TIDMRGD
RNS Number : 6527L
Real Good Food PLC
29 April 2015
Real Good Food plc (AIM: RGD)
Proposed Sale of Napier Brown Sugar Limited
Real Good Food plc ("Real Good Food" or "the Company") is a
diversified food business, serving a number of market sectors
including retail, manufacturing, wholesale, foodservice and export.
The Company is a major distributor of sugar in the UK through its
Napier Brown subsidiary, and manufactures a wide range of baking
ingredients, jams and sweet bakery products. Its brands include
Whitworths Sugar, Renshaw and R&W Scott.
HIGHLIGHTS
-- Proposed sale of Napier Brown business for a total cash
payment of GBP34m plus working capital at Completion
-- Company expects Completion of the Sale will allow the Continuing Group to:
o move the Continuing Group into a net cash position (net debt
as at 30 September 2014 was GBP36.3m); and
o both create the resources for investment and enable these
resources to be focused on its remaining added-value businesses,
with particular emphasis on the attractive markets of cake
decoration, food ingredients and premium bakery.
-- General Meeting of Shareholders to approve the Sale on 14 May 2015
-- Irrevocable undertakings to vote in favour of the Resolution
(being proposed as an Ordinary Resolution) received from
Shareholders representing approximately 69% of the Company's
current issued share capital
Commenting on the proposed Sale, Pieter Totté, Executive
Chairman of Real Good Food, states:
"I am proud of what we have achieved in building the Napier
Brown business and expanding its customer base and developing its
supply chain. However, the changes taking place within the European
sugar market mean that the future of this business is best served
by it becoming part of an international production group. We
believe Tereos is the best choice for both customers and employees.
This transaction will allow us to focus all our resources on the
continued growth of our remaining businesses. I would like to thank
the staff and employees for their contribution over the years."
The Company is pleased to announce that on 29 April 2015 it
entered into a conditional agreement with Tereos Group ("Tereos" or
the "Buyer") pursuant to which the Buyer has agreed to acquire the
entire issued share capital of Napier Brown Sugar Limited ("Napier
Brown") from the Company (the "Sale" or "Disposal"). As
Consideration for the Sale, the Buyer will pay the Company GBP34m
plus working capital in cash on Completion of the Sale (further
details of the Consideration for the Sale are set out below).
Introduction
The Company's strategy for its sugar business has always been
heavily influenced by the regulatory framework of the EU Sugar
Regime. It was initially anticipated that the EU sugar beet
production quotas would end in 2020, however, the EU Commission has
decided to end quotas from 2017. This decision has profound
implications for the EU sugar industry. Napier Brown, as a
non-refining independent business of significant scale, is unique
within Europe and reflects the unusual market structure in the UK,
where British Sugar and Tate & Lyle are the only domestic sugar
producers. Tate & Lyle has been reducing its production and
accordingly the UK market has become increasingly in deficit and
reliant on imports.
Napier Brown has an important role in providing such imports to
the UK market but, in order to operate effectively, it needs to
ensure that cost-effective sources of sugar are available to it.
The Company believes that this requires the direct backing of a
powerful producer and therefore Napier Brown has been exploring
relationships with a number of sugar producers. It has become
increasingly clear that such producers, while attracted to Napier
Brown's UK route-to-market, desire full control of the business
rather than a strategic partnership. Consequently, the Company has
concluded that a full sale of Napier Brown is in the best interests
of the Company and Napier Brown. After exploring various options
for a sale of Napier Brown, the Company has concluded that a sale
to the Buyer represents the best value for Shareholders and
therefore has entered into the conditional Sale Agreement.
The Disposal, should it complete, would be deemed to be a
disposal resulting in a fundamental change of business pursuant to
Rule 15 of the AIM Rules and, as such, requires the prior approval
of Shareholders. Accordingly the Company is convening the EGM to
seek Shareholder approval for the Disposal in accordance with AIM
Rule 15.
Details of the Napier Brown Business
Napier Brown is Europe's largest non-refining sugar distributor.
It sources sugar from the UK as well as importing from mainland
Europe and the rest of the world. It supplies customers in the UK
across all market sectors: industrial, retail, wholesale and
foodservice. The business operates under two distinct brands:
Napier Brown and Whitworths Sugar. The Napier Brown brand serves
the food, drink and industrial sectors, as well as wholesale and
reseller clients. The brand currently has over 200 customers who
Napier Brown supplies with bulk (tankers) and/or bagged sugars.
Whitworths sugar is Napier Brown's consumer brand in the retail and
wholesale sectors. It supplies a complete range of 'everyday'
sugars and a range of premium sugars under the 'Whitworths for
Baking' sub-brand. Napier Brown operates from two sites, its
commercial and retail packing site in Normanton, West Yorkshire and
its sugar hub at Stallingborough, near Immingham, North
Lincolnshire.
Background and Reasons for the Sale
The Napier Brown Business has a long and successful history as a
major supplier in the UK sugar market, both to industrial and to
retail customers. However the decision by the EU Commission to end
beet production quotas in the EU from 2017 will have fundamental
implications for the industry. The Directors believe that in the
post-quotas era, Napier Brown's interests would be best served by
having a direct integration with a sugar producer. Napier Brown has
an important role in providing imports to the UK market, but in
order to operate effectively, it needs to ensure high quality, cost
effective and reliable sources of sugar. Accordingly, the Company
has concluded that the Sale to Tereos is in the best interests of
the Company and Napier Brown.
