TIDMRGD
RNS Number : 2200J
Real Good Food PLC
18 December 2020
Real Good Food plc
("RGF" or "the Group")
Final Results for the Year Ended 31 March 2020
Real Good Food plc
Annual Report and Accounts
For the year ended 31 March 2020
Overview
Financial highlights
-- Revenue from continuing businesses increased by 8.1% from GBP61.6 million to
GBP66.6 million.
-- During a period of transition, the Group delivered an adjusted EBITDA*
on continuing businesses of GBP3.3 million against GBP1.9
million in the prior year.
-- Following disposals in the prior year, the two remaining
divisions, Cake Decoration and Food Ingredients are profitable
(before impairment, depreciation, amortisation and significant
items) and generated an adjusted EBITDA* of GBP6.8 million before
central costs.
-- Central costs have reduced by GBP0.4 million from GBP3.9 million to GBP3.5 million.
-- Goodwill has been impaired this year by GBP12.6 million
(2019: GBP18.7million), to reflect the value today of the
continuing businesses; covid-19 impact has been reflected in the
impairment.
-- Net debt stood at GBP45.4 million (2019: GBP35.7 million),
being predominantly shareholder loans, of which GBP12.3 million is
in the form of convertible loan notes. The loan interest in the
year is GBP5.0m, of which GBP0.5m has been paid.
Operational highlights
-- The Group now constitutes two main divisions, Cake Decoration
(trading under the brand names of Renshaw and Rainbow Dust Colours)
and Food Ingredients (trading as Brighter Foods). Brighter Foods
has made significant progress in earnings and revenue since March
2019 outperforming the Board's expectations. Meanwhile, Cake
Decorations is still in the last phases of turnaround,
demonstrating an ability to win new business from a streamlined
cost base.
-- Overall, the underlying adjusted EBITDA on continuing
activities of the Group improved by GBP1.4 million, from GBP1.9
million to GBP3.3 million due to the headway gains in Brighter
Foods and lower central costs more than offsetting the lower (short
term) profits in Cake Decorations.
-- Brighter Foods yielded significant benefits during the year
to 31 March 2020. Revenue increased by GBP10.1 million (66%) to
GBP25.3 million and operating profit more than doubled to GBP2.9
million during the year. More importantly this growth continued
despite the set-back of covid-19 at the start of the current
year.
-- Cake Decoration had come under pressure owing to the UK
declining market for sugar paste (-14.7%) and marzipan (-2.1%)(1) .
However, Renshaw's sales outperformed the underlying market
decline. Frostings are a growing market, and the business is well
placed in this segment following recent investment. Renshaw also
signed a new exclusive distribution agreement with Decopac, the
largest distributor of cake supplies in the US to assist in growing
their share of the US market.
Current Trading
-- The impact of covid-19 was seen in the first quarter, as many
customers felt the impact of lockdown. However, with lockdown
restrictions easing, trading has improved in both divisions with
quarter 3 (October 2020 to December 2020) sales in line with FY20
and in-line with Board expectations.
-- Within Cake Decorations, where the operating structure has
been significantly improved, the focus is on strengthening customer
relationships, enhancing customer service and growing sales through
new product launches and category expansion. There have been new
client wins since the year end both in the Retail and B2B markets;
overseas markets have recovered well. Since the start of the
financial year, the business has successfully launched over 40 new
products which generated over GBP2 million of sales on an
annualised basis.
-- Brighter Foods, after the initial impact of the lockdown, has
continued to grow its earnings from a wider customer base than this
time last year. Q3 earnings are on target to be ahead of FY20.
-- The Board is reviewing all initiatives to improve the capital structure of the Group.
1. Kantar data to Dec 19
Mike Holt, Executive Chairman commented:
"A lot has happened since March. Clearly, covid-19 has impacted
financial performance in the current year, and the near-term
outlook continues to hold challenges due to the pandemic. However,
both businesses are getting stronger and more resilient. In
particular, Brighter Foods continues to grow and has further
strengthened its reputation for innovation and responsiveness. For
the Group as a whole, Brexit ought to be more positive than
negative.
The Board is committed to reducing the Company's debt burden and
normalising its capital structure as soon as possible."
Enquiries:
Real Good Food plc Tel: 0151 541 3790
Mike Holt, Executive Chairman
Maribeth Keeling, Chief Finance Officer
finnCap Limited (Nomad and Broker) Tel: 020 7220 0500
Carl Holmes / James Thompson (Corporate
Finance)
MHP Communications (Financial PR) Tel: 020 3128 8100
Reg Hoare / Katie Hunt rgf@mhpc.com
About Real Good Food
Real Good Food plc is a food manufacturing business serving several
market sectors including retail (own label and private label),
manufacturing and export. The Company has two businesses, Cake
Decoration (Renshaw and Rainbow Dust Colours) and Food Ingredients
(Brighter Foods), with leading brands in their chosen markets.
Chairman's Statement
Overview
I am pleased to report that Real Good Food has continued to make
further progress in its journey of rebuilding shareholder value,
with ongoing support from its principal investors.
The Group has faced a number of challenges. JF Renshaw, the main
component of the Cake Decorations business unit, sells into mature
markets with increasing competition, particularly within the retail
sector, and operates out of an aged site in Liverpool with a higher
than sector average wage bill. Despite this a re-vitalised
management team led by Steve Moon is making good progress with
tangible improvements being delivered in relation to customer
service, product quality and product innovation. Some cost
improvements have been achieved but more is needed to generate
acceptable returns whilst remaining competitive. In summary, the
Cake Decoration business is now more customer focused and is
beginning to recreate and leverage the value of the Renshaw brand,
albeit the progression is steady rather than transformational at
this stage. Progress is being accelerated. For the year to 31 March
2020, results were impacted by declining sugar paste demand, but
the business unit managed to make a modest profit at adjusted
EBITDA level. Clearly, as noted in our AGM trading update on 23
September 2020, revenues and profits have been impacted by covid-19
during the current year due to the restrictions on social
gatherings impacting the UK Wholesale market but progress is
continuing to be made to make this business less dependent on the
maturing sugar paste and marzipan markets through product
innovation; new product launches having been made with Tesco,
Waitrose and Marks & Spencer.
In contrast, recent investments to increase the production
capacity of Brighter Foods yielded significant benefits during the
year to 31 March 2020. Revenue increased by GBP10.1 million (66%)
to GBP25.3m and profits more than doubled to GBP2.9 million during
the year. More importantly this growth has continued despite the
set-back of covid-19 at the start of the current year. The business
has continued to gain traction with several new blue-chip customers
leveraging its reputation and ability to introduce top quality new
products quickly and effectively.
We have made an impairment charge of GBP12.6m in respect of the
carrying value of Cake Decoration given lower profits in the year,
the impact of covid-19 and improvement challenges at the Liverpool
site. However, it is our belief that further impairments can be
avoided given the current initiatives within JF Renshaw and the
opportunity and need to accelerate progress.
Overall, the underlying adjusted EBITDA on continuing activities
of the Group improved by GBP1.4 million, from GBP1.9 million to
GBP3.3 million (see note 3) due to the headway gains in Brighter
Foods and lower central costs more than offsetting the lower
(short-term) profits in Cake Decorations. A lot of work is underway
to build on this upward momentum.
The level of total indebtedness remains a matter of concern, net
debt having risen from GBP35.7 million to GBP45.4 million largely
as a result of the accrued redemption premium on investor loans and
convertible loan notes which totalled GBP5.0 million. I am pleased
to report that an agreement has been reached with the investors to
extend the repayment date of these loans from 17 May 2021 to 19 May
2022 with no change to the interest rate payable on the loans. The
convertible loan notes (CLNs) will reduce from 30% per annum to 12%
per annum effective from 31 December 2020. The Independent
Directors believe this to be appropriate given limited alternative
forms of funding and finance at the present time.
Dividend
As with previous years, the Board is not recommending the
payment of a dividend for the year. The focus is on investing in
the growth of Brighter Foods and the turnaround of Cake Decoration
in order to deliver the best possible returns for shareholders.
Board changes
There have been significant changes in the composition of the
Board since April of last year. Anthony Ridgwell joined the Board
in May 2019 as a Non-Executive Director replacing his father, Pat
Ridgwell. Steve Dawson stepped down as a Non-Executive Director in
August 2019, due to executive commitments elsewhere, and was
replaced by Gail Lumsden who joined the Board in October 2019.
After leading the divestment of a number of non-core businesses,
Hugh Cawley stepped down from his role as Chief Executive Officer
in September 2019. From October 2019, Paul Richardson served as a
part-time Executive Director with responsibilities for Corporate
Affairs and Governance until stepping down in March 2020 to pursue
a full-time position in another company. I became Non-Executive
Chairman in June 2019 after Pat Ridgwell stepped down. Following
Paul Richardson's move, I effectively became Executive Chairman,
and this was confirmed by the Board last month. The Managing
Directors of the two business units report to me and are
responsible for the delivery and execution of their respective
business unit strategies.
Following these changes, the Board is now stable and, in my
opinion, more aligned, effective, and focused on sorting things out
to rebuild shareholder value and simplify the capital structure. I
am also keen to engage with minority shareholders to ensure their
voices are heard and that, notwithstanding the unusual composition
of the Board, that the right decisions are made for all
stakeholders.
Corporate Governance
The Board is very mindful of the issues and problems in relation
to corporate governance during the period 2016 to early 2018 and is
fully aligned with the importance of sound corporate governance.
The Group is governed through the Board and its Committees, namely
Audit Committee and the Remuneration Committee. Further details of
the work carried out by these committees is in the Reports on pages
23 and 25.
Strategy
The Group's strategy is set out in more detail later in the
Strategic Review, but, in summary, the Group has two autonomous
business units which are leaders in their chosen markets and have
the potential to deliver better quality profits and net cash
inflows for the Group. Management actions have been taken within
Cake Decoration to continue to work with customers on innovation
and to build long term customer relationships, improving
operational efficiencies further and growing sales in the UK and
internationally. Food Ingredients has successfully scaled up its
production capacity and will continue to broaden its customer base
and seek profitable ways to grow its business further.
