TIDMRGD
RNS Number : 7101G
Real Good Food Company Plc (The)
03 July 2012
The Real Good Food Company plc (AIM: RGD)
Results for the 15 months to 31 March 2012
The Real Good Food Company plc ("RGFC" or the "Group"), owns the
largest independent non-refining distributor of sugar in Europe
(Napier Brown), supplies bakery ingredients (Renshaw and R&W
Scott ) and manufactures patisserie and desserts (Haydens
Bakery)
HIGHLIGHTS
15 months to 12 months to
31 March 2012 December 2011 December 2010
GBP'000s GBP'000s GBP'000s
Revenue 305,529 249,040 200,104
EBITDA 9,185 9,112 5,635
EPS
Basic adjusted 6.2p 7.0p 2.8p
Diluted adjusted 5.7p 6.5p 2.6p
Working Capital
(Fixed Assets/Stock/Trade
Debtors
&Trade Creditors) 38,750 36,708 29,667
Net Borrowings
(Incl Cash) 28,655 25,853 22,636
Net Debt/EBITDA
*Based on 12 months to March
2012 3.3* 2.8 4.0
-- Strong performance driven by focus on brand development and
by driving sales growth
-- EBITDA up 62% to GBP9.1m in 12 months to December 2011 (2010:
GBP5.6m) - performance in 3 Months to 31 March 2012 reflects usual
seasonal pattern of trading in quarter one (January to March)
-- Key trading divisions of Napier Brown, Garrett and Renshaw
all increased their EBITDA performance year on year
-- Significant improvement in EPS adjusted (fully diluted
excluding significant items) at 5.7p for 15 months to 31 March 2012
up 119% on 2.6p for 12 months to 31 December 2010
-- Significant improvement in Net Debt / EBITDA ratio, down from
4.0 at 31 December 2010 to 2.8 at 31 December 2011. (March 2012
reflects normal seasonality profile)
-- Net borrowings of GBP28.7m at 31 March 2012 are up against
2010 driven primarily by the increased value in the supply chain
following the impact mainly of higher sugar costs, but still down
on position at 31 March 2011
Pieter Totte, RGFC Executive Chairman, commented:
"In 2011 we delivered on our commitment to return to growth in
sales and profitability. We are now embarking on an exciting period
designed to transform the scale of the Group over the next three
years. This strategy is rooted in robust plans produced by each
individual business and we have restructured the Group to support
these."
3 July 2012
ENQUIRIES:
Real Good Food
Pieter Totte, Chairman Tel: 020 3056 1516
Mike McDonough, Finance Director Tel: 0151 706 8200
Shore Capital & Corporate Tel: 020 7408 4090
Stephane Auton / Patrick Castle
Cubitt Consulting Tel: 020 7367 5100
Gareth David
Change of Accounting Reference Date
In April 2011 the board announced it was moving its reference
date from 31 December to 31 March to better align its financial
reporting with its trading seasonality. The October to December
period being especially busy generating most of the year's
operating profits (approx 58% of EBITDA is generated in 2011
calendar).
Prior to this change the group was faced with preparing annual
budgets and market updates for the current year before the key
trading period results were known. Whilst we have had a good track
record in meeting expectations over the last two to three years the
board believe this change will improve the quality and accuracy of
reporting in the future.
To help retain transparency where relevant the 2011 calendar
year results are presented in this report alongside the 15 Months
to 31 March 2012 to aid comparison with the prior year.
Impact of Change
The Jan - March period is the Group's "quietest" trading period
with EBITDA typically around the break even level driven by the
combination of the lowest sales levels in the year in this quarter
with a relatively flat overhead base through the year.
This is evident in the trading comparatives with sales of
GBP305.5m for the 15 Months to 31 March 2012, GBP56.5m higher than
the 12 months ended 31 Dec 2011 (GBP249.0m) but profitability flat
with EBITDA at GBP9.2m and GBP9.1m respectively. Given this, the
key comparatives and commentary in this report will focus on
comparing like with like, with performance for the full year 2011
compared with 2010 (calendar) to ensure that the underlying year on
year trading is visible.
CHAIRMAN'S STATEMENT
Overview
I am very pleased with our achievements during 2011: we have
delivered significant growth in both sales and EBITDA as well as
setting out a clear course for how we intend to build the business
over the next three years.
All divisions recorded sales growth and Group EBITDA increased
to GBP9.1m in 2011, an increase of GBP3.5m on 2010. A significant
proportion of this came from Napier Brown as we responded
successfully to the market changes but the overall profit
performance was supported also by strong results from Renshaw and
Garrett Ingredients. Overall profits for the 15 month period to 31
March 2012 were in line with expectations.
Working capital levels generally have been higher during 2011 as
compared to 2010 as a result of both supporting our growth plans
and reflecting higher commodity prices, particularly in sugar. As
at 31 March 2012 working capital of GBP38.8m was up 8% on 31 March
2011 (GBP35.9m) but well within management expectations.
Net Debt as at 31 March 2012 was GBP28.7m (31 March 2011:
GBP29.4m) in line with expectations with Net Debt/EBITDA levels
reducing significantly from 4.0 in 2010 to 2.8 at 31 December
2011.
The changes in the sugar market following the Sugar Regime
reform period now give Napier Brown a very clear strategic focus.
Customers in the EU are looking for alternative sources of sugar to
provide competition to the reducing number of big EU beet
producers. With our experience in sugar sourcing and our well
established routes to market we are well placed to provide
this.
In this respect we are delighted that Omnicane, the biggest
sugar producer in Mauritius, has decided to take a significant
equity stake in RGFC. We have known them for many years and
following their investment in the Company we have held positive
discussions which lead us to believe that there are many mutual
benefits to be realised from greater cooperation.
Omnicane, with its world class model of sugar cane refining
combined with electricity co-generation, is a low cost producer of
cane sugar. We believe that this model of refining cane sugar in
the source country is the right one, not only for Mauritius but
also for other cane producers across the world and we intend to
work in partnership with Omnicane to develop this. Omnicane can
provide the experience and expertise in cane refining and Napier
Brown can provide the routes to market, particularly in Europe
where customers want and need new supply sources.
Garrett Ingredients had an extremely successful period
benefiting from the management focus we have given it and following
a similar strategy to Napier Brown in widening its supply sources
within dairy products. Its growth prospects come from developing
both its product range and its customer base.
Renshaw has benefited from the growing interest in homebaking
both in the UK and internationally and this growth has prompted us
to review our vision for the brand. There is an exciting
opportunity to broaden its focus from its original strength in the
specialist crafting sector in the UK to a much wider consumer
audience both in the UK and internationally. We see the web as a
major facilitator for this.
Just as we have seen benefits separating Garrett Ingredients
from Napier Brown and running it as a stand alone business unit, we
have started the same process with R&W Scott at Carluke. By
separating it from Renshaw and investing in local management we
have given its brand and product portfolios renewed focus which
should begin to pay dividends during the course of this year.
At Haydens, 2011 saw the opening of the Hopton Distribution site
which both created a new business stream but also critically freed
up space for us to invest in the bakery. We now have three business
streams, ambient, chilled and frozen, and a broadening customer
base particularly in foodservice.
We have now implemented the best structure for the Group to
facilitate our stated aim of doubling sales over the next three
years. Whilst each division is responsible for its growth plans, we
now have, in addition to the PLC board, a Group Executive Board
where individual Directors have group responsibilities across key
areas such as HR, IT, Compliance & Governance, Operations and
Marketing where it is clear cross divisional opportunities can be
delivered.
Having the right people in the right roles is essential and we
have to ensure that each business is resourced fully and
effectively. The Group will help achieve this as well as ensuring
consistent and high quality employment practices are observed
across all our sites.
Our ambitious growth plans present some exciting challenges
operationally and will require investment in new capacity. Again,
at Group level we can assess the priorities and help smooth
implementation of these projects to support the commercial
plans.
Finally, we have discovered over the past two years some hidden
gems in the brands we own and it is right that the Group provides
quality support and direction in managing these assets. The recent
new products have given us some indication of the potential for the
Renshaw brand and we now have a significantly enhanced vision of
its potential.
