RNS Number : 2476E
Real Good Food Company Plc (The)
25 September 2008
The Real Good Food Company plc
Interim results for the six months ended 30 June 2008
The Real Good Food Company plc ("the Group"), the sugars, ingredients and bakery company, today announces its Interim Results for the
six months ended 30 June 2008
Highlights
> Market conditions in core Sugar Division remain challenging
> 13% growth in sales achieved by Baking Ingredients Division
> Total Group sales from continuing operations down 8% to �104.0m (2007: �112.8m)
> Operating profit before taxation and significant items of �921,000 (2007: �2.2m)
> Loss before taxation of �1.59m (2007: �184,000)
> Diluted loss per share of 1.7p (2007: profit of 4.7p)
> Successful refinancing of debt facilities
Pieter Totte, Chairman of The Real Good Food Company plc, comments:
"Sales of the group continue to be skewed towards the last quarter and the critical Christmas trading period. It is still too early to
anticipate the outcome of trading in this period. However, given the circumstances and trading conditions outlined above and in the absence
of any significant improvement in market conditions, the Board anticipates that the results for the year ended 31 December 2008 are likely
to be circa �1m lower than current market expectations."
25 September 2008
Enquiries:
The Real Good Food Company plc Tel: 020 7335 2500
Stephen Heslop Chief Executive
Lee Camfield Finance Director
Shore Capital Tel: 020 7408 4090
Guy Peters
College Hill Tel: 020 7457 2020
Gareth David
Chairman's Statement
Introduction
As highlighted in our most recent trading update, these results for the six months to 30th June 2008 reflect a period of difficult
trading conditions, when margins have been under competitive pressure and when fuel and energy prices have continued to rise, and look
likely to have a consequential effect during the second half, particularly on packaging items.
Total Group sales for the period fell by 8% to �104m, principally due to a 10% reduction in sales by our Sugar Division and despite
sales growth of 13% in our Baking Ingredients Division and a modest decline in sales of just 4% in the Bakery Division. Operating profit
before significant items from continuing operations fell from �2.25m to �921,000, reflecting a 36% fall within our Sugar Division to �1.84m,
a 32% fall within Baking Ingredients to �78,000 and an operating loss of �275,000 (2007: profit of �58,000) in our Bakery Division.
EU market conditions relating to sugar have continued to be challenging due largely to the uncertainty surrounding the reference price
change on the 1st October 2008 and 2009. This continues to have an effect on our business.
EU Beet producers have so far relinquished some 5.2 million tonnes of sugar quota and the Commission expects further reductions to be
announced by the end of January 2009. This should ensure that no further compulsory quota cut across all member states will be necessary.
I am very pleased to announce the appointment of Andrew Brown to the position of Managing Director, Napier Brown Foods effective 19th
August. Andrew has held a number of senior posts within RHM and served as MD of the Milling Division. Equally I am pleased to confirm that
the group has successfully re-financed its debt structure with KBC, a leading Belgian bank.
Sugar Division
�'000s 2008 2007
Six Six
Months Months
Sales 85,713 95,022
Operating Profit* 1,838 2,865
*Normalised profit before significant items, interest and central costs
Sales in our Sugar Division were down 10% on the prior year, almost entirely due to two principal reasons. One, the loss of a large
account as previously reported and, two, price deflation as a consequence of the EU reform programme. This revenue decline was partially
offset by currency movements, which increased both sales and costs of sales equally and retail volumes which were up 4% on the prior year.
In our Blends operation new business has been secured with further activities planned in 2009 to improve overall operating margins.
Dairy trading has been more difficult than anticipated due to the poor and inclement weather. However, plans are being finalised to further
develop the business. Whilst overall profitability was down versus the prior year it remained in line with our expectations.