Outlook
We are fully committed to improving the Group's financial
performance, reducing its debt burden, and normalising its capital
structure. The Board is actively pursuing a range of options to
restructure the Group and simplify its capital structure. Clearly,
covid-19 has impacted financial performance, and some options, but
both businesses have been reasonably resilient, albeit aided by the
Government's Job Retention Scheme. The uncertainties of covid-19
remain, but they are expected to ease during 2021. Brexit ought to
be more positive than negative for the Group as a whole.
Finally, I would like to thank our employees who have worked
hard to overcome various challenges, during the covid-19 crisis, to
ensure that products and customer service continued (and continue)
to be delivered.
Strategic Review
2019/20 performance
Overall revenue from continuing businesses increased from
GBP61.6 million to GBP66.6 million, with an increase of GBP10.1
million (66%) within Food Ingredients and Cake Decoration's sales
being down by GBP5.2 million (11%). The increase within Food
Ingredients reflects the increase in capacity from an additional
production line installed during the year and sales to a new
blue-chip customer gained in January 2020. Although Cake
Decorations outperformed the sector, market demand for marzipan and
sugar paste declined during the year. The delay in the launch of
frostings also impacted FY20. However, with the new plant in
Liverpool now fully operational, we will see the benefit of this
growing market in FY21. The increase in sales by Food Ingredients
was the main driver for the step-change in profitability, buoyed by
improved operational efficiencies particularly in relation to waste
levels; underlying adjusted EBITDA for Food Ingredients increased
from GBP2.8 million to GBP5.0 million. In Cake Decoration,
underlying adjusted EBITDA decreased from GBP3.0 million in 2019 to
GBP1.8 million in 2020, owing to the reduced sales partly offset by
the lower overhead costs; savings in overhead costs were GBP0.9
million.
Over the last two accounting periods, significant costs (both
cash costs and non-cash costs) have been recognised in the
turnaround of the Cake Decoration business; restructuring costs
necessary to align overheads, for example, losses on disposal of
non-core businesses and impairment charges where future forecast
profitability could not sustain the value of goodwill recognised
some years ago. There are a number of initiatives ongoing within
the Cake Decorations business to make it stronger and more
profitable. There are also a range of other options being evaluated
to enhance returns from this business. The onset of the covid-19
crisis, forcing many countries into lockdown, impacted sales and
profitability during the final quarter of FY20, and has continued
throughout FY21. There will be further costs incurred in FY21
within the Cake Decorations business to ensure the infrastructure
and operational facilities are able to deliver the sales growth and
improved profitability that the Board believe is achievable.
The Group's central resources have been pared back and
opportunities are continually sought to reduce these further,
consistent with good governance. The Group retains higher levels of
shareholder debt than is ideal, the coupon on which was determined
in less profitable times. This interest burden, almost all of which
is rolled-up, will remain for the foreseeable future.
31 March 31 March
2020 2019
GBP'000s GBP'000s
Loss before taxation of continuing
businesses (20,147) (26,090)
----------------------------------- --------- ---------
Depreciation of property, plant,
and equipment 2,375 1,573
Impairment charge 12,909 18,675
Amortisation of intangibles 1,538 1,454
Significant items 1,031 1,717
Finance costs 5,432 4,406
Other finance costs 169 166
----------------------------------- --------- ---------
EBITDA (adjusted) Profit 3,307 1,901
----------------------------------- --------- ---------
Capital structure
The Group manages the capital structure and reviews the
requirements in response to economic conditions.
During the course of the financial year, the Group secured a
total credit facility of GBP8.87 million from Leumi ABL Limited,
enabling RGF to repay certain debt facilities provided by the
Company's three major shareholders, NB. Ingredients Limited,
Omnicane International Investors Limited, and certain funds managed
by Downing LLP. The facilities consisted of a GBP5.45m revolving
credit facility, a GBP1.3m term loan both on 60 months ending
August 2024, and a GBP2.12m plant and machinery facility on 36
months ending August 2022.
The maximum draw down value during FY20 occurred in September
2019, being GBP2.0m. This was used to build stock for the Christmas
sales in Cake Decorations. The lowest month was August 2019, when
no draw down was required, as there was a credit balance in the
revolving credit facility of GBP0.4m.
The Board recognises that the Group's level of debt is higher
than expected for a business like Real Good Food. However, given
its business model, the presence of bank debt within the Group was
restricted to asset-backed finance held by J F Renshaw and its
revolving credit facility. As at 31 March 2020 there was no bank
overdraft. At the same time, the Group's balance sheet retains a
significant tangible asset base, goodwill that has been written
down to realistic levels, and has net assets significantly in
excess of the Group's current stock market capitalisation. This is
an important measure in establishing the Group's financial worth in
the future.
Operating performance and outlook
Having agreed budgets for the year, these quickly became
obsolete before the start of FY21 owing to covid-19. The business
set a new budget taking into account the impact of the lockdown in
the UK and worldwide. The revised budget reduced sales by c.GBP9m
from the original budget, as a result of our customer's clients
having to close during lockdown. Brighter Foods' largest customer
was required to close as part of the lockdown.
Both businesses being food manufacturers have remained open
during the lockdown period. However, sales have been lower than
would normally be the case. In common with other companies, RGF is
reviewing all options to mitigate the impact of the reduced sales.
Both businesses have taken advantage of the government job
retention scheme and have deferred the repayment of the VAT to
conserve cash. We prepare the business forecast on varying levels
of revenues and have modelled the effect of these to ensure
appropriate action can be taken if required. So far, the
performance of each of the businesses is aligned with the Board's
expectations and central costs are as expected. The Cake Decoration
market in the UK, particularly in the retail sector, is proving
increasingly competitive, but we are confident that we can leverage
experience and expertise to deliver what our customers need and
want. The Food Ingredients division's growth plans are
well-established, with a focus on innovative bars that exceed
customer expectations. The
future for both businesses is positive. However, the recovery
from covid-19 is impacting the Group for the FY21 financial year.
The Group is working to ensure that both divisions have a strong
sustainable base to capitalise on opportunities that may arise from
the current situation. There are also the uncertainties of Brexit
and we are mindful that both businesses serve Europe with the Cake
Decoration business having a European operation which may be
impacted and Brighter Foods having key customers in Europe. The
Group is preparing for Brexit as best it can given the uncertainty
around the government negotiations for a trade deal with
Europe.
After another challenging year in the period to 31 March 2020,
the Board wishes to thank all the Group's and businesses'
stakeholders for their understanding and continued support.
Although covid-19 will impact FY21, the expectation is that the
Group sales performance in quarter 4 FY21 will be in line with pre
Covid 19 sales; this is dependent on no further lockdown measures
being imposed.
Group strategy
The Board's strategy is to have two profitable cash generative
businesses. The turnaround plan in Cake Decorations continues to
build on the work undertaken last year and setting a refreshed and
invigorated strategy for the business. There have been some key
changes in the Cake Decoration business following an in-depth
review to identify functions that would be better carried out by a
specialist provider. Consequently, a decision was taken to
outsource warehousing and distribution to a first-class third-party
provider and as a result the business is already seeing the
improvements in customer service. The business has also
strengthened its senior team in New Product Development (NPD) and
Marketing to drive greater focus on innovation and sales growth.
The strategy for the Food Ingredients division continues to be
focused on delivering great products for our customers, as
evidenced by the significant growth in that business. The
investment in a new production plant of GBP3.2 million has resulted
in an increase in sales of GBP10.1m this year.
The Group central resources have reduced significantly. Central
resources are now limited to functions that relate to finance and
general management.
Summary and Outlook
We believe we now have the leadership, the senior management,
and the resources capable of delivering a further uplift in
performance from both businesses, and a substantially lower central
cost base that is more fit for purpose. The Board is also actively
evaluating a range of options, for both businesses, to maximise
shareholder returns.
The lockdowns since late March 2020 in the UK and elsewhere have
had a significant impact on our sales in FY21. The businesses have
continued to operate and work with customers to deliver products.
The Group sales are ahead of the covid-19 budget prepared in March
and we continue to see sales returning to pre covid-19 times.
However, with the possibility of new lockdown restrictions, this is
under constant review. The Board have taken actions to conserve
cash and have also used the government furlough scheme. The Group
remains focused on continuing to improve its performance, reduce
net debt and thereby increase shareholder value and returns.
The Board is grateful for the continued support of all
stakeholders who have shown confidence in the Group during the past
year and will make every effort to retain the positive momentum
which is now clearly evident in the underlying businesses. The
Board is confident in the future prospects for the Group as a
whole.
Divisional Business Review
Real Good Food
Cake Decoration
2019/20 Performance
In a transitional year, the result for Cake Decoration was
disappointing with an adjusted EBITDA lower than the previous year.
This was driven by a slower than expected completion of the
investment in the soft icing plant which went into production in
quarter three. This production line gives additional, large scale,
manufacturing capability for frostings and other soft icing
products which are becoming increasingly popular due to their ease
of use for the novice baker and decorator.
UK sales came under pressure owing to the declining market for
sugarpaste (-14.7%) and marzipan (-2.1%)(1) . Although Renshaw's
sales outperformed the underlying market decline, there were
reduced sales in the Retail and Wholesale sectors. The
manufacturing sector, although slightly behind, was showing a
growing momentum in the final quarter. The International market
decline was owing to one customer who reduced volumes in FY20 owing
to uncertainty with Brexit. Sales to the US are down year on year
owing to a change in stocking policy with a major customer.
In line with the company strategy, an agreement was signed in
October 19 with Decopac, the largest distributor of cake supplies
in the US, for the sole distribution rights for the US market. The
Board understand that the agreement implies significant sales
targets in what we consider an important market for Renshaw in the
future.
During the year, changes have been made to the Senior Management
structure as well as strengthening the Marketing function to ensure
the customer is at the heart of the business. Although there remain
further opportunities for improvement, Renshaw remains a strong
brand in the sector.
Further work and efforts will continue throughout FY21 to
enhance products, develop new products which delight our customers
and streamline our sales and operational processes.
Forward plans
The business continues a growth strategy focused on increased
supply of everyday convenience products under its own and
customers' brands. The investment in the soft icings plant will
benefit from the growing frostings market which is expected to grow
by c5%(1) . Export growth is focused on North America where the
company has identified the greatest potential to grow sales.