We believe R&W Scott can also be extended out from its core
jam heritage. Meanwhile our revitalisation of the Whitworths brand
in sugar has been enthusiastically greeted by the retail trade
supporting as it does Napier Brown's overall strategy of providing
customers with a differentiated supply option.
Outlook
In 2011 we delivered on our commitment to return to growth in
sales and profitability. We are now embarking on an exciting period
designed to transform the scale of the Group over the next three
years. This strategy is rooted in robust plans produced by each
individual business and we have restructured the Group to support
these.
While the strategy is not dependent on any single business, we
are fortunate to have the support of Omnicane as a major
shareholder to work with us on our plans for Napier Brown, our
biggest business. We also believe that Omnicane can also help us
with our export ambitions.
I would like to take this opportunity to thank colleagues across
all the sites in all our businesses for their enthusiasm and
support without which we would not have achieved the progress I
have reported.
Pieter Totte
Chairman
3 July 2012
DIVISIONAL REVIEW
Napier Brown (Sugar)
From its facility at Normanton, near Leeds, Napier Brown sources
sugar from the UK, mainland Europe and worldwide supplying
customers in the UK across all market sectors; manufacturing,
retail, wholesale and foodservice
15 months ended 12 months ended 12 months ended
31 March 2012 31 December 2011 31 December 2010
GBP'000s GBP'000s GBP'000s
Revenue(1) 176,885 143,675 108,400
EBITDA 4,383 3,749 409
Operating profit(2) 3,703 3,220 (80)
Operating profit
% 2.1 2.2 -
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant
items and central costs
2011/12 Review
2011 saw a dramatic change in the balance of supply and demand
within the EU sugar market reflecting changes in the world market.
The EU beet sugar production quotas and reduced import availability
due to volatile world prices and currency fluctuations, produced
shortages which in the UK were exacerbated by a significant failure
of part of the beet crop. The shortage in the supply chain led to
sugar prices increasing by approx. 40% at the start of 2011
allowing the market in general to return to more normal margins
following the unsustainable levels triggered by regime change which
affected profitability in 2008 through to 2010.
Revenue at GBP143.7m for 2011 was up 32.6% on 2010 with volume
growth accounting for 5.2% of this with the remainder being driven
by passing on increased sugar costs. EBITDA at GBP3.7M for 2011
reflects the recovery in margins over 2010. For the 15 month period
both revenue and EBITDA reflect the usual lower activity in the
January to March period in line with expectations.
The business had to move quickly to supplement its traditional
supply routes in order to meet customer demands. This required us
to buy sugar from a number of new sources all around the world:
seven new countries in all. This exercise was logistically complex
leading to an increase in costs and working capital but we were, at
the same time, able to benefit from increased selling prices. More
importantly the experience gained from handling these sugars and
the new relationships we built up with sugar producers will stand
us in good stead going forward.
Market prices remained high for the new contract season from
October 2011 as supplies continued to be tight. Our contracted
volumes increased as more major manufacturing customers decided to
increase their number of suppliers and include Napier Brown within
their supply portfolio. This combination of higher volumes and
higher market prices led to significant revenue increases year on
year.
Margins returned to more sustainable levels within the sector
though delays in retail price increases and continued competition
within the retail arena meant that margins remained depressed in
this sector. The need to buy in sugars from a range of new sources
increased working capital requirements.
Current Trading
Sales of retail sugars have improved over the past few months as
the marketing plans we have been working on have begun to bear
fruit. In retail we now have a very distinctive branded offering
targeted at all retailers as opposed to relying on one or two price
driven private label contracts.
A new marketing department has been set up and a brand manager,
a category manager and a new account manager recruited. Brand and
PR agencies have been appointed to revitalise the Whitworths brand
and bring new ranges to the market. The new 'Whitworths for Baking'
range of sugars in innovative, re-sealable pouches has gained good
listings in major multiples and early orders are strong.
Meanwhile industrial sales have also been buoyant as we have
increased our market share with strategic partners who recognise
our ability to supply sugar through new routes thus providing
security of supply, best-in-class service and competitive
pricing.
Outlook
The business has embarked on a number of new initiatives to
develop its strategy. 'Multi-sourcing' will be central to our
business proposition and customers are keen for us to continue to
offer alternative supply options to the major EU beet sugar
producers. In this respect we continue to develop relationships
with new supply sources and are planning to invest in an
infrastructure which can handle a range of sugars from different
sources efficiently and cost effectively.
We have already begun contracting sales for the new season from
October and have gained a number of new customers. Meanwhile our
new Whitworths branded ranges has enabled us to extend our customer
base in retail while we continue to work on further innovations and
new products for 2013.
Garrett Ingredients (Sugar & Dairy)
Based at Thornbury, near Bristol, Garrett sources dairy and
other specialist food ingredients from across the UK, Eire and
continental Europe for supply (along with sugar sourced from Napier
Brown) to large, medium and small food manufacturing businesses
across the UK.
15 months ended 12 months ended 12 months ended
31 March 2012 31 December 31 December 2010
2011
GBP'000s GBP'000s GBP'000s
Revenue(1) 38,181 30,776 25,584
EBITDA 3,231 2,747 1,182
Operating profit(2) 3,231 2,747 1,182
Operating profit
% 8.5 8.9 4.4
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant
items and central costs
2011/12 Review
Turnover increased during 2011 by 20.3% to GBP30.8m driven by a
5.3% volume increase in dairy ingredients and higher commodity
prices. Much of the focus during the year was ensuring product
availability by increasing the supplier base in dairy powders,
butters and cheese from the UK, Ireland and continental Europe. In
addition two new distributor partnerships in the UK were signed
with Friesland Campina for sweet condensed milk and Cargill for
dextrose.
A high proportion of the division's sugar sales are 'spot' and
sales prices increased during the early part of the year as sugar
supplies were short due to the UK crop difficulties and, as with
the Napier experience, this also allowed the business to rebuild
sugar margins to "normal" levels following the upheavals during
regime change. Garretts had the same experience in sugar as Napier
with margins being restored to more sustainable levels as seen in
the EBITDA performance for 2011 of GBP2.7m. The 15 month period
captures the usually less profitable January to March period.
Current Trading
Garrett's historic strength with small food manufacturers is now
being complemented with a growing customer base amongst larger
manufacturers where dairy and sugar may not be a core ingredient
and where Garrett can offer excellent service and security of
supply. Dairy markets have been relatively quiet recently while
sugar sales have continued to be strong.
The Sunshine Ice Cream mix brand has been relaunched for summer
2012 while work is underway with a number of customers to produce
bespoke added value blends utilising the mixing plant at the
R&W Scott site in Carluke.
The sales operation is being restructured following the
appointment of Paul Carlisle as Sales Director and the setting up
of a dedicated telesales operation at the head office in Thornbury.
This is being supported by investment in IT systems and associated
training.
Outlook
With the UK Dairy supply base consolidating, plans are in place
to increase sourcing from further afield and open up trading
channels with manufacturers and supply partners from continental
Europe and beyond. An integral part of the three year plan is to
increase the supply partner base, either as simply a customer for
the supplier or as a dedicated distributor for the manufacturer's
ingredients to the UK and Irish food manufacturing market.
Sales growth will come from both increasing the product range
and the breadth of the customer base. Negotiations are underway on
several potential new distributorships and supply agreements
focusing on areas such as whey powder, where the number of UK
manufacturers has decreased leading to reduced availability.
Renshaw (Bakery Ingredients)
Operating out of its Liverpool facility Renshaw is a leading
manufacturer of high quality food ingredients, primarily to the
baking sector both in the UK and for export with a strong
reputation for quality, consistency and innovation.
15 months ended 12 months ended 12 months ended
31 March 2012 31 December 2011 31 December 2010
GBP'000s GBP'000s GBP'000s
Revenue(1) 46,368 38,624 34,325
EBITDA 5,816 5,966 5,437
Operating profit(2) 4,908 5,222 4,767
Operating profit
% 10.6 13.5 13.9
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant
items and central costs.
2011/12 Review
2011 has seen another successful year with revenue growing by
12.5% to GBP38.6m (2010 GBP34.3m) driven by both domestic and
international sales with EBITDA at GBP5.9m also up on 2010 (9.7%).