Baking ingredients
�'000s 2008 2007
Six Six
Months Months
Sales 14,271 12,358
Operating Profit* 78 115
* Normalised profit before significant items, interest and central costs
Sales in the first half have been very positive and are up 13% on the prior year, reflecting healthy sales in the retail sector. This is
partially offset with lower chocolate compound sales, which have been adversely affected by higher oil prices used in the manufacturing
process. Gross margins were only slightly ahead, which reflects the delay in recovering all the material inflation. Material, fuel and
energy prices have continued to rise, hence further discussions are being finalised in relation to price increases.
The business continues to explore new opportunities with new sales to M&S for chocolate drops and a range of syrups currently being sold
into food service. Contracts for the remainder of the year have all been finalised with the major retailers for the busy Christmas trading
period. Operational efficiencies are improved at both factories and will support customer service during the busy seasonal period.
Bakery division
�'000s 2008 2007
Six Six
Months Months
Sales 8,535 8,889
Operating Profit* (275) 58
* Normalised profit before significant items, interest and central costs
Overall sales are down 4% on the prior year reflecting poor sales on a few key lines. The business is now focused on matching the
consumer and customer needs to address this shortfall. As a consequence, the business has established a relationship with a leading
patisserie Chef from London which should enhance our overall capability.
Material control remains a major challenge to the business and as a consequence further rationalisation will be required as well as
further price increases to offset the effect of fuel and energy prices encountered this year. The business has now implemented the shift
re-configuration as planned, reducing expensive night shift premiums.
Significant items
During the period under review, the Group incurred a number of one-off significant costs. These were largely related to the refinance of
the Group (�0.8m) reflecting break costs with our previous lender and the release of the associated prepaid loan arrangement fees.
Restructuring costs of �0.4m were also incurred as operational restructuring was undertaken at a number of divisions, whilst the provision
for an onerous lease was increased by �0.2m as the Group has been unable to re-lease the property.
Cashflow
Cashflow from operating activities before working capital and significant items was �1.7m, reflecting a lower level of operating profit
compared to the prior year. Investment in working capital was reduced by �0.4m during the period. Higher stock levels within both Sugar and
Bakery Ingredients were driven by raw material inflation, seasonal stock builds for the higher second half sales and higher dairy and
imported sugar stocks. These were offset by higher creditor levels, largely reflecting the timing of the stock builds and higher raw
material costs.
Net interest costs amounted to �1.1m while continuing operations tax payments were �0.7m Additional tax payments of �2.9m were made in
the period in relation to the deferred payments of tax due on the profit on disposal of Five Star Fish last year. Loan repayments, under our
existing facility, of �0.8m left net debt at �31.4m up �5.5m since the year end, reflecting the deferred tax payments and higher stock
levels.
Refinancing
As reported in our pre-close statement, the Group completed a re-finance of our debt facilities on the 19th July. This saw the repayment
of facilities with our existing lender and new asset backed facilities undertaken with KBC, a leading Belgian bank. The new loans are for a
period of five years, with two revolving facilities, secured against debtors and stock and term loan facilities of �13.3m which attract loan
repayments of �2.20m per annum.
Outlook
In the Sugar Division the last few months have been a difficult trading period with both volumes and margins lower than anticipated as
we enter the first reference price change. Whilst the sugar industry appears to be moving towards equilibrium on supply, some volatility is
still expected until the regime change is fully implemented in October 2009. Further, customer call off on volumes is expected to continue
below our original expectations.
Within Bakery Ingredients, sales improvements achieved in the first half have abated with lower volumes and margins in quarter three.
There is much nervousness within the trade in attempting to understand potential consumer attitudes during the key Christmas trading period
and this leads us to be cautious on our expectations for the full year.
In the Bakery Division sales have continued below that of the prior year. However new business has been secured within the Foodservice
sector following re-assessment of the overall business strategy. Margins remain difficult as the business continues to wrestle with material
variances and higher input costs.
Sales of the group continue to be skewed towards the last quarter and the critical Christmas trading period. It is still too early to
anticipate the outcome of trading in this period. However, given the circumstances and trading conditions outlined above and in the absence
of any significant improvement in market conditions, the Board anticipates that the results for the year ended 31 December 2008 are likely
to be circa �1m lower than current market expectations.