Following the successful closure of the Brussels warehouse in FY19
and fulfilling European sales from the UK, the closure of the US
based warehouse will be undertaken in FY21 with sales being shipped
directly from the factory in Liverpool to the US. The business
continues to implement organisational changes that will result in a
more streamlined business which is focused on growth opportunities,
efficiency savings and an improvement in overall performance.
Covid-19
As a food manufacturer, the business has remained open during
the lockdown period. Our priority is the safety of our staff whilst
supplying our customers with the highest quality product. All
required changes to meet covid-19 requirements have been carried
out at the sites.
The impact in FY20 has been limited with a reduction in sales in
the final few weeks of FY20, across all sectors. Some specialist
retailers closed, and the major retailers were focussed on getting
core commodities into the stores whilst the Wholesale Sector saw
many of their own clients having to close. An updated forecast has
been prepared in light of the lockdown restrictions. The business
is currently operating in line with this forecast.
2020 2019
12 months to March GBP'm GBP'm
Revenue 41.2 46.4
EBITDA (adjusted)* 1.8 3.0
Impairment charge (12.6) (18.7)
Operating (loss) (13.4) (17.3)
Operating (loss)% (32.5%) (37.3%)
------------------- ------- -------
1. Kantar data to Dec 19
*See note 3 for reconciliation
Real Good Food
Food Ingredients
2019/20 Performance
Brighter Foods creates, develops, and manufactures snack bars
for the healthy snacking market from its factories in Tywyn,
Gwynedd in mid Wales. Brighter Foods is a multi-award-winning
company which produces snacks which are targeted at areas such as
diet control, gluten free, lactose free, low or no added sugar,
sports nutrition, organic and fair trade and its manufacturing
capabilities, even before recent expansion, are highly regarded
throughout the industry. As well as manufacturing partner-branded
products, Brighter Foods has its own healthier brands such as Wild
Trail, which is stocked in retailers and health food stores.
Brighter Foods itself also saw significant change in growing its
sales by 66% in the year ended 31 March 2020 owing to the new B3
plant that started production in March 2019. The investment of
GBP3.2 million to increase the capacity resulted in an increase in
sales of cGBP10 million. There were some challenges during the
early period of production that had a negative impact on
the EBITDA of cGBP0.5 million owing to levels of excess waste,
however the waste is
now in line with expectations. The new equipment gave Brighter
Foods the capacity to bring on board a new blue-chip customer in
January 2020.
Forward plans
Following the covid-19 government lockdown, some of the areas
that Brighter Food customers trade in have been impacted, such as
the travel industry and the 'food on the go' culture. This has
resulted in new product launches being delayed until later in the
year, this will impact sales in FY21, however the customers will
remain, albeit with lower sales owing to covid-19 impact in the
first quarter. The business is known for its innovation and this is
continuing in FY21.
Once the lockdown position is eased in Wales, Brighter Foods is
well-positioned as it is in the health and wellness market, to
continue the growth in revenue which has characterised every other
year of the business since its formation in 2014.
Covid-19
As a food manufacturer, the business has remained open during
the lockdown period. Our priority is the safety of our staff whilst
supplying our customers with the highest quality product. The
business has made the required changes to comply with all covid-19
restrictions. The impact in FY20 has been minimal owing to the
communications with customers and production planning, however
there will be an impact on sales in FY21. The business has used the
government furlough scheme to offset the lower sales and retain
staff. A new forecast was prepared following the covid-19 impact,
and the business is currently ahead of the plan.
12 months to 2020 2019
March GBP'm GBP'm
Revenue 25.3 15.2
EBITDA (adjusted)* 5.0 2.8
Operating profit 2.9 1.2
Operating profit
% 11.5% 7.8%
------------------- ------ ------
*See note 3 for reconciliation
Finance Review
Revenue
Group revenue of the continuing businesses for the 12 months
ending 31 March 2020 is GBP66.6 million (2019: GBP61.6 million), an
increase of 8.1% on the revenue to
31 March 2019. This results from an increase in Brighter Foods
of GBP10.1m (66%) and a decline in Cake Decoration of GBP5.2m
(11%). The decrease in Cake Decoration is a result of the declining
market in sugarpaste and marzipan, and the delay in the production
of frostings that is a growing market in the cake decorations
business. The Brighter Foods increase was driven from securing a
new Blue-Chip customer in January 2020 and sales were generated in
the final quarter of the financial year as well as organic growth
from existing customers.
Profit measure on operations
Gross profit on the continuing businesses for the overall Group
was GBP27.0 million (2019: GBP18.0 million). At 35.4%, the
delivered margin in the year, was significantly above the prior
year of 23.7%, strongly indicative of the improved quality of
earnings for the Group as a whole. Delivered margin is defined as
gross profit less costs of delivery.
The operating loss in the year of GBP14.5 million is reported
after an impairment charge on goodwill of GBP12.6 million,
depreciation and amortisation charge of GBP3.9 million and
significant costs of GBP1.0 million.
The EBITDA for the Group is a loss of GBP10.6m. The adjusted
EBITDA is the underlying continuing business profitability of
GBP3.3m.
The two items that are adjusted for are :
Impairment charge: GBP12.9m
Significant Items: GBP1.0m
The significant costs incurred relate to the Cake Decoration
business and are predominantly for redundancy costs as part of the
turnaround. The number of indirect employees reduced year on year
is 17 across the business.
The impairment charge is against JF Renshaw. The Board, having
considered the trading expectations, are happy that the recoverable
amount would support the revised value in the accounts.
After finance costs of GBP5.6 million, this resulted in a loss
before tax for the year of GBP20.1 million (2019: loss of GBP26.1
million) for continuing businesses. This equates to a basic loss
per share of 19.22 pence on continuing operations (28.64 pence in
2019), (see note 9).
Cash flow and net debt
Conserving cash is a key measure for the Group. Covid-19 of
course heightened the focus with the UK lockdown in March 2020. The
business modelling includes looking at varying levels of revenues
and the effect of movements on cash planning to ensure appropriate
action can be taken if required.
As part of the cash planning, the Group increased the current
revolving credit facility by GBP2m, this was completed in August
2020.
The Group board increased the meetings to a weekly call in the
immediate term, moving to bi-weekly after the initial lockdown
ended. The main purpose was to review cash and trading for the
following months.
The Group has used the Government furlough scheme, (GBP1.3m),
deferred VAT (GBP1.0m) and PAYE payments (GBP0.9m) to conserve cash
during the lockdown period. Repayments of the VAT and PAYE are
being made in line with the government 'time to pay' plan.
Shares issued in the year and additional loans to 31 March 2020
amounted to GBP35k. The net debt at the end of FY20 stood at
GBP45.4m versus GBP35.7m in FY19, this is predominantly shareholder
loans of which GBP12.3m is in the form of convertible loan
notes.
The Group extended the revolving credit facility in the early
part of FY21 to include Brighter Foods debtors and the US debtor in
response to covid-19.
12 months 2020 2019
to March GBP'000s GBP'000s
Revenue 66,576 61,560
Gross profit 26,981 18,027
Delivered
margin 23,542 14,612
Delivered
margin % 35.4% 23.7%
EBITDA (adjusted)* 3,307 1,901
Operating
(loss) before
impairment
and significant
items (590) (1,126)
Operating
loss after
impairment
and significant
items (14,530) (21,518)
Operating
loss % (21.8%) (35.0%)
Loss before
tax (20,147) (26,090)
------------------- --------- ---------
All figures refer to continuing businesses.
*See note 3 for reconciliation
Going Concern and Post Balance Sheet Events
The Directors have considered the Group's business activities
together with the factors likely to affect its planned future
performance including covid-19 and Brexit and are taking
appropriate action. RGF has a robust crisis management plan that is
being implemented, including taking action to mitigate risks and
conserve cash.
The sectors we serve have and will continue to be impacted
whilst the country is in a state of lockdown, particularly the
wholesale market and 'food on the go'. The Board consider the
revised covid-19 budget to be reasonable and these assumptions have
been projected and shared with the Group's auditors.
The forecasts agreed with the businesses have been adjusted for
the covid-19 impact. The Board reviewed the sensitivity of the
sales and have modelled the effects of these, whilst reviewing all
the measures to have a sustainable business model post covid-19.
RGF is using all options to mitigate the impact of reduced sales,
including the job retention programme and has furloughed staff at
both businesses.
The Directors considered the following scenarios:
Scenario 1: Reduction in revenue of 12% and
Scenario 2: Reduction in EBITDA of 35%
In both stressed scenarios the Group has sufficient liquidity
headroom until August 2021, when cash becomes tighter coinciding
with the stock build for Christmas and the expected PUT option
payment.
The Group has various levers that it can use to mitigate the
shortfall including:
Additional asset backed funding
Cessation of non-essential spend
The Group will take action as appropriate, should sales not be
in line with expectations.
The banking covenants in place being positive 3 month rolling
EBITDA and positive tangible net worth are not breached on the
stressed scenarios referred to above.
In June 20, the Directors approved the increase in funding with
ABL Leumi, increasing the facility by GBP2m. This was a result of
covid-19 to ensure that the Group had adequate facilities in place
should the lockdown last longer than expected.
The principal shareholders of the Group have shown considerable
support for the working capital requirements and as a result have
extended the repayment period of the current loans from 17 May 2021
to 19 May 2022.
A further deed of amendment was entered into with the Brighter
Foods minority shareholders to amend the terms of the Put option.
The Board of RGF believe that the Deed is in the best interest of
all stakeholders as it reduces the immediate cash outflow of the
Group and aligns the interests of the Minority Shareholders (who
form part of the core management team of Brighter Foods) with RGF
in improving earnings and ultimately maximising the value of the
business to RGF.
Having carefully considered the liquidity of the Group and
Company in line with the current strategy and future performance,
the Directors have a reasonable expectation that the Company and
the Group have adequate resources to continue in operational
existence for the next 12 months and therefore continue to adopt
the going concern basis in preparing the consolidated financial
statements.
New Standards
New standards and amendments which are effective from 1 January
2019 and have been adopted within the Group's accounting policies
are:
IFRS 16 Leases (effective for periods beginning after 1 January
2019) replacing IAS 17 Leases and IFRIC 4 determining whether an
arrangement contains a Lease. The Group has adopted IFRS 16
applying the modified retrospective method with no changes to the
comparative accounting periods.