The reported period (15 months to March 2012) appears to buck this
trend, however, Renshaw is an exceptionally seasonal business with
the bulk of its trading profits generated in the last few months of
the calendar year. Quarter one 2012 has generated a small loss at
EBITDA level, in line with our expectations, seasonality and prior
years.
In the UK the Renshaw brand extended its presence in both the
retail and craft sectors while export sales continued to show
growth both in the core business in the USA as well as other
markets such as Scandinavia. This was recognised when The Liverpool
Daily Post awarded Renshaw the title 'Regional Exporter of the
Year' for 2011.
Retailers and the media are maintaining a strong focus on both
homebaking and cake decorating. Renshaw has sought to capitalise on
this with a range of new innovative products that have begun to
gain new distribution in both mainstream and specialist craft
retailers.
Sales growth led to the Liverpool manufacturing site producing
record tonnage during the year, including 76 new retail products.
This was achieved through a combination of 24 hour working and a
rationalisation of shift patterns to improve continuity and
capacity. Investment in new extruding and packing equipment was
also required to meet the demand.
Current Trading
Sales have remained strong both domestically and internationally
and the business has invested in people to manage this growth
across all the sales channels.
The Commercial team has been restructured to focus on the three
main channels of Industrial, Consumer and Export while plans are in
place to develop a new e-commerce channel. The Development team has
been upgraded with new appointments including a focus on packaging.
In addition a new dedicated Operations Director for the Liverpool
site has recently joined the business.
Outlook
It is clear that the homebaking trends which are being
experienced in the UK are being replicated in many other countries
and research has begun into identifying the areas of greatest
potential. Our vision is to develop the Renshaw brand globally as
an expert in cake decorating and we see the creation of a branded
e-commerce sales channel as central to this.
R&W Scott (Bakery Ingredients)
R&W Scott at its Carluke facility south-east of Glasgow
produces chocolate coatings and sauces, jams and dry powder blends
for the industrial, retail, wholesale and foodservice markets.
15 months ended 12 months ended 12 months ended
31 March 2012 31 December 2011 31 December 2010
GBP'000s GBP'000s GBP'000s
Revenue(1) 14,437 11,791 8,468
EBITDA (1,044) (829) 18
Operating profit(2) (1,338) (1057) (192)
Operating profit
% (9.3) (9.0) (2.3)
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant
items and central costs
2011/12 Review
2011 proved to be a tough year for the business which incurred
significant material cost increases which were not being recovered
in sales price increases until late in the year. As a consequence
of the delay in passing on costs and due to production
inefficiences on a changing sales mix EBITDA for 2011 fell to a
loss of (GBP0.8M) over the previous year with the 15 month period
presenting a similar picture whilst underlying volumes were static
against the prior year.
In order to address this the Carluke site was established as a
separate trading division from Renshaw during the latter half of
2011, under its old trading name R&W Scott, in order to bring
more commercial focus to its key product areas of chocolate
coatings, sauces, jams and dry powder blends.
2011 saw overall volumes at the site increase to 7,400 tonnes
helped by the re-siting of the dry powder mix from Napier Brown in
Normanton. To support this volume growth, further capital
investment was made in the site in the areas of malted filling
capacity, refining capability and retail packing as well as
upgrades from an environmental and health and safety
perspective.
Current trading
I am pleased to report that the current year has started
strongly and has returned to profitability. Delivered margin (gross
profit after distribution before overheads) aspirations for 2012/13
are to move from the 12% achieved in 2011/12 to above 20%. Run rate
in the first quarter is in line with plan due to improved pricing,
increased output of higher value added lines and focus on
improvement initiatives. Business development plans are in place to
continue to drive margin improvement and return EBITDA back to
positive.
Outlook
The vision for R&W Scott is to transform the Carluke site
from being a manufacturer of largely commodity products to an added
value, innovative and commercial business utilising the site's
considerable brand heritage, skills and capabilities.
A new site based management team has been established to bring
focus to the business across all sales channels; industrial,
foodservice and retail. Using our experience to create new recipes,
made in innovative ways and that have lifestyle appeal, is the key
to brand development, improved product offerings and to delivering
growth. The first example of this is the revitalisation of the
R&W Scott brand with an exciting new range of naturally sweet
retail jams due to appear in supermarkets later this year.
The business plans to increase turnover to GBP25m within 3 years
and the site has both the capacity and capability to deliver this.
Product development in tune with the needs of the consumer today
will drive the business to be a brand led enterprise supported by
investment in facilities, plant and new product support.
Haydens Bakeries (Bakery Division)
From its site in Devizes, Wiltshire Haydens Bakeries produces an
extensive range of high added value, hand finished, ambient,
chilled and frozen patisserie and dessert products to retail and
foodservice customers. Through its Hopton Distribution subsidiary,
it also consolidates distribution of bakery products from other
manufacturers to Waitrose.
15 months ended 12 months ended 12 months ended
31 March 2012 31 December 2011 31 December 2010
GBP'000s GBP'000s GBP'000s
Revenue(1) 29,658 24,184 23,327
EBITDA (604) (398) 415
Operating profit(2) (1,333) (961) (238)
Operating profit
% (4.5) (4.0) (1.0)
(1) Including inter-company trading
(2) Normalised operating profit before interest, significant
items and central costs
2011/12 Review
As reported previously Haydens had a difficult year in 2011 on
two fronts. Significant material cost increases which were not
reflected in sales price increases until quarter four and the
factory development started later than planned preventing
management from delivering the cost reduction opportunities from
production efficiencies and improved material usage.
Revenue growth of 3.7% in 2011 was not sufficient to offset the
combined impact of these pressure points resulting in EBITDA
dropping to a loss (GBP0.4m) in 2011 with the trend largely the
same for the 15 month period.
Commercially the business continued to thrive with over thirty
new products launched focusing on the bakery's core processes.
These new products included premium dessert products for the
'Heston' brand in Waitrose through to individually packaged Danish
products and were developed under the supervision of Executive
Chef, Ross Sneddon who has recently been awarded the honour of
Master Chef-Patisserie. New formats of Haydens' high quality
products are part of the division's strategy to broaden its
exposure to new customer channels such as impulse, convenience and
foodservice.
The new Distribution Centre for Waitrose opened in April 2011
and this has enabled the 3 year bakery modernisation programme to
begin with blast chilling and freezing capability planned to be in
place by mid-2012. These changes are critical to delivering
production cost and material usage efficiencies as well as reaching
new sales channels. Meanwhile there has also been investment in
tart and pie capacity required to meet growing demand.
Current Trading
There continues to be strong demand for the Company's added
value products, with over 15 new patisserie and dessert launches in
the late spring of this year. Additionally, new food service
products were launched in line with Hayden's strategy to develop
the full potential in this sector.
In the immediate future, the focus is on increasing efficiencies
and reducing costs through the implementation of the factory
development programme, delayed from last year. This is now live and
stage 1 benefits should start to materialise from the 3(rd) quarter
of this year.
Outlook
The division has a clear strategic plan to focus its new product
development in its areas of expertise and broaden its customer base
by exploiting its quality credentials across a range of trade
channels. The capability to utilise ambient, chilled and frozen
supply chains is central to this.
The factory development programme is being delivered by a new
highly motivated Operations team, led by newly appointed John
Larsen. The team is committed to delivering significant return on
this investment within the current financial year. This plan,
coupled with aspirations for strong sales growth in the second half
of the year, is providing the management with reason for
optimism.
FINANCE DIRECTOR'S REPORT
Accounting reference date
As commented on at the start of this report, the change in the
accounting reference date will improve the Group's budgeting and
forecasting routines, and consequently in providing stakeholders
with commentary and trading updates. At this time, however, we "tag
on" our lowest trading quarter to our normal twelve month period
creating some "noise" around understanding the underlying
performance and trend. In order to overcome this, emphasis in the
commentary is placed on comparatives with like for like "calendar"
performance for 2011 versus 2010. Additional commentary on the 31
March 2012 position is included where appropriate.
