TIDMRGD
RNS Number : 3564C
Real Good Food PLC
28 September 2018
28 September 2018
Real Good Food plc
("Real Good Food" or "the Company")
Final results for the year ended 31 March 2018
Real Good Food plc, (AIM: RGD) the diversified food business,
today announces its final results for the year ended 31 March
2018.
Financial highlights
-- Revenue increased by 20% from GBP107.7 million to GBP129.8 million.
-- Adjusted EBITDA* reduced from a profit of GBP1.4 million to a
loss of GBP2.6 million, leading to an operating loss of GBP23.2
million
(2017: loss of GBP5.6 million).
-- Loss before tax was GBP25.2 million, after impairment charges
of GBP10.5 million and significant items of GBP5.0 million, with an
underlying loss before tax of GBP9.7 million (2017: loss of GBP6.2
million).
-- Losses reflect the recognition of asset values and historic
disruption caused by an intense period of ambitious investment,
which led to an inflated overhead base.
-- Since new management took control, some GBP2.8 million has
been taken out of annualised central costs.
-- Profitability was also affected by rising raw material costs
and increased competition, exacerbating the impact of poor
financial control of central costs.
-- New management and a refreshed Board have brought rigour to
corporate governance, accounting practices and commercial
discipline over the period.
-- The Company is now properly financed for the longer term,
providing a platform to maximise earnings while also looking to
optimise shareholder value, including, where appropriate, through
managed disposals of constituent businesses.
Operational highlights and post period end
-- Governance and control:
A simple, clear objective and a turnaround strategy has been
articulated and is well underway, focusing on core assets.
Significant Board changes made to improve corporate
governance:
-- Appointment of Hugh Cawley as CEO from 1 January 2018.
-- Two new independent Non-Executive Directors appointed post-year end.
Improvements to financial processes and procedures.
Corporate governance review carried out by Ernst & Young and
all recommendations being implemented.
Continuing and enduring support of the Group's major
shareholders.
-- Operational:
Disposal of two non-core businesses to focus more strongly on
Cake Decoration and Food Ingredients, for a total consideration of
GBP13.8 million.
Central costs now materially reduced.
Restructuring of financing undertaken raising up to GBP9.7
million post-year end to reduce debt and provide the platform for
future growth and managed disposals where appropriate.
Current trading
-- Trading is in line with our expectation for the year.
-- Christmas period remains critically important for Renshaw,
one of the Group's principal continuing businesses.
* Adjusted EBITDA represents earnings before depreciation,
amortisation, impairments, significant items and finance costs
Hugh Cawley, Chief Executive said:
"Last year was one which we will look back on with little pride
or satisfaction. However, since the start of 2018, we have begun to
take many of the remedial actions to turn around performance,
continuing these steps beyond the financial year end. Moreover, we
can now see the benefits of these actions in terms of having
eliminated term bank debt, much reduced costs and a greater focus
on our continuing businesses, all of which provide cause for
optimism for the future.
"At the moment, underlying trading is in line with our modest
expectations for the year, although the Christmas trading period
remains a critically important one for Renshaw especially. Overall,
the performance of, and prospects for, what is now a smaller and
more focused Group, have improved considerably."
Enquiries:
Real Good Food plc Tel: 0151 541 3790
Hugh Cawley, Chief Executive
Harveen Rai, Finance Director
finnCap Limited (Nomad and Broker) Tel: 020 7220 0500
Matt Goode / Carl Holmes / James Thompson
(Corporate Finance)
MHP Communications (Financial PR) Tel: 020 3128 8100
Reg Hoare / Katie Hunt rgf@mhpc.com
About Real Good Food
Real Good Food plc is a diversified food business serving a
number of market sectors including retail, manufacturing,
foodservice and export. The Company focuses on three main markets:
Cake Decoration (Renshaw and Rainbow Dust Colours), Food
Ingredients (R W Scott and Brighter Foods) and Premium Bakery
(Chantilly Patisserie).
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
Strategic Review
Introduction
The year under review was one which the Company will look back
on with little pride or satisfaction, but from which we believe
many valuable lessons have been learnt which will stand us in good
stead in the future. The importance of strong corporate governance
and clear strategic direction, the ill-advisedness of investing
before having secured the necessary funding and without having a
clear, rational, unequivocal business case, and the enormous
consequential direct and indirect cost of failings in these areas,
all feature prominently in the reasons for our poor performance in
this period.
However, the Board is pleased to report that since the start of
2018, we have begun to take many of the remedial actions to turn
around the Group performance, continuing these steps beyond the
financial year end. Moreover, we can now see the benefits of these
actions in terms of having eliminated term bank debt, much reduced
costs and a greater focus on our continuing core businesses, all of
which provide optimism for the future.
2017/18 performance
Revenues from continuing businesses increased in the year from
GBP107.7 million in 2016/17 to GBP129.8 million in 2017/18,
reflecting not least the effect of the acquisition of Brighter
Foods from April 2017, which added GBP16.1 million of revenue.
Adjusted EBITDA* in the same period dropped, however, from a
positive GBP1.4 million in 2016/17 to a negative GBP2.6 million in
2017/18, with a resulting operating loss. After taking account of
the exceptional ("significant") items of GBP5.0 million, and
impairment charges of GBP10.5 million, the statutory loss before
tax totalled GBP25.2 million (2017: GBP6.2 million).
These significant losses arose from a number of issues. There
was uncontrolled growth in the infrastructure and overhead base of
the businesses and Head Office, in anticipation of significant,
unprecedented and unrealised growth in revenues. It can be argued
that these arose from a blurring of focus on the commercial
imperatives of the businesses as sizeable capital investments were
implemented in less than perfectly managed projects. We were also
affected by the macro-economy with a variety of unfavourable
movements in external influences, including commodity prices,
exchange rates and litigation. Our inflexible and monolithic
inability to adapt to these macro changes exacerbated an already
complex situation. Change was required and the current Board has
embraced the radical change and discipline necessary for a
turnaround. In line with our review of corporate governance, we
also appraised the accounting practices of the recent past and, of
necessity, have subsequently made a variety of adjustments.
31 March 31 March
2018 2017
GBP'000s GBP'000s
---------------------------------------------- --------- ---------
Profit/(Loss) before taxation (25,167) (6,236)
---------------------------------------------- --------- ---------
Depreciation of property, plant and equipment 2,909 2,428
Impairment charge 10,494 4,109
Amortisation of intangibles 2,269 360
Significant Items 5,009 87
Finance Costs 1,756 427
Other Finance Costs 164 216
---------------------------------------------- --------- ---------
Adjusted EBITDA* Profit / (Loss) (2,566) 1,391
---------------------------------------------- --------- ---------
* Adjusted EBITDA represents earnings before depreciation,
amortisation, impairments, significant items and finance costs
Capital structure issues
Over the course of the financial year, and following the year
end, our three major shareholders (Napier Brown, Omnicane and, from
the second quarter onwards, Downing LLP client funds) were
repeatedly called upon to support the Group's finances through a
mixture of injections of loan capital and new equity. The
requirement arose not just from the poor results of the business
and the extensive capital programme, but also from having acquired
Brighter Foods in April 2017, without having clearly identified the
source of funds which would satisfy the acquisition funding. The
details of the injection of this funding and how and when it was
injected were included in the shareholder circular issued on 18th
July 2018 and those details are in note 11.
The longer-term funding solution which was implemented, and
concluded in August 2018 following the financial year end, was the
investment by our three major supportive shareholders in the loan
notes convertible into equity to replace the loan notes issued in
respect of their last injection of up to GBP8.7 million. At the
same time, to ensure that the minority shareholders were able to
participate in a fundraising alongside the supportive major
shareholders, an open offer was undertaken, which raised GBP1
million, at 5 pence per share, completed in August 2018. This
financial restructuring was approved at the general meeting of
shareholders held in London in August 2018.
Although the Board believes the Group's level of debt
outstanding remains higher than a business such as Real Good Food
should have, given its business model, the presence of bank debt
within the Group is now restricted to asset backed finance with J F
Renshaw and R&W Scott, and the invoice discount facility; today
there is no bank term loan outstanding. At the same time, the
Group's balance sheet retains a significant tangible asset base,
goodwill that has been written down to realistic levels, and net
assets significantly in excess of the Group's current stock market
capitalisation. This is an important measure in establishing the
Group's financial worth in future.
The Board is confident therefore that these steps, in
combination with a variety of other corporate initiatives including
the recently announced disposal of Haydens Bakery, have now
established a solid financial footing from which the remaining
constituent businesses of the Group are able to flourish.