Amendments to IFRS 9 Prepayment Features with negative
Compensation (effective 1 January 2019); and
Amendments to IAS 28: Long term interests in Associates and
Joint ventures (effective 1 January 2019).
Pension Scheme
The Group offers a defined contribution scheme for all current
employees that is funded on a monthly basis. In addition, the
Company operates a defined benefit scheme that was closed to new
members in 2000. The defined benefit scheme is the Napier Brown
Retirement Pension Plan (the Plan). The IAS 19 pension scheme
valuation reported a gross deficit at 31 March 2020 of GBP7.9
million (2019: restated to GBP7.4 million). The Plan assets
decreased by
GBP0.1 million to GBP13.7 million (2019: GBP13.8 million) and
the Plan liabilities are
GBP20.8 million compared to GBP21.2 million at 31 March
2019.
Dividend
The Directors, considering the Group's performance and cash
resources, do not recommend the payment of a final dividend for the
year ended 31 March 2020 (2019: nil).
Consolidated Statement of Comprehensive Income
Year ended 31 March 2020
12 months 12 months
ended ended
31 March 31 March
2020 2019
Notes GBP'000s GBP'000s
Revenue 2,3 66,576 61,560
Cost of sales (39,595) (43,533)
----------------------------------------------------- ----- --------- ---------
Gross profit 26,981 18,027
Distribution expenses (3,439) (3,415)
Administrative expenses (24,132) (15,738)
----------------------------------------------------- ----- --------- ---------
Operating (loss) before impairment and significant
items (590) (1,126)
Impairment charge on goodwill (12,622) (18,675)
Impairment charge on tangible fixed assets (287) -
Significant items 4 (1,031) (1,717)
----------------------------------------------------- ----- --------- ---------
Operating loss after impairment and significant
costs 5 (14,530) (21,518)
Finance costs 6 (5,448) (4,406)
Other finance costs 7 (169) (166)
----------------------------------------------------- ----- --------- ---------
Loss before tax (20,147) (26,090)
Income tax credit 1,692 349
----------------------------------------------------- ----- --------- ---------
Loss from continuing operations (18,455) (25,741)
Loss from discontinued operations - (6,243)
----------------------------------------------------- ----- --------- ---------
Net loss (18,455) (31,984)
----------------------------------------------------- ----- --------- ---------
Attributable to:
Owners of the parent (19,121) (32,321)
Non-controlling interests 666 337
----------------------------------------------------- ----- --------- ---------
Net loss (18,455) (31,984)
Items that will or may be reclassified to profit
or loss
Foreign exchange differences on translation of
subsidiaries (106) (32)
Items that will not be reclassified to profit or
loss
Actuarial (losses)/gains on defined benefit plan 11 (1,097) 441
Tax relating to items which will not be reclassified 215 (75)
----------------------------------------------------- ----- --------- ---------
Other comprehensive (loss)/gain (988) 334
----------------------------------------------------- ----- --------- ---------
Total comprehensive (loss) for the year (19,443) (31,650)
----------------------------------------------------- ----- --------- ---------
Attributable to:
Owners of the parent (20,109) (31,987)
Non-controlling interests 666 337
----------------------------------------------------- ----- --------- ---------
Total comprehensive (loss) for the year (19,443) (31,650)
----------------------------------------------------- ----- --------- ---------
12 months 12 months
ended ended
31 March 31 March
2020 2019
Notes GBP'000s GBP'000s
Basic and diluted loss per share - continuing operations 9 (19.22)p (28.64)p
Basic and diluted loss per share - discontinued
operations 9 nil (6.85)p
--------------------------------------------------------- ----- --------- ---------
The notes on pages 37 to 73 form part of these financial
statements.
Consolidated Statement of Changes in Equity
Year ended 31 March 2020
Foreign
Issued Share Share Exchange
Share Premium Other Option Translation Retained Non-Controlling Total
Capital Account Reserve Reserve Reserve Earnings Total Interest Equity
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Total
comprehensive
(loss)/gain
for
the year 1,569 2,720 (4,796) 310 13 55,741 55,557 1,803 57,360
Loss for the
year - - - - - (32,321) (32,321) 337 (31,984)
Other
comprehensive
(loss)/gain
for
the year - - - - (32) 366 334 - 334
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Total
comprehensive
(loss)/gain
for
the year - - - - (32) (31,955) (31,987) 337 (31,650)
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Transactions
with
owners of the
Group,
recognised
directly in
equity
Shares issued
in the year 418 566 - - - - 984 - 984
Share based
payments - - - (38) - - (38) - (38)
Deferred tax
on
share-based
payments - - - (34) - - (34) - (34)
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Total
contributions
by and
distributions
to owners of
the Group 418 566 - (72) - - 912 - 912
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Balance as at
31
March 2019 1,987 3,286 (4,796) 238 (19) 23,786 24,482 2,140 26,622
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Total
comprehensive
(loss)/gain
for
the year
Loss for the
year - - - - - (19,121) (19,121) 666 (18,455)
Other
comprehensive
(loss)/gain
for
the year - - - - (106) (882) (988) - (988)
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Total
comprehensive
(loss)/gain
for
the year - - - - (106) (20,003) (20,109) 666 (19,443)
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Transactions
with
owners of the
Group,
recognised
directly
in equity
Shares issued
in
the year 4 8 - - - - 12 - 12
Share based
payments - - - (35) - - (35) - (35)
Deferred tax
on
share-based
payments - - - - - - - - -
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Total
contributions
by and
distributions
to owners of
the Group 4 8 - (35) - - (23) - (23)
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Balance as at
31
March 2020 1,991 3,294 (4,796) 203 (125) 3,783 4,350 2,806 7,156
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Consolidated Statement of Financial Position
Year ended 31 March 2020
31 March 31 March
2020 2019
Notes GBP'000s GBP'000s
NON-CURRENT ASSETS
Goodwill 37,753 50,375
Other intangible assets 61 1,599
Tangible fixed assets 16,199 16,578
Investments 81 81
Deferred tax asset 1,508 1,259
---------------------------------------------- ----- --------- ---------
55,602 69,892
---------------------------------------------- ----- --------- ---------
CURRENT ASSETS
Inventories 6,823 6,840
Trade and other receivables 10,232 8,614
Current tax assets 182 52
Cash collateral 8 215 2,000
Cash and cash equivalents 1,363 2,909
---------------------------------------------- ----- --------- ---------
18,815 20,415
---------------------------------------------- ----- --------- ---------
Assets classed as held for sale 1,148 148
---------------------------------------------- ----- --------- ---------
TOTAL ASSETS 75,565 90,455
---------------------------------------------- ----- --------- ---------
CURRENT LIABILITIES
Trade and other payables 9,097 10,629
Borrowings 10 2,717 668
Lease liabilities 10 390 -
NCI put option 2,900 -
---------------------------------------------- ----- --------- ---------
15,104 11,297
---------------------------------------------- ----- --------- ---------
NON-CURRENT LIABILITIES
Borrowings 10 43,059 37,961
Lease liabilities 10 567 -
Long-term liabilities - NCI put option 1,520 4,997
Derivative liability - Convertible loan notes - 294
Deferred tax liabilities 223 1,881
Retirement benefit obligation 11 7,936 7,403
---------------------------------------------- ----- --------- ---------
53,305 52,536
---------------------------------------------- ----- --------- ---------
TOTAL LIABILITIES 68,409 63,833
---------------------------------------------- ----- --------- ---------
NET ASSETS 7,156 26,622
---------------------------------------------- ----- --------- ---------
EQUITY
Share capital 1,991 1,987
Share premium account 3,294 3,286
Other reserve (4,796) (4,796)
Share option reserve 203 238
Foreign exchange translation reserve (125) (19)
Retained earnings 3,783 23,786
---------------------------------------------- ----- --------- ---------
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT 4,350 24,482
Non-controlling Interest 2,806 2,140
---------------------------------------------- ----- --------- ---------
TOTAL EQUITY 7,156 26,622
---------------------------------------------- ----- --------- ---------
Consolidated Cash Flow Statement
Year ended 31 March 2020
31 March 31 March
2020 2019
Notes GBP'000s GBP'000s
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss) before taxation (20,147) (32,333)
Finance and other finance costs 6,7 5,617 4,572
FX movement (115) (98)
Goodwill Impairment charge 12,622 18,675
Impairment charge fixed asset 287 -
Share based payment expense (35) (38)
Loss on discontinued business - 5,202
Loss on disposal of intangible assets - 123
Loss on disposal of property, plant, and equipment - 135
Past service cost on pension 11 16 106
Fair value of derivative liability (294) 294
Fair value of NCI put option (577) 201
Depreciation of property, plant, and equipment 2,375 2,656
Amortisation of intangibles 1,538 1,464
----------------------------------------------------- ----- --------- -------------
Operating Cash Flow 1,287 959
Decrease in inventories 17 186
(Increase)/decrease in receivables (2,327) 613
Pension contributions 11 (733) (347)
Decrease in cash collateral 1,785 -
Increase/(decrease) in payables 1,279 (3,511)
----------------------------------------------------- ----- --------- -------------
Cash From/(used in) operations 1,308 (2,100)
Income taxes received/(paid) 52 (68)
Interest paid (189) (493)
Interest on finance leases (27) -
----------------------------------------------------- ----- --------- -------------
Net cash inflow/(outflow) from operating activities 1,144 (2,661)
----------------------------------------------------- ----- --------- -------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of intangible assets - (10)
Purchase of property, plant, and equipment (1,819) (4,474)
Disposal of discontinued business, net of cash
disposed of 550 16,669
Payment of deferred consideration - (4,520)
----------------------------------------------------- ----- --------- -------------
Net cash (outflow)/inflow from investing activities (1,269) 7,665
----------------------------------------------------- ----- --------- -------------
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in year 4 984
Repayment of borrowings 10 (504) (1,750)
Inflow of term loans 10 3,420 -
Repayment of other loans 10 (1,636) -
(Repayment)/inflow of investor loans 10 (4,519) 856
Inflow of funds from convertible loan notes 10 - 8,545
Drawdowns on revolving credit facilities 28,261 57,266
Repayments on revolving credit facilities (26,409) (65,935)
Capital repayments on finance leases - (4,783)
----------------------------------------------------- ----- --------- -------------
Net cash (outflow) from financing activities (1,383) (4,817)
----------------------------------------------------- ----- --------- -------------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,508) 187
----------------------------------------------------- ----- --------- -------------
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period 2,909 2,731
Effects of currency translations on cash and cash
equivalents (38) (10)
Net movement in cash and cash equivalents (1,508) 188
----------------------------------------------------- ----- --------- -------------
Cash and cash equivalents at end of period 1,363 2,909
----------------------------------------------------- ----- --------- -------------
Notes to the Financial Information
Year ended 31 March 2020
1. Presentation of financial information
General information
Real Good Food plc is a public limited company incorporated in
England and Wales under the Companies Act (registered number
04666282). The Company is domiciled in England and Wales and its
registered address is 61 Stephenson Way, Wavertree, Liverpool L13
1HN. The Company's shares are traded on the Alternative Investment
Market (AIM).