Principal terms of the Sale
Pursuant to the terms of the Sale Agreement, the Buyer has
agreed to acquire the entire issued share capital of Napier Brown
from the Company. The total consideration receivable by the Company
will be an amount for the Sale Share (adjusted by reference to the
Napier Brown Net Working Capital) and the repayment or discharge by
the Buyer of the Intercompany Account. The Buyer will pay GBP34m
plus net working capital at Completion. The Disposal is conditional
upon the passing of the Resolution by Shareholders at the EGM. The
Sale Agreement will terminate if this condition is not
satisfied.
Information on the Buyer
The Buyer is Tereos, the world's fifth-largest sugar group.
Tereos is specialised in processing sugar beet, sugar cane and
cereals. The Tereos Group also has leading positions in the markets
for alcohol and starch derivatives. Tereos has 42 industrial sites
and employs 24,000 people across four continents. In 2013-14, the
Tereos Group recorded 4.7 billion euros in revenues. A cooperative
group, Tereos unites 12,000 cooperative growers around a long-term
vision: adding value to agricultural raw materials and contributing
towards the supply of quality food.
The Company believes that Tereos is an ideal fit to support the
growth of the Napier Brown business. Tereos has recently announced
that it will increase its French sugar production by approximately
20 per cent. following the end of quotas from 2017 and is the
largest sugar producer in France.
Shareholder Approval
The Sale, should it complete, would be deemed to be a disposal
resulting in a fundamental change of business pursuant to Rule 15
of the AIM Rules and therefore requires the prior approval of
Shareholders. Consequently, the Resolution (which is an ordinary
resolution which to be approved requires at least 50 per cent. of
Shareholders voting to vote in favour) is being proposed at the
EGM. The Company has received undertakings to vote in favour of the
Resolution from Shareholders who hold or are interested in, in
aggregate 47,904,882 Shares, representing approximately 69 per
cent. of the Company's current issued share capital.
Circular and Notice of General Meeting
The Company today expects to send a circular (and accompanying
Notice of General Meeting) to Shareholders which contains full
details of the Sale (the "Circular"). The Circular will shortly be
available on the Company's website www.realgoodfoodplc.com and the
contents of the Circular are reproduced in full at the end of this
announcement.
Preliminary Results
The Company currently expects to announce its preliminary
results for the financial year ending 31 March 2015 in early July
2015.
Defined terms in this announcement not otherwise defined shall
have the same meaning as is ascribed to them in the Circular.
29 April 2015
ENQUIRIES:
Real Good Food plc
Pieter Totté, Chairman Tel: 020 3056 1516
Andrew Brown, Marketing Director Tel: 020 3056 1516
Mike McDonough, Finance Director Tel: 0151 706 8200
Shore Capital & Corporate Tel: 020 7408 4090
(Nomad and Joint Broker)
Stephane Auton
Patrick Castle
Daniel Stewart and Company Plc Tel: 020 7776 6550
(Joint Broker)
Martin Lampshire
Cubitt Consulting Tel: 020 7367 5100
Gareth David
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication of this document 29 April 2015
Last date and time for receipt of the Form of Proxy 11.00 a.m.
on 12 May 2015
EGM 11.00 a.m. on 14 May 2015
Anticipated date of Completion 15 May 2015
Notes:
1. References to times and dates in this document are to London
times and dates unless otherwise stated
2. If any of the above times and/or dates change, the revised
times and/or dates will be notified by announcement through the
Regulatory Information Service of the London Stock Exchange.
FORWARD-LOOKING STATEMENTS
This document includes statements that are, or may be deemed to
be, "forward-looking statements". These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms "believes", "estimates", "plans",
"anticipates", "targets", "aims", "continues", "projects",
"assumes", "expects", "intends", "may", "will", "would" or
"should", or in each case, their negative or other variations or
comparable terminology. These forward-looking statements include
all matters that are not historical facts.
They appear in a number of places throughout this document and
include statements regarding the Directors', the Company's and the
Group's intentions, beliefs or current expectations concerning,
among other things, the Group's results or operations, financial
condition, prospects, growth strategies and the industries in which
the Group operates. By their nature, forward-looking statements
involve risk and uncertainty because they relate to future events
and circumstances. A number of factors could cause actual results
and developments to differ materially from those expressed or
implied by the forward-looking statements, including without
limitation: conditions in the markets, the market position of the
Group, earnings, financial position, cash flows, return on capital,
anticipated investments and capital expenditures, changing business
or other market conditions and general economic conditions. These
and other factors could adversely affect the outcome and financial
effects of the plans and events described in this document.
Forward-looking statements contained in this document based on
past trends or activities should not be taken as a representation
that such trends or activities will continue in the future.
However, these forward-looking statements and other statements
contained in this document regarding matters that are not
historical facts involve predictions. No assurance can be given
that such future results will be achieved.
Except to the extent required by applicable law, the AIM Rules
for Companies or the Disclosure and Transparency Rules published by
the FCA, the Company disclaims any obligation or undertaking to
update any forward-looking statement contained in this document to
reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statement is based.