Board changes
During the financial year, there were a number of Board changes,
with further changes since the year end. On 1 August 2017, Peter
Salter (Non-Executive Director) resigned and Pieter Totté
(Executive Chairman) and Dave Newman (Finance Director and Company
Secretary) resigned on 7 August 2017. There was no compensation for
loss of office to these Directors.
The Board was strengthened by the appointment of three new
Directors. Judith MacKenzie (non-independent Non-Executive Director
from one of our three major shareholders, Downing LLP) was
appointed on 21 July 2017 and Hugh Cawley (independent
Non-Executive Director) joined on 7 August 2017. Harveen Rai was
appointed as Finance Director and Company Secretary on 7 August
2017. On 8 August 2017 Christopher Thomas was appointed as Chief
Executive (from Non-Executive Director) and Pat Ridgwell assumed
the post of Interim Non-Executive Chairman (from Deputy
Chairman).
These changes were made to improve the independence and
corporate governance structure of the Board and to strengthen
further the strategic and turnaround expertise for the Group in
short order. In the light of the previous failings, the Board
subsequently commissioned a full independent review of the Group's
financial processes and procedures, corporate governance and
controls to be carried out by specialists from Ernst & Young
which has been completed and the recommendations are in the process
of being implemented in full.
On 1 January 2018, Hugh Cawley was appointed Chief Executive, as
Christopher Thomas stood down from the position to become
Non-executive Deputy Chairman. Following the year end, we announced
the appointments of, and are delighted to welcome to the Board as
independent Non-Executive Directors, Mike Holt (also as Chair of
the Audit & Risk Committee) and Steve Dawson. We are confident
that their experience and fresh perspectives will add real value to
the Board.
We have now completed the major planned changes to the Board's
composition with a more appropriate mix of independent and
non-independent Directors as well as Executives and
Non-Executives.
Operating performance and outlook
Over the year and post-year end, the Board has dealt with a
number of other challenges facing the Group, over and above the
funding situation, such that the performance of, and prospects for,
what is now a smaller and more focused Group, have improved
considerably. The substantial investment in central cost has
largely been unwound, for example, with the central headcount
reduced from 47 to 12 as at the date of signing these accounts.
This has reduced the central cost base by an annualised GBP2.8m
before reinvesting a proportion of the savings to ensure the
divisions have directly replaced as required the roles previously
provided by Head Office.
Each business has now set its own objective and its strategy,
defined what resources it requires to deliver those and then is
shaping the organisation of its people accordingly. We have
corporately learnt more about our own businesses, their strengths
and weaknesses, and continue to do so, with the assistance of
external perspectives where required.
We are very conscious, particularly following the shock of last
year's poor Christmas trading period, that we cannot be complacent
and must recognise the competitive pressures which are a relatively
new feature for some of our businesses. At the moment, underlying
trading is in line with our modest expectations for the year. The
Christmas trading period remains a critically important one for
Renshaw especially. Having had a year where we incurred significant
one-off financial costs (principally significant items and
impairments) our intention in the future is to report a far more
straightforward Income Statement without excessive adjustments,
thus enabling investors to value the Group more easily using
standard metrics.
'So far so good' therefore aptly describes progress to date in
this new financial year. The operational management teams and the
employees of the Group have endured considerable challenges, as
have other stakeholders. As is the nature of any turnaround, the
pain comes before any benefit and we thank all our stakeholders for
their patience and unstinting support thus far.
Group strategy
The Board's strategy has been to implement a turnaround plan for
the Group by focusing on its core assets. Phase 1 of the plan has
broadly been delivered (disposals, refinancing, cost reductions,
normalised accounting policies). We are now moving onto Phase 2 to
improve the profitability and cash generation of the core assets
and place the Group in a stronger position to deliver shareholder
value.
A basic tenet of the strategy required to deliver our objectives
is to work appropriately with the management of each and every
business to improve its performance, thus increasing the return on
the considerable investment that has been made in recent years and
thereby also increasing the inherent value of each business. Some
of the businesses in the Group are further developed along that
track than others.
Mindful that the Group has suffered historically from spreading
its resources too thinly, the Board recognises that where the net
value to shareholders of a business currently within the Group is
demonstrably greater were it to be sold in the short term (as
opposed to retained and turned around), then it must be considered
a candidate for sale. Garrett Ingredients was an example just after
the period under review. The recent disposal of Haydens also
resulted from that recognition. As a result, the continuing
material divisions of the Group comprise Food Ingredients and Cake
Decoration, both of which are clearly profitable divisions.
Summary
The Group now principally comprises two excellent divisions,
with clear objectives and strategies to achieve those objectives.
We believe we have the leadership, the senior management and the
resources capable of delivering the marked uplift in performance
required of each of them, together with the solid financial
foundation from which to do so. Indeed, there are signs of
improvement already apparent in each business.
There have been marked strides made in the standards of
corporate governance throughout and there is much firmer control
over costs and capital. This is a significant improvement on the
situation of just a year ago. We are grateful for the continued
support of all the stakeholders who have shown confidence in the
Group during some historically challenging times and we will strive
to keep the positive momentum which has been built of late. The
Board now has good reason to be more confident, but far from
complacent, in the future prospects for the Company.
Hugh C L Cawley, Chief Executive Officer
Divisional Business Review
Real Good Food Cake Decoration
2017/18 Performance
This year's result for Cake Decoration was disappointing in one
of the key businesses of the Group. Significant delays to the
commissioning of new manufacturing equipment aimed at introducing
new products, formats and a new brand, a delay in recovering
commodity cost increases during the key sales period, and a
significant increase in competitive intensity, particularly in the
retail sector, were the most significant factors contributing to
the performance.
A transformational capital investment programme started during
the year, with a new line to produce convenience formats of
Renshaw's core product, rolled icing, and a new soft icings plant;
one line is now fully operational and the other is in the final
stages of commissioning.
Consumer demand in the Cake Decoration category in the UK was
largely flat, although consumer shopping behaviour continued to
change, with footfall moving from Grocery Multiples to Discount
& Bargain store channels where the range of homebaking products
is more limited. During the key trading season for sweet
homebaking, competitive intensity increased considerably resulting
in lower selling prices across brand and own-label products. A
delay in recovering commodity cost increases in sugar and dairy
products further contributed to reduced margins.
Outside the UK, the establishment of a USA-based warehouse to
fulfil orders for North America was completed, leading to a one-off
reduction of stock within the supply chain but consumer demand
remains strong. A review of the order fulfilment model for
Continental Europe customers was initiated with the aim of ensuring
the division is easier to do business with and the Europe-based
personnel are focused on business development.
A product rebranding and relaunch exercise at Rainbow Dust was
initiated with some delays experienced due to the scale and
technical complexity of ensuring product compliance, particularly
for export markets. The Preston manufacturing site made significant
strides to ensuring it has the potential to distribute products
into new channels and territories, achieving both FDA and BRC
accreditations.
Forward plans
The business is implementing plans focused on streamlining
processes and resources to ensure better coordination of activity
across the Cake Decoration operating units and executing a growth
strategy focused on increased supply of everyday usage and
convenience products under its own and retailer brands, in the UK
and in selected export markets.
The professional cake decorating community already holds Renshaw
products in high esteem - we value and cherish that hard-won
respect. The launch of the Simply Create(TM) brand represents a
real opportunity for Renshaw to encourage novice consumers to
practise and expand their cake decorating skills. The range
includes high-quality frostings in an easy-to-use tub, tasty icings
in a carton and pourable icings, and it provides an easy excuse to
create and enjoy a celebration cake, with professional-looking
results. With the challenges over the past year, we held back the
planned national launch of Simply Create(TM) . During the current
year, Simply Create(TM) has been listed in Booths in the north-west
of England and throughout the Co-op estate, with encouraging early
results; wider national distribution is planned from early next
year.
In business-to-business, the division sees significant
opportunities to leverage its long-standing industry knowledge and
expertise to help cake manufacturers, for example, by delivering
better value core ingredients and some new innovative products,
capitalising on current cake decorating trends.
Export growth is focused on North America where the division has
identified significant potential to grow sales, and a plan has been
developed which will see an increase in sales resource, a higher
profile presence in the market and the acquisition of new
customers.
Following its review of the order fulfilment model for Europe,
the business has closed its Brussels warehouse and reverted to
supplying product from the UK with no detriment to service levels.
The Europe-based sales effort will now focus on existing and new
business development.
Ensuring the supply of consistently high-quality product remains
the key imperative for the division and, while it values the
reputation it has and the accreditations achieved, it is
implementing various initiatives to ensure product quality
standards continue to improve and that it leads the industry in
this respect.