Basis of preparation
The consolidated financial information is presented on the basis
of International Financial Reporting Standards (IFRS) as adopted by
the European Union and has been prepared in accordance with AIM
rules and the Companies Act 2006, as applicable to companies
reporting under IFRS.
The financial information set out in this preliminary statement
does not constitute the Group's statutory accounts for the years
ended 31 March 2020 or 2019. Statutory accounts for 2019 have been
delivered to the Registrar of Companies, and those for 2020 will be
delivered in due course. The auditor has reported on those
accounts; their report was (i) qualified - due to Covid-19
restrictions the auditor was not able to observe the counting of
physical inventories at the end of the year for inventories held by
Brighter Foods Limited, a subsidiary and significant component of
Real Good Food plc, due to restrictions in the attendance of
external visitors at company and third-party premises, specifically
as a result of Covid-19. They were, unable to satisfy themselves by
alternative means concerning the inventory quantities held by that
component at 31 March 2020, which are included in the consolidated
statement of financial position at GBP2,574,000. They were
therefore unable to determine whether any adjustment to this amount
was necessary, or what the impact of any such adjustment would be
on the consolidated statement of comprehensive income, consolidated
statement of changes in equity, consolidated statement of financial
position or consolidated cash flow statement. (ii) did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006. The accounts are prepared on a going concern basis.
These results were approved by the Board of Directors on 18
December 2020.
Discontinued operations
A discontinued operation is a component of the Group's business
that represents a separate major line of business or geographical
area of operation that has been disposed of or is held for sale, or
is a subsidiary acquired exclusively with a view to resale.
Classification of a discontinued operation occurs upon disposal or
when the operation meets the criteria to be classified as held for
sale, if earlier. When an operation is classified as a discontinued
operation, the comparative income statement is presented as if the
operation had discontinued from the start of the comparative
period.
During the twelve months to 31 March 2020, the Group did not
dispose of any major lines or businesses. At 31 March 2020, some
remaining assets in relation to the disposed businesses are classed
as held for sale.
IFRS standards and interpretations adopted
New standards and amendments which are effective from 1 January
2019, and have been adopted within the Group's accounting
policies are:
-- IFRS 16 Leases (effective for periods beginning after 1
January 2019) replacing IFRS 17 Leases and IFRIC 4 determining
whether an arrangement contains a Lease.
-- Amendments to IFRS 9 Prepayment Features with Negative
Compensation (effective 1 January 2019); and
-- Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures (effective 1 January 2019).
The Group has adopted IFRS 16 applying the modified
retrospective method with no changes to the comparative accounting
periods. There was no impact on opening reserves.
The Group has applied the following transitional provisions for
leases which were previously classified as operating leases:
-- Lease liabilities have been measured at the present value of
the remaining lease payments on transition, discounted at a
weighted average incremental borrowing rate of 4.41%; and
-- Right of use assets have been measured at an amount equal to
the lease liability at the transition date.
-- Because the adoption of IFRS16 leases has increased EBITDA,
it has had the effect of reducing the loss per share by 0.52p and
the diluted loss per share by 0.17p.
The Group has applied the following recognition exemptions and
practical expedients:
-- Contracts have not been reassessed in relation to whether
they are or contain a lease at the date of initial application;
-- Initial direct costs have been excluded from the measurement
of the right of use asset at the date of initial application;
-- Leases which are short term or low value have not been
accounted for according to IFRS 16, and instead lease payments have
been expensed on a straight-line basis over the lease term;
-- Leases for which the lease term ends within 12 months of
initial application have not been accounted for according to IFRS
16, and instead lease payments have been expensed on a
straight-line basis over the lease term;
-- Single discount rates are used for portfolios of leases with
reasonably similar characteristics; and
-- Hindsight has been used in the determination of the lease
term where options to extend or terminate the lease exist.
Further detail in relation to the leases accounting policy under
IFRS 16 has been included in note 2.
The adoption of the amendments to IFRS 9 and IAS 28 have not had
an impact on the financial statements of the Group.
The Group does not expect any standards issued by the IASB, but
not yet effective, to have a material impact on the Group.
2. Revenue
The revenue for the Group for the current year arose from the
sale of goods in the following areas:
Cake Decoration GBP41.2 Manufactures, sells, and supplies cake decorating
million products and ingredients for the baking sector.
(2019 GBP46.4m)
------------------------ -------------------------------------------------
Food Ingredients GBP25.3 Manufactures and supplies a range of snack bars
million to the retail sector.
(2019 GBP15.2m)
------------------------ -------------------------------------------------
3. Segment reporting
Business segments
The divisional structure reflects the management teams in place
and ensures all aspects of trading activity have the specific focus
they need in order to achieve our growth plans.
The Group operates in two main divisions: Cake Decoration and
Food Ingredients. The Head Office functions of Finance, Technical
and Information Services provide support to the divisions in
varying scale.
Head Office
Cake and non-trading Continuing Discontinued Total
12 months ended 31 March Decoration Food Ingredients subsidiaries Operations Operations Group
2020 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Total revenue 48,621 25,333 - 73,954 - 73,954
Intercompany sales (7,378) - - (7,378) - (7,378)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
External revenue 41,243 25,333 - 66,576 - 66,576
Cost of sales (23,615) (15,980) - (39,595) - (39,595)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Gross profit 17,628 9,353 - 26,981 - 26,981
Distribution expenses (2,995) (444) - (3,439) - (3,439)
Administrative expenses (14,353) (5,974) (3,805) (24,132) - (24,132)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Operating profit/(loss)
before impairment and
significant items 280 2,935 (3,805) (590) - (590)
Significant items (1,081) (9) 59 (1,031) - (1,031)
Impairment charge (12,622) - (287) (12,909) - (12,909)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Operating (loss)/profit
after impairment and
significant items (13,423) 2,926 (4,033) (14,530) - (14,530)
Finance costs (198) (3) (5,247) (5,448 -- (5,448)
Other finance costs - - (169) (169) - (169)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
(Loss)/profit before
tax (13,621) 2,923 (9,449) (20,147) - (20,147)
Income tax credit/(expense) - - 1,692 1,692 - 1,692
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
(Loss)/profit after
tax as per comprehensive
statement of income (13,621) 2,923 (7,757) (18,455) - (18,455)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Head Office
Cake and non-trading Continuing Discontinued Total
12 months ended 31 March Decoration Food Ingredients subsidiaries Operations Operations Group
2019 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Total revenue 56,340 15,151 - 71,491 26,365 97,856
Intercompany sales (9,931) - - (9,931) (346) (10,277)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
External revenue 46,409 15,151 - 61,560 26,019 87,579
Cost of sales (31,716) (11,585) (232) (43,533) (21,615) (65,148)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Gross profit/(loss) 14,693 3,566 (232) 18,027 4,404 22,431
Distribution expenses (3,074) (341) - (3,415) (1,227) (4,642)
Administrative expenses (9,662) (1,998) (4,078) (15,738) (9,267) (25,005)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Operating profit/(loss)
before impairment and
significant items 1,957 1,227 (4,310) (1,126) (6,090) (7,216)
Significant items (589) (42) (1,086) (1,717) (46) (1,763)
Impairment charge (18,675) - - (18,675) - (18,675)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Operating (loss)/profit
after impairment and
significant items (17,307) 1,185 (5,396) (21,518) (6,316) (27,654)
Finance costs (141) - (4,265) (4,406) (107) (4,513)
Other finance costs - - (166) (166) - (166)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
(Loss)/profit before
tax (17,448) 1,185 (9,827) (26,090) (6,243) (32,333)
Income tax credit/(expense) 18 (122) 453 349 - 349
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
(Loss)/profit after
tax as per comprehensive
statement of income (17,430) 1,063 (9,374) (25,741) (6,243) (31,984)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Geographical segments
The Group earns revenue from countries outside the United
Kingdom, as shown below:
Food
Cake Decoration Ingredients
12 months ended 31 March 2019 GBP'000s GBP'000s
UK 30,276 15,149
Europe 6,201 2
USA 8,643 -
Rest of World 1,289 -
------------------------------ --------------- ------------
Total 46,409 15,151
------------------------------ --------------- ------------
The Group has two customers which constitute over 10% of
revenue: one providing 22% of revenue, and the other 13%.
Food
Cake Decoration Ingredients
12 months ended 31 March 2020 GBP'000s GBP'000s
UK 28,266 22,319
Europe 4,631 3,014
USA 7,293 -
Rest of World 1,053 -
------------------------------ --------------- ------------
Total 41,243 25,333
------------------------------ --------------- ------------
The Group has two customers which constitute over 10% of
revenue: one providing 21% of revenue, and the other 10%.