DIRECTORS, SECRETARY AND ADVISERS
Directors P W Totté (Executive Chairman)
M J McDonough (Group Finance Director)
P G Ridgwell (Non-Executive Deputy Chairman)
P C Salter (Non-Executive Director)
C O Thomas (Non-Executive Director)
J M d'Unienville (Non-Executive Director)
Group Company Secretary David Newman
Registered Office International House 1 St. Katharines Way London
E1W 1XB
Nominated Adviser Shore Capital and Corporate Limited 14 Clifford Street
London W1S 4JU
Broker Shore Capital Stockbrokers Limited 14 Clifford Street
London W1S 4JU
Joint Broker Daniel Stewart & Co Plc Becket House
36 Old Jewry London EC2R 8DD
Corporate Advisor Midicorp Corporate Finance Ltd Mayfair House
14-18 Heddon Street London
W1B 4DA
Solicitors to the Company Joelson Wilson LLP 30 Portland Place London
W1B 1LZ
Reporting Accountant to the Company
Crowe Clark Whitehill LLP St Bride's House
10 Salisbury Square London
EC4Y 8EH
Registrars Capita Asset Services The Registry
34 Beckenham Road Kent
BR3 4TU
DEFINITIONS
The following definitions apply throughout this document
(including the enclosed Notice of Meeting) and in the accompanying
Form of Proxy, unless the context requires otherwise:
"AIM" the AIM market operated by the London Stock Exchange;
"AIM Rules" the London Stock Exchange's rules and guidance notes
contained in its "AIM Rules for Companies" publication relating to
companies whose securities are traded on AIM as amended from time
to time;
"Buyer" Tereos Participations SAS (no 444 413 058) whose
registered office is at 11 rue Pasteur, 02390
Origny-Sainte-Benoite, France or another Tereos Group Company;
"Company" or "RGF" Real Good Food plc;
"Companies Act" the Companies Act 2006;
"Completion" completion of the Disposal pursuant to the terms of
the Sale Agreement;
"Completion Balance Sheet" the balance sheet of Napier Brown as
at Completion to be prepared
pursuant to the Sale Agreement;
"Consideration" the total consideration receivable by the
Company under the Sale Agreement being the Share Price and the
repayment or discharge by the Buyer of the Intercompany
Account;
"Continuing Group" the Company and its subsidiaries other than
Napier Brown;
"Directors" the directors of the Company from time to time;
"Disposal" "Sale" or "Transaction" the sale of the entire issued
share capital of Napier Brown by the
Company to the Buyer pursuant to the Sale Agreement;
"EGM" the extraordinary general meeting of the Company convened
to be held at International House, 1 St. Katharine's Way, London
E1W 1XB at 11.00 a.m. on 14 May 2015 and any adjournment thereof,
to consider and, if thought fit, pass the Resolution, notice of
which is set out at the end of this document;
"Form of Proxy" the form of proxy which accompanies this
document for use by Shareholders in connection with the General
Meeting;
"Group" the Company and its subsidiaries;
"IFRS" International Financial Reporting Standards as adopted by
the European Union;
"Intercompany Account" the amount owing by Napier Brown to the
Group at Completion;
"London Stock Exchange" London Stock Exchange plc;
"Napier Brown" Napier Brown Sugar Limited (No 9344403);
"Napier Brown Business" the business of the industrial and
retail distribution of sugar
previously carried on by Renshaw under the name "Napier Brown"
and as now carried on by Napier Brown;
"Napier Brown NWC" the net working capital of Napier Brown at Completion;
"NB Transfer" the transfer by Renshaw to Napier Brown of the
business and assets of Renshaw's Napier Brown trading division
further details of which are set out in Part 2;
"NB Transfer Agreement" the agreement dated 17 March 2015 made between Renshaw and
Napier Brown relating to the NB Transfer;
"Notice" or "Notice of EGM" the notice of EGM set out at the end of this document;
"Renshaw" Renshawnapier Limited (No. 1665672) a wholly-owned
subsidiary of the Company;
"Resolution" as set out in the Notice;
"Sale Agreement" the sale and purchase agreement dated 29 April
2015 entered into
between (1) the Company and the Buyer pursuant to which the
Company has conditionally agreed to sell Napier Brown to the
Buyer;
"Sale Share" the one ordinary share of GBP1 in the issued share
capital of Napier Brown to be sold by the Company to the Buyer
pursuant to the Sale Agreement;
"Shareholders" holders of Shares in the Company from time to time;
"Shares" or "RGF Shares" ordinary shares of 2 pence each in the
capital of the Company;
"Share Price" the consideration payable by the Buyer for the
Sale Share further details of which are set out in Part 2;
"subsidiary" or "subsidiary undertaking"
have the meanings given to them by the Companies Act;
"Tereos" the Buyer;
"Tereos Group" Tereos and its subsidiaries from time to time and
each of them being a Tereos Group Company
"GBP" Great British Pounds Sterling.
Part 1
Letter from the Chairman of Real Good Food plc
Real Good Food plc
(Incorporated in England and Wales under the Companies Acts 1985
to 1989 with registered number 4666282)
Directors: Registered office:
P W Totté (Executive Chairman) International House
M J McDonough (Group Finance Director) 1 St. Katharines Way P G
Ridgwell (Non-Executive Deputy Chairman) London
P C Salter (Non-Executive Director) England
C O Thomas (Non-Executive Director) E1W 1XB
J M d'Unienville (Non-Executive Director)
29 April 2015
Dear Shareholder
Proposed Sale of Napier Brown and
Notice of Extraordinary General Meeting
1. INTRODUCTION
The Company's strategy for its sugar business has always been
heavily influenced by the regulatory framework of the EU Sugar
Regime. It was initially anticipated that the EU sugar beet
production quotas would end in 2020, however, the EU Commission has
decided to end quotas from 2017. This decision has profound
implications for the EU sugar industry. Napier Brown, as a
non-refining independent business of significant scale, is unique
within Europe and reflects the unusual market structure in the UK
where British Sugar and Tate & Lyle are the only domestic sugar
producers. Tate & Lyle has been reducing its production and
accordingly the UK market has become increasingly in deficit and
reliant on imports.