2018 2017
12 Months to March GBPm GBPm
------------------- ----- -----
Revenue 47.7 47.0
Adjusted EBITDA* 2.6 6.5
Operating profit 0.5 5.5
Operating profit % 1.0% 11.7%
------------------- ----- -----
* Adjusted EBITDA represents earnings before depreciation,
amortisation, impairments, significant items and finance costs
Food Ingredients
2017/18 Performance
The Food Ingredients division has undergone a fundamental
transformation during the past two years, with the exciting,
value-adding acquisition of 84.3% of Brighter Foods at the start of
the financial year. Conversely, shortly after the end of the
period, in line with our current strategy, we divested Garrett
Ingredients, recognising that its net value to shareholders was
better realised from a disposal than from continued ownership. The
trading conditions faced by Garrett Ingredients in the year,
resulted in recognising an impairment of GBP3.5 million. During the
year to March 2018, there was also considerable investment in
R&W Scott, where the acquisition of one multiple retailer's jam
business added significant volume, though at lower than normal
margins for this business. Brighter Foods performed well during the
period and helped move the division into positive EBITDA
(adjusted), although commodity prices were unhelpful for the
trading business and for R&W Scott for much of the year.
2018 2017**
12 Months to March GBPm GBPm
------------------------------- ------ -------
Adjusted for:
Revenue 45.9 26.9
Adjusted EBITDA* profit/(loss) 2.3 (1.4)
Operating (loss) (3.5) (5.6)
Operating (loss) % (7.6)% (20.8)%
------------------------------- ------ -------
**2017 restated for continuing business only.
* Adjusted EBITDA represents earnings before depreciation,
amortisation, impairments, significant items and finance costs
Forward plans
The acquisition of Brighter Foods transformed the scale and
boosted the profitability of this division, establishing an
important presence in the added value health sector. The
performance of R&W Scott in the year was disappointing,
notwithstanding it secured a major jam contract, and the returns
from the investment made in plant and equipment did not start to
show through until after the close of the year. The origins of the
sugar trading dispute impacted the profitability of the division
markedly during the year, particularly at Garrett Ingredients, and
the resulting switch of suppliers helped margin recovery in the
second half of the year. The dispute regarding the non-supply
contracted sugar remains unresolved.
The acquisition of Brighter Foods has provided the Group with a
robust and stable platform in the growing health food &
wellness market.
Brighter Foods, acquired in April 2017, creates and manufactures
snack bars for the healthy snacking market from its factories in
Tywyn, Gwynedd in Mid Wales. This multi-award-winning company
produces snacks which are targeted at areas such as diet control,
gluten free, lactose free, low or no added sugar, sports nutrition,
organic and fair trade. As well as manufacturing partner-branded
products, Brighter Foods has its own healthier brands such as Wild
Trail, which is stocked in major retailers and health food
stores.
Premium Bakery
2017/18 Performance
It is difficult to over-emphasise the disruptive effect of the
extensive investment programme at Haydens during the year. As a
result of the capital investment, however, the factory in Devizes
now has significant extra capacity (one of the important features
that made the business attractive to its recent acquirer) and is
delivering enviable service levels. This has already allowed the
business to attract Tesco and Sainsburys to join the growing
customer list, utilising the equipment installed as part of the
investment. Commodity prices were also very unhelpful over the
year, with the cost of butter remaining at historically high levels
and our commercial agreements at that time not tailored to recover
any of the added cost. Projects are underway to improve the levels
of waste and overall efficiency, seeking to extract maximum return
from the new investment. Recruitment of high-calibre staff across
the industry remains a key differentiator and with a project that
also invested in staff and facilities, we have increased the
attractiveness of the business for the future.
In the event, the planned move of the Chantilly Patisserie
business to new premises was shelved, since, while it was of course
intuitively right to expand and grow, given the relative scarcity
of cash last year, the investment case for doing so simply could
not be made; the business remains based in premises where growth
will potentially be capacity-constrained, although this is not
currently an issue.
The challenging trading conditions resulted in an impairment of
fixed assets of GBP6.0 million for Haydens Bakeries, and an
impairment charge to goodwill of GBP1.0 million for Chantilly
Patisserie.
2018 2017
12 Months to March GBPm GBPm
------------------------------- ------- -----
Adjusted for:
Revenue 36.2 33.9
Adjusted EBITDA* profit/(loss) (0.9) 1.2
Operating profit/(loss) (10.2) 0.1
Operating profit/(loss) % (28.2)% 0.3%
------------------------------- ------- -----
* Adjusted EBITDA represents earnings before depreciation,
amortisation, impairments, significant items and finance costs
Forward plans
The Haydens business was sold in early September 2018, to
Bakkavor Limited for GBP12 million, leaving Chantilly Patisserie as
the only business in our Premium Bakery category. Commodity prices
will continue to be a challenge, most particularly in the higher
end of the market in which Chantilly operates but with excellent
products and a strong pipeline of new product innovations,
Chantilly's ability to stand alone in serving its foodservice
customer base is well-established.
Finance Review
Overview
During the year to 31 March 2018, the finance team, supported by
the Board, senior management, auditors, financial advisors and
external consultants, carried out comprehensive reviews of
financial controls and corporate governance.
The findings of the reviews set into motion a number of
activities to improve financial controls and governance with all
recommendations in the process of being implemented.
A number of accounting processes and procedures were reviewed
which resulted in a number of negative adjustments within EBITDA
(adjusted), and also profit before tax, and full reviews of all
investments in light of projected future divisional performance saw
material impairments of assets and goodwill, too.
Revenue
Group revenue for the 12 months ending 31 March 2018 was
GBP129.8 million (2017: GBP107.7 million), an increase of 20% on
the revenue to 31 March 2017. This results from growth in the Food
Ingredients business of GBP19.1 million, in Premium Bakery of
GBP2.3 million and a near-flat performance in Cake Decoration where
sales YOY increased by GBP0.7 million. The increase in the Food
Ingredients division was driven mainly by the acquisition of
Brighter Foods in April 2017, the revenue from Brighter amounting
to GBP16.1 million in the year. Premium Bakery also saw revenue
growth following significant investment in the year in both the yum
yum and tarts categories.
Profit measure on operations
Gross profit on the continuing businesses for the overall Group
was GBP24.9 million (2017: GBP26.3 million). At 14.9%, the
delivered margin in the year was below the prior year of 19.9%.
This margin has been impacted by several factors including
unfavourable commodity price increases, later than expected and
limited price recovery, currency impact, and changes in accounting
estimations within stock.
The operating loss in the year of GBP23.2 million is reported
after an impairment charge of GBP10.5 million, depreciation and
amortisation charge of GBP5.2 million and significant costs of
GBP5.0 million. The impairment review resulted in an impairment of
goodwill of GBP4.5 million, and impairment of fixed assets of
GBP6.0 million.
This has resulted in a statutory loss before tax of GBP25.2
million (2017: loss of GBP6.2 million), giving a basic loss per
share of 33.10 pence against a loss per share of 8.18 pence in 2017
(see note 10).
Cashflow and net debt
The significant capital investments, financial impact of poor
governance and other factors affecting the operating loss described
above, led to insufficient working capital. Shares issued in the
year and additional loans to 31 March 2018 amounted to GBP24.2
million, of which GBP13.0 million of cash was used in investing
activities and GBP6.6 million of cash was used in operating
activities.
Refinancing and additional funds
During the year, and since 31 March 2018, significant funds were
injected into the business by the major shareholders to support the
working capital needs of the business. Agreed investor loans and
equity placing total GBP27.0 million to the year end, and a further
GBP9.7 million was agreed after the year end, of which GBP1.0
million was raised through the Open Offer in August 2018. The Group
further increased its borrowings under hire purchase to GBP6.4
million and continued to utilise the invoice discounting facility.
Further details of borrowings can be found in note 11. The total of
borrowings saw interest charges in the year totalling GBP1.6
million.
Pension scheme
The Group offers a defined contribution scheme for all current
employees that is funded on a monthly basis. In addition, the
Company operates a defined benefit scheme that was closed to new
members in 2000.
The defined benefit scheme is the Napier Brown Retirement
Pension Plan (the Plan). The IAS 19 pension schemes valuation
reported a gross deficit at 31 March 2018 of GBP6.4 million (2017:
GBP5.9 million). The Plan assets decreased by GBP0.4 million to
GBP13.5 million (2017: GBP13.9 million) and the Plan liabilities
are GBP19.9 million compared to GBP19.8 million at 31 March 2017.
See note 12 for further details.
Dividend
The Directors, taking into account the Group's performance and
cash resources, do not recommend the payment of a final dividend
for the year ended 31 March 2018 (2017: GBP28k).
