration is payable after 12 months of trading and
will be in range of GBPNil to GBP4.5 million and is based on
performance of the company. Costs incurred in acquiring this
company amount to GBP369k which has been included in these accounts
as part of significant items (note 9).
12. Goodwill
Notes GBP'000s
Carried forward 31 March
2017 69,416
Additions 11 7,872
Impairment 9 (1,724)
Carried forward 30 September
2017 75,564
======================
Following a reforecast exercise, an impairment review was
conducted which indicated an impairment of GBP1,724k in relation to
the Food Ingredients division.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAAAAASFXFFF
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December 22, 2017 08:04 ET (13:04 GMT)
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