Revenue
Group revenue from continuing operations for the 15 months to 31
March 2012 was GBP305.5m 2011 (Jan to Dec) at GBP249.0m, on a like
for like basis was approx 25% up (GBP48.9M) on 2010 at GBP200.1m.
Of this GBP48.9m year on year increase, approximately 80%
(GBP39.4m) is from the Napier & Garretts businesses with
GBP30.2m of this increase "value driven", reflecting the increased
commodity costs, primarily sugar, and passed on in sales prices to
customers.
Overall on a like-for-like basis the Group grew in volume terms
by 5.3% in 2011.
Key Comparatives 15 months ended 12 months ended 12 months ended
(Continuing Operations 31 March 31 December 31 December
excluding Significant 2012 2011 2010
items)
GBP'000s GBP'000s GBP'000s
Revenue 305,529 249,040 200,104
Gross Profit 39,626 33,472 23,879
Delivered Margin
(Gross Profit after
Distribution costs) 26,617 22,887 15,826
EBITDA 9,185 9,112 5,637
Operating profit
(EBITDA less Depn) 6,564 7,041 3,609
Operating profit % 2.1% 2.8% 1.8%
PBT
(After Financing &
Pension costs) 4,910 5,737 2,343
Margins
Delivered Margin for the 15 month period was GBP26.6m resulting
in EBITDA of GBP9.2m with 2011 calendar year at GBP22.9m up 44.6%
on 2010 (GBP15.8m). This increase is a result, primarily, of
trading margins in sugar returning to more normal sustainable
levels following the upheavals in the Sugar Regime that adversely
affected profitability from 2008 through 2010.
Profit before Tax and Interest
Overall profits for the 15 month period and 2011 calendar year
were in line with expectations driven by the recovery in Sugar in
Napier and Garretts.
Financing Costs
Financing costs for the 15 months at GBP1.9M were in line with
the 2011 "run rate" of GBP1.5m (2010 GBP1.4m).
Significant Items
During the 15 months the Group incurred one-off costs of
GBP0.55m due mostly to the reorganisation of the Haydens operation,
GBP0.43m, a continuation of the modernisation programme started in
2010. GBP0.12m was incurred in the liquidation and winding up of
dormant subsidiaries and the hive down of Haydens trading from the
Plc entity into its own limited company. The tidying up of this
structure will reduce administration and increase transparency for
stakeholders.
Working Capital & Net 31 March 31 December 31 December
Debt 2012 2011 2010
GBP'000s GBP'000s GBP'000s
Working Capital
(Fixed Assets/Stock/Trade
Debtors & Trade Creditors) 38,750 36,708 29,667
Net Borrowings
(Incl Cash) 28,655 25,883 22,636
Net Debt/EBITDA
*Based on 12 months
to March 2012 3.3* 2.8 4.0
Cash Flow and Debt
Working Capital levels have increased (24% as at 31 December
2011) over 2010 levels reflecting primarily increased material
costs which are not expected to ease in the short term. The group
has also maintained higher stock levels especially in sugar
following the problems experienced in the supply chain last
year.
These factors have pushed debt levels up, with Net Debt up 14%
at 31 December 2011 compared to 31 December 2010, although this is
in line with expectations and well within our funding
facilities.
Net Debt (after Cash) as at 31 March 2012 was GBP28.7m (31 March
2011 GBP29.4m) reflecting the normal seasonality through the
year.
However, underlying Debt levels as compared to EBITDA (Net Debt
to EBITDA) have reduced significantly from 4.0 in 2010 to 2.8 at
Dec 2011. March 2012 has moved up since Dec 2011 but this is in
line with expectations and follows our normal seasonality
pattern.
Pensions
Two subsidiaries, Napier Brown Foods Limited and Renshawnapier
Limited, operate a defined benefit pension scheme which is closed
to new members. The IAS 19 valuation of the scheme at 31 March 2012
identified a GBP1.1m deficit, a deterioration of GBP1.1m since
December 2010. The scheme's assets have largely retained their
value since 2010 with the deficit mainly driven by the fall in
discount rates at the present time increasing the present value of
future benefits. The Group is proactive with the trustees in
managing the scheme, not losing sight of the fact key market
drivers are weak and presenting a negative view at this time.
During the period the Group contributed GBP177k (2010: GBP117k) to
the scheme.
Key Performance Indicators
The Board of Directors 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:
The 2011 Calendar as compared with 2010 breaks out the
underlying trends with improvement across all areas, with the 15
month period to 31 March 2012 capturing the seasonality of the
January to March quarter which dilutes the picture.
31 March 31 December 31 December
2012 2011 2010
Revenue growth(1) n/a 24.5% (7.2%)
Operating margin(2) 2.1% 2.8% 1.8%
Debt cover (net debt:EBITDA)(3) 3.3* 2.8 4.0
Interest cover(4) 4.8 7.0 4.5
Health & Safety score(5) n/a 83% 80%
1 Revenue growth is calculated for continuing operations.
-
2 Operating margin is stated for continuing operations only
- and is calculated by dividing operating profit before tax,
interest and 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.
* Based on 12 months to March 2012
4 Interest cover is calculated by dividing EBITDA by net
- interest payments (gross interest payable less interest
receivables).
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
3 July 2012
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
15 months ended 31 March 2012
15 months ended 31 March 12 months ended 31 December
2012 2010
Significant
Before Significant Before Items
Significant Items Significant (Note
Items (Note 3) Total Items 3) Total
CONTINUING OPERATIONS GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
REVENUE 305,529 - 305,529 200,104 - 200,104
Cost of sales (265,903) - (265,903) (176,225) - (176,225)
------------- ------------ ---------- ------------- ------------ ----------
GROSS PROFIT 39,626 - 39,626 23,879 - 23,879
Distribution costs (13,009) - (13,009) (8,053) - (8,053)
Administration
expenses (20,053) (550) (20,603) (12,217) (395) (12,612)
OPERATING PROFIT 6,564 (550) 6,014 3,609 (395) 3,214
Finance income - - - 5 - 5
Finance costs (1,896) - (1,896) (1,365) - (1,365)
Other finance
income 242 - 242 94 - 94
------------- ------------ ---------- ------------- ------------ ----------
PROFIT BEFORE TAXATION 4,910 (550) 4,360 2,343 (395) 1,948
Income tax expense (859) 113 (746) (536) 111 (425)
------------- ------------ ---------- ------------- ------------ ----------
PROFIT FROM CONTINUING
OPERATIONS 4,051 (437) 3,614 1,807 (284) 1,523
============= ============ ========== ============= ============ ==========
OTHER COMPREHENSIVE
INCOME
Actuarial (losses)
/ gains on defined
benefit plans (1,499) - (1,499) 488 - 488
Income tax relating
to components of
other comprehensive
income 360 - 360 (137) - (137)
TOTAL COMPREHENSIVE
INCOME FOR THE
YEAR 2,912 (437) 2,475 2,158 (284) 1,874
============= ============ ========== ============= ============ ==========
Earnings per share
from continuing
and discontinued
operations:
- basic 5.6p 2.3p
- diluted 5.1p 2.2p
Earnings per share
from continuing
operations:
- basic 5.6p 2.3p
- diluted 5.1p 2.2p
Consolidated STATEMENT OF Changes in equity
15 months ended 31 March 2012
Issued
Share Share Premium Share Option Retained
Capital Account Reserve Earnings Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
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
--------- -------------- ------------- ---------- ---------
Balance as at 1 January
2011 1,300 68,870 153 9,661 79,984
Shares options to be issued - - 38 - 38
Deferred tax on share
options - - 335 - 335
Shares issued in period - 4 - - 4
Total comprehensive income
for the year - - - 2,475 2,475
Balance as at 31 March
2012 1,300 68,874 526 12,136 82,836
========= ============== ============= ========== =========
consolidated STATEMENT OF FINANCIAL POSITION
15 months ended 31 March 2012
31 March 2012 31 December 2010
GBP'000s GBP'000s
NON CURRENT ASSETS
Goodwill 75,796 75,796
Other intangible assets 521 625
Property, plant and equipment 17,057 15,603
Deferred tax asset 912 351
94,286 92,375
-------------- -----------------
CURRENT ASSETS
Inventories 17,380 9,546
Trade and other receivables 24,444 24,373
Cash and cash equivalents 2,506 3,187
44,330 37,106
-------------- -----------------
TOTAL ASSETS 138,616 129,481
============== =================
CURRENT LIABILITIES
Trade and other payables 20,082 19,891
Borrowings 24,366 17,258
Derived financial instruments - 30
Current tax liabilities 570 589
-------------- -----------------
45,018 37,768
-------------- -----------------
NON CURRENT LIABILITIES
Borrowings 6,796 8,565
Deferred tax liabilities 2,886 3,164
Retirement benefit obligations 1,080 -
-------------- -----------------
10,762 11,729
-------------- -----------------
TOTAL LIABILITIES 55,780 49,497
-------------- -----------------
NET ASSETS 82,836 79,984
============== =================
EQUITY
Share capital 1,300 1,300
Share premium account 68,874 68,870
Share option reserve 526 153
Retained earnings 12,136 9,661
-------------- -----------------
TOTAL EQUITY 82,836 79,984
============== =================
These financial statements were approved by the Board of
Directors and authorised for issue on 3 July 2012. They were signed
on its behalf by:
P W Totte M J McDonough
Chairman Director
CONSOLIDATED cash flow statement
15 months ended 31 March 2012
15 months ended 12 months ended
31 March 2012 31 December
2010
GBP'000s GBP'000s
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Profit before taxation 4,360 1,948
Finance costs 1,896 1,365
Finance income - (5)
IAS 19 income (242) (94)
Depreciation of property, plant &
equipment 2,449 1,785
Amortisation of intangibles 172 241
Operating Cash Flow 8,635 5,240
(Increase)/Decrease in inventories (7,834) 24
Increase in receivables (70) (922)
Increase in payables 221 904
---------------- ----------------
Cash generated from operations 952 5,363
Income taxes paid (932) (23)
Interest paid (1,896) (1,341)
---------------- ----------------
Net cash from operating activities (1,876) 3,999
---------------- ----------------
CASH FLOW FROM INVESTING ACTIVITIES
Interest received - 5
Shares issued in period 4 -
Purchase of intangible assets (68) (215)
Purchase of property, plant & equipment (3,903) (2,162)
---------------- ----------------
Net cash used in investing activities (3,967) (2,372)
---------------- ----------------
CASH FLOW USED IN FINANCING ACTIVITIES
Additional/(Repayment) of borrowings 5,540 (3,708)
Repayment of obligations under finance
leases (201) (272)
Pension contributions (177) (117)
Net cash used in financing activities 5,162 (4,097)
---------------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (681) (2,470)
================ ================
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning
of period 3,187 5,657
Net movement in cash and cash equivalents (681) (2,470)
---------------- ----------------
Cash and cash equivalents at end
of period 2,506 3,187
================ ================
Cash and cash equivalents comprise:
Cash 2,506 3,187
Overdrafts - -
---------------- ----------------
2,506 3,187
================ ================
NOTES TO THE FINANCIAL STATEMENTS
15 months ended 31 March 2012
1. presentation of financial statements
General information
The Real Good Food Company plc is a public limited company
incorporated in England and Wales under the Companies Act
(registered number 4666282). The Company is domiciled in England
and Wales and its registered address is 229 Crown Street,
Liverpool, Merseyside, L8 7RF. The Company's shares are traded on
the Alternative Investment Market (AIM).
The principal activities of the Group are the sourcing,
manufacture and distribution of food to the retail and industrial
sectors.
Basis of preparation
These consolidated financial statements are presented on the
basis of International Financial Reporting Standards (IFRS) as
adopted by the European Union and interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC)
and have been prepared in accordance with AIM rules and the
Companies Act 2006, as applicable to companies reporting under
IFRS.
These consolidated financial statements have been prepared in
accordance with Group accounting policies and under the historical
cost convention, except where modified by the revaluation of
certain financial instruments and commodities.
New IFRS standards and interpretations adopted
The following IFRS standards, amendments and interpretations are
not yet effective and have not been adopted early by the group.
The adoption of these standards, amendments and interpretations
is not expected to have a material impact on the Group's profit for
the period or equity. The adoptions may affect disclosures in the
Group's financial statements.
2. 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 was traditionally set out along
those lines. However in 2011 with the separating of the R&W
Scott business from Renshaw we have now migrated to a structure
that reflects the management teams in place and also ensures all
aspects of trading activity has the specific focus it needs in
order to achieve our growth plans
15 months ended 31 March
2012
Continuing
Operations Significant Total
Napier Garrett Renshaw R&W Scott Haydens Total items Group
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Total Revenue 189,406 38,967 46,572 14,437 29,658 319,040 - 319,040
Revenue
- Internal (12,521) (786) (204) - - (13,511) - (13,511)
External
Revenue 176,885 38,181 46,368 14,437 29,658 305,529 - 305,529
Operating
Profit 3,703 3,231 4,908 (1,338) (1,333) 9,171 (550) 8,621
Head Office
and
consolidation
adjustments (2,607) - (2,607)
Net Finance -
Costs (943) (195) (495) (142) (121) (1,896) - (1,896)
Pension
finance
income - - - - - 242 - 242
----------- --------- ---------- ------------ --------- ------------ ------------ ---------
Profit/(loss)
before tax 3,168 2,628 4,413 (1,480) (1,454) 4,910 (550) 4,360
Tax (546) (453) (761) 255 251 (1,254) - (1,254)
Unallocated
Tax - - - - - 395 113 508
----------- --------- ---------- ------------ --------- ------------ ------------ ---------
Profit/(loss)
after tax
as per
comprehensive
statement
of income 2,622 2,175 3,652 (1,225) (1,203) 4,051 (437) 3,614
----------- --------- ---------- ------------ --------- ============ ============ =========
Sales between segments are charged at prevailing market
rates.
2. SEGMENT REPORTING (continued)
15 months ended 31 Unallocated
March 2012 Napier Garrett Renshaw R&W Scott Haydens (1) Total Group
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Segment assets 27,122 4,646 15,694 6,752 7,288 61,502
Unallocated assets
Goodwill 75,796
Other intangible
assets 0
Property, plant
and equipment 28
Deferred tax assets 912
Trade and other
receivables 275
Cash and cash equivalents 103
------------
Total assets 138,616
------------
Segment liabilities (26,699) (4,739) (8,710) (1,503) (3,247) (44,898)
Unallocated liabilities
Trade and other
payables
Borrowings (8,808)
Current tax liabilities 318
Deferred tax liabilities (2,392)
------------
Total liabilities (55,780)
------------
Net operating assets 423 (93) 6,984 5,249 4,041 82,836
--------- --------- --------- ---------- --------- ------------
Non current asset
additions 369 - 907 318 2,363 14 3,971
Depreciation 598 - 826 294 722 9 2,449
Amortisation 82 - 82 - 7 1 172
(1) Unallocated
Relates primarily to the Head Office and non current asset
additions, depreciation and amortisation which cannot be
meaningfully allocated to individual operating divisions.
Geographical segments
The Group earns revenue from countries outside the United
Kingdom, but as these only represent 3.0% of the total revenue of
the Group, segmental reporting of a geographical nature is not
considered relevant
2. SEGMENT REPORTING (continued)
12 months Ended 31 December
2010
Continuing
R&W Operations Significant Total
Napier Garrett Renshaw Scott Bakery Total items Group
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Total Revenue 109,883 26,230 34,503 8,468 23,327 202,411 - 202,411
Revenue -
Internal (1,483) (646) (178) - - (2,307) - (2,307)
External Revenue 108,400 25,584 34,325 8,468 23,237 200,104 - 200,104
Operating
Profit (80) 1,182 4,767 (192) (238) 5,439 (395) 5,044
Head Office
and
consolidation
adjustments (1,830) - (1,830)
Net Finance
Costs (638) (151) (369) (91) (86) (1,335) - (1,335)
Unallocated
Net Finance
Costs - - - - -
------------ ------------ ---------
94 94
Pension finance
income - - - - - (25) - (25)
------------ ------------ ---------
Profit/(loss)
before tax (718) 1,031 4,398 (283) (324) 2,343 (395) 1,948
Tax 97 (289) (933) 79 31 (1,015) - (1,015)
Unallocated
Tax - - - - - 479 111 590
----------- --------- ---------- ---------- --------- ------------ ------------ ---------
Profit/(loss)
after tax
as per
comprehensive
statement
of income (621) 742 3,465 (204) 293 1,807 (284) 1,523
=========== ========= ========== ========== ========= ============ ============ =========
Sales beween segments are charged at prevailing market
rates.
2. SEGMENT REPORTING (continued)
12 months ended Unallocated
31 December 2010 Napier Garrett Renshaw R&W Scott Haydens (1) Total Group
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Segment assets 20,794 3,501 16,232 6087 6,303 52,917
Unallocated assets
Goodwill 75,796
Other intangible
assets 1
Property, plant
and equipment 5
Deferred tax assets 351
Inventory -
Trade and other
receivables 287
Derived financial
assets
Current tax assets -
Cash and cash
equivalents 124
------------
Total assets 129,481
------------
Segment liabilities (20,184) (3,326) (7,034) (1,370) (3,947) (35,861)
Unallocated liabilities
Trade and other
payables (406)
Borrowings (10,511)
Derived financial
instruments -
Current tax liabilities (308)
Deferred tax liabilities (2,411)
Provisions
------------
Total liabilities (49,497)
------------
Net operating assets 609 1,756 9,197 4,717 2,356 79,984
--------- --------- --------- ---------- --------- ------------
Non current asset
additions 404 - 776 126 1072 2,378
Depreciation 420 - 526 210 624 5 1,785
Amortisation 67 - 144 - 28 2 241
Unallocated
Relates primarily to the Head Office and non current asset
additions, depreciation and amortisation which cannot be
meaningfully allocated to individual operating divisions.
Geographical segments
The Group earns revenue from countries outside the United
Kingdom, but as these only represent 3.1% of the total revenue of
the Group, segmental reporting of a geographical nature is not
considered relevant.
3. SIGNIFICANT ITEMS
15 months 12 months
ended ended
31 March 31 December
2012 2010
GBP'000s GBP'000s
Management restructuring costs (429) (395)
Group restructuring costs (121) -
---------- --------------
(550) (395)
Taxation credit on significant items 113 111
---------- --------------
(437) (284)
========== ==============
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. The Group restructuring cost relate to
liquidation of dormant subsidiaries necessary to simplify the Group
structure.
4. dIRECTORS' REMUNERATION
15 months 12 months
ended ended
31 March 31 December
2012 2010
GBP'000s GBP'000s
Fees 268 208
Executive salaries and benefits 698 403
Share-based payments 22 24
---------- -------------
988 635
========== =============
The emoluments of the Directors for the period were as
follows:
Share 12 months
Short term Based 15 months ended
Employee payments Post Employment ended 31 31 December
Benefits* Benefits Benefits March 2012 2010
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
M J McDonough 239 - 20 - 259 193
P W Totte 439 22 - - 461 223
P Ridgwell 96 - - - 96 79
P C Salter 133 - - - 133 108
C O Thomas 39 - - - 39 32
------------- ------------ --------- ------------------ ------------ -------------
946 22 20 - 988 635
============= ============ ========= ================== ============ =============
* Short term Employee Benefits (Salaries and fees) include both
fees received as an officer of the Company and separate consultancy
fees.
Key management personnel are considered to be the Company
Directors
4. dIRECTORS' REMUNERATION (continued)
Directors' interests in share options
Option Type Date of Number Number of Exercise Earliest Exercise
Grant of options Price Exercise Expiry
options at 31 December Date Date
at 31 March 2010
2012
P W Totte
Un-approved options
2009 July 2009 1,000,000 1,000,000 5.25p July 2012 July 2019
Un-approved options
2010 May 2010 142,857 142,857 24.50p May 2013 May 2020
Un-approved options
2011 March 2011 3,817,725 - 25.0p April 2011 Mar 2021
P Ridgwell
Un-approved options
2009 July 2009 476,190 476,190 5.25p July 2012 July 2019
Un-approved options
2010 May 2010 61,224 61,224 24.50p May 2013 May 2020
P C Salter
Un-approved options
2009 July 2009 285,714 285,714 5.25p July 2012 July 2019
Un-approved options
2010 May 2010 102,040 102,040 24.50p May 2013 May 2020
C O Thomas
Un-approved options
2009 July 2009 304,762 304,762 5.25p July 2012 July 2019
Un-approved options
2010 May 2010 40,816 40,816 24.50p May 2013 May 2020
Warrants Dec 2003 369,000 369,000 67.75p Dec 2007 Dec 2013
M J McDonough
Approved options
2009 June 2009 476,190 476,190 5.25 July 2012 July 2019
Approved options
2010 May 2010 20,408 20,408 24.50p May 2013 May 2020
Un-approved options
2010 May 2010 40,816 40,816 24.50p May 2013 May 2020
3,817,725 new options were granted to Directors during the
period (2010 - 408,161). Options have been granted to directors
whose performances and potential contribution were judged to be
important to the operations of the Group, as incentives to maximise
their performance and contribution.
The mid-market price of the ordinary shares on 31 March 2012 was
58.5p and the range during the period was 24.1p to 73.5p.
During the period retirement benefits were accruing to 1 (2010 -
1) Directors in respect of money purchase pension schemes.
No Director exercised share options during the year.
5. Taxation
15 months 12 Months
ended ended31 December
31 March 2010
2012
GBP'000s GBP'000s
CURRENT TAX
UK Current tax on profit of the period 1,102 576
UK Current tax on significant items (113) (111)
Adjustments in respect of prior years (98) (7)
----------- -----------------
Total current tax 891 458
Deferred Tax
Deferred tax charge re pension scheme 101 26
Origination and reversal of timing differences 36 104
Adjustments in respect of prior years 45 (56)
Deferred tax asset re losses brought forward - -
Adjustment in respect of change in
deferred tax rate (327) (107)
----------- -----------------
Total deferred tax (145) (33)
----------- -----------------
Tax on profit on ordinary activities 746 425
=========== =================
Factors affecting tax charge for the period:
The tax assessed for the period is lower (2010 - lower) than the
standard rate of corporation tax in the UK 26.39% (2010 - 28%). The
differences are explained below:
15 months 12 months
ended 31 ended 31
March 2012 December
2010
GBP'000s GBP'000s
TAX RECONCILIATION
Profit per accounts before taxation 4,360 1,948
Tax on profit on ordinary activities at
standard CT rate of 26.39% (2010 28%) 1,150 545
Expenses not deductible for tax purposes 48 51
Impact of change in tax base for leasehold - -
Additional deduction for R&D expenditure (64) -
Deferred tax asset re losses brought forward - -
Temporary difference movements at lower (9) -
tax rate
Adjustment in respect of change in deferred
tax rate (327) (107)
Adjustments to tax in respect of prior
years (52) (64)
------------ ----------
Tax charge for the period 746 425
============ ==========
6. 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.
15 months ended 12 months
31 March 2012 ended 31 December
2010
Continuing Continuing
Operations Operations
Earnings after tax attributable to ordinary shareholders (GBP000's) 3,614 1,523
Weighted Average No. of shares in issue (000's) 65,017 65,014
---------------- -------------------
Basic earnings per share 5.6p 2.3p
================ ===================
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.
15 months 12 months ended
ended 31 31 December
March 2012 2010
Continuing Continuing
Operations Operations
Earnings after tax attributable to ordinary shareholders (GBP000's) 3,614 1,523
Total Potential Weighted Average No. of shares in issue (000's) 71,385 68,311
------------ ----------------
Diluted earnings per share 5.1p 2.2p
============ ================
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.
15 months 12 months
ended 31 ended 31
March 2012 December
2010
Continuing Continuing
Operations Operations
Earnings after tax attributable to ordinary
shareholders (GBP000's) 3,614 1,523
Add back significant items (note 6) 550 395
Add back tax on significant items (113) (111)
------------ --------------
Adjusted earnings after tax attributable
to ordinary shareholders (GBP000's) 4,051 1,807
============ ==============
Weighted Average No. of shares in issue
(000's) 65,017 65,014
------------ --------------
Basic earnings per share 6.2p 2.8p
============ ==============
Total Potential Weighted Average No.
of shares in issue (000's) 71,385 68,311
------------ --------------
Basic diluted earnings per share 5.7p 2.6p
============ ==============
7. goodwill
Group
GBP'000s
Cost
Brought forward 1 January 2011 75,796
===============
Carried forward 31 March 2012 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:
31 December
31 March 2012 2010
GBP'000s GBP'000s
Sugar and Bakery Ingredients
division* 75,796 75,796
Carried forward 31 March 2012 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 7.19% (2010 - 4.61%).
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 GBP84.7 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 17.11% (2010 - 10.4%) would cause the Board to impair the
carrying value of goodwill.
8. Borrowings AND CAPITAL MANAGEMENT
31 March 31 March 31 December 31 December
2012 2012 2010 2010
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 6,016 6,016 7,784 7,784
Revolving credit
facilities 22,340 1,135 15,032 1,098
Hire purchase 32 32 233 106
---------- ---------- ------------- -------------
31,162 7,183 25,823 8,978
========== ========== ============= =============
Amounts due for
settlement within
12 months 24,366 3,161 17,258 3,187
Amounts due for
settlement after
12 months 6,796 4,022 8,565 5,791
---------- ---------- ------------- -------------
31,162 7,183 25,823 8,978
========== ========== ============= =============
Features of the Group's borrowings are as follows:
The Group's financial instruments comprise cash, a term loan,
hire purchase and finance leases, revolving credit facility,
overdraft 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 main risks from the Group's financial instruments are
interest rate risk and liquidity risk. The Group also has some
currency exposure in relation to its sugar trade and also some
currency exposure in relation to the purchase of almonds from the
United States, however, this is mitigated by matching 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.
The Group operates a number of term loans and revolving credit
facilities with PNC Business Credit. The property term loan
currently bears interest at 3% above base rate and is repayable via
monthly instalments of GBP71,000 and then a bullet repayment of
GBP3,529,000 in July 2013. At the year end GBP4.6m was outstanding
under this facility. Our fixed asset term loan also currently bears
interest at 3% above base rate and is repayable by monthly
instalments of GBP85,000 until July 2013. At the year end GBP1.3m
was outstanding under this loan. Our final term loan currently
bears interest at 4% above base rate and is repayable via monthly
instalments of GBP62,000 up to June 2012. At the year end GBP0.1m
was outstanding under this facility.
The Group's revolving credit facilities, which are available
until July 2013, comprise of Sterling and Euro denominated invoice
discounting facilities and an inventory asset facility. The invoice
discounting facilities currently bear interest at 2.65% above
Sterling and Euro base rates respectively and are secured against
the underlying trade receivables. The total amount outstanding
under these facilities at the end of the period was GBP15.6m,
whilst the maximum permitted borrowings are GBP24.4m. The inventory
finance facility currently bears interest at 2.95% above base rate
and at the period end GBP6.7m was outstanding under this facility
which has a maximum borrowing limit of GBP8.5m and is secured upon
the finished goods and certain raw material inventories of the
Group.
The fixed interest rate liabilities relate to amounts payable on
hire purchase agreements. The weighted average interest rate of
these liabilities was 6.0% (2010 - 6.93%) and the weighted average
period for which the interest rates are fixed was 6 months (2010 -
15 months).
The Group had outstanding loan notes amounting to GBP2,773,908
(2010 - GBP2,773,908) due to Napier Brown Ingredients Limited as
disclosed in note 9. The loan note holders have previously agreed
to waive the accrued interest in relation to these notes, which
were also interest free during 2011. No agreement is in place for
2012 onwards.
The financial assets of the Group are surplus funds, which are
offset against borrowings under the facility, and there is no
separate interest rate exposure.
PNC Business Credit has a debenture incorporating a fixed and
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 our banking arrangements with KBC contain
certain cross guarantees. Hire purchase and finance lease
liabilities are secured upon the underlying assets.
Forward foreign exchange contracts
The Group has no forward foreign exchange contracts in place as
at end of March 2012.
Liquidity risk management
The Board reviews the Group's liquidity position on a monthly
basis and monitors its forecast and actual cash flows against
maturing profiles of its financial assets and liabilities.
The following table details the Group's maturity profile of its
financial liabilities.
2012 Less than 1 - 3 3 months 1 - 5 5 + years
1 month months to 1 year years GBP'000s Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Trade and other
payables 9,308 10,774 - - - 20,082
Loan notes - - - 2,774 - 2,774
Bank term loans 218 372 1,404 4,022 - 6,016
Revolving credit
facilities - - 22,340 - - 22,340
Finance leases 21 11 - - - 32
---------- ---------- ----------- ---------- ---------- ----------
9,547 11,157 23,744 6,796 - 51,244
========== ========== =========== ========== ========== ==========
2010 Less than 1 - 3 3 months 1 - 5 5 + years
1 month months to 1 year years GBP'000s Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Trade and other
payables 7,246 12,645 - - - 19,891
Loan notes - - - 2,774 - 2,774
Bank term loans 170 510 1,360 5,744 - 7,784
Revolving credit
facilities - - 15,032 - - 15,032
Finance leases 21 59 106 47 - 233
---------- ---------- ----------- ---------- ---------- ----------
7,437 13,214 16,498 8,565 - 45,714
========== ========== =========== ========== ========== ==========
The profile of the trade payables has been taken as being
consistent with the Group's payment terms to suppliers.
Analysis of market risk sensitivity
Currency risks:
The Group is exposed to currency risk on purchases made of
almonds from the United States. The risk associated with these
purchases is mitigated by matching with sales in foreign
currencies. The effect of a 10c strengthening of the US dollar
against Sterling exchange rate at the balance sheet date on the
trade payables carried at that date would, with all other variables
being held constant, have resulted in a decrease in pre tax profits
of GBP7k. The impact of a 10c strengthening of the US Dollar
against Sterling at the balance sheet date on our trade receivables
carried at that date would, all other variables being held
constant, have resulted in an increase in pre-tax profits of
GBP78k.
The Group is also exposed to currency risk on purchases of sugar
from Europe. The risk associated with these purchases is mitigated
by matching with sales in foreign currencies. These sales form part
of our Invoice Discounting facilities with PNC, which generate a
Euro loan obligation. The effect of a EUR0.05 strengthening of the
Euro versus Sterling exchange rate at the balance sheet date on our
overall Euro net position carried at that date would, all other
variables being held constant, have resulted in a decrease in
pre-tax profits of GBP168k.
Interest rate risks:
The Group has an exposure to interest rate risk arising from
fluctuations in Sterling and Euro base rates. The impact of a 1%
increase in the applicable interest rates at the balance sheet date
on the variable rate debt carried at that date would, all other
factors remaining unchanged, have resulted in a decrease in pre tax
profits of GBP284k.
Obligation under finance leases
2012 2010
GBP'000s GBP'000s
Finance lease liabilities - minimum lease
payments
Due within one year 32 195
Due within one to five years - 49
---------- ----------
32 244
Future finance charges on finance leases (-) (11)
---------- ----------
Present value of finance lease liabilities 32 233
========== ==========
The present value of finance lease liabilities
is as follows:
---------- ----------
Due within 1 year 32 186
Due within 1 to 5 years - 47
---------- ----------
32 233
========== ==========
It is the Group's policy to lease certain property, plant and
equipment under finance leases. For the period ended 31 March 2012
the average effective borrowing rate was 6.0% (2010 - 6.93%).
Interest rates are fixed at the contract dates. All leases are on a
fixed repayment basis and no arrangements have been entered into
for contingent rental payments. All lease obligations are
denominated in Sterling.
The fair value of the Group's lease obligations approximates to
their carrying amount.
9. related party transactions
Napier Brown Foods Limited was a former subsidiary of Napier
Brown Ingredients Limited. At the year end a loan note of
GBP2,773,908 was owed to Napier Brown Ingredients Limited in which
P G Ridgwell, who is a Director of The Real Good Food Company plc,
has a beneficial interest. The loan note holders agreed to waive
their rights to the accrued interest on this loan note to December
2011. The accounts assume that this waiver will continue to March
2012, thus accrued interest on the loan amounted to GBPnil (2010 -
GBPnil) at 31 March 2012.
Transactions between the Company and its subsidiaries are as
follows: -
Trading transactions - purchase of goods
15 months ended 12 months ended
31 March 2012 31 December 2010
GBP'000s GBP'000s
Renshawnapier Limited 827 808
31 March 2012 31 December
GBP'000s 2010
Amounts due to GBP'000s
Renshawnapier Limited 31,734 24,040
Napier Brown Foods Limited Nil Nil
Renshawnapier Limited is a related party because it is a 100%
owned subsidiary of Napier Brown Foods Limited which is a 100%
subsidiary of The Real Good Food Company plc.
Purchases from related parties have been made at market prices;
settlement of the debt is made under normal trading terms.
Amounts due from related parties
31 December
31 March 2012 2010
GBP'000s GBP'000s
Renshawnapier Limited Nil Nil
Napier Brown Foods Limited 40,333 39,258
The Group has provided loans to its subsidiary companies at
rates which reflect the rates charged by its own bankers. Loans and
interest are repayable by monthly instalments.
10. 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/deficit to be calculated using prudent as
opposed to best actuarial assumptions. The actuarial valuation
showed a deficit of GBP5.3 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 deficit 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 March 2012. This has
resulted in a deficit in the scheme of GBP1,080,000.
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.
Present values of defined benefit obligations, fair value of
assets and deficit
31 March
2012 31 December 31 December 31 December 31 December
GBP'000s 2010 2009 2008 2007
GBP'000s GBP'000s GBP'000's GBP'000's
Present value
of defined benefit
obligation 17,085 16,212 15,945 15,094 16,268
Fair value of
plan assets (16,005) (16,308) (15,363) (14,830) (18,052)
---------- ------------- ------------- ------------- -------------
Deficit/(surplus)
in plan 1,080 (96) 582 264 (1,784)
Amount not recognised
in accordance
with IAS I9 paragraph
58b - 96 - - 1,249
Gross amount recognised 1,080 - 582 264 (535)
Deferred tax at
24% (2012) (259) - (163) (74) 535
---------- ------------- ------------- ------------- -------------
Net liability (821) - 419 190 -
========== ============= ============= ============= =============
Reconciliation of opening and closing balances of the present
value of the defined benefit obligations
31 March 2012 31 December 2010
GBP'000s GBP'000s
Defined benefit obligation at start
of period 16,212 15,945
Interest cost 1,132 937
Actuarial losses/(gains) 611 (6)
Benefits paid, death in service insurance
premiums and expenses (870) (664)
--------------- ------------------
Defined benefit obligation at end
of period 17,085 16,212
=============== ==================
10. Pensions ARRANGEMENTS (continued)
Reconciliation of opening and closing balances of the fair value
of plan assets
31 March 31 December
2012 2010
GBP'000s GBP'000s
Fair value of scheme assets at start of
the year 16,308 15,363
Expected return on scheme assets 1,374 1,031
Actuarial (losses)/gains (984) 578
Contributions by the Group paid 177 117
Adjustment for contribtions by the Group
not agreed - (117)
Benefits paid, death in service insurance
premiums and expenses (870) (664)
--------- ------------
Fair value of scheme assets at end of the
year 16,005 16,308
========= ============
The actual return on the scheme assets over the period ending 31
March 2012 was GBP390,000 (2010 - GBP1,609,000).
Total expense recognised in the statement of comprehensive
income within other finance income
31 March 31 December
2012 2010
GBP'000s GBP'000s
Interest on liabilities 1,132 937
Expected return on scheme assets (1,374) (1,031)
--------- ------------
Total (income) (242) (94)
========= ============
Statement of recognised income and expenses
15 months 12 months
ended ended
31 March 31 December
2012 2010
GBP'000s GBP'000s
Difference between expected and actual
return on scheme assets: gain (984) 578
Experience gains and losses arising on
the scheme liabilities: gain (46) 387
Effects of changes in the demographic and
financial assumptions underlying the present
value of the scheme liabilities: (loss) (565) (381)
Reversal of the limit under IAS19 paragraph
58b 96 (96)
Total amount recognised in statement of
changes in equity (1,499) (488)
========== ============
10. Pensions ARRANGEMENTS (continued)
Assets
31 March 31 December 31 December
2012 2010 2009
GBP'000s GBP'000s GBP'000s
Equities 9,615 10,779 10,274
Bonds & Gilts 4,915 3,990 3,919
Property 434 408 449
Cash 1,041 1,131 721
---------- ------------- -------------
Total assets 16,005 16,308 15,363
========== ============= =============
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.
Assumptions
As at As at As at
31 March 31 December 31 December
2012 2010 2009
% per annum % per annum % per annum
Inflation 2.90 3.10 3.10
Salary increases - - -
Rate of discount 5.00 5.70 6.00
Allowance for pension in
payment increases of RPI
or 5% p.a. if less 2.80 3.10 3.10
Allowance for revaluation
of deferred pensions of
RPI or 5% if less 1.90 3.10 3.10
Allowance for commutation 75% of max 75% of max 50% of max
of 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 7.7%
Rate of Salary Increase / decrease Increase / decrease
Growth of 0.5% p.a. by 2.3%
Rate of mortality Increase / decrease Increase / decrease
of 0.5% p.a. by 0.0%
1 year increase in life Increase by 3.3%
expectancy
The mortality assumptions adopted at 31 March 2012 imply the
following life expectancies:
Male retiring at age 65 in 2010 21.7 years
Female retiring at age 65 in 2010 23.8 years
Male retiring at age 65 in 2030 22.7 years
Female retiring at age 65 in 2030 25.0 years
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.
Expected long term rates of return
The expected long term rates of return applicable at the start
of each period are as follows:
31 March 31 December 31 December
2012 2010 2009
% per annum % per annum % per annum
Equities 7.55 7.50 6.90
Bonds 4.60 5.60 5.64
Property 7.55 6.50 5.90
Cash 0.50 4.20 3.50
Overall for scheme 5.87 6.83 6.29
------------- ------------- -------------
31 March
2012 31 December 31 December 31 December 31 December
GBP'000s 2010 2009 2008 2007
GBP'000s GBP'000s GBP'000s GBP000's
Fair value of assets 16,005 16,308 15,363 14,830 18,052
Defined benefit
obligation (17,085) (16,212) (15,945) (15,094) (16,268)
---------- ------------- ------------- ------------- -------------
Surplus /(deficit)
in scheme (1,080) 96 (582) (264) 1,784
---------- ------------- ------------- ------------- -------------
Experience adjustment
on
scheme assets (984) 578 113 (3,937) 893
Experience adjustment
on
scheme liabilities (46) 387 18 (114) 464
========== ============= ============= ============= =============
11. AUDIT STATUS
The preliminary announcement has been prepared under the
historical cost convention, on a going concern basis and in
accordance with the recognition and measurement principles of
International Financial Reporting Standards and IFRIC
interpretations as adapted by the EU ("IFRS"), but this
announcement does not in itself contain sufficient information to
comply fully with IFRS.
The directors have considered the working capital requirements
of the group for a period of one year from the date of this
announcement and believe that the going concern basis is
appropriate due to the current cash balance and future
prospects.
The preliminary announcement has been prepared on the basis of
the same accounting policies as published in the audited financial
statements of the Group for the year ended 31 December 2010 and the
accounting policies adopted in the audited financial statements of
the Group for the period ended 31 March 2012.
Comparative figures for the year ended 31 December 2010 have
been extracted from the statutory financial statements for that
period which carried an unqualified audit report, did not include a
reference to any matters to which the auditor drew attention by way
of emphasis and did not contain a statement under section 498(2) or
498(3) of the Companies Act 2006.
The financial information in this announcement does not
constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006.
The audited statutory financial statements for the period ended
31 March 2012, which have not yet been delivered to The Registrar
of Companies, contain an unqualified audit report, do not include a
reference to any matters to which the auditor might draw attention
by way of emphasis and do not contain a statement under section
498(2) or 498(3) of the Companies Act 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR RTMATMBBMBFT
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