Napier Brown has an important role in providing such imports to
the UK market but in order to operate effectively, it needs to
ensure that cost-effective sources of sugar are available to it.
The Company believes that this requires the direct backing of a
powerful producer and therefore Napier Brown has been exploring
relationships with a number of sugar producers. It has become
increasingly clear that such producers, while attracted to Napier
Brown's UK route-to-market, desire full control of the business
rather than a strategic partnership. Consequently, the Company has
concluded that a full sale of Napier Brown is in the best interests
of the Company and Napier Brown. After exploring various options
for a sale of Napier Brown, the Company has concluded that a sale
to the Buyer represents the best value for Shareholders and
therefore has entered into the conditional Sale Agreement. Further
information on the Buyer is set out in paragraph 5 of this Part
1.
The Sale, should it complete, would be deemed to be a disposal
resulting in a fundamental change of business pursuant to Rule 15
of the AIM Rules and as such requires the prior approval of
Shareholders. Accordingly, the Company is convening the EGM to seek
Shareholder approval for the Sale in accordance with AIM Rule 15.
The formal notice of the EGM is set out at the end of this document
and a Form of Proxy is also enclosed for you to complete and
return.
The purpose of this document is to provide you with details of
the Sale Agreement and the Resolution. The Board of Directors
consider that the Resolution is in the best interests of the
Company and its Shareholders as a whole and recommend that you vote
in favour of the Resolution.
2. DETAILS OF THE NAPIER BROWN BUSINESS
Napier Brown is Europe's largest non-refining sugar distributor.
It sources sugar from the UK as well as importing from mainland
Europe and the rest of the world. It supplies customers in the UK
across all market sectors: industrial, retail, wholesale and
foodservice. The business operates under two distinct brands:
Napier Brown and Whitworths Sugar. The Napier Brown brand serves
the food, drink and industrial sectors as well as wholesale and
reseller clients. The brand currently has over 200 customers who
Napier Brown supplies with bulk (tankers) and/or bagged sugars.
Whitworths sugar is Napier Brown's consumer brand in the retail and
wholesale sectors. It supplies a complete range of 'everyday'
sugars and a range of premium sugars under the 'Whitworths for
Baking' sub-brand. Napier Brown operates from two sites, its
commercial and retail packing site in Normanton, West Yorkshire and
its sugar hub at Stallingborough, near Immingham, North
Lincolnshire.
For the 15-month period ended 31 March 2012, the years ended 31
March 2013 and 31 March 2014 and the 6-month period ended 30
September 2014, the results of the Napier Brown Business were as
follows:
Audited
Unaudited Audited Audited 15-months
6 months ended Year ended Year ended ended 31
30 September 31 March 31 March March
2014 2014 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 83,108 172,089 167,754 189,406
Gross profit 5,042 14,126 18,186 19,450
(Loss)/profit after
tax (4,351) (2,364) 2,607 2,284
As at 30 September 2014, the Napier Brown Business had unaudited
gross assets of GBP46,763,000 and unaudited net assets of
GBP30,192,000, including goodwill of GBP12,000,000.
The financial information above has been extracted without
material adjustment from the consolidation schedules which support
the unaudited interim results for the Group for the 6-month period
ended 30 September 2014 and the audited financial statements of the
Group for the year ended 31 March 2014, the year ended 31 March
2013 and the 15-month period ended 31 March 2012. Further financial
information on Napier Brown is set out in Part 3 of this document
and Shareholders are advised to read the whole of this document and
not solely rely on the summary financial information above.
3. BACKGROUND AND REASONS FOR THE DISPOSAL
The Napier Brown Business has a long and successful history as a
major supplier in the UK sugar market, both to industrial and to
retail customers. However the decision by the EU Commission to end
beet production quotas in the EU from 2017 will have fundamental
implications for the industry. The Directors believe that in the
post-quotas era, Napier Brown's interests would be best served by
having a direct integration with a sugar producer. Napier Brown has
an important role in providing imports to the UK market, but in
order to operate effectively, it needs to ensure high quality, cost
effective and reliable sources of sugar. Accordingly, the Company
has concluded that the Disposal is in the best interests of the
Company and Napier Brown.
4. PRINCIPAL TERMS OF THE SALE
Pursuant to the terms of the Sale Agreement, the Buyer has
agreed to acquire the entire issued share capital of Napier Brown
from the Company. The total consideration receivable by the Company
will be an amount for the Sale Share (adjusted by reference to the
Napier Brown NWC) and the repayment or discharge by the Buyer of
the Intercompany Account. The Buyer will pay GBP34m plus net
working capital at Completion on account of its liabilities in this
respect. Further details of the Consideration are set out in Part
2.
The Disposal is conditional upon the passing of the Resolution
by Shareholders at the EGM. The Sale Agreement will terminate if
this condition is not satisfied.
The principal terms of the Sale Agreement are set out in more
detail in Part 2 of this document.
5. INFORMATION ON THE BUYER
The Buyer is Tereos, the world's fifth-largest sugar group.
Tereos is specialised in processing sugar beet, sugar cane and
cereals. The Tereos Group also has leading positions in the markets
for alcohol and starch derivatives. Tereos has 42 industrial sites
and employs 24,000 people across four continents. In 2013-14, the
Tereos Group recorded 4.7 billion euros in revenues. A cooperative
group, Tereos unites 12,000 cooperative growers around a long-term
vision: adding value to agricultural raw materials and contributing
towards the supply of quality food.
