TIDMRGD
RNS Number : 7750D
Real Good Food Company Plc (The)
29 March 2011
The Real Good Food Company plc (AIM: RGD)
Preliminary Results for the year ended 31 December 2010
The Real Good Food Company plc ("the Group"), owns the largest
independent non-refining distributor of sugar in Europe (Napier
Brown) and is a supplier of dairy ingredients ("Garrett"), bakery
ingredients (Renshaw) and a manufacturer of sweet bakery products
(Haydens) for a range of major retail customers.
Highlights
0 Significant progress achieved across all businesses in the
Group
0 Total group sales down 7% to GBP200.1m (2009: GBP215.6m),
solely due to reduced EU intervention price for sugar
0 Group EBITDA of GBP5.6m in line with 2009 (2009: GBP5.6m)
0 Profit before taxation and significant items increased to
GBP2.34m (2009: GBP2.15m)
0 Improvement in earnings per share (Basic) to 2.3p (2009:
1.3p)
0 Continued reduction in net debt to GBP22.6m from GBP24.1m at
the end of 2009
Pieter Totte, Chairman of The Real Good Food Company plc,
comments:
"All four businesses have made substantial progress during the
year; Napier Brown has come through the difficult years of the EU
sugar regime changes and is now well positioned with its supply
arrangements to play an important role in the UK market; Garrett's
has been relaunched as a standalone business and has quickly and
successfully embarked on a growth strategy; Renshaw has delivered
remarkably strong growth ahead of expectations both in the UK and
Export while Haydens has continued to grow its sales while also
progressing its restructuring plan."
29 March 2011
ENQUIRIES:
The Real Good Food Company plc Tel: 0151 706 8200
Pieter Totte, Chairman
Mike McDonough, Group Finance Director
Shore Capital Tel: 020 7408 4090
Stephane Auton
College Hill Tel: 020 7457 2020
Gareth David
CHAIRMAN'S STATEMENT & REVIEW OF OPERATIONS
Overview
As mentioned in my interim report, I expected this year to be a
transitional year, but that I was delighted with the progress we
were making. It is now very pleasing to be able to demonstrate this
in our results for the year, with overall Group profitability in
line with expectations and a further reduction of GBP1.5m in our
net debt.
For our sugar business this financial year has been the toughest
ever in terms of margin as we were trading on the last stage of the
EU sugar regime reform, with a reference price drop of 28% over the
2008 level. In the latest crop season, starting on 1 October 2010,
we experienced improved volumes and margins and therefore finished
the second half of the year better than the first half, and this
has continued into the new financial year.
Our views regarding the market going forward, following the EU
regime changes, have so far been vindicated. We felt that the
market in the EU for the 2010-2011 campaign would be tight in
supply and would therefore see price increases. During the final
quarter of 2010, prices started to go up, albeit at a much higher
level and faster than expected.
Our multiple sourcing plan, which we developed over this last
year, has proven to be very beneficial as we have been able to
repair our margins and we see that prices are likely to improve
further during the course of 2011, particularly in the bagged
sector. In our view the tightness of the market that we started to
see in late 2010 will continue into 2011 and 2012. World shortages
of sugar have been well reported and this, on top of the EU
shortage, will add to the volatility in the market-place.
Within our sugar business, we decided to re-establish the
separate identity of Garrett Ingredients, our dairy business, which
has a name that is well known in the market. It has now been
de-merged from Napier Brown and is being run as a separate
standalone business. We are now starting to report and comment
Garrett separately, in order to improve visibility.
Looking ahead we can see growth in this business through
widening its product range and increasing the sales force to give
it real national coverage. Tom Fowler, Managing Director, who
joined the company in March 2010, has developed a strong team and
delivered an excellent set of results, with EBITDA of GBP1.2m
representing an increase of 10% year on year.
The business sees opportunities in widening its supplier base
and is actively negotiating relationships and possible joint
ventures across the UK, Eire, Europe and in particular Poland. I am
confident that Tom and his team are building a very strong position
for Garrett in its markets and will continue to grow this
business.
We expected an improved performance at Renshaw, the bakery
ingredients division, but with strong growth year-on-year driving
an EBITDA increase of 67% to GBP5.5m, the result has beaten our own
best expectations. The product development team are planning a
Renshaw-branded range to be introduced in the market-place and
spent the largest part of their capacity this year on developing
this range ahead of its planned launch in May 2011.
A particular focus on developing our export markets has proved
highly successful, we reinforced our commercial and product
development team during the year, and are planning to further
develop our export management team in 2011. Currently we export to
over 30 countries, with the US currently representing the largest
part of our export business, accounting for 60% of export
sales.
Haydens is continuing to grow its sales, reinforcing its supply
position with its key customers and at the same time working on a
very ambitious restructuring and refurbishing plan. The first major
phase this year has been the signing of a lease for new premises
adjacent to our existing bakery, which will increase our footprint
by approximately 40% add much needed capacity to our distribution
part of the business, at the same time this will also free up space
for manufacturing.
Opening is ahead of schedule, and is officially planned in May
2011. This will also initiate the start of the second phase which
will improve the efficiency of manufacturing through the
introduction of state of the art baking technology, tools and
machinery. This ultimately will enable us to improve our
profitability, expand our output and capability for new innovative
products.
Napier Brown (Sugar)
Napier Brown supplies a range of sugars in many formats to all
major market sectors; large, medium and small industrial,
wholesale, retail grocery and foodservice from its facilities at
Normanton, near Leeds.
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
Revenue(1) 108,400 134,857
EBITDA 409 2,216
Operating (loss)/profit(2) (80) 1,649
Operating profit
% - 1.2
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant
items and central costs
The knock-on effects of the reform of the EU Sugar Regime
continued to dominate the sugar market in 2010. We had always
anticipated that following the reforms the market would change but
both the speed at which these changes took place and the dramatic
nature of them took all commentators by surprise.
The doubling of the world price for raw sugar between July and
September 2010 meant that Europe, which following the Sugar regime
reforms has become a net importer, very quickly began to experience
a shortage in sugar supply as the imports of cane sugar required to
balance supply with demand within the EU failed to materialise, as
world producers found local markets more attractive.
This shortage was then exacerbated by crop problems in certain
countries, most particularly in the UK. These market changes caused
us a number of challenges in the latter part of 2010 as suppliers
either withdrew volumes and/or increased prices.
Margins remained tight for the majority of the year and though
some price rises were experienced towards the end of the year,
sourcing and logistics costs also increased. Industrial and
wholesale volumes grew slightly during the year as customers
recognised the value of spreading their risk by buying from more
than one supplier.
Supply strategy
Two years ago the overwhelming majority of our purchases came
from the UK. This has already begun to change but needs to develop
further and we would envisage over 50% of our supply being imported
by 2012. We have been extensively researching new supply sources
and have entered into a number of new supply agreements, some of
them exclusive. We plan to develop this process further during the
course of the year.
Investing in infrastructure
In addition to these new sources, we are preparing ourselves to
be able to receive,quality check and distribute sugar from
different origins and in different formats as efficiently as
possible. We are examining a number of innovative ideas as to how
to distribute and offload bulk sugar.
We have also invested in our infrastructure at our Normanton
site including a new 25kg bagging line and a shrinkwrap format for
retail and wholesale during 2010. Future plans include upgrading
our sugar processing equipment and developing new pack formats.
Developing our Marketing
We increasingly recognise that we need to invest in
communicating with the UK customer base the pivotal role which we
believe we will play in the UK market in the coming years. Supply
security will become all important and we plan to work with
customers to achieve this. In retail, we have ambitious marketing
plans for our Whitworths brand, the first phase of which will come
to fruition later this year.
Looking Forward
In early 2011 we were faced with substantial price increases
imposed on us by our two main UK suppliers. We have managed
successfully to pass on these increases in the market and, with our
plans to broaden our supply base from next year, we will be able to
deliver increased value and security of supply to our
customers.
For 2011 and onwards we see our 'multi-sourcing' proposition
becoming increasingly attractive. We believe that UK buyers will be
looking for security of supply. The reduction in cane refining in
the UK plus the recent beet crop issues will make the UK even more
of an import market and with the shortage of sugar within Europe
generally, our ability to offer alternative supply sources will be
more important than ever.
Napier Brown is well positioned for growth with new supply
arrangements being increasingly attractive in an under-supplied UK
market. The business is now structured to manage customers in each
market sector (bulk, industrial bags and retail) and will invest to
deliver value added products and service as their needs demand.
Garrett Ingredients (Dairy)
Garrett Ingredients ("Garrett"), which is based at Thornbury,
near Bristol, supplies a range of dairy powders, blends, and
specialist ingredients, in addition to sugars to the ice cream and
bakery industries.
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
Revenue(1) 25,584 24,706
EBITDA 1,182 1,088
Operating profit(2) 1,182 1,088
Operating profit % 4.6% 4.4%
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant
items and central costs
This business made a significant recovery in 2010, growing both
sales and margin, and was re-launched under its original name,
Garrett Ingredients, in October 2010, to reflect the successful
proposition and style of its considerable heritage in the dairy
market. Under the leadership of Tom Fowler, who has now been
appointed Managing Director, the management team has been developed
and extended with a number of new appointments made to take
advantage of the many growth opportunities available.
Garrett still has a strong presence supplying the ice cream
industry, but has continued to diversify into other food
manufacturing sectors such as bakery, ready meals and soft drinks
manufacturers. The company's main operation is trading dairy
ingredients alongside sugar. It also has access to the Group's dry
blends manufacturing unit, which is now sited at Carluke in
Scotland, where a range of dairy mixes are produced, including
bespoke blends for individual customers.
The business has also expanded its offering into other
specialist ingredients thereby offering a 'One Stop Shop' solution
to many customers. As well as leveraging better pricing, Garrett is
well known for its technical knowledge and expertise and offers
full product traceability.
Dairy Markets
A combination of growing global demand and more frequent extreme
weather events across the world has led to increased volatility in
dairy markets in terms of both supply and price. Our strategy to
meet this challenge, as with Napier Brown in sugar, is to look to
increase the number of our supply partners across the UK, Eire and
increasingly both Western and Eastern Europe.
Product range and customer base
Our growth strategy involves broadening both our product range
and our customer base. As well as continuing to develop sales of
existing products such as our award winning UHT Sunshine Ice Cream
Mix, we are working with customers to identify specific ingredients
which we can source on their behalf. We appointed a Business
Development Manager, Paul Carlisle, during the year and he is now
successfully introducing our proposition to a range of new
customers and industry sectors.
Looking Forward
Garrett Ingredients, with its entrepreneurial spirit and strong
reputation for customer service, is well placed for growth by
offering customers supply security and technical assurance in
increasingly volatile markets.
Renshaw (Bakery Ingredients)
Renshaw supplies a range of high quality food ingredients
primarily to the bakery sector, comprising craft bakers and major
cake manufacturers and also to grocery retailers. It operates two
facilities, one in Liverpool and the other in Carluke, south-east
of Glasgow.
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
Revenue(1) 42,793 34,964
EBITDA 5,455 3,260
Operating profit(2) 4,575 2,493
Operating profit % 10.6 6.6
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant
items and central costs
2010 was a record year for Renshaw, with sales up by 13% to
GBP43 million, significantly ahead of its three year growth plan.
All sectors of the business performed ahead of expectations, with
Sugar paste (icing) being a key driver across all sales channels.
Our export business continued to expand: we now export to 31
countries globally, and exports will be a key focus in 2011.
Results from plans put in place at the beginning of 2010 have
started to materialise and have had a positive impact on the
overall performance of the business. In addition to growing the
core areas of our business Renshaw has also expanded its presence
in other categories in a response to the continuing interest in
home baking.
The Scott brand which is manufactured in Carluke, Scotland, was
relaunched as R&W Scott with a new "retro" image which
highlights the heritage and small batch production methods of the
factory. The two new quality ranges of Scottish 50% fruit jams and
marmalades have been well received in the regional trade and also
in the export market and plans are in place to build on this
success. Promotion at trade shows and the Scottish Food Shows were
well received.
Key challenges came in the form of commodity cost increases
which affected the majority of our products and were either
mitigated or recovered in trhe market place.
People
The commercial team has been strengthened with the introduction
of a number of key personnel who will focus on continuing to drive
innovation within the category from a branded perspective, whilst
also responding to customers needs in the different channels. On
the finance side, Graham Chellew has been promoted to Finance
Director of Renshaw, and continues to improve internal reporting
and financial measurement.
Plant
Realisation of new products and packaging has required
investment in machinery for both production and packing and these
have been implemented within the current factory environment.
Increases in demand for core products have also been dealt with by
adopting a flexible approach within the factory and developing
multiuse areas.
Looking Forward
The majority of the planning and work undertaken in 2010 will
come to fruition in the second and third Quarters of the current
year. To capitalise on the current trend of home baking and
crafting, the Renshaw brand has been segmented into a Professional
and a Consumer offering. Within the proposition are new and
innovative products and packaging solutions which will deliver
first to market presence in both the professional and consumer
sectors.
With a complete marketing support package including online,
advertising and public relations support, the brand presence of
Renshaw will become strongly felt in the consumer marketplace in
2011. Continued sponsorship of industry events and a trade
advertising programme will assure a maintained presence in the
bakery area too. Increasing demand for our products abroad has led
to a number of enquiries through our website and also an increased
focus on export as an opportunity. Several geographical areas have
been targeted for initial focus.
Haydens (Bakery)
Haydens Bakeries produces chilled and ambient premium patisserie
and dessert products to retail grocery customers. It operates from
a site in Devizes, Wiltshire.
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
Revenue(1) 23,327 21,086
EBITDA 415 305
Operating profit(2) (238) (394)
Operating profit % (1.0) (1.9)
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant
items and central costs
2010 witnessed a steady and seamless continuation of the
restructuring at Haydens, as the foundations that were put in place
the previous year have now been largely completed and the Executive
team is now well placed to deliver its recovery plan. Strong new
product development once again aided record sales for Hayden's
across all sectors, including the bakery, patisserie and dessert
ranges. Overall sales were up by 10% and of particular note was the
growth seen in the dessert ranges, where strong innovation provided
growth in the order of 20%.
One of the key challenges facing the Business in 2010 was
matching the growing expectations of the key Customers with
available capacity. In July, the Business was able to secure a long
lease on an additional 30,000 sq feet of space in close proximity
to the Bakery. This equates to 40% additional footprint and will
allow Hayden's to create a dedicated contract distribution site.
The space freed up in the prime manufacturing area allows a
significant development plan to commence in both refurbishment and
the installation of new state of the art process lines.
Christmas, traditionally the peak trading period of the year,
provided a 'best ever Christmas' for Haydens, in spite of poor
weather conditions which changed purchasing habits over the festive
period.
Last year, we reported on the start of our three year plan for
the Business and the formation of a very strong and talented senior
team. I am delighted to report that we have made good progress
across all four principal platforms of the Plan:
People
The Haydens Executive Board was strengthened with the internal
appointment of Stephen Brooks as Operations Director and most
recently with Peter Dunn as Commercial Director. Heavy investment
in training has resulted in the business having a stronger and
highly committed workforce. Reductions in both temporary and agency
staff has further led to an up-skilling at all levels of the
Company.
Plant
The move of the Contract Distribution commenced with the
acquisition of an additional site in July. The GBP800,000 capital
investment will be completed by Easter 2011. The space released
will allow the implementation of the operational strategy to
proceed with the first of the new process lines to be installed
during 2011.
Process
Work on integrating modern systems alongside 'hand crafting'
skills continues to progress. System and procedural changes to
stock and material management are providing benefits and greater
control. Lean initiatives first introduced last year are being
embraced across the Operation.
Product
A key milestone was achieved in the second half of the year with
the appointment of Ross Sneddon as Executive Chef. Ross joins
Hayden's with a wealth of experience as a highly skilled
Chocolatier and Patisserie chef. He has created a new Innovations
team, which will become fully operational during the first half of
2011.
Looking forward
There is much excitement around the new distribution site
planned to open in time for Easter this year. This is a very
significant milestone as it allows the Business to achieve two
fundamental parts of its strategy simultaneously.
Firstly, with a larger and dedicated site for the Distribution
activity, efficiencies previously not attainable can be realised.
This, along with the ability to offer a cost effective route to
market for other manufacturers, makes the proposition very
commercial.
Secondly, the space freed up with the move means that the
Operational strategy can commence. This will finally allow the
Business to develop the core competencies that are already in
demand. The first part of this new development will be in place by
the half year and further significant developments can be expected
before the year end.
Outlook
All four businesses have made substantial progress during the
year; Napier Brown has come through the difficult years of the EU
sugar regime changes and is now well positioned with its supply
arrangements to play an important role in the UK market; Garrett's
has been relaunched as a standalone business and has quickly and
successfully embarked on a growth strategy; Renshaw has delivered
remarkably strong growth ahead of expectations both in the UK and
Export while Haydens has continued to grow its sales while also
progressing its restructuring plan.
All four businesses understand their strengths and we will be
looking to leverage these strengths through our brands, both
industrial and consumer. In sugar we will refocus on our Napier
Brown brand with its strong reputation in the industrial sector
while developing our Whitworths consumer brand in retail; in our
Dairy business we have resurrected the Garrett brand which again
has a powerful heritage; in bakery ingredients we plan to extend
the success of the Renshaw brand in the industrial sector into
retail while also developing the R&W Scott brand in jam while
Haydens continues to develop its reputation as a supplier of
premium patisserie and desserts.
I would like to take this opportunity to thank all our employees
across all the businesses for their considerable efforts over the
past year without which we would not have achieved this substantial
progress. The businesses all now have a clear vision and strategy
and success in achieving our plans will be down to their continued
support.
The businesses are all at exciting stages of their development
and are well resourced with strong management teams who are focused
on delivering the next phase of our growth plans. As such the Group
is well placed to deliver further improvements in sales and
profitability.
Pieter Totte
Chairman
29 March 2011
FINANCE DIRECTOR'S REPORT
Group revenue from continuing operations, at GBP200.1m (2009:
GBP215.6m) was down GBP15.5m (7.2%) influenced heavily by the
market reduction in sugar costs reflected in sales prices. The
divisional performance was as follows:
-- Napier Brown down GBP26.5m, although GBP15m of this reflects
the drop in Sugar costs as part of the Regime change with the rest
primarily a withdrawal from low margin business.
-- Garrett, whlist historically reported as part of Napier is a
Sugar and Dairy trading business in its own right and warrants
separate reporting. I'm pleased to report revenue was up GBP0.9m in
what has been a difficult sugar and dairy market over the year.
-- Renshaw delivered sales growth of 22% with all sectors up on
2009 with particular success in higher retail sales both in the UK
and US.
-- Hayden's Bakeries enjoyed continued growth of 10% over 2009
with growth in both Retail and Foodservice.
Margins
Margin after Distribution costs (delivered margins) at GBP15.8m
(2009: GBP15.6m) was in line with 2009 and expectations. Napier
Brown's margins dropped by GBP2.3m with sales prices falling
disproportionately lower than Sugar costs driving overall
performance to only GBP0.4M at EBITDA level. Garretts was able to
extend margins by GBP0.2m on positive management of a difficult
market. Renshaw's strong growth increased overall margin levels by
GBP2.3m. Haydens was flat year-on-year, with commodity cost
increases offsetting the continuing Sales growth and sales prices
not moving to recover costs until late in the year.
Profit before tax and interest
In what we expected to be a difficult year of transition for the
Sugar market, overall operating profits for the Group before
significant items, at GBP3.6m, was in line with forecast and 2009
levels.
Financing costs
Financing costs in 2010 at GBP1.37m were in line with 2009
levels (GBP1.38m).
Significant items
During the year the Group incurred costs of GBP0.4m primarily
related to the reorganisation of the Haydens operation which has
seen a significant investment in resources during the year to
support the growth plans.
Cash flow and debt
The Group's total net debt (after cash) as at 31 December was
GBP22.6m (2009: GBP24.1m). The GBP1.5m reduction is driven
primarily by improvements in trading terms and working capital
management. Cash management continues to be an area of major focus
for us. The Group's borrowing facilities with PNC Business Capital
comprise GBP34m of total facilities, of which GBP19.6m (incl
GBP3.18m cash) was utilised as at 31 December 2010, at a blended
average cost of 2.76% over base rate.
Pensions
The subsidiaries of the Group, Napier Brown Foods Limited and
Renshawnapier Limited, operate a defined benefit pension scheme.
The scheme is closed to new members. The IAS 19 valuation of the
scheme at the year end identified a GBP0.1m surplus, an improvement
of GBP0.4m on the prior year. During the year the Group contributed
GBP117k (2009: GBP98k) to the scheme.
Key Performance Indicators
The Group's Board monitors a range of financial and
non-financial key performance indicators, reported on a periodic
basis, to measure the Group's performance over time. The key
performance indicators are set out below:
Year ended Year ended
31 December 31 December
2010 2009
Revenue growth(1) (7.2%) (1.4%)
Operating margin(2) 1.8% 1.6%
Debt cover (net
debt:EBITDA)(3) 4.0 4.3
Interest cover(4) 4.5 4.0
Health & Safety
score(5) 80% 75%
1 Revenue growth is calculated for continuing
- operations.
2 Operating margin is stated for continuing
- operations only and is calculated by dividing
profit before tax and before significant items
by revenue from continuing operations.
3 Debt cover is calculated by dividing total net
- debt by continuing EBITDA. EBITDA is defined as
earnings before significant items, interest,
tax, depreciation and intangible asset
amortisation.
4 Interest cover is calculated by dividing EBITDA
- by net interest payments (gross interest payable
less interest receivable).
5 Health & Safety score represents the weighted
- average score across all sites as determined by
our health and safety score index which was
introduced in 2008 and is measured by an
external consultant.
Mike McDonough
Group Finance Director
29 March 2011
CONSOLIDATED STATEMENT of comprehensive income
For the year ended 31 December 2010
Year Ended 31 December Year Ended 31 December
2010 2009
Before Significant Before Significant
Significant Items (Note Significant Items
Items 6) Total Items (Note 6) Total
CONTINUING
OPERATIONS GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
REVENUE 200,104 - 200,104 215,613 - 215,613
Cost of sales (176,225) - (176,225) (191,606) - (191,606)
GROSS PROFIT 23,879 - 23,879 24,007 - 24,007
Distribution
costs (8,053) - (8,053) (8,433) - (8,433)
Administration
expenses (12,217) (395) (12,612) (12,030) (525) (12,555)
OPERATING
PROFIT 3,609 (395) 3,214 3,544 (525) 3,019
Finance income 5 - 5 92 - 92
Finance costs (1,365) - (1,365) (1,472) - (1,472)
Other finance
income 94 - 94 (13) - (13)
PROFIT BEFORE
TAXATION 2,343 (395) 1,948 2,151 (525) 1,626
Income tax
expense (536) 111 (425) (945) 149 (796)
PROFIT FROM
CONTINUING
OPERATIONS 1,807 (284) 1,523 1,206 (376) 830
OTHER
COMPREHENSIVE
INCOME
Actuarial gains
/ (losses)
on defined
benefit plans 488 - 488 (520) - (520)
Income tax
relating to
components of
other
comprehensive
income (137) - (137) 146 - 146
TOTAL
COMPREHENSIVE
INCOME FOR THE
YEAR 2,158 (284) 1,874 832 (376) 456
Earnings per
share from
continuing and
discontinued
operations:
- basic 2.3p 1.3p
- diluted 2.2p 1.3p
Earnings per
share from
continuing
operations:
- basic 2.3p 1.3p
- diluted 2.2p 1.3p
----------
Consolidated STATEMENT OF Changes in equity
For the year ended 31 December 2010
Issued Share
Share Share Premium Option Retained
Capital Account Reserve Earnings Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Balance as at 1
January 2009 1,300 68,870 73 7,331 77,574
Shares options
to be issued - - - - -
Total
comprehensive
income for the
year - - - 456 456
Balance as at 31
December 2009 1,300 68,870 73 7,787 78,030
--------- -------------- --------- ---------- ---------
Balance as at 1
January 2010 1,300 68,870 73 7,787 78,030
Shares options
to be issued - - 34 - 34
Deferred tax on
share options - - 46 - 46
Total
comprehensive
income for the
year - - - 1,874 1,874
Balance as at 31
December 2010 1,300 68,870 153 9,661 79,984
========= ============== ========= ========== =========
consolidated STATEMENT OF FINANCIAL POSITION
As at 31 December 2010
31 December 31 December
2010 2009
GBP'000s GBP'000s
NON CURRENT ASSETS
Goodwill 75,796 75,796
Other intangible assets 625 651
Property, plant and equipment 15,603 15,226
Deferred tax asset 351 431
92,375 92,104
------------ ------------
CURRENT ASSETS
Inventories 9,546 9,570
Trade and other receivables 24,373 23,452
Cash and cash equivalents 3,187 5,657
37,106 38,679
------------ ------------
TOTAL ASSETS 129,481 130,783
============ ============
CURRENT LIABILITIES
Trade and other payables 19,891 19,023
Borrowings 17,258 18,373
Derived financial instruments 30 -
Current tax liabilities 589 158
------------ ------------
37,768 37,554
------------ ------------
NON CURRENT LIABILITIES
Borrowings 8,565 11,430
Deferred tax liabilities 3,164 3,187
Retirement benefit obligations - 582
------------ ------------
11,729 15,199
------------ ------------
TOTAL LIABILITIES 49,497 52,753
------------ ------------
NET ASSETS 79,984 78,030
============ ============
EQUITY
Share capital 1,300 1,300
Share premium account 68,870 68,870
Share option reserve 153 73
Retained earnings 9,661 7,787
------------ ------------
TOTAL EQUITY 79,984 78,030
============ ============
These financial statements were approved by the Board of
Directors and authorised for issue on
29 March 2011.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2010
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Profit before taxation 1,948 1,626
Finance costs 1,365 1,472
Finance income (5) (92)
IAS 19 costs/(income) (94) 13
Depreciation of property, plant
& equipment 1,785 1,895
Amortisation of intangibles 241 127
Operating Cash Flow 5,240 5,041
Decrease in inventories 24 1,393
Decrease/(Increase) in
receivables (922) 1,736
Increase in payables 904 1,414
------------- -------------
Cash generated from operations 5,246 9,584
Income taxes recovered/(paid) (23) 987
Interest paid (1,341) (1,960)
------------- -------------
Net cash from operating activities 3,882 8,611
------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES
Interest received 5 92
Purchase of intangible assets (215) (265)
Purchase of property, plant &
equipment (2,162) (713)
------------- -------------
Net cash used in investing activities (2,372) (886)
------------- -------------
CASH FLOW USED IN FINANCING
ACTIVITIES
Repayment of borrowings (3,708) (3,236)
Repayment of obligations under
finance leases (272) (296)
Net cash used in financing activities (3,980) (3,532)
------------- -------------
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS (2,470) 4,193
============= =============
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning
of year 5,657 1,464
Net movement in cash and cash
equivalents (2,470) 4,193
------------- -------------
Cash and cash equivalents at end
of year 3,187 5,657
============= =============
Cash and cash equivalents comprise:
Cash 3,187 5,657
Overdrafts - -
------------- -------------
3,187 5,657
============= =============
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2010
1. SEGMENT REPORTING
Business segments
The group has historically traded with its operating segments
being Sugar, Bakery Ingredients and Bakery and the Group's
management and reporting structure has been set out along these
lines. 2010 saw the re-launch of Garrett Ingredients as an
important part of the group and from 2011 this division, which is
currently reported within Sugar, will be reported as a separate
operating segment.
The following table shows the Group's revenue and results for
the year under review analysed by operating segment. The Group
reports and manages its trading segments at an EBIT reporting level
without allocating head office costs. The table below, therefore,
shows segment performance at a profit after tax level without
allocating any head office or consolidation adjustments or the tax
and finance costs relating to head office.
Year Ended 31 December 2010
Continuing
Bakery Operations Significant Total
Sugar Ingredients Bakery Total items Group
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Total Revenue 136,113 42,971 23,327 202,411 - 202,411
Revenue -
Internal (2,129) (178) - (2,307) - (2,307)
External
Revenue 133,984 42,793 23,327 200,104 - 200,104
Operating
Profit 1,102 4,575 (238) 5,439 (395) 5,044
Head Office
and
consolidation
adjustments (1,830) - (1,830)
Net Finance
Costs
Unallocated
Net Finance (789) (460) (86) (1,335) - (1,335)
Costs - - - (25) - (25)
Pension
finance
income - - - 94 - 94
----------- ------------ ---------
Profit/(loss)
before tax 313 4,115 (324) 2,343 (395) 1,948
Tax
Unallocated (192) (854) 31 (1,015) - (1,015)
Tax - - - 479 111 590
----------- ------------ ---------
Profit/(loss)
after tax as
per
comprehensive
statement of
income 121 3,261 (293) 1,807 (284) 1,523
=========== ============ =========
Inter-segment sales are charged at prevailing market rates.
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
2. SIGNIFICANT ITEMS
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
Management restructuring costs (395) (634)
Onerous lease provision released - 109
------------- --------------
(395) (525)
(395) (525)
Taxation credit on significant items 111 149
------------- --------------
(284) (376)
============= ==============
During the year the Group incurred a number of significant costs
as detailed above. The management restructuring costs reflect a
number of fundamental reorganisations within our operating
divisions during the year.
3. Taxation
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
CURRENT TAX
UK Current tax on profit of the year 576 221
UK Current tax on significant items (111) (149)
Adjustments in respect of prior years (7) (58)
------------ ------------
Total current tax 458 14
Deferred Tax
Deferred tax charge re pension scheme 26 57
Origination and reversal of timing differences 104 455
Adjustments in respect of prior years (56) (12)
Deferred tax asset re losses brought forward - 282
Adjustment in respect of change in
deferred tax rate (107) -
------------ ------------
Total deferred tax (33) 782
------------ ------------
Tax on profit on ordinary activities 425 796
============ ============
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
Factors affecting tax charge for the year:
The tax assessed for the year is lower (2009 - higher) than the
standard rate of corporation tax in the UK (28%). The differences
are explained below:
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
TAX RECONCILIATION
Profit per accounts before taxation 1,948 1,626
Tax on profit on ordinary activities at
standard CT rate of (28%) 545 455
Expenses not deductible for tax purposes 51 22
Impact of change in tax base for leasehold - 107
Additional deduction for R&D expenditure - (33)
Deferred tax asset re losses brought forward - 282
Marginal Relief - (4)
Adjustment in respect of change in deferred
tax rate (107) -
Adjustments to tax in respect of prior
years (64) (33)
------------ ------------
Tax charge for the year 425 796
============ ============
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
4. 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.
Year ended 31 December Year ended 31 December
2010 2009
Continuing Continuing
Operations Operations
Earnings after tax
attributable to ordinary
shareholders (GBP000's) 1,523 830
Weighted Average No. of
shares in issue (000's) 65,014 65,014
----------------------- -----------------------
Basic earnings per share 2.3p 1.3p
======================= =======================
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all potential dilutive ordinary shares. 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 total potential dilutive weighted average
number of shares considers the number of shares that would have
been issued assuming the exercise of the share options.
Year ended 31 December Year ended 31 December
2010 2009
Continuing Continuing
Operations Operations
Earnings after tax
attributable to ordinary
shareholders (GBP000's) 1,523 830
Total Potential Weighted
Average No. of shares in
issue (000's) 68,311 65,590
----------------------- -----------------------
Diluted earnings per share 2.2p 1.3p
======================= =======================
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
4. EARNINGS per SHARE (continued)
Adjusted earnings per share
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 allows shareholders
to gain a clearer understanding of the trading performance of the
Group.
Year ended 31 December Year ended 31
2010 December 2009
Continuing Continuing
Operations Operations
Earnings after tax attributable to
ordinary shareholders (GBP000's) 1,523 830
Add back significant items (note
6) 395 525
Add back tax on significant items (111) (149)
----------------------- ---------------
Adjusted earnings after tax
attributable to ordinary
shareholders (GBP000's) 1,807 1,206
======================= ===============
Weighted Average No. of shares in
issue (000's) 65,014 65,014
----------------------- ---------------
Basic earnings per share 2.8p 1.9p
======================= ===============
Total Potential Weighted Average
No. of shares in issue (000's) 68,311 65,590
----------------------- ---------------
Basic diluted earnings per share 2.6p 1.8p
======================= ===============
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
5. goodwill
GROUP
GBP'000s
Cost
Brought forward 1 January 2010 75,796
Carried forward 31 December 2010 75,796
Goodwill acquired on business combinations is allocated at acquisition
to the Cash Generating Units that are expected to benefit from that
business combination. Before any recognition of impairment losses,
the carrying amount of goodwill has been allocated as follows:
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
Sugar and Bakery Ingredients division* 75,796 75,796
Carried forward 31 December 2010 75,796 75,796
* The goodwill relating to the Sugar and Bakery Ingredients
Divisions arose out of the single acquisition of Napier Brown Foods
by The Real Good Food Company plc in 2005. It has not been possible
to allocate this goodwill between individual Cash Generating
Units.
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill may be
impaired.
The recoverable amounts of the Cash Generating Units are
determined from value in use calculations. The key assumptions for
the value in use calculations are those regarding discount rates
and expected changes to selling prices and direct costs.
The rate used to discount the forecast cash flows is the Group's
pre-tax weighted average cost of capital of 4.61% (2009 - 3.57%).
The Group prepares cash flow forecasts derived from the most recent
financial plans approved by the board for the next three years and
extrapolates this over a further 16 years at a zero growth rate.. A
period of 19 years has been applied as the Directors used this
period to assess the viability of the acquisition when the business
was acquired in 2005. Changes in selling prices and direct costs
are based on past practices and expectations of future changes in
the market. Using these parameters and allowing for disposal income
at the end of this time scale the recoverable amounts exceed the
carrying value by GBP54 million. Actual results were 12% above the
forecast cash flows used for the impairment review in the previous
year.
An increase in the Group's weighted average cost of capital to
above 10.4% (2009 - 7.6%) would cause the Board to impair the
carrying value of goodwill.
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
6. Borrowings AND CAPITAL MANAGEMENT
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2010 2010 2009 2009
Group Company Group Company
GBP'000s GBP'000s GBP'000s GBP'000s
Unsecured
borrowings at
amortised cost
Loan notes 2,774 - 2,774 -
Secured
borrowings at
amortised cost
Bank term
loans 7,784 7,784 10,379 10,379
Revolving
credit
facilities 15,032 1,088 16,145 1,598
Hire purchase 233 106 505 199
------------- ------------- ------------- -------------
25,823 8,978 29,803 12,176
============= ============= ============= =============
Amounts due for
settlement
within 12
months 17,258 3,187 18,373 3,647
Amounts due for
settlement
after 12
months 8,565 5,791 11,430 8,529
------------- ------------- ------------- -------------
25,823 8,978 29,803 12,176
============= ============= ============= =============
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
7. Pensions ARRANGEMENTS
The Group operates a defined benefit pension plan in the UK. A
full actuarial valuation was carried out as at 1 April 2009 in
accordance with the scheme funding requirements of the Pensions Act
2004 and the funding of the scheme is agreed between the Group and
the trustees in line with those requirements. These in particular
require the surplus/defecit to be calculated using prudent as
opposed to best actuarial assumptions. The actuarial valuation
showed a deficit of GBP5.0 million. However, a further actuarial
review was undertaken as at 31 March 2010 which revealed that the
deficit had reduced to GBP2.7 million. This was a result of the
recovery of the stock markets from the low in 2009 and improvements
in gilt yields and discount rates. On the basis of this valuation
the Group agreed with the trustees that it will eliminate the
GBP2.7 million deficit over a period of 11 years and 9 months from
1 April 2009 by the continuation of contributions of GBP8,145 per
month up to 31 July 2010, increasing to GBP12,000 per month between
1 August and 31 December 2010, GBP130,000 per annum in 2011,
GBP155,000 per annum in 2012 and GBP265,000 per annum thereafter.
In addition and in accordance with the actuarial valuation the
Group has agreed with the trustees that it will meet the expenses
of the scheme and levies to the Pension Protection Fund, along with
further defecit contributions contingent on the Group's year end
cash position relative to its banking covenants.
For the purposes of IAS19 the data provided for the 1 April 2009
Actuarial valuation has been approximately updated to reflect
liabilities on the accounting basis at 31 December 2010. This has
resulted in a surplus in the scheme of GBP96,000.
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. The asset this year is not recognised as the
scheme is closed to new members and therefore the surplus is not
considered to be recoverable by the Group.
Present values of defined benefit obligations, fair value of
assets and deficit
Year Year Year Year ended Year
ended 31 ended 31 ended 31 31 ended 31
December December December December December
2010 2009 2008 2007 2006
GBP'000s GBP'000s GBP'000s GBP'000's GBP'000's
Present value of
defined benefit
obligation 16,212 15,945 15,094 16,268 17,808
Fair value of plan
assets (16,308) (15,363) (14,830) (18,052) (16,585)
---------- ---------- ---------- ----------- ----------
Deficit/(surplus)
in plan (96) 582 264 (1,784) 1,223
Amount not
recognised in
accordance with
IAS I9 paragraph
58b 96 - - 1,249 -
Gross amount
recognised - 582 264 (535) 1,223
Deferred tax at
28% / 30% - (163) (74) 535 (367)
---------- ---------- ---------- ----------- ----------
Net liability - 419 190 - 856
========== ========== ========== =========== ==========
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
7. Pensions ARRANGEMENTS (continued)
Reconciliation of opening and closing balances of the present
value of the defined benefit obligations
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
Defined benefit obligation at start of
year 15,945 15,094
Interest cost 937 930
Actuarial losses/(gains) (6) 633
Benefits paid, death in service insurance
premiums and expenses (664) (712)
------------ ------------
Defined benefit obligation at end of year 16,212 15,945
============ ============
Reconciliation of opening and closing balances of the fair value
of plan assets
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
Fair value of scheme assets at start of
the year 15,363 14,830
Expected return on scheme assets 1,031 917
Actuarial gains 578 113
Contributions by the Group paid 117 98
Adjustment for contribtions by the Group
not agreed (117) 117
Benefits paid, death in service insurance
premiums and expenses (664) (712)
------------ ------------
Fair value of scheme assets at end of the
year 16,308 15,363
============ ============
The actual return on the scheme assets over the year ending 31
December 2010 was GBP1,609,000 (2009 - GBP2,692,000).
Total expense recognised in the statement of comprehensive
income within other finance income
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
Interest on liabilities 937 930
Expected return on scheme assets (1,031) (917)
------------ ------------
Total cost/(income) (94) 13
============ ============
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
7. Pensions ARRANGEMENTS (continued)
Statement of recognised income and expenses
Year ended Year ended
31 December 31 December
2010 2009
GBP'000s GBP'000s
Difference between expected and actual
return on scheme assets: gain 578 113
Experience gains and losses arising on
the scheme liabilities: gain 387 18
Effects of changes in the demographic and
financial assumptions underlying the
present value of the scheme liabilities:
(loss) (381) (651)
Reversal of the limit under IAS19 paragraph 58b
(96) -
Total amount recognised in statement of
changes in equity 488 (520)
============ ============
Assets
Year ending Year ending Year ending
31 December 31 December 31 December
2010 2009 2008
GBP'000s GBP'000s GBP'000s
Equities 10,779 10,274 8,547
Bonds 3,990 3,919 5,092
Property 408 449 563
Cash 1,131 721 628
------------- ------------- -------------
Total assets 16,308 15,363 14,830
============= ============= =============
None of the fair values of the assets shown above include any of
the Group's own financial instruments or any property occupied by,
or other assets used by, the Group.
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
7. Pensions ARRANGEMENTS (continued)
Assumptions
Year ended Year ended Year ended
31 December 31 December 31 December
2010 2009 2008
% per annum % per annum % per annum
Inflation 3.10 3.10 3.10
Salary increases - - -
Rate of discount 5.70 6.00 6.30
Allowance for pension in
payment increases of RPI
or 5% p.a. if less 3.10 3.10 3.10
Allowance for revaluation
of deferred pensions of RPI
or 5% if less 3.10 3.10 3.10
Allowance for commutation of 75% of max 50% of max 50% of max
pension for cash at retirement allowance allowance allowance
Assumption Change in assumption Change in liability
Discount rate Increase / decrease Decrease / increase
Rate of inflation of 0.5% p.a. by 7.8%
Rate of salary Increase / decrease Increase / decrease
growth of 0.5% p.a. by 3.1%
Rate of morality Increase / decrease Increase / decrease
of 0.5% p.a. by 0.0%
1 year increase in Increase by 2.8%
life expectancy
The mortality assumptions adopted at 31 December 2010 imply the
following life expectancies:
Male retiring at age 21.9 years
65 in 2010
Female retiring at age 24.0 years
65 in 2010
Male retiring at age 23.8 years
65 in 2030
Female retiring at age 26.0 years
65 in 2030
The long-term expected rate of return on cash is determined by
reference to UK long dated government bond yields at the balance
sheet date. The long-term expected return on bonds is determined by
reference to UK long dated government and corporate bond yields at
the balance sheet date. The long-term expected rate of return on
equities is based on the rate of return on bonds with an allowance
for out-performance.
NOTES TO THE FINANCIAL STATEMENTS (continued)
Year ended 31 December 2010
7. Pensions ARRANGEMENTS (continued)
Expected long term rates of return
The expected long term rates of return applicable at the start
of each period are as follows:
Year ended Year ended Year ended
31 December 31 December 31 December
2010 2009 2008
% per annum % per annum % per annum
Equities 7.50 6.90 6.90
Bonds 5.60 5.64 5.64
Property 6.50 5.90 5.90
Cash 4.20 3.50 3.50
Overall for scheme 6.83 6.29 6.29
------------- ------------- -------------
Year Year Year Year Year
ended 31 ended 31 ended 31 ended 31 ended 31
December December December December December
2010 2009 2008 2007 2006
GBP'000s GBP'000s GBP'000s GBP'000s GBP000's
Fair value
of assets 16,308 15,363 14,830 18,052 17,808
Defined
benefit
obligation (16,212) (15,945) (15,094) (16,268) (16,585)
---------- ---------- ---------- ---------- ----------
Surplus
/(deficit)
in scheme 96 (582) (264) 1,784 1,223
---------- ---------- ---------- ---------- ----------
Experience
adjustment
on
scheme
assets 578 113 (3,937) 893 (244)
Experience
adjustment
on
scheme
liabilities 387 18 (114) 464 280
========== ========== ========== ========== ==========
8. Audit status
The financial information set out above does not constitute the
company's statutory financial statements for the years ended 31
December 2010 or 2009, but is derived from those financial
statements. Statutory financial statements for 2009 have been
delivered to the Registrar of Companies and those for 2010 will be
delivered following the company's annual general meeting. The
auditors have not yet reported on the 2010 financial
statements.
Whilst the financial information included in this preliminary
announcement has been computed in accordance with International
Financial Reporting Standards (IFRS), this announcement does not in
itself contain sufficient information to comply with IFRS. The
accounting policies used in the preparation of this preliminary
announcement are consistent with those in the full financial
statements which have yet to be published. The preliminary results
for the year ended 31 December 2010 were approved by the Board of
Directors on 29 March 2011.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BLGDXUXDBGBI
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