Reconciliation of operating Head Office
(loss)/profit to underlying Cake and non-trading Continuing Discontinued Total
adjusted EBITDA to 31 Decoration Food Ingredients subsidiaries Operations Operations Group
March 2020 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Operating (loss)/profit (13,423) 2,926 (4,033) (14,530) - (14,530)
Significant items 1,081 9 (59) 1,031 - 1,031
Impairment charge 12,622 - 287 12,909 - 12,909
Loss on disposal - - - - - -
Depreciation 1,521 667 187 2,375 - 2,375
Amortisation 34 1,379 125 1,538 - 1,538
----------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Underlying adjusted
EBITDA 1,835 4,981 (3,493) 3,323 - 3,323
----------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Reconciliation of operating Head Office
(loss)/profit to underlying Cake and non-trading Continuing Discontinued Total
adjusted EBITDA to 31 Decoration Food Ingredients subsidiaries Operations Operations Group
March 2019 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Operating (loss)/profit (17,307) 1,185 (5,396) (21,518) (6,136) (27,654)
Significant items 589 42 1,086 1,717 46 1,763
Impairment charge 18,675 - - 18,675 - 18,675
Loss on disposal - - - - 5,202 5,202
Depreciation 1,016 242 315 1,573 1,083 2,656
Amortisation 12 1,376 66 1,454 10 1,464
----------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Underlying adjusted
EBITDA 2,985 2,845 (3,929) 1,901 205 2,106
----------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Head Office
Cake and non-trading Continuing Discontinued Total
Decoration Food Ingredients subsidiaries Operations Operations Group
31 March 2020 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Segment assets 57,032 20,103 (1,570) 75,565 - 75,565
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Segment liabilities 13,835 3,123 51,451 68,409 - 68,409
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Net operating assets 43,197 16,980 (53,021) 7,156 - 7,156
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Non-current asset additions 330 1,489 - 1,819 - 1,819
Depreciation (1,521) (667) (187) (2,375) - (2,375)
Amortisation (34) (1,379) (125) (1,538) - (1,538)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Head Office
Cake and non-trading Continuing Discontinued Total
Decoration Food Ingredients subsidiaries Operations Operations Group
31 March 2019 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Segment assets 108,357 13,460 (31,362) 90,455 - 90,455
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Segment liabilities 23,985 3,073 36,775 63,833 - 63,833
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Net operating assets 84,372 10,387 (68,137) 26,622 - 26,622
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
Non-current asset additions 102 4,581 - 4,683 - 4,683
Depreciation (1,016) (242) (315) (1,573) (1,083) (2,656)
Amortisation (12) (1,376) (66) (1,454) (10) (1,464)
---------------------------- ----------- ---------------- ---------------- ----------- ------------ ---------
In line with the Group strategy of allowing each business to
understand its true cost base as a stand-alone business, during the
12 months ended 31 March 2020, Head Office costs of GBP1.1 million
(2019 GBP1.4m) have been re-allocated to the Cake Decoration
division.
4. Significant items
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000s GBP'000s
--------------------------------------------------------------- --------- ---------
Abnormal costs relating to ongoing capital projects - (38)
Investigation work and penalties - (315)
Professional fees in relation to refinancing costs - (380)
Change in value of convertible loan notes derivative liability 294 -
Asset write-offs - (330)
Commercial disputes - (118)
Management restructuring(1) (1,325) (582)
--------------------------------------------------------------- --------- ---------
Significant items (1,031) (1,763)
--------------------------------------------------------------- --------- ---------
Continuing business (1,031) (1,717)
Discontinued business - (46)
--------------------------------------------------------------- --------- ---------
Total significant items (1,031) (1,763)
--------------------------------------------------------------- --------- ---------
The Group's underlying profit figure excludes a number of items
which are material and non-recurring and are detailed separately to
ensure the underlying operating performance of the businesses is
clearly visible, without the distortions of these non-recurring
costs.
The year to 31 March 2020 has seen a lower level of significant
items than in the previous year. They are explained in the notes
below:
1 The fair value of the CLNs was reduced in FY20 from the FY19
estimate. This was shown as a significant item in the accounts.
2 Restructure costs relating to the Cake Decorations business and Head Office infrastructure
The year to 31 March 2019 had the following significant
costs
1. Abnormal costs during improving capacity of business units.
Considerable funds have been invested throughout the Group in the
past two years in capital projects, to improve the capacity and
operating efficiency of the Group.
2. Investigation work and penalties relating to corporate
governance failings. There were well-publicised failings in the
area of corporate governance. The costs incurred related to
external agencies sufficiently experienced and qualified to ensure
all failings investigated and identified and remedial actions
highlighted.
3. Professional fees relating to refinancing. The very unusual
frequency and short-term costs of refinancing in the period are
highlighted here, as being the costs associated with providing
repeated emergency funding before any form of longer-term package
was able to be negotiated. All loans have now been
renegotiated.
4. Asset write-offs. The costs incurred in the year relate to
inventory and intangible asset write-offs in relation to an
abandoned product launch.
5. Commercial disputes. These costs relate to the
well-publicised issues, identified separately in previous
announcements to the City, arising from disputes over material
sugar contracts. All claims are now settled
6. Management restructuring. Individual redundancies are
generally a matter of everyday business, however, significant
restructuring has been required and effected right across the group
during the past 24 months, as fundamental changes in the operations
have been brought about, while deliberate, one-off changes have
been delivered. The central functions have been largely disbanded,
for example, as the group can demonstrably no longer afford to
sustain a central overhead of marketing, operations, or HR. The
costs of severance for these staff members have been separately
identified and disclosed here.
5. Operating profit
Operating profit for continuing operations
12 months 12 months
ended ended
31 March 31 March
2020 2019
Notes GBP'000s GBP'000s
External Sales 66,576 61,560
------------------------------------------------- ----- --------- ---------
Staff Costs (19,208) (20,622)
Inventories:
- cost of inventories as an expense (included in
cost of sales) (29,265) (25,917)
Depreciation of property, plant, and equipment (2,375) (1,573)
Amortisation of intangible assets (1,538) (1,454)
Significant items 4 (1,031) (1,717)
Impairment charges (12,909) (18,675)
Operating lease payment:
- land and buildings - (486)
- other assets - (57)
Research and development expenditure (1,516) (803)
Impairment of trade receivables (84) (100)
Foreign exchange gains/(losses) 138 (327)
Other net operating expenses (13,318) (11,347)
Total (81,106) (83,078)
------------------------------------------------- ----- --------- ---------
Operating loss (14,530) (21,518)
------------------------------------------------- ----- --------- ---------
6. Finance costs
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000s GBP'000s
Interest on bank loans, overdrafts, and investor loans (5,466) (4,164)
------------------------------------------------------- --------- ---------
Interest on obligations under finance leases - (154)
Interest on lease liabilities (12) -
Interest on non-controlling interest put option 46 (89)
Past service cost on pension (note 11) (16) (106)
------------------------------------------------------- --------- ---------
(5,448) (4,513)
------------------------------------------------------- --------- ---------
Continuing business (5,448) (4,406)
------------------------------------------------------- --------- ---------
Discontinued business - (107)
------------------------------------------------------- --------- ---------
7. Other finance costs
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000s GBP'000s
Interest on pension scheme liabilities (note 11) (497) (516)
Interest on pension scheme assets (note 11) 328 350
------------------------------------------------- --------- ---------
(169) (166)
------------------------------------------------- --------- ---------
8. Notes supporting the cash flow statement
The cash collateral figure for the Group is GBP0.2million (FY19
GBP2.0m). This has been provided to Lloyds Bank plc as security for
insurance claims of the Group. This amount is not included in the
cash flow.
Group
Non-current Current
Loans and Loans
Borrowings and Borrowings
GBP'000s GBP'000s Total
Real Good Food plc (Group) (Note 10) (Note 10) GBP'000s
At 31 March 2018 16,390 24,160 40,550
---------------------------------------------------- ----------- --------------- ---------
Cash Flows 6,214 (12,015) (5,801)
Non-cash flows
- Loans renegotiated to move from current at
March 2018 to non-current at March 2019 12,144 (12,144) -
- Interest accruing on loans 4,317 - 4,317
- Accrued interest added to principal loan
at the point of issue of convertible loan notes 261 - 261
- Transaction costs of issuance of convertible
loan notes included in liability (317) - (317)
- Fair value measurement of convertible loan
notes (345) - (345)
- Hire purchase disposed of as part of discontinued
entity (36) - (36)
-
Loans and borrowings classified as non-current
at March 2018 becoming current before March
2020 (667) 667 -
---------------------------------------------------- ----------- --------------- ---------
At 31 March 2019 37,961 668 38,629
---------------------------------------------------- ----------- --------------- ---------
Cash Flows (2,661) 1,184 (1,477)
Non-cash flows
- Interest accruing on loans 5,425 - 5,425
- Redemption premiums added to accrued interest
cost on shareholder loans 3,084 - 3,084
- Transaction costs of issuance of convertible
loan notes included in liability 115 - 115
-
Loans and borrowings classified as non-current
at March 2019 becoming current before March
2020 (865) 865 -
---------------------------------------------------- ----------- --------------- ---------
At 31 March 2020 43,059 2,717 45,776
---------------------------------------------------- ----------- --------------- ---------
- Redemption premiums added to accrued interest
cost on shareholder loans 3,084 - 3,084
- Transaction costs of issuance of convertible
loan notes included in liability 115 - 115
------------------------------------------------ ------ ------
At 31 March 2020 40,677 -40,677
------------------------------------------------ ------ ------
Net Debt
Net debt is a key performance indicator for the Group. It is
defined as short term and long term borrowings less cash. See table
below:
31 March 31 March 31 March 31 March
2020 Group 2020 Company 2019 Group 2019 Company
Note GBP'000s GBP'000s GBP'000s GBP'000s
Short term borrowings 10 (2,717) - (668) -
Short term lease liabilities 10 (390) - - -
Long term borrowings 10 (43,059) (40,677) (37,961) (36,715)
Long term lease liabilities 10 (567) - - -
Cash 1,363 8 2,909 1,140
----------------------------- ---- ----------- ------------- ----------- -------------
Total Net Debt (45,370) (40,669) (35,720) (35,575)
----------------------------- ---- ----------- ------------- ----------- -------------
Group
Net cash
and current Non-current
borrowings borrowings Net debt
GBP'000s GBP'000s GBP'000s
At 1 April 2018 21,429 16,390 37,819
Cash flow (2,719) (3,082) (5,801)
Other non-cash movements(1) (20,951) 24,653 3,702
------------------------------ ------------ ----------- ---------
At 31 March 2019 (2,241) 37,961 35,720
Cash flow(2) 1,882 (1,723) 159
Other non-cash movements(3) 2,103 7,388 9,491
------------------------------ ------------ ----------- ---------
At 31 March 2020 1,744 43,626 45,370
------------------------------ ------------ ----------- ---------
9. Earnings per share
Basic earnings per share
Basic earnings per share is calculated on the basis of dividing
the loss attributable to ordinary shareholders of the Company by
the weighted average number of ordinary shares in issue during the
year.