Pieter Totte
Chairman
25 September 2008
Consolidated Income statement for the six months ended 30 June 2008 (Unaudited)
Period ended 30 June
Period Ended 30 June
2008
2007
Notes Before Significant Significant Items Total Before Significant Items
Total
Items Signifi
cant
Items
�'000s �'000s �'000s �'000s �'000s
�'000s
CONTINUING OPERATIONS
REVENUE 103,972 - 103,972 112,835 -
112,835
Cost of sales 92,821 - 92,821 99,162 -
99,162
GROSS PROFIT 11,151 11,151 13,673
13,673
Distribution costs 4,371 4,371 5,165
5,165
Administration expenses 5,859 1,365 7,224 6,253 489
6,742
OPERATING PROFIT 921 (1,365) (444) 2,255 (489)
1,766
Finance Income 106 - 106 180 -
180
Finance Costs (1,407) - (1,407) (2,220) -
(2,220)
Net Pension Finance Income 157 - 157 90 -
90
PROFIT/(LOSS) Before Taxation (223) (1,365) (1,588) 305 (489)
(184)
Taxation 75 410 485 (66) -
-66
PROFIT/(LOSS) FROM CONTINUING
OPERATIONS
(148) (955) (1,103) 239 (489)
(250)
DISCONTINUED OPERATIONS
REVENUE - - - 14,962 -
14,962
Operating Expenses - - - 12,804 -
12,804
OPERATING PROFIT - - - 2,158
2,158
Finance Costs - - - (95) -
(95)
Profit on Sale of Subsidiary - - - - 8,300
8,300
Taxation - - - (439) -6,581
(7,020)
PROFIT/(LOSS) FROM
DISCONTINUED OPERATIONS
- - - 1,624 1,719
3,343
PROFIT/(LOSS) FOR THE PERIOD (148) (955) (1,103) 1,862 1,230
3,093
Basic Profit/(loss) per share 5 0 (1.7) 2.9
4.8
Diluted Profit/(loss) per 5 0 (1.7) 2.9
4.7
share
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2008 (UNAUDITED)
GROUP BALANCE SHEET 30 June 08 30 June 07 31 Dec 07
As at 30 June 2008
�'000s �'000s �'000s
ASSETS
Non Current Assets
Goodwill 75,796 75,794 75,796
Intangibles 587 548 547
Property, Plant and Equipment 16,770 15,841 16,721
93,153 92,183 93,064
Current Assets
Inventory 11,970 11,396 9,353
Trade and Other Receivables 24,749 27,144 24,784
Financial Instruments at fair 1 123 113
value
Corporation Tax 556 - -
Cash and cash equivalents 7,769 23,333 13,780
45,045 61,996 48,030
Total Assets 138,198 154,179 141,094
LIABILITIES
Current Liabilities
Borrowings 22,223 17,161 22,479
Trade and Other Payables 19,580 20,254 17,289
Financial Instruments at fair 37 12 81
value
Corporation Tax - 7,410 3,615
41,840 44,837 43,464
Non current Liabilities
Borrowings 16,921 31,482 17,161
Deferred Tax 982 844 912
Provisions 545 470 356
18,448 32,796 18,429
77,910 76,546 79,201
Total Assets Less Liabilities
SHAREHOLDERS' EQUITY
Called up share capital 1,300 1,300 1,300
Share premium account 68,870 68,870 68,870
Other Reserves 79 68 66
Profit and loss account 7,661 6,308 8,965
EQUITY SHAREHOLDERS FUNDS 77,910 76,546 79,201
STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2008 (UNAUDITED)
Issued Share Share Premium IFRS 2 Retained Earnings Total
Capital Account Share
Option
reserve
�'000s �'000s �'000s �'000s �'000s
Balance at 1 January 2007 1,297 68,773 53 2,536 72,659
Shares to be issued - Options - - 15 - 15
Options exercised in period 3 97 - - 100
Profit for the period - - - 3,093 3,093
Pension scheme surplus for - - - 679 679
period
Balances as at 30 June 2007 1,300 68,870 68 6,308 76,546
Balance at 1 January 2008 1,300 68,870 66 8,965 79,201
Shares to be issued - Options - - 13 - 13
Profit/(Loss) for the period - - - (1,103) (1,103)
Pension Scheme surplus for - - - (201) (201)
period
Balances as at 30 June 2008 1,300 68,870 79 7,661 77,910
CASH FLOW STATEMENT FOR THE SIX MONTHS ENDING 30 JUNE 2008 (UNAUDITIED)
6 months to 30 June 6 months to 30 June