Outlook
Following a difficult year current trading is in line with our
modest expectations for the year. The Group remains focused on
continuing to improve its results and reduce net debt, as well as
its corporate governance and internal controls to support the
business strategy and increase shareholder value and returns.
Results of continuing operations
31 March 31 March
2018 2017
GBP'000s GBP'000s
------------------------- --------- ---------
Revenue 129,842 107,736
Gross profit 24,902 26,325
Delivered margin 19,443 21,410
Delivered margin % 14.9% 19.9%
EBITDA (adjusted) (loss) (2,566) 1,391
Operating loss (23,247) (5,593)
Operating loss % (17.9)% (5.2)%
Loss before tax (25,167) (6,236)
------------------------- --------- ---------
Consolidated Statement of Comprehensive Income
Year ended 31 March 2018
12 months 12 months
ended ended
31 March 31 March
2018 2017
GBP'000s GBP'000s
------------------------------------------------------------ --- --------- ---------
Revenue 2,3 129,842 107,736
Cost of sales (104,940) (81,411)
------------------------------------------------------------ --- --------- ---------
Gross profit 24,902 26,325
Distribution expenses (5,459) (4,915)
Administrative expenses (27,187) (22,807)
Impairment charge (10,494) (4,109)
Significant Items 4 (5,009) (87)
------------------------------------------------------------ --- --------- ---------
Operating loss 5 (23,247) (5,593)
Finance costs 6 (1,756) (427)
Other finance costs 7 (164) (216)
------------------------------------------------------------ --- --------- ---------
Loss before tax (25,167) (6,236)
Income tax (expense)/credit 9 (53) 483
------------------------------------------------------------ --- --------- ---------
Loss from continuing operations (25,220) (5,753)
------------------------------------------------------------ --- --------- ---------
Loss from discontinued operations (1,345) (226)
------------------------------------------------------------ --- --------- ---------
Net loss (26,565) (5,979)
------------------------------------------------------------ --- --------- ---------
Attributable to:
Owners of the parent (27,099) (5,979)
Non-controlling interests 534 -
------------------------------------------------------------ --- --------- ---------
Net loss (26,565) (5,979)
------------------------------------------------------------ --- --------- ---------
Items that will not be reclassified to profit or
loss
Foreign exchange differences on translation of subsidiaries 61 (48)
Actuarial losses on defined benefit plan 12 (599) (1,847)
Tax relating to items which will not be reclassified 100 351
------------------------------------------------------------ --- --------- ---------
Other comprehensive loss (438) (1,544)
------------------------------------------------------------ --- --------- ---------
Total comprehensive loss for the year (27,003) (7,523)
------------------------------------------------------------ --- --------- ---------
Attributable to:
Owners of the parent (27,537) (7,523)
Non-controlling interests 534 -
------------------------------------------------------------ --- --------- ---------
Total comprehensive loss for the year (27,003) (7,523)
------------------------------------------------------------ --- --------- ---------
Basic and diluted loss per share - continuing operations 10 (33.10)p (8.18)p
Basic and diluted loss per share - discontinued operations 10 (1.76)p (0.32)p
------------------------------------------------------------ --- --------- ---------
Note: The impairment charge comprises write downs of the plant
and equipment of Haydens Bakery (GBP6.0 million) and of Goodwill in
Garretts Ingredients (GBP3.5 million) and Chantilly Patisserie
(GBP1.0 million)
Consolidated Statement of Changes in Equity
Year ended 31 March 2018
Issued Share Share Foreign Non-
Share Premium Other Option Translation Retained Controlling Total
Capital Account Reserves Reserve Reserve Earnings Total Interest Equity
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Balance as at
31 March 2016 1,402 71,375 - 592 - 21,049 94,418 - 94,418
Total
comprehensive
loss for the
year
Loss for the
year - - - - - (5,979) (5,979) - (5,979)
Other
comprehensive
loss for the
year - - - - (48) (1,496) (1,544) - (1,544)
-------------- --------- --------- --------- --------- ------------ --------- --------- ----------- ---------
Total
comprehensive
loss for the
year - - - - (48) (7,475) (7,523) - (7,523)
-------------- --------- --------- --------- --------- ------------ --------- --------- ----------- ---------
Transactions
with
owners of the
Group,
recognised
directly in
equity
Shares issued
in the year 9 19 - - - - 28 - 28
Deferred tax
on
share based
payments - - - (177) - - (177) - (177)
Dividends paid - - - - - (28) (28) - (28)
Cancellation
of
share premium - (71,272) - - - 71,272 - - -
-------------- --------- --------- --------- --------- ------------ --------- --------- ----------- ---------
Total
contributions
by and
distributions
to owners of
the
Group 9 (71,253) - (177) - 71,244 (177) - (177)
-------------- --------- --------- --------- --------- ------------ --------- --------- ----------- ---------
Balance as at
31 March 2017 1,411 122 - 415 (48) 84,818 86,718 - 86,718
-------------- --------- --------- --------- --------- ------------ --------- --------- ----------- ---------
Total
comprehensive
loss for the
year
Loss for the
year - - - - - (27,099) (27,099) 534 (26,565)
Other
comprehensive
income for
the
year - - - - 61 (499) (438) - (438)
-------------- --------- --------- --------- --------- ------------ --------- --------- ----------- ---------
Total
comprehensive
loss for the
year - - - - 61 (27,598) (27,537) 534 (27,003)
-------------- --------- --------- --------- --------- ------------ --------- --------- ----------- ---------
Transactions
with
owners of the
Group,
recognised
directly in
equity
Shares issued
in the year 158 2,598 - - - - 2,756 - 2,756
Share based
payments - - - (5) - - (5) - (5)
Deferred tax
on
share based
payments - - - (100) - - (100) - (100)
Long-term
liabilities - - (4,796) - - - (4,796) - (4,796)
Acquisition of
majority
interest - - - - - - - 1,269 1,269
-------------- --------- --------- --------- --------- ------------ --------- --------- ----------- ---------
Total
contributions
by and
distributions
to owners of
the
Group 158 2,598 (4,796) (105) - - (2,145) 1,269 (876)
-------------- --------- --------- --------- --------- ------------ --------- --------- ----------- ---------
Balance as at
31 March 2018 1,569 2,720 (4,796) 310 13 57,220 57,036 1,803 58,839
-------------- --------- --------- --------- --------- ------------ --------- --------- ----------- ---------
Consolidated Statement of Financial Position
Year ended 31 March 2018
31 March 31 March
2018 2017
Notes GBP'000s GBP'000s
-------------------------------------------- ----- --------- ---------
NON-CURRENT ASSETS
Goodwill 69,955 69,416
Other intangible assets 3,247 1,155
Tangible fixed assets 30,098 23,932
Investments 81 -
Deferred tax asset 1,129 1,435
-------------------------------------------- ----- --------- ---------
104,510 95,938
-------------------------------------------- ----- --------- ---------
CURRENT ASSETS
Inventories 10,582 13,323
Trade and other receivables 15,296 16,016
Current tax assets 27 233
Cash collateral 11 2,000 -
Cash and cash equivalents 2,731 464
-------------------------------------------- ----- --------- ---------
30,636 30,036
-------------------------------------------- ----- --------- ---------
TOTAL ASSETS 135,146 125,974
-------------------------------------------- ----- --------- ---------
CURRENT LIABILITIES
Bank overdrafts - 619
Trade and other payables 22,486 15,243
Borrowings 11 24,160 11,375
Financial instrument - 146
-------------------------------------------- ----- --------- ---------
46,646 27,383
-------------------------------------------- ----- --------- ---------
NON-CURRENT LIABILITIES
Borrowings 11 16,390 4,701
Long-term liabilities - NCI put option 4,796 -
Deferred tax liabilities 2,035 1,278
Retirement benefit obligation 12 6,440 5,894
-------------------------------------------- ----- --------- ---------
29,661 11,873
-------------------------------------------- ----- --------- ---------
TOTAL LIABILITIES 76,307 39,256
-------------------------------------------- ----- --------- ---------
NET ASSETS 58,839 86,718
-------------------------------------------- ----- --------- ---------
EQUITY
Share capital 1,569 1,411
Share premium account 2,720 122
Other reserve (4,796) -
Share option reserve 310 415
Foreign exchange translation reserve 13 (48)
Retained earnings 57,220 84,818
-------------------------------------------- ----- --------- ---------