12 months 12 months 12 months 12 months
ended ended ended ended
31 March 31 March 31 March 31 March
2020 2020 2019 2019
Continuing Discontinued Continuing Discontinued
Operations Operations Operations Operations
Loss after tax attributable to ordinary
shareholders (GBP'000s) (19,121) - (26,078) (6,243)
Weighted average number of shares in
issue for basic EPS ('000s) 99,505 - 91,032 91,032
Employee share options ('000s) 1,830 - 364 364
Convertible loan notes ('000s) 200,571 - 144,554 144,554
Weighted average number of shares in
issue for diluted EPS ('000s) 301,906 - 235,950 235,950
---------------------------------------- ----------- ------------- ----------- -------------
Basic and diluted loss per share (19.22)p - (28.64)p (6.85)p
---------------------------------------- ----------- ------------- ----------- -------------
The total loss per share for 2020 is (19.22)p (2019 continuing
and discontinued operations: (35.49)p).
Diluted earnings per share
The number of shares calculated as above is compared with the
number of shares that would have been issued assuming the exercise
of all outstanding share options. The potential ordinary shares are
considered anti-dilutive as they decrease the loss per share.
Therefore, diluted EPS is the same as basic. If all of the share
options had been exercised before the period end, the earnings per
share would then have been a loss per share of 6.33p (2019: loss of
11.05p on the continuing operations and a loss per share of 2.64p
on the discontinued operations).
The weighted average number of shares in issue for the year was
99,504,581 and the number of options outstanding was 4,060,835.
If these were all exercised the cash raised would be equivalent
to that which would be raised by issuing 1,830,303 shares at the
average share price during the year. There were also 211,924,421
convertible loan notes outstanding, of which the weighted average
number of shares was 200,571,327. Therefore, the weighted average
number of dilutive potential ordinary shares is 301,906,212.
Because the adoption of IFRS 16 Leases has increased EBITDA, it
has had the effect of reducing the loss per share by 0.52p and the
diluted loss per share by 0.17p.
10. Borrowings and capital management
31 March 31 March 31 March 31 March
2020 2020 2019 2019
Group Company Group Company
GBP'000s GBP'000s GBP'000s GBP'000s
Secured borrowings at amortised cost
Bank term loans 2,916 - - -
Revolving credit facilities 1,853 - - -
Leases 957 - - -
Other loans 102 - 1,636 -
Investor loans* 28,336 28,336 25,165 25,165
Investor loans - Cash Collateral - - 2,000 2,000
Convertible loan notes** 12,341 12,341 9,550 9,550
Government grants 228 - 278 -
------------------------------------- --------- --------- --------- ---------
46,733 40,677 38,629 36,715
------------------------------------- --------- --------- --------- ---------
Borrowings due for settlement within
12 months 2,717 - 668 -
Lease liabilities due for settlement
within 12 months 390 - - -
Borrowings due for settlement after
12 month 43,059 40,677 37,961 36,715
Lease liabilities due for settlement
after 12 months 567 - - -
------------------------------------- --------- --------- --------- ---------
Total 46,733 40,677 38,629 36,715
------------------------------------- --------- --------- --------- ---------
*Accrued interest of GBP2.9 million at 31 March 2019 is not
shown in the above Investor loans, this is shown within accruals in
payables. The investor loans shown consists of GBP20.6 million
principal amount, GBP4.6 million accrued interest up to 31 March
2020 and redemption premiums of GBP3.1 million.
**Convertible loan notes shown at 31 March 2020 consist of
GBP8.8 million investment (2019: GBP8.8 million), GBP3.6 million
accrued interest (2019: GBP1.4 million), GBPnil fair value
adjustment (2019: GBP(0.3) million) and GBP(0.1 million) of
transaction costs (2019: GBP(0.3) million) being spread over the
remaining life of the liability.
Government grants represents the amount of grants received for
which the criterion to ensure that repayment is not required has
not yet been met. Grant monies in respect of which the criteria
have been met are included in operating income.
All existing shareholder loans were renegotiated in December
2020 to require repayment in May 2022.
Convertible loan notes
In May 2018, the Company secured further funding from each of
its major shareholders totalling GBP8.8 million. NB Holdings Ltd
and Omnicane Investors Ltd each providing GBP3.4 million and funds
managed by Downing LLP provided GBP1.9 million. This instrument has
since, with shareholder approval, been replaced with convertible
loan notes of GBP8.8 million with a conversion price of 5 pence.
The loan is repayable in 3 years from the date of issue or can be
converted at any time into shares at the holder's option. In
December 2020, the shareholders agreed to amend the repayment date
of the loans to the 19 May 2022. Also, the Amendment Deed amends
the CLNs minimum annual return from 30% per annum to 12% per annum,
effective from 31 December 2020
The instrument accrues interest at a rate of 12 percent per
annum accruing daily and will mature and be due for repayment in
full on 19 May 2022, unless they are redeemed before that date. On
that date, unless the convertible loan notes are converted into
ordinary shares on the conversion date, a redemption premium fee
will be payable. The redemption fee will be an amount which, when
added to the interest accrued on the relevant notes, provides a
total return equal to the amount which would have accrued in
respect of such notes from the date of the convertible loan note
instrument until and including the date the notes are redeemed in
full had the interest rate been 30 percent per annum.
A host loan at amortised cost and an embedded derivative
liability, being measured at fair value with changes in value being
recorded in profit or loss, have been recognised. At 31 March 2020,
the derivative liability was valued at GBPnil (2019: GBP0.3
million)
The convertible loan notes shown consist of a host loan at
amortised costs of GBP8.8 million and GBP4.3 million accrued
interest up to
31 March 2020.
10. Borrowings and capital management (continued)
Features of the Group's borrowings are as follows:
The Group's financial instruments comprised cash, leases, a
revolving credit facility, investor loans and various items arising
directly from its operations, such as trade payables and
receivables. The main purpose of these financial instruments is to
finance the Group's operations. The government grant is specific to
Brighter Foods.
The main risks from the Group's financial instruments are
interest rate risk and liquidity risk. Liquidity risk arises from
the Group's management of working capital and the finance charges
and principal repayments on its debt instruments. The Group's
policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due.
The Group also has some currency exposure in relation to its
Euro and US Dollar commodity purchases. However, this is mitigated
by matching in part against foreign currency sales. The Board
reviews and agrees policies, which have remained substantially
unchanged for the year under review, for managing these risks.
The Group's policies on the management of interest rate,
liquidity and currency exposure risks are set out in the Report of
the Directors.
During the year ended 31 March 2020 the Group continued with the
borrowing facilities in place and secured loans from investors. As
at
31 March 2020, the borrowings comprised:
-- revolving credit facility of GBP5.45 million with Leumi ABL
Limited on a revolving basis with a term of 60 months. This
facility is secured against the debtors of JF Renshaw Ltd and
Rainbow Dust Colours Ltd with an interest rate of 2.25% above
3-month LIBOR. Because the group retains the risks and rewards of
ownership of the underlying debts, these continue to be recognised
in these financial statements.
-- The Group secured facilities against specific plant and
machinery with Leumi ABL Limited GBP2.1 million. The facilities
interest payable is 2.75% above LIBOR.
-- The Group secured a GBP1.3m term loan facility with the term being 60 months.
The three major shareholders, NB Holdings Ltd, Omnicane
Investors Ltd, and certain funds managed by Downing LLP, supported
the business, and provided significant funding to the Group by way
of loans.
The loans at 31 March 2020 were as follows:
Date Amount Method of Funding Major Shareholder(s)
May 2018 GBP8.8m Secured convertible NB Holdings Ltd (GBP3.4m),
loan notes Omnicane Investors
Ltd (GBP3.4m),
Funds managed by Downing
LLP (2.0m)
-------------- -------- ------------------- ---------------------------
March 2018 GBP4.0m Secured loan notes NB Holdings Ltd (GBP1.7m),
Omnicane Investors
Ltd (GBP1.7m),
Funds managed by Downing
LLP (GBP0.6m)
-------------- -------- ------------------- ---------------------------
January 2018 GBP3.0m Secured loan notes NB Holdings Ltd (GBP1.3m),
Omnicane Investors
Ltd (GBP1.3m),
Funds managed by Downing
LLP (GBP0.4m)
-------------- -------- ------------------- ---------------------------
September 2017 GBP4.0m Secured loan notes NB Holdings Ltd (GBP1.33m),
Omnicane Investors
Ltd GBP1.33m),
Funds managed by Downing
LLP (GBP1.33m)
-------------- -------- ------------------- ---------------------------
August 2017 GBP0.8m Secured loan notes NB Holdings Ltd (GBP0.4m),
Omnicane Investors
Ltd (GBP0.4m)
-------------- -------- ------------------- ---------------------------
June 2017 GBP2.7m Secured loan notes NB Holdings Ltd (GBP1.3m),
Omnicane Investors
Ltd (GBP1.3m)
-------------- -------- ------------------- ---------------------------
June 2017 GBP6.1m* Secured loan notes Funds managed by Downing
LLP
-------------- -------- ------------------- ---------------------------
Total GBP29.4m
-------------- -------- ------------------- ---------------------------
* Interest is payable on a quarterly basis to the MI Downing
Monthly Income Fund up to a principal amount of GBP0.9 million.
At 31 March 2020 Leumi ABL Limited had a debenture incorporating
a floating charge over the undertaking and all property and assets
present and future including goodwill, book debts, uncalled
capital, buildings, fixtures, intangible assets, fixed plant, and
machinery. In addition, the banking arrangements with Lloyds Bank
plc had a guarantee over the Brighter Foods debtors.
Liquidity risk management
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall
due.