The Company believes that the Buyer is an ideal fit to support
the growth of the Napier Brown business. The Buyer has recently
announced that it will increase its French sugar production by
approximately 20 per cent. following the end of quotas from 2017
and is the largest sugar producer in France.
6. SHAREHOLDER APPROVAL
The Sale, should it complete, would be deemed to be a disposal
resulting in a fundamental change of business pursuant to Rule 15
of the AIM Rules and therefore requires the prior approval of
Shareholders. Consequently, the Resolution is being proposed at the
EGM.
7. CURRENT TRADING OF THE GROUP
The Group released a trading update on 1 April 2015. In the
trading update the Group made the following statement in relation
to its current trading:
"The well-publicised reductions in EU sugar market prices are
continuing to make trading difficult for both Napier Brown and
Garrett Ingredients. Following a very poor first half, Napier Brown
has returned to profit but, notwithstanding the improved trading in
the second half, has unfortunately remained behind expectations for
the year. The rest of the Group has performed strongly and ahead of
management expectations, with Renshaw and Haydens in particular
performing well. The Group has, in addition, incurred significant
one-off transaction costs as well as legal costs in relation to the
discussions with the UK and EU Competition Authorities.
Overall, as a result of the above, the Company expects reported
earnings, prior to any adjustments for one-off costs or
restructuring of the Group, to be significantly behind current
market expectations for the year ending 31 March 2015."
8. EFFECT OF THE DISPOSAL ON THE CONTINUING GROUP AND USE OF PROCEEDS
The financial effects of the Sale are set out in the unaudited
pro forma financial information on the Continuing Group at Part 4
of this document. The pro forma financial information has been
prepared to illustrate the effect of the Sale on the consolidated
net assets of the Continuing Group had the Sale occurred on 30
September 2014 and on the earnings of the Continuing Group had the
Sale occurred on 1 April 2013.
The Company expects that the Sale will enable the Continuing
Group to achieve the following:
-- move the Continuing Group into a net cash position (net debt
as at 30 September 2014 was GBP36.3m); and
-- both create the resources for investment and enable these
resources to be focused on its remaining added value businesses
with particular emphasis on the attractive markets of cake
decoration, food ingredients and premium bakery.
9. WORKING CAPITAL
The Directors are of the opinion that, taking into account the
net proceeds of the Disposal, the Continuing Group has sufficient
working capital for its present requirements that is for at least
12 months following the date of this document.
10. EGM
A formal notice convening the EGM is set out at the end of this
document. The EGM will be held at
11.00 a.m. on 14 May 2015 at International House, 1 St.
Katharine's Way, London E1W 1XB at which Shareholders will be asked
to consider and, if thought fit, approve the Resolution. The
Resolution will be proposed as an ordinary resolution and will give
power to the Company to effect the Disposal under the terms of the
Sale Agreement.
11. UNDERTAKINGS TO VOTE
The Company has received irrevocable undertakings to vote in
favour of the Resolution from certain Shareholders who hold, in
aggregate, 22,933,397 Shares, representing approximately 33.0 per
cent. of the Company's current issued share capital. The Company
has also received irrevocable undertakings to vote in favour of the
Resolution from Directors who hold, or are interested in, an
aggregate of 24,971,485 Shares, representing 35.9 per cent. of the
Company's current issued share capital. Therefore the Company has
received undertakings to vote in favour of the Resolution from
Shareholders who hold or are interested in, in aggregate
approximately 68.9 per cent of the Company's current issued share
capital.
12. ACTION TO BE TAKEN
A reply-paid Form of Proxy for use in connection with the EGM is
enclosed with this document. Whether or not you intend to be
present at the EGM, you are requested to complete, sign and return
the Form of Proxy in accordance with the instructions printed
thereon to the Company's registrars, Capita Asset Services, as soon
as possible and, in any event, not later than 11.00 a.m. on 12 May
2015. The completion and return of a Form of Proxy will not
preclude you from attending the EGM and voting in person should you
subsequently wish to do so.
13. CONSENTS
Shore Capital has given and has not withdrawn its written
consent to the inclusion of the references to its name in the form
and context in which it is included.
Crowe Clark Whitehill LLP has not withdrawn its written consent
to the inclusion of the references to its name in the form and
context in which it is included.
14. RECOMMENDATION
The Board of Directors consider that the Disposal is in the best
interests of the Company and its Shareholders as a whole.
Accordingly, the Board of Directors recommend that Shareholders
vote in favour of the Resolution.
Yours faithfully
Pieter Totté
Chairman
Part 2
Principal terms of the Sale
1. NAPIER BROWN
On 17th March 2015 certain of the business and assets of Renshaw
comprising its Napier Brown trading division were transferred to
Napier Brown together with the Company's freehold property at
Stallingborough which had been used by Renshaw in connection with
the Napier Brown Business. The consideration payable by Napier
Brown under the NB Transfer Agreement and the Stallingborough
property transfer were left outstanding as interest-free unsecured
intra-group loans repayable on demand.
Renshaw and Napier Brown gave mutual indemnities customary for
an agreement of the nature of the NB Transfer Agreement.
The NB Transfer is part of a wider group reorganisation whereby
various trading divisions of Renshaw are to be transferred to new
wholly-owned subsidiaries of the Company.
2. TERMS OF THE SALE AGREEMENT
The Disposal will be effected by the sale of the entire issued
share capital of Napier Brown by the Seller to the Buyer pursuant
to the terms of the Sale Agreement.
The principal terms of the Sale Agreement are as follows.
A. Amounts Receivable
The total amounts receivable by the Company under the Sale
Agreement will be the Share Price and the repayment or discharge by
the Buyer of the Intercompany Account. The Share Price will be an
amount equal to the aggregate of (i) GBP34,000,000 plus (ii) the
Napier Brown NWC less (iii) the Intercompany Account.
The amounts receivable will be satisfied by a cash payment on
Completion by the Buyer to the Company which will be subject to
adjustment following the agreement or determination of the
Completion Balance Sheet and apportioned between the Share Price
and the repayment or discharge of the Intercompany Account.
No later than 30 days after Completion the Company will prepare
a completion balance sheet of Napier Brown as at Completion and
deliver it to the auditors of the Company for review together with
(inter alia) a statement of the Napier Brown NWC. After that review
has been completed the Company will deliver the Completion Balance
Sheet and related documents to the Buyer for review and agreement
or determination.
B. Condition Precedent to Completion
Completion is conditional on the passing of the Resolution by
Shareholders.
C. Warranties and Indemnities
The Company has given certain warranties and indemnities which
are customary for an agreement of this nature.
D. Limitations of liability
Generally the aggregate liability of the Company for breaches of
the warranties and indemnities in the Sale Agreement will not
exceed GBP10m and related tax covenant will not exceed the purchase
price. Claims in respect of the warranties given in the Sale
Agreement must be brought within 18 months after Completion.
E. Undertakings
The Company has undertaken that the business of Napier Brown
will continue to trade in the ordinary course of business until
Completion. The Company has also given non-compete undertakings (on
behalf of itself and the Group) regarding the business carried on
by Napier Brown and non-solicitation undertakings regarding the
employees of Napier Brown in each case for a period of 3 years from
Completion. The Sale Agreement includes exceptions allowing the
Group to continue to operate its retained businesses in the
ordinary course. These undertakings are customary for a transaction
of this nature.
F. Tax covenant
Pursuant to the tax covenant (the "Tax Covenant") contained in
the Sale Agreement, the Company has agreed to be responsible for
certain pre-Completion tax liabilities of Napier Brown and to pay
to the Buyer an amount equal to any such liabilities and reasonable
out of pocket expenses. It is customary for purchasers on
transactions of this nature to request that the sellers provide
such a tax covenant. Claims under the Tax Covenant must be brought
within 7 years of Completion.
G. Ancillary Agreements
Under the Sale Agreement the Company is to enter into an
agreement with Napier Brown whereby the Company will provide (or
procure the provision of) certain transitional services to Napier
Brown for a period following Completion.
In addition under the Sale Agreement the Company is to enter
into an agreement with Napier Brown whereby the Company grants
Napier Brown the right to supply the Group's annual sugar product
requirements for a period of 5 years following Completion on
certain terms and conditions.
H. Governing law
The Sale Agreement is governed by English law.
Part 3
Financial information relating to the Napier Brown Business
1. Nature of financial information
The following unaudited financial information relating to the
Napier Brown Business has been prepared under IFRS. The unaudited
financial information has been extracted, without material
adjustment, from the consolidation schedules used in preparing the
audited consolidated financial statements of the Group for the
15-month period ended 31 March 2012, each of the years ended 31
March 2013 and 31 March 2014 and from the consolidation schedules
used in preparing the unaudited consolidated interim financial
information of the Group for the 6-month period ended 30 September
2014.
The extracted financial information relating to the Napier Brown
Business has not been audited and has not been reported on by an
accountant.
The unaudited financial information contained in this Part 3
does not constitute statutory accounts within the meaning of
section 434 of the Companies Act 2006. The consolidated statutory
accounts for the Group in respect of the financial periods ended 31
March 2012, 31 March 2013 and 31 March 2014 have been delivered to
the Registrar of Companies. The auditors' reports in respect of the
consolidated statutory accounts for the Group for each of these
three financial periods were unqualified and did not contain
statements under section 498(2) or (3) of the Companies Act
2006.
Shareholders should read the whole of this document and not rely
solely on the summarised unaudited financial information contained
in this Part 3.
2. Income statements for the Napier Brown Business
Set out below are the unaudited income statements for the Napier
Brown Business for the 15-month period ended 31 March 2012, each of
the years ended 31 March 2013 and 31 March 2014 and the
6-month period ended 30 September 2014:
6 months Year Year 15 months ended ended Ended ended
30 September 31 March 31 March 31 March
2014 2014 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
External revenue 77,842 162,333 157,156 176,885
Intercompany revenue 5,266 9,756 10,598 12,521
-------- -------- -------- --------
Total revenue 83,108 172,089 167,754 189,406
Cost of sales (78,066) (157,963) (149,568) (169,956)
-------- -------- -------- --------
Gross profit 5,042 14,126 18,186 19,450
Distribution costs (5,709) (9,543) (7,783) (8,319)
Administration expenses (3,765) (6,607) (6,050) (7,428)
-------- -------- -------- --------
Operating (loss)/profit (4,432) (2,024) 4,353 3,703
Finance costs (402) (1,046) (810) (943)
-------- -------- -------- --------
(Loss)/profit before tax (4,834) (3,070) 3,543 2,760
Taxation 483 706 (936) (476)
-------- -------- -------- --------
(Loss)/profit for the financial period
attributable to owners of the parent (4,351) (2,364) 2,607
2,284
-------- -------- -------- --------
3. Statement of net assets for the Napier Brown Business
Set out below is the unaudited statement of the net assets of
the Napier Brown Business as at 30 September 2014:
Assets
As at 30 September 2014
GBP'000
Goodwill 12,000
Other intangible assets 405
Property, plant and equipment 8,378
Deferred tax assets 273
--------
Non-current assets 21,056
Inventory 7,060
Trade and other receivables 18,463
Other financial assets 181
--------
Current assets 25,704
--------
Total assets 46,760
--------
Liabilities
Trade and other payables (15,909)
Other financial liabilities (183)
--------
Current liabilities (16,092)
Trade and other payables (200)
Deferred tax liabilities (276)
--------
Non-current liabilities (476)
--------
Total liabilities (16,568)
--------
Net assets
30,192
--------
Part 4(A)
Unaudited pro forma financial information relating to the
Continuing Group
Set out below is an unaudited pro forma statement of the net
assets of the Continuing Group as at 30 September 2014, together
with an unaudited pro forma statement of earnings of the Continuing
Group for the 6-month period ended 30 September 2014 and the year
ended 31 March 2014 (together the "Pro Forma Financial
Information"). The Pro Forma Financial Information has been
prepared on the basis set out in the notes below to illustrate the
effect of the Sale on the consolidated net assets of the Continuing
Group had the Sale occurred on 30 September 2014 and on the
earnings of the Continuing Group had the Sale occurred on 1 April
2013. It has been prepared for illustrative purposes only. Because
of its nature, the Pro Forma Financial Information addresses a
hypothetical situation and, therefore, does not represent the
Continuing Group's actual financial position or results. It is
based on the consolidation schedules used in preparing the audited
consolidated balance sheet and income statements of the Group and
the unaudited financial information of the Napier Brown Business as
at 30 September 2014, the 6-month period ended 30 September 2014
and the year ended 31 March 2014, which in the case of the Napier
Brown Business is reproduced in Part 3 of this document.
Shareholders should read the whole of this document and not rely
solely on the summarised financial information contained in this
Part 4(A) of this document.
The report on the unaudited pro forma statements of net assets
and earnings is set out in Part 4(B) of this document.
1. Unaudited pro forma statement of the net assets the Continuing Group
Pro forma
Assets
Group net net assets
assets as at Less of the 30 September assets of Disposal
Continuing 2014 Napier Brown adjustments Group
(Note 1) (Note 2) (Note 3) (Note 5)
GBP'000 GBP'000 GBP'000 GBP'000
Goodwill 75,796 (12,000) - 63,796
Intangibles 931 (405) - 526
Property, plant and equipment 21,726 (8,378) - 13,348
Deferred tax assets 2,064 (273) (358) 1,433
------- ------- ------- -------
Non-current assets 100,517 (21,056) (358) 79,103
Inventory 17,629 (7,060) - 10,569
Trade and other receivables 35,510 (18,463) - 17,047 Current tax
assets 412 - - 412
Other financial assets 181 (181) - -
Cash and cash equivalents 4,433 - 23,713 28,146
------- ------- ------- -------
Current assets 58,165 (25,704) 23,713 56,174
------- ------- ------- -------
Total assets 158,682 (46,760) 23,355 135,277
------- ------- ------- -------
Liabilities
Borrowings (33,295) - 16,471 (16,824)
Trade and other payables (28,781) 15,909 - (12,872)
Other financial liabilities (181) 183 - 2
------- ------- ------- -------
Current liabilities (62,257) 16,092 16,471 (29,694)
Borrowings (7,455) - 2,430 (5,025)
Trade and other payables (183) 200 - 17
Deferred tax liabilities (2,720) 276 273 (2,171) Retirement
benefit obligations (4,659) - - (4,659)
------- ------- ------- -------
Non-current liabilities (15,017) 476 2,703 (11,838)
------- ------- ------- -------
Total liabilities (77,274) 16,568 19,174 (41,532)
------- ------- ------- -------
Net assets 81,408 (30,192) 42,529 93,745
------- ------- ------- -------
2. Unaudited pro forma statement of earnings for the Continuing
Group for the 6-month period ended 30 September 2014
Pro forma
Less earnings
Napier for the
Group Brown Intercompany Continuing earnings earnings
adjustments Group
(Note 1) (Note 2) (Note 4) (Note 5)
GBP'000 GBP'000 GBP'000 GBP'000
External revenue 128,666 (77,842) - 50,824
Intercompany revenue - (5,266) 5,266 -
------- ------- ------- -------
Total revenue 128,666 (83,108) 5,266 50,824
Cost of sales (114,545) 78,066 (5,266) (41,745)
------- ------- ------- -------
Gross profit 14,121 (5,042) - 9,079
Distribution costs (8,066) 5,709 - (2,357)
Administration expenses (10,394) 3,765 - (6,629)
------- ------- ------- -------
Operating (loss)/profit (4,339) 4,432 - 93
Finance costs (723) 402 - (321)
Other finance costs (155) - - (155)
------- ------- ------- -------
Loss before tax (5,217) 4,834 - (383)
------- ------- ------- -------
Taxation 506 (483) - 23
------- ------- ------- -------
Loss for the financial period attributable
to owners of the parent (4,711) 4,351 - (360)
------- ------- ------- -------
3. Unaudited pro forma statement of earnings for the Continuing
Group for the year ended 31 March 2014
Pro forma
Less earnings
Napier for the
Group Brown Intercompany Continuing earnings earnings adjustments
Group (Note 1) (Note 2) (Note 4) (Note 5) GBP'000
GBP'000 GBP'000 GBP'000
External revenue 272,576 (162,333) - 110,243
Intercompany revenue - (9,756) 9,756 -
------- ------- ------- -------
Total revenue 272,576 (172,089) 9,756 110,243
Cost of sales (239,187) 157,963 (9,756) (90,980)
------- ------- ------- -------
Gross profit 33,389 (14,126) - 19,263
Distribution costs (13,828) 9,543 - (4,285)
Administration expenses (18,892) 6,607 - (12,285)
------- ------- ------- -------
Operating profit 669 2,024 - 2,693
Finance costs (1,602) 1,046 - (556) Other finance costs (59) - -
(59)
------- ------- ------- -------
(Loss)/profit before tax (992) 3,070 - 2,078
Taxation 758 (706) - 52
------- ------- ------- -------
(Loss)/profit for the financial year
attributable to owners of the parent (234) 2,364 - 2,130
------- ------- ------- -------
Notes:
1) The financial information relating to the Group has been
extracted, without material adjustment, from the audited financial
statements of the Group as at 31 March 2014 and the unaudited
interim results for the 6-month period ended 30 September 2014.
2) The unaudited financial information relating to the Napier
Brown Business has been extracted, without material adjustment,
from the unaudited financial information of the Napier Brown
Business as set out in Part 3 of this document. To the extent that
the adjustments to the Group earnings relate to the Sale, these
adjustments will have a continuing impact on the consolidated
profit and loss of the Continuing Group.
3) The Company has agreed to sell Napier Brown for a
consideration GBP34,000,000 on a cash and debt free basis, plus a
payment equal to the net working capital at completion. The
Disposal adjustments comprise of the following:
-- receipt of cash proceeds of GBP34,000,000;
-- receipt of the net working capital proceeds of GBP9,614,000,
being the net book value of inventories, trade and other
receivables, and trade and other payables, as at 30 September
2014;
-- payment of transaction expenses relating to the Disposal of GBP1,000,000; and
-- repayment of the Napier Brown related borrowings, being
GBP18,901,000 as at 30 September 2014.
4) The intercompany adjustments reflect the following:
-- the removal of revenues made from sugar sales by the Napier
Brown Business to the Continuing Group;
-- the increase in cost of sales to reflect equivalent sugar
purchases from 3rd party suppliers; and
-- the removal of deferred tax assets and liabilities arising on
the consolidation of Napier Brown.
5) The unaudited pro forma statements of net assets and earnings
do not reflect any changes in the trading positions of either the
Continuing Group or the Napier Brown Business or any other changes
arising from other transactions, other than those outlined in the
above notes, since 30 September 2014.
6) The borrowings removed as adjustments in Note 3 were the
unaudited interim balances as at 30 September 2014.
Part 4(B)
Report on the unaudited pro forma financial information relating
to the Continuing Group
The Directors
Real Good Food plc International House 1 St. Katharine's Way
London E1W 1XB
The Directors
Shore Capital and Corporate Limited Bond Street House
14 Clifford Street London W1S 4JU
29 April 2015
Dear Sirs,
Introduction
We report on the unaudited pro-forma financial information
relating to Real Good Food plc (the "Company") and its subsidiaries
other than Napier Brown (the "Continuing Group") as at 30 September
2014 and the results for each of the 6-month period ended 30
September 2014 and the year ended 31 March 2014 (together the
"Pro-Forma Financial Information") set out in Part 4(A) "Pro Forma
Financial Information Relating to Napier Brown" of the Company's
shareholders' circular (the "Shareholders' Circular") dated 29
April 2015, which has been prepared on the basis described, for
illustrative purposes only, to provide information about how the
disposal of Napier Brown might have affected the net assets and
earnings presented on the basis of the accounting policies adopted
by the Company in preparing the unaudited interim financial
information for the 6-month period ended 30 September 2014 and the
audited financial information for the year ended 31 March 2014.
Responsibilities
It is the responsibility of the directors of the Company (the
"Directors") to prepare the Pro-Forma Financial Information in
accordance.
It is our responsibility to form an opinion as to the proper
compilation of the Pro-Forma Financial Information and to report
that opinion to you.
In providing this opinion we are not updating or refreshing any
reports or opinions previously made by us on any financial
information used in the compilation of the Pro-Forma Financial
Information, nor do we accept responsibility for such reports or
opinions beyond that owed to those to whom those reports or
opinions were addressed by us at the dates of their issue.
Basis of opinion
We conducted our work in accordance with Standards of Investment
Reporting 4000 as issued by the Auditing Practices Board in the
United Kingdom. The work that we performed for the purpose of
making this report, which involved no independent examination of
any of the underlying financial information, consisted primarily of
comparing the unadjusted financial information with the source
documents, considering the evidence supporting the adjustments and
discussing the Pro-Forma Financial Information with the
Directors.
We planned and performed our work so as to obtain all the
information and explanations which we considered necessary in order
to provide us with reasonable assurance that the Pro-Forma
Financial Information has been properly compiled on the basis
stated and that such basis is consistent with the accounting
policies of the Company.
Our work has not been carried out in accordance with auditing or
other standards and practices generally accepted in jurisdictions
outside the United Kingdom and accordingly should not be relied
upon as if it had been carried out in accordance with those
standards and practices.
Opinion
In our opinion:
-- the Pro-Forma Financial Information has been properly complied on the basis stated; and
-- that such basis is consistent with the accounting policies of the Company.
Declaration
We are responsible for this report as part of the Shareholders'
Circular and declare that we have taken all reasonable care to
ensure that the information contained in this report is, to the
best of our knowledge, in accordance with the facts and contains no
omission likely to affect its import. This declaration is included
in the Shareholders' Circular.
Yours faithfully,
Crowe Clark Whitehill LLP
Chartered Accountant
This information is provided by RNS
The company news service from the London Stock Exchange
END
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