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT 57,036 86,718
Non-controlling interest 1,803 -
-------------------------------------------- ----- --------- ---------
TOTAL EQUITY 58,839 86,718
-------------------------------------------- ----- --------- ---------
Consolidated Cash Flow Statement
Year ended 31 March 2018
Notes 2018 31 March
GBP'000s 2017
GBP'000s
----------------------------------------------------- ----- --------- ---------
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss)/profit before taxation (26,512) (6,462)
Finance and other finance costs 6, 7 1,805 643
FX movement 152 -
Share based payment expense (5) -
Loss on discontinued business 142 -
Loss on disposal of property, plant and equipment 107 -
Depreciation of property, plant and equipment 2,929 2,434
Impairment charge 10,494 4,109
Past service cost/(gain) on pension 12 115 (1,330)
Amortisation of intangibles 2,274 365
----------------------------------------------------- ----- --------- ---------
Operating cash flow (8,499) (241)
Decrease/(increase) in inventories 3,675 (963)
Decrease in receivables 1,641 1,021
Pension contributions (942) (310)
NCI put option (4,796) -
Increase in payables 3,155 1,497
----------------------------------------------------- ----- --------- ---------
Cash (used in)/generated by operations (5,766) 1,004
Income taxes received/(paid) 1 (237)
Interest paid (809) (427)
----------------------------------------------------- ----- --------- ---------
Net cash (outflow)/inflow from operating activities (6,574) 340
----------------------------------------------------- ----- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of intangible assets (249) (686)
Purchase of property, plant and equipment (10,961) (10,820)
Acquisition of business, net of cash acquired (1,781) -
----------------------------------------------------- ----- --------- ---------
Net cash outflow from investing activities (12,991) (11,506)
----------------------------------------------------- ----- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Shares issued in year 2,756 28
Dividends paid - (28)
Repayment of loans (750) (688)
Inflow of investor loans 21,398 -
Drawdowns on revolving credit facilities 99,266 5,628
Repayment of revolving credit facilities (99,930) -
New finance leases acquired 1,008 4,074
Capital repayments on finance leases (1,306) -
----------------------------------------------------- ----- --------- ---------
Net cash inflow from financing activities 22,442 9,014
----------------------------------------------------- ----- --------- ---------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 2,877 (2,152)
----------------------------------------------------- ----- --------- ---------
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period (155) 1,997
Effects of currency translations on cash and cash
equivalents 9 -
Net movement in cash and cash equivalents 2,877 (2,152)
----------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at end of period 8 2,731 (155)
----------------------------------------------------- ----- --------- ---------
Cash and cash equivalents comprise:
Cash 2,731 464
Overdrafts - (619)
----------------------------------------------------- ----- --------- ---------
2,731 (155)
----------------------------------------------------- ----- --------- ---------
Notes to the Financial Information
Year ended 31 March 2018
1. Presentation of financial information
General information
Real Good Food plc is a public limited company incorporated in
England and Wales under the Companies Act (registered number
04666282). The Company is domiciled in England and Wales and its
registered address is 61 Stephenson Way, Wavertree, Liverpool L13
1HN. The Company's shares are traded on the Alternative Investment
Market (AIM).
Basis of preparation
The consolidated financial information is presented on the basis
of International Financial Reporting Standards (IFRS) as adopted by
the European Union and have been prepared in accordance with AIM
rules and the Companies Act 2006, as applicable to companies
reporting under IFRS.
The financial information set out in this preliminary statement
does not constitute the Group's statutory accounts for the years
ended 31 March 2018 or 2017. Statutory accounts for 2017 have been
delivered to the Registrar of Companies, and those for 2018 will be
delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The accounts are prepared on a going concern basis.
These results were approved by the Board of Directors on 28
September 2018.
Discontinued operations
A discontinued operation is a component of the Group's business
that represents a separate major line of business or geographical
area of operations that has been disposed of or is held for sale,
or is a subsidiary acquired exclusively with a view to resale.
Classification of a discontinued operation occurs upon disposal or
when the operation meets the criteria to be classified as held for
sale, if earlier. When an operation is classified as a discontinued
operation, the comparative income statement is presented as if the
operation had discontinued from the start of the comparative
period. The disposal of the Garrett Ingredients Nutrition business
in year to March 2018, gave rise to a discontinued operation.
2. Revenue
The revenue for the Group for the current year arose from the
sale of goods in the following areas:
Cake Decoration Manufactures, sells and supplies cake decorating products
GBP47.7million and ingredients for the baking sector. The revenue from
the Renshaw Academy is shown in Head Office and relates
to the Cake Decoration division.
---------------- -------------------------------------------------------------
Food Ingredients Manufactures and supplies a range of food ingredients such
GBP45.9million as chocolate coatings, sauces, jams, dry powder blends
and snack bars to the retail, wholesale and foodservice
sectors.
---------------- -------------------------------------------------------------
Premium Bakery The manufacture and supply of high quality cakes and desserts
GBP36.2million to the retail and foodservice sectors.
---------------- -------------------------------------------------------------
3. Segment reporting
Business segments
The divisional structure reflects the management teams in place
and also ensures all aspects of trading activity have the specific
focus they need in order to achieve our growth plans.
The Group operates in three main divisions: cake decoration,
food ingredients and premium bakery. The Head Office
functions of Finance, Human Resources, Technical, Marketing and
the Innovation Centre provide support to the divisions in varying
scale.
Premium Continuing Discontinued Total
12 months ended 31 Cake Decoration Food Ingredients Bakery Head Office Operations Operations Group
March 2018 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Total revenue 55,175 50,641 36,206 61 142,083 284 142,367
Revenue - internal (7,544) (4,697) - - (12,241) - (12,241)
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
External revenue 47,631 45,944 36,206 61 129,842 284 130,126
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Underlying adjusted
EBITDA (see table
below) 2,597 2,344 (922) (6,585) (2,566) (844) (3,410)
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Operating
profit/(loss)
before impairment
& significant items 1,524 238 (2,439) (7,067) (7,744) (869) (8,613)
Impairment charge - (3,506) (6,988) - (10,494) - (10,494)
Significant items (1,060) (275) (731) (2,943) (5,009) (476) (5,485)
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Operating
profit/(loss) 464 (3,543) (10,158) (10,010) (23,247) (1,345) (24,592)
Net finance costs (214) (127) (205) (1,210) (1,756) - (1,756)
Other finance costs - - - (164) (164) - (164)
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Profit/(loss) before
tax 250 (3,670) (10,363) (11,384) (25,167) (1,345) (26,512)
Tax 1,364 (580) 99 (936) (53) - (53)
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Profit/(loss) after
tax as per
comprehensive
statement of income 1,614 (4,250) (10,264) (12,320) (25,220) (1,345) (26,565)
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Included in the Premium Bakery segment, one single customer
accounts for 17.2% (2017: 19.8%) of the continuing Group's external
sales for the year ended 31 March 2018.
Geographical segments
The Group earns revenue from countries outside the United
Kingdom, but as these only represent 9.8% of the total revenue of
the Group (2017 : 11.6%), segmental reporting of a geographical
nature is not considered relevant. The Cake Decoration segment
accounts for the majority of this turnover.