2008 2007
�'000s �'000s
CASH FLOW FROM OPERATING ACTIVITIES
(Loss)/Profit for (1,588) 10,179
the period before
taxation
Adjusted for:
Finance costs 1,407 2,315
Finance income (106) (180)
IAS 19 income (157) (90)
Depreciation of 895 930
property, plant &
equipment
Amortisation of 47 67
intangibles
Share based payment 13 15
expense
Gain on disposal of - (8,300)
discontinued
operation
Operating Cash Flow 511 4,936
(Increase) in (2,617) (4,214)
inventories
Decrease/(Increase) 35 (2,386)
in receivables
Increase in payables 2,430 3,242
Cash generated from operations 359 1,578
Income taxes paid (696) (584)
Interest paid (1,130) (2,292)
Net cash from operating activities (1,467) (1,298)
CASH FLOW FROM INVESTING ACTIVITIES
Interest received 100 180
Disposal of division - 33,974
Income tax paid on (2,919) -
disposal of division
Purchase of (87) (153)
intangible assets
Purchase of (944) (1,352)
property, plant &
equipment
Net cash (used in)/from investing activities (3,850) 32,649
CASH FLOW USED IN FINANCING ACTIVITIES
Repayment of (812) (23,476)
borrowings
Repayment of (129) (346)
obligations under
finance leases
Proceeds on issue of - 100
shares
Net cash used in financing activities (941) (23,722)
(6,258) 7,629
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS
Cash and cash 10,785 6,925
equivalents at
beginning of year
Net movement in cash (6,258) 7,629
and cash equivalents
Cash and cash equivalents at balance sheet date 4,527 14,554
Cash and cash equivalents comprise:
Cash 7,769 23,333
Overdrafts (3,242) (8,779)
4,527 14,554
Notes
1. General information
The Real Good Food Company plc is a public limited company ("company") incorporated in the United Kingdom under the Companies Act 1985
(registration number 4666282). The Company is domiciled in the United Kingdom and its registered address is International House, 1 St
Katherine'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.
Copies of the interim report are being sent to shareholders. Further copies of the interim report and Annual Report and Accounts may be
obtained from the address above.
2. Basis of preparation
The Real Good Food plc adopted International Financial Reporting Standards (IFRS) with effect from 1 January 2006 and these interim
statements are prepared under this basis.
The financial information set out in this document does not comprise of the statutory accounts of the Company within the meaning of
section 240(5) of the Companies Act 1985.
It is the company's policy to show items that it considers being of a significant nature separately on the face of the Income Statement
in order to assist the reader to understand the accounts. The company defines the term significant as items that are material in respect to
their size and nature; for example, a major restructuring of the activities of the group. Summary details of significant items are shown in
the Chairman's statement which forms part of these accounts.
3. Segment analysis
The group has adopted IFRS 8 "Operating Segments" in advance of its effective date, with effect from 1 January 2007. IFRS 8 requires
that operating segments be identified on the basis of internal reporting and decision making. This is in line with the previous divisional
reporting which the group previously published and therefore the information is consistent with that of previous financial statements.
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 but before any interest and significant items.
Sugar Bakery Ingredients Bakery Head Office and Total Discontinued Total Group
Consolidation Operations
Adjustments
Revenue - External 81,653 13,784 8,535 - 103,972 - 103,972
Revenue - Internal 4,060 487 - (4,547) - - -
Total Revenue 85,713 14,271 8,535 (4,547) 103,972 - 103,972
Operating Profit 1,838 78 (275) (720) 921 - 921
Significant Items (1,365)
Earnings before interest and (444)
Tax
Net Interest (1,301)
Pension Finance Income 157
Tax 244
Loss after Tax (1,344)
Sugar Bakery Ingredients Bakery Head Office and Total Discontinued Total Group
Consolidation Operations
Adjustments
Segment assets 74,445 27,719 5,318 30,698 138,180 18 138,198
Segment liabilities (15,591) (2,447) (3,595) (37,029) (58,662) (1,626) (60,288)
Net Assets 58,854 25,272 1,723 (6,331) 79,518 (1,608) 77,910
The group operates a central treasury function, finance costs cannot be meaningfully allocated to individual operating divisions.
4. Earnings per ordinary share
Earnings per share is calculated on the basis of profit for the year after tax, divided by the weighted average number of shares in
issue for 2008 of 65,014,348 (2007: 65,014,348).
Diluted (loss)/earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all potential dilutive ordinary shares. Potential dilutive ordinary shares arise from share options and warrants. For these, a
calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual
market share price of the Company's shares) based on the monetary value of the exercise price attached to outstanding share options. Thus
the dilutive weighted average number of shares considers the number of shares that would have been issued assuming the exercise of the share
options.
An adjusted earnings per share and a diluted adjusted earnings per share, which exclude significant items, has also been calculated as
in the opinion of the Board this will allow shareholders to gain a clearer understanding of the trading performance of the Group.
2008
2007
Earnings �'000s Weighted Average No. Per share amount Earnings �'000s Weighted Average No.
Per share amount
of shares pence of shares
pence
Earnings attributable to (1,103) 65,014,348 (1.7) 3,093 65,014,348
4.8
ordinary shareholders
Significant items 955 - - (1,230) -
-
Adjusted Earnings per share (148) 65,014,348 0 1,863 65,014,348
2.9
Dilutive effect of options - - - - 243,782
-
Dilutive effect of warrants - - - - 105,776
-
Diluted earnings per share (1,103) 65,014,348 (1.7) 3,093 65,363,906
4.7
Diluted adjusted earnings per (148) 65,014,348 0 1,863 65,363,906
2.9
share
5. Dividends
No dividend is proposed for the six months ended 30 June 2008.
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
A subsidiary of the Group, Napier Brown Foods Limited, 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 �45,836.
Assumptions
The assets of the scheme have been taken at market value and the liabilities have been calculated using the following principal
actuarial assumptions:
30 June 2008 31 December 2007
% per annum % per annum
Rate of increase in pensions in payment 3.90 3.45
Discount rate 6.00 5.80
Inflation assumption 4.00 3.45
Revaluation rate for deferred pensions 4.00 3.45
The fair value of the assets in the scheme, the present value of the liabilities in the scheme and the expected rate of return at each
balance sheet date were:
30 June 2008 31 December 2007
% %
Equities 8.10 7.50
Bonds 5.60 5.00
Property 6.60 6.00
Cash 4.50 4.50
30 June 2008 31 December 2007
�'000s �'000s
Total fair value of assets 17,398 18,052
Present value of scheme liabilities (15,379) (16,268)
Surplus/(Deficit) in the scheme 2,019 1,784
Amount not recognised in accordance with IAS (2,019) (1,784)
19 paragraph 58b
Amount to be recognised - -
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.
As the scheme is closed and benefits are no longer accruing to members, the surplus is unrecoverable by the company, and as such the
surplus of �2,019k is not reflected in the Group balance sheet.
8. Post Balance Sheet Events
On the 17th July the Group completed a re-finance of the Groups debt facilities. The re-financing involved the repayment of our existing
revolving and term loans with our existing lenders and the entering into loan agreements with KBC, a leading Belgium bank. The new loans
facilities are:
* A revolving stock loan facility;
* A revolving invoice discounting;
* A 5 year fixed asset backed loan facility;
* A 5 year term loan;
A 15 year property loan with a bullet payment after 5 years.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FKQKKABKDQCB
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