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:
3 months
Less than to
1 month 1-3 months 1 year 1-5 years 5+ years Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
2020
Trade and other payables 6,738 1,710 420 229 - 9,097
Investor loans - - - 20,562 - 20,562
Convertible loan notes - - - 8,807 - 8,807
Bank term loans 72 144 649 2,051 - 2,916
Revolving credit facilities - - 1,853 - - 1,853
Leases 45 59 261 335 257 957
Government grants 5 12 32 179 - 228
NCI put option liability - - 2,900 1,520 - 4,420
---------------------------- --------- ---------- --------- --------- --------- ---------
6,860 1,925 6,115 33,683 257 48,840
Interest - - - 8,771 - 8,771
Redemption premiums - - - 3,084 - 3,084
---------------------------- --------- ---------- --------- --------- --------- ---------
Total 6,860 1,925 6,115 45,538 257 60,695
---------------------------- --------- ---------- --------- --------- --------- ---------
3 months
Less than to
1 month 1-3 months 1 year 1-5 years 5+ years Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
2019
Trade and other payables 6,122 3,719 665 123 - 10,629
Convertible loan notes - - - 8,807 - 8,807
Revolving credit facilities - - - - - -
Investor loans - - - 24,254 - 24,254
Government grants 5 12 32 197 31 277
Hire purchase 53 101 465 1,017 - 1,636
NCI put option liability - - - 4,997 - 4,997
---------------------------- --------- ---------- ------------------- --------- --------- ---------
6,180 3,832 1,162 39,395 31 50,600
Interest 5 10 38 10,234 - 10,287
---------------------------- --------- ---------- ------------------- --------- --------- ---------
Total 6,185 3,842 1,200 49,629 31 60,887
---------------------------- --------- ---------- ------------------- --------- --------- ---------
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 risks on purchases of
commodities from USA and Europe. The risk associated with these
purchases is mitigated by sales also made to customers in these
countries, however, to the extent that these do not cover each
other there is a risk of exposure to the Group.
The effect of the exposure is calculated as being:
-- With an excess of $ assets to $ liabilities, a 10%
strengthening of the US dollar would result in an increase in
pre-tax profits of GBP62k.
A 10% weakening of the US dollar would result in a decrease of
pre-tax profits of GBP51k.
-- With an excess of EUR assets to EUR liabilities a 10%
strengthening of the Euro would result in an increase in pre-tax
profits of GBP35k.
A 10% weakening of the Euro would result in a decrease of
pre-tax profits of GBP29k.
Interest rate risks:
The Group has an exposure to interest rate risk arising from
borrowings based upon the Bank of England base rate. However, at
the balance sheet date, the Group did not have any outstanding
balance on these borrowing facilities, and so the impact of an
increase in the applicable interest rates would, all other factors
remaining unchanged, not have impacted profits.
11. Pensions arrangements
Defined Contribution Scheme. The Group operates a defined
contribution scheme for all employees, including provision to
comply with auto-enrolment requirements laid down by law.
In addition, the Company operates one defined benefits scheme
which was closed to new members in 2000 and closed to future
accrual with effect from 5 April 2004. The Defined Benefit scheme
is a funded arrangement with assets held in a separate
trustee-administered fund. Members of the Plan are entitled to
retirement benefits based on their final salary at the date of
leaving the Plan (or 5 April 2004 if earlier), and length of
service.
An arrangement was previously agreed with the Trustees under
which employer contributions to the scheme are GBP1 million per
year from
1 August 2019. For the purposes of IAS 19 the data provided for
the 31 March 2018 actuarial valuation, has been approximately
updated to reflect defined benefit obligations on the accounting
basis at 31 March 2020. This has resulted in a deficit in the Plan
of GBP7,936k. The present value of contributions payable exceeds
the net liability and, in accordance with IFRIC14, the additional
liability has been recognised.
Present values of defined benefit obligations, fair value of
assets and deficit
31 March 31 March
31 March 31 March 2018 2017 31 March
2020 2019 (restated)* (restated)* 2016
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Present value of defined benefit
obligation 20,750 21,177 21,448 21,319 21,094
Fair value of Plan assets (13,735) (13,774) (13,529) (13,946) (15,013)
--------------------------------- --------- --------- ------------ ------------ ----------------
Deficit/(surplus) in Plan 7,015 7,403 7,919 7,373 6,081
Effect of asset ceiling/IFRIC14 921 - - - -
Gross amount recognised 7,936 7,403 7,919 7,373 6,081
Deferred tax ** (1,508) (1,258) (1,094) (1,120) (1,155)
--------------------------------- --------- --------- ------------ ------------ ----------------
Net liability 6,428 6,145 6,825 6,253 4,926
--------------------------------- --------- --------- ------------ ------------ ----------------
* Following legal advice taken at the time, the Group posted a
past service credit into the accounts in the year ended 31 March
2017 in respect of certain pension increases being considered
discretionary. Fresh legal advice clarifies these payments are
mandatory and so GBP1.5 million has been added to the defined
benefit obligation to cover this requirement. This correction has
been adjusted via brought forward reserves from 2017, thus matching
the cost and benefit, rather than taken in the current period
accounts.
** Deferred tax rate 2020: 19%, 2016, 2017, 2018 & 2019: 17%
Reconciliation of opening and closing balances of the present
value of the defined benefit obligations
31 March 31 March
2020 2019
GBP'000s GBP'000s
Defined benefit obligation at start of period 21,177 21,448
Interest cost 497 516
Actuarial (gains)/losses (8) 77
Past service cost 16 106
Benefits paid (932) (970)
---------------------------------------------- --------- ---------
Defined benefit obligation at end of period 20,750 21,177
---------------------------------------------- --------- ---------
Reconciliation of opening and closing balances of the fair value
of Plan assets
31 March 31 March
2020 2019
GBP'000s GBP'000s
Fair value of Plan assets at start of period 13,774 13,529
Interest income on Plan assets 328 350
Return on assets less interest income (168) 518
Contributions paid by the Group 733 347
Benefits paid, death-in-service insurance premiums
and expenses (932) (970)
--------------------------------------------------- --------- ---------
Fair value of Plan assets at end of period 13,735 13,774
--------------------------------------------------- --------- ---------
UK equities 2,210 2,667
Other investments 11,525 11,107
--------------------------------------------------- --------- ---------
Total plan assets at end of period 13,735 13,774
--------------------------------------------------- --------- ---------
The actual return on the Plan assets over the period ended 31
March 2020 was GBP(82)k (2019: GBP868k).
Total expense recognised in the Statement of Comprehensive
Income within other finance income
31 March 31 March
2020 2019
GBP'000s GBP'000s
Interest on liabilities 497 516
Interest on assets (328) (350)
------------------------ --------- ---------
Net interest cost 169 166
Past service cost 16 106
------------------------ --------- ---------
Total cost 185 272
------------------------ --------- ---------
Statement of recognised income and expenses
31 March 31 March
2020 2019
GBP'000s GBP'000s
Actuarial (loss)/gain on the Plan assets (168) 518
Experience gains arising on the Plan liabilities - 427
Actuarial (loss)/gain on the Plan liabilities arising
from changes in demographic assumptions (151) 436
Actuarial gain/(loss) on the Plan liabilities arising
from changes in financial assumptions 143 (940)
Change in the effect of the asset ceiling / IFRIC14 (921) -
------------------------------------------------------------ --------- ---------
Total amount recognised in Statement of Other Comprehensive
Income (1,097) 441
------------------------------------------------------------ --------- ---------
11. Pensions arrangements (continued)
Assets
31 March 31 March 31 March
2020 2019 2018
GBP'000s GBP'000s GBP'000s
UK equity 2,210 2,667 1,511
Overseas equity - - 2,952
Absolute return fund 1,522 1,013 3,136
Corporate Bonds 2,746 2,699 1,105
Gilts 3,112 3,137 945
Multi-Asset Funds 3,927 4,055 -
Property - - 83
Cash 218 203 1,122
Alternative assets - - 2,675
--------------------- --------- --------- ---------
Total assets 13,735 13,774 13,529
--------------------- --------- --------- ---------
The investment strategy for the Plan is controlled by the
Trustees, in consultation with the Company. None of the fair values
of the assets shown above includes any of the Group's own financial
instruments or any property occupied by, or other assets used by,
the Group. Absolute return funds are invested in a diverse range of
assets in order to achieve equity-like returns with reduced
volatility. Alternative assets include infrastructure and
derivatives.
Assumptions
31 March 31 March 31 March 31 March
2020 2019 2018 2017
GBP'000s GBP'000s GBP'000s GBP'000s
Inflation 2.70 3.30 3.10 3.20
Salary increases - - - -
Rate of discount 2.30 2.40 2.65 2.85
Allowance for pension in payment increases
RPI max 5% 2.70 3.10 3.00 3.10
RPI min 3% max 5% 3.20 3.50 3.40 3.40
Allowance for revaluation of deferred
pensions 2.20 2.30 2.10 2.20
------------------------------------------- ---------- ---------- ---------- ----------
90% of 90% of 90% of 90% of
Allowance for commutation of pension max max max max
for cash at retirement allowance allowance allowance allowance
------------------------------------------- ---------- ---------- ---------- ----------
The obligations of the Plan have been calculated by projecting
forwards the figures from the initial results of the latest
valuation as at 31 March 2020 and then making appropriate
adjustments for known experience and for differences in
assumptions.
The mortality assumptions adopted at 31 March 2020 and 31 March
2019 imply the following life expectancies from age 65:
31 March 31 March
2020 2019
Male retiring at age 65 in current year 21 years 21 years
Female retiring at age 65 in current year 23 years 23 years
Male retiring at age 65 in 20 years' time 22 years 22 years
Female retiring at age 65 in 20 years' time 25 years 24 years
------------------------------------------- -------- --------
The weighted-average duration of the defined benefit obligation
at 31 March 2020 was 15 years (2019: 15 years).
Historic funding positions
The funding positions applicable at the start of each period are
as follows:
12 months
12 months 12 months ended 12 months 12 months
ended ended 31 March ended ended
31 March 31 March 2018 31 March 31 March
2020 2019 (restated)* 2017 2016
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Fair value of assets 13,735 13,774 13,529 13,946 15,013
Defined benefit obligation (20,750) (21,177) (21,448) (21,319) (21,094)
Effect of asset ceiling / IFRIC14 (921) - - - -
---------------------------------- --------- --------- ------------ --------- ---------
(Deficit) in scheme (7,936) (7,403) (7,919) (7,373) (6,081)
Experience adjustment on scheme
assets (168) 518 (232) 652 (1,122)
---------------------------------- --------- --------- ------------ --------- ---------
Experience adjustment on scheme
liabilities - 427 - (103) -
---------------------------------- --------- --------- ------------ --------- ---------
* Following legal advice taken at the time