Reconciliation of Premium Continuing Discontinued Total
underlying EBITDA Cake Decoration Food Ingredients Bakery Head Office Operations Operations Group
to operating profit GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Operating
profit/(loss) 464 (3,543) (10,158) (10,010) (23,247) (1,345) (24,592)
Significant items 1,060 275 731 2,943 5,009 476 5,485
Impairment charge - 3,506 6,988 - 10,494 - 10,494
Depreciation 797 693 994 425 2,909 20 2,929
Amortisation 276 1,413 523 57 2,269 5 2,274
Underlying adjusted
EBITDA 2,597 2,344 (922) (6,585) (2,566) (844) (3,410)
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Premium Head Continuing Discontinued Total
Cake Decoration Food Ingredients Bakery Office Operations Operations Group
31 March 2018 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Segment assets 110,146 24,615 17,337 (16,952) 135,146 - 135,146
--------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Segment liabilities 26,219 18,449 27,097 4,542 76,307 - 76,307
--------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Net operating assets 83,927 6,166 (9,760) (21,494) 58,839 - 58,839
--------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Non-current asset
additions 2,646 4,206 8,169 2,087 17,108 - 17,108
Depreciation (797) (693) (994) (425) (2,909) (20) (2,929)
Amortisation (276) (1,413) (523) (57) (2,269) (5) (2,274)
--------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Premium Head Continuing Discontinued Total
12 months ended 31 Cake Decoration Food Ingredients Bakery Office Operations Operations Group
March 2017 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Total revenue 51,042 31,195 33,892 - 116,129 472 116,601
Revenue - internal (4,053) (4,340) - - (8,393) - (8,393)
----------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
External revenue 46,989 26,855 33,892 - 107,736 472 108,208
----------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Underlying adjusted
EBITDA
(see table overleaf) 6,528 (1,352) 1,167 (4,952) 1,391 (212) 1,179
----------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Operating profit/(loss)
before impairment
& significant items 5,758 (1,823) 192 (5,524) (1,397) (226) (1,623)
Impairment charge - (3,589) - (520) (4,109) - (4,109)
Significant items (264) (141) (95) 413 (87) - (87)
----------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Operating profit/(loss) 5,494 (5,553) 97 (5,631) (5,593) (226) (5,819)
Net finance costs (129) (34) (83) (181) (427) - (427)
Other finance costs - - - (216) (216) - (216)
----------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Profit/(loss) before
tax 5,365 (5,587) 14 (6,028) (6,236) (226) (6,462)
Tax (1,280) 763 (29) 1,029 483 - 483
----------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Profit/(loss) after
tax as per
comprehensive
statement of income 4,085 (4,824) (15) (4,999) (5,753) (226) (5,979)
----------------------- --------------- ---------------- --------- --------- ----------- ------------ ---------
Reconciliation of
underlying EBITDA
(adjusted) to Premium Continuing Discontinued Total
operating Cake Decoration Food Ingredients Bakery Head Office Operations Operations Group
profit GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Operating
(profit)/loss 5,494 (5,553) 97 (5,631) (5,593) (226) (5,819)
Significant items 264 141 95 (413) 87 - 87
Impairment charge - 3,589 - 520 4,109 - 4,109
Depreciation 719 463 696 550 2,428 6 2,434
Amortisation 51 8 279 22 360 8 368
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
Underlying adjusted
EBITDA 6,528 (1,352) 1,167 (4,952) 1,391 (212) 1,179
--------------------- --------------- ---------------- --------- ----------- ----------- ------------ ---------
4. Significant items
12 months 12 months
ended ended
Commentary 31 March 31 March
Notes 2018 GBP'000s 2017 GBP'000s
------------------------------------------------------ ---------- -------------- --------------
Disruption/abnormal wastage costs relating to ongoing
capital projects 1 (885) -
Investigation work 2 (1,207) -
Professional fees in relation to refinancing costs 3 (553) -
Discontinued operations and asset write-off 4 (920) -
Commercial disputes 5 (355) -
Past service gain on pensions -- - 1,155
Management restructuring 6 (1,254) (419)
Acquisition and legal costs 7 (311) (823)
------------------------------------------------------ ---------- -------------- --------------
Significant items (5,485) (87)
------------------------------------------------------ ---------- -------------- --------------
Continuing business (5,009) (87)
Discontinued business (476) -
------------------------------------------------------ ---------- -------------- --------------
Total significant items (5,485) (87)
------------------------------------------------------ ---------- -------------- --------------
-- Historically, an allowance for future pension increases of 3%
has been included in the defined benefit obligation. The past
service gains of GBP1,155k reflect the value of this discretionary
option, rather than the 3% assumed historically.
The Group's underlying profit figure excludes a number of items
which are material and non-recurring and are detailed separately to
ensure the underlying operating performance of the businesses is
clearly visible, without the distortions of these non-recurring
costs.
The year to March 2018 has been one of significant corporate
change, upheaval and challenge and the excluded items, explained in
the notes below, have been commensurately large.
1. Disruption/abnormal wastage during improving capacity of
business units. Considerable funds have been invested throughout
the Group in the past two years in capital projects, to improve the
capacity and operating efficiency of the Group. The unusual costs
associated with abnormal disruption, which arose on the capital
projects in Haydens, Renshaw and R&W Scott, have been
separately tracked in the P&L.
2. Investigation work relating to corporate governance failings.
There were well-publicised failings in the area of corporate
governance. The costs of securing the services of external agencies
sufficiently specialised, experienced and qualified to ensure all
failings were fully investigated and identified, and remedial
actions highlighted on a timely basis have been identified
separately.
3. Professional fees relating to refinancing costs required. The
very unusual frequency and short-term costs of refinancing in the
period are highlighted here, as being the costs associated with
providing repeated emergency funding before any form of longer-term
package was able to be negotiated. All loans have now been
negotiated.
4. Close of business transaction and asset write-offs. During
the year, we closed the Garrett Ingredients Nutrition business
(GBP476k), a business that we had bought out of administration, to
avoid incurring continuing losses and to avoid the distraction that
managing a distressed business inevitably entails. The remaining
costs relate to capital expenditure projects which are no longer
being pursued.
5. Commercial disputes. These costs relate to the
well-publicised issues, identified separately in previous
announcements to the City, arising from disputes over material
sugar contracts. One claim is now settled, the other continues and
is not yet resolved.
6. Management restructuring. Individual redundancies are
generally a matter of everyday business, however, significant
restructuring has been required and effected right across the Group
during the past 12 months, as fundamental changes in the operations
have been brought about, while deliberate, one-off changes have
been delivered. The central functions have been largely disbanded,
for example, as the Group can demonstrably no longer afford to
sustain a central overview of marketing, operations, or HR. The
costs of severance for these staff members have been separately
identified and disclosed here.
7. The Company incurred further legal fees in 2018 relating to
the successful acquisition of Brighter Foods in April 2017.
5. Operating profit
Operating profit for continuing operations
12 months 12 months
ended ended
31 March 31 March
Notes 2018 GBP'000s 2017 GBP'000s
------------------------------------------------- ----- -------------- --------------
External sales 129,842 107,736
------------------------------------------------- ----- -------------- --------------
Staff costs (40,732) (31,070)
Inventories:
- cost of inventories as an expense (included in
cost of sales) (70,591) (53,317)
Depreciation of property, plant and equipment (2,909) (2,428)
Amortisation of intangible assets (2,269) (360)
Significant items 4 (5,009) (87)
Impairment charge (10,494) (4,109)
Operating lease payment:
- land and buildings (1,161) (409)
- other assets (269) (436)
Research and development expenditure (1,795) (1,839)
Impairment of trade receivables (146) 92
Foreign exchange losses/(gains) 289 (19)
Other net operating expenses (18,003) (19,347)
------------------------------------------------- ----- -------------- --------------
Total (153,089) (113,329)
------------------------------------------------- ----- -------------- --------------
Operating loss (23,247) (5,593)
------------------------------------------------- ----- -------------- --------------
Note: The impairment charge comprises write downs of the plant
and equipment of Haydens Bakery (GBP6.0 million) and of Goodwill in
Garrett Ingredients (GBP3.5 million) and Chantilly Patisserie
(GBP1.0 million)
6. Finance costs
12 months
12 months ended
ended 31 March
31 March 2017
2018 GBP'000s GBP'000s
------------------------------------------------------ -------------- ---------
Interest on bank loans, overdrafts and investor loans (1,311) (409)
Interest on obligations under finance leases (330) (18)
Past service cost on pension (115) -
------------------------------------------------------ -------------- ---------
(1,756) (427)
------------------------------------------------------ -------------- ---------
Continuing business (1,756) (427)
------------------------------------------------------ -------------- ---------
Discontinued business - -
------------------------------------------------------ -------------- ---------
7. Other finance costs
12 months
12 months ended
ended 31 March
31 March 2017
2018 GBP'000s GBP'000s
------------------------------------------------- -------------- ---------
Interest on pension scheme liabilities (note 12) (553) (754)
Interest on pension scheme assets (note 12) 389 538
------------------------------------------------- -------------- ---------
(164) (216)
------------------------------------------------- -------------- ---------
8. Notes supporting the cash flow statement
The cash collateral figure for the Group is GBP2 million. This
has been provided to Lloyds Banking Group as security for the
liabilities of the Group. The GBP2 million has been supplied as
investor loans by Omnicane and Napier Brown and attracts interest.
This amount is not included in the cashflow.
Group
Current
Non-current Loans
Loans and and
Borrowings Borrowings Total
GBP000's GBP000's GBP000's
--------------------------------------------------- ----------- ----------- ---------
At 31 March 2017 4,701 11,375 16,076
Cash flows 12,562 7,124 19,686
Non-cash flows
- Cash collateral - 2,000 2,000
- Loans and borrowings classified as non-current
at 31 March 2017 becoming current before 31 March
2018 (3,157) 3,157 -
- Hire purchase assets procured by lender 2,006 455 2,461
- Government grant 278 49 327
--------------------------------------------------- ----------- ----------- ---------
At 31 March 2018 16,390 24,160 40,550
--------------------------------------------------- ----------- ----------- ---------
Company
Non-current Current
Loans and Loans and
Borrowings Borrowings Total
GBP000's GBP000's GBP000's
--------------------------------------------------- ----------- ----------- ---------
At 31 March 2017 1,500 1,000 2,500
Cash flows 11,254 9,394 20,648
Non-cash flows
Cash collateral - 2,000 2,000
- Loans and borrowings classified as non-current
at 31 March 2017 becoming current before 31 March
2018 (1,500) 1,500 -
--------------------------------------------------- ----------- ----------- ---------
At 31 March 2018 11,254 13,894 25,148
--------------------------------------------------- ----------- ----------- ---------
9. Taxation
Group
31 March 31 March
2018 2017
GBP'000s GBP'000s
----------------------------------------------- --------- ---------
Current tax
UK current tax on profit of the period (58) (84)
UK current tax on significant items - 84
Adjustments in respect of prior years 196 134
----------------------------------------------- --------- ---------
Total current tax 138 134
----------------------------------------------- --------- ---------
Origination and reversal of timing differences (213) 377
Adjustments in respect of prior years 22 (28)
----------------------------------------------- --------- ---------
Total deferred tax (191) 349
----------------------------------------------- --------- ---------
Tax - continuing operations (53) 483
Tax - discontinued operations - -
----------------------------------------------- --------- ---------
Total tax (53) 483
----------------------------------------------- --------- ---------
Tax (expense)/credit on loss (53) 483
----------------------------------------------- --------- ---------
Factors affecting tax charge for the period:
The tax assessed for the period differs from the standard rate
of corporation tax in the UK of 19% (2017 : 20%).
The differences are explained below:
31 March 31 March
2018 2017
GBP'000s GBP'000s
-------------------------------------------------------- --------- ---------
Tax reconciliation
Loss per accounts before taxation (26,512) (6,462)
Tax on loss on ordinary activities at standard tax rate
of 19% (2017: 20%) 5,037 1,292
Expenses not deductible for tax purposes (2,191) (709)
Share option relief - 26
Current year losses not recognised - deferred tax (3,202) (204)
Adjustments in respect of change in deferred tax rate 85 (28)
Adjustments to tax in respect of prior years 218 106
-------------------------------------------------------- --------- ---------
Total tax (53) 483
-------------------------------------------------------- --------- ---------
Tax on continuing operations (53) 483
Tax on discontinued operations - -
-------------------------------------------------------- --------- ---------
Tax (expense)/credit for the period (53) 483
-------------------------------------------------------- --------- ---------
The Finance (No. 2) Act 2015 introduced a reduction in the main
rate of corporation tax from 20% to 19% from 1 April 2017 and from
19% to 18% from 1 April 2020. These reductions were substantively
enacted on 26 October 2015.
The Finance Act 2016 introduced a further reduction in the main
rate of corporation tax to 17% from 1 April 2020. This was
substantively enacted on 6 September 2016. Accordingly, deferred
tax balances that are expected to reverse after 1 April 2020 have
been valued at the lower rate of 17%.
10. Earnings per share
Basic earnings per share
Basic earnings per share is calculated on the basis of dividing
the profit/(loss) attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares in issue
during the year.
12 months 12 months 12 months 12 months
ended ended ended ended
31 March 31 March 31 March 31 March
2018 2018 2017 2017
Continuing Discontinued Continuing Discontinued
Operations Operations Operations Operations
----------------------------------------------------- ----------- ------------- ----------- -------------
Loss after tax attributable to ordinary shareholders
(GBP'000s) (25,220) (1,345) (5,753) (226)
Weighted average number of shares in issue
for basic EPS ('000s) 76,179 76,179 70,272 70,272
Employee share options ('000s) 1,790 1,790 4,234 4,234
Weighted average number of shares in issue
for diluted EPS ('000s) 77,969 77,969 74,506 74,506
----------------------------------------------------- ----------- ------------- ----------- -------------
Basic and diluted loss per share (33.10)p (1.76)p (8.18)p (0.32)p
----------------------------------------------------- ----------- ------------- ----------- -------------
The total loss per share (continuing and discontinued
operations) for 2018 is (34.86)p (2017: (8.50)p).
Diluted earnings per share
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.
The weighted average number of shares in issue for the year was
76,179,123 and the number of options outstanding was 6,930,748. If
these were all exercised the cash raised would be equivalent to
that which would be raised by issuing 1,789,851 shares at the
average share price during the year. The difference between these
figures is the weighted average number of dilutive potential
ordinary shares of 77,968,974.
Adjusted earnings per share
An adjusted earnings per share and a diluted adjusted earnings
per share, which exclude significant items, have also been
calculated as in the opinion of the Board this allows shareholders
to gain a clearer understanding of the trading performance of the
Group.
12 months 12 months 12 months 12 months
ended ended ended ended
31 March 31 March 31 March 31 March
2018 2018 2017 2017
Continuing Discontinued Continuing Discontinued
Operations Operations Operations Operations
----------------------------------------------------- ----------- ------------- ----------- -------------
Loss after tax attributable to ordinary shareholders
(GBP'000s) (25,220) (1,345) (5,753) (226)
----------------------------------------------------- ----------- ------------- ----------- -------------
Add back significant items (GBP'000s) (note
4) 5,009 476 87 -
----------------------------------------------------- ----------- ------------- ----------- -------------
Adjusted loss after tax attributable to ordinary
shareholders (GBP'000s) (20,211) (869) (5,666) (226)
Weighted average number of shares in issue
for basic EPS ('000s) 76,179 76,179 70,272 70,272
Weighted average number of shares in issue
for diluted EPS ('000s) 77,969 77,969 74,506 74,506
----------------------------------------------------- ----------- ------------- ----------- -------------
Adjusted loss per share (26.53)p (1.14)p (8.06)p (0.32)p
----------------------------------------------------- ----------- ------------- ----------- -------------
* Prior year basic and diluted loss per share was (8.16)p after
adjusting for tax on significant items
The total adjusted loss per share (continuing and discontinued
operations) for 2018 is (27.67)p (2017: (8.38)p).
11. Borrowings and capital management
31 March 31 March 31 March 31 March
2018 Group 2018 Company 2017 Group 2017 Company
GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------------------- ----------- ------------- ----------- -------------
Secured borrowings at amortised cost
Bank term loans 1,750 1,750 2,500 2,500
Revolving credit facilities 8,669 - 9,333 -
Hire purchase 6,406 - 4,243 -
Investor loans* 21,398 21,398 - -
Investor loans - cash collateral 2,000 2,000 - -
Government grants 327 - - -
------------------------------------------- ----------- ------------- ----------- -------------
40,550 25,148 16,076 2,500
------------------------------------------- ----------- ------------- ----------- -------------
Amount due for settlement within 12 months 24,160 13,894 11,375 1,000
Amount due for settlement after 12 months 16,390 11,254 4,701 1,500
------------------------------------------- ----------- ------------- ----------- -------------
Total 40,550 25,148 16,076 2,500
------------------------------------------- ----------- ------------- ----------- -------------
* Accrued interest of GBP0.7m at 31 March 2018 is not shown in
the above Investor loans, this is shown within accruals in
payables.
Government grants represents the amount of grants received for
which the criterion to ensure that repayment is not required has
not yet been met. Grant monies in respect of which the criteria
have been met are included in operating income.
All existing shareholder loans were renegotiated in June 2018 to
require repayment in June 2020.
Features of the Group's borrowings are as follows:
The Group's financial instruments comprised cash, a term loan,
hire purchase and finance leases, a revolving credit facility, an
overdraft, investor loans and various items arising directly from
its operations such as trade payables and receivables. The main
purpose of these financial instruments is to finance the Group's
operations. The government grant is specific to Brighter Foods.
The main risks from the Group's financial instruments are
interest rate risk and liquidity risk. Liquidity risk arises from
the Group's management of working capital and the finance charges
and principal repayments on its debt instruments. The Group's
policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due.
The Group also has some currency exposure in relation to its
Euro and US Dollar commodity purchases. However, this is mitigated
by matching in part against foreign currency sales. The Board
reviews and agrees policies, which have remained substantially
unchanged for the year under review, for managing these risks.
The Group's policies on the management of interest rate,
liquidity and currency exposure risks are set out in the Report
of
the Directors.
During the year ended 31 March 2018 the Group continued with the
borrowing facilities in place and secured loans from investors. The
borrowings comprised:
-- A term loan with Lloyds Banking Group ("LBG") repayable in
quarterly instalments of GBP250k with a final repayment in October
2018. Interest on this loan is charged at 2.75% above Bank of
England base rate (Base Rate).
-- Invoice discount facility of GBP20 million with LBG on a
revolving basis with a minimum term of 12 months and a six-month
notice period. This facility is secured against the debtors across
the whole of the Group's UK businesses (excluding Brighter Foods)
with an interest rate of 1.5% above Base Rate.
-- An overdraft facility with LBG of up to GBP2.0m with two
major shareholders (Napier Brown Holdings and Omnicane Limited)
each putting GBP1.0m into an account as security. The interest rate
on the overdraft is at 3.5% above Base Rate.
-- The Group also secured facilities against specific plant and
machinery with LBG and ABN Amro Lease NV totalling GBP6.3m. The
facilities interest payable is varied per specific agreement, but
is generally between 3.5% and 4.0%.
The three major shareholders, NB Holdings Limited, Omnicane
Investors Limited and certain funds managed by Downing LLP,
supported the business and provided significant funding to the
Group by way of loans.
The loans are summarised as follows:
Date Amount Method of Funding Major Shareholder(s)
-------------- --------- ----------------------- ----------------------
March 2018 GBP4.0m* Unsecured loan notes NB (GBP1.7m), Omnicane
(GBP1.7m)
Downing (GBP0.6m)
January 2018 GBP3.0m Unsecured loan notes NB (GBP1.3m), Omnicane
(GBP1.3m) Downing
(GBP0.4m)
September 2017 GBP4.0m Loan Facility & loan NB (GBP1.3m), Omnicane
notes (GBP1.3m) Downing
Secured on specific (GBP1.3m)
chattel assets
August 2017 GBP2.0m Loan facility NB (GBP1.0m), Omnicane
(applied as collateral (GBP1.0m)
for bank overdraft)
June 2017 GBP4.0m Investor loans NB (GBP2.0m), Omnicane
(GBP2.0m)
June 2017 GBP7.3m** Loan notes Downing
-------------- --------- ----------------------- ----------------------
TOTAL GBP24.3m
-------------- --------- ----------------------- ----------------------
* GBP0.9m of the funding agreed in March 2018 was received in
April 2018
** Interest is payable on a quarterly basis to the MI Downing
Monthly Income Fund up to a principal amount of GBP0.9m
Lloyds Bank plc has a debenture incorporating a floating charge
over the undertaking and all property and assets present and future
including goodwill, book debts, uncalled capital, buildings,
fixtures, intangible assets, fixed plant and machinery. In
addition, the banking arrangements with Lloyds Bank plc contain
certain cross-guarantees.
Post-year end borrowings
-- In May 2018 the Company secured further funding from each of
its major shareholders totalling GBP8.5m. NB and Omnicane each
provided GBP3.3m and Downing provided GBP1.9m (with a further
GBP0.2m to be provided at the sole discretion of Downing prior to
30 September 2018). This instrument has since, with shareholder
approval, been converted into a "Convertible Loan Note" instrument
with a conversion price of 5 pence. This instrument accrues
interest at 12%, maturing in full on 17 May 2021, unless converted
before that date. Should the shareholders exercise the right to
convert the "CLN" into Ordinary shares, this would result in
dilution of current shareholdings.
-- A further GBP1.0m was raised through an Open Offer in August
2018, with a further 20,115,190 shares admitted on 17 August
2018.
-- Following the sales of Garrett Ingredients Limited and
Haydens Bakeries Limited the invoice discount facility with LBG was
reduced to GBP10 million.
-- The residue of the term loan of GBP1.8 million at 31 March
2018 was repaid in full in September 2018 with the proceeds of the
Haydens disposal.
-- The terms of the investor loans were amended post the year
end subject to the "Amendment Deed" with all loans (except the
Convertible Loan Notes) accruing interest at a rate of 10%,
repayable with the principal amount on 30 June 2020.
12. Pensions arrangements
Defined Contribution Scheme. The Group operates a defined
contribution scheme for all employees, including provision to
comply with auto-enrolment requirements laid down by law.
In addition, the Company operates one defined benefit scheme
which was closed to new members in 2000. From 1 April 2016 the
Company annual contributions were agreed at GBP320k for 11 years
and eight months, increasing at 4% per annum each April. The
Company expects to pay GBP346k to the Plan for the year commencing
1 April 2018 (2018: GBP333k). The defined benefit scheme is funded
by the Company.
For the purposes of IAS 19 the data provided for the 31 March
2015 actuarial valuation has been approximately updated to reflect
defined benefit obligations on the accounting basis at 31 March
2018. This has resulted in a deficit in the Plan of GBP6,440k.
It is the policy of the Company to recognise all actuarial gains
and losses in the year in which they occur in the Statement of
Comprehensive Income.
Present values of defined benefit obligations, fair value of
assets and deficit
31 March 31 March 31 March 31 March 31 March
2018 2017 2016 2015 2014
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------------------------------------- --------- --------- --------- --------- ---------
Present value of defined benefit obligation 19,969 19,840 21,094 21,799 19,033
Fair value of Plan assets (13,529) (13,946) (15,013) (16,111) (15,360)
-------------------------------------------- --------- --------- --------- --------- ---------
Deficit/(surplus) in Plan - Gross
amount 6,440 5,894 6,081 5,688 3,673
Deferred tax at 17%* (1,095) (1,120) (1,155) (1,138) (735)
-------------------------------------------- --------- --------- --------- --------- ---------
Net liability 5,345 4,774 4,926 4,550 2,938
-------------------------------------------- --------- --------- --------- --------- ---------
* Deferred tax rate 2016 & 2017: 19%, 2014 & 2015:
20%
Reconciliation of opening and closing balances of the present
value of the defined benefit obligations
31 March 31 March
2018 2017
GBP'000s GBP'000s
---------------------------------------------- --------- ---------
Defined benefit obligation at start of period 19,840 21,094
Interest cost 553 754
Actuarial (gains)/losses 367 2,499
Settlements - (2,060)
Past service loss/(gain) 115 (1,584)
Benefits paid (906) (863)
---------------------------------------------- --------- ---------
Defined benefit obligation at end of period 19,969 19,840
---------------------------------------------- --------- ---------
Reconciliation of opening and closing balances of the fair value
of Plan assets
31 March 31 March
2018 2017
GBP'000s GBP'000s
---------------------------------------------------------------- --------- ---------
Fair value of Plan assets at start of period 13,946 15,013
Interest income on Plan assets 389 538
Actuarial (losses)/gains (232) 652
Contributions paid by the Group 332 920
Settlements - (2,314)
Benefits paid, death in service insurance premiums and expenses (906) (863)
---------------------------------------------------------------- --------- ---------
Fair value of Plan assets at end of period 13,529 13,946
---------------------------------------------------------------- --------- ---------
The actual return on the Plan assets over the period ended 31
March 2018 was GBP157k (2017: GBP1.2m).
13. Post year-end activities
1. On 23 April 2018, a sale of assets was completed for Garrett
Ingredients Limited, for a consideration of GBP1.8 million payable
in cash, on a debt free/cash free basis. In the Group's financial
year ended 31 March 2017, Garretts contributed GBP21.3m of revenues
and an operating loss of GBP0.9m. It had net assets of GBP1.9m.
2. On 6 September 2018 the sale of Haydens Bakery Limited to
Bakkavor Group plc was completed for a consideration of GBP12m,
payable by means of a cash payment of GBP9.6m and the assumption by
the buyer of GBP2.4m of third-party debt. The cash funds received
were used to reduce the Group's indebtedness, first settling the
lending secured against Haydens' assets (GBP2.3m), then repaying in
full the outstanding term loan with the Group's bankers (GBP1.3m).
In the Group's financial year ended 31 March 2017, Haydens
(excluding the Chantilly Patisserie business which is not a part of
this transaction) contributed GBP31.3m of revenue, and broke even
at profit before tax, closing that year with net liabilities of
GBP0.8m.
3. Further borrowings of up to GBP8.7 million in the form of
Convertible Loan Notes were secured in May 2018
(see note 11).
4. Open offer was executed for GBP1.0 million at a share price
of 5 pence per share. (see note 11).
5. The bank term loan was fully repaid in September 2018. (See note 11).
6. Chantilly Patisserie (formerly part of Haydens Bakery Ltd)
was incorporated as a new separate legal entity on 31 July 2018
with the name RGF Patisserie Ltd. Real Good Food plc has one
Ordinary GBP1 share in RGF Patisserie.
7. Name changes post year-end. Garretts Ingredients Limited was
changed to Real Good Food Ingredients Limited. Haydens Bakeries
Limited (dormant) was changed to RGF Devizes Limited.
8. Following the closure of the London office, the registered
office of Real Good Food plc was changed to 61 Stephenson Way,
Wavertree, Liverpool L13 1HN on 12 July 2018. This change was also
reflected in the UK subsidiaries of the Group (except Brighter
Foods Limited), details of which are available on the Group's
website
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UWVRRWVAKUAR
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September 28, 2018 06:59 ET (10:59 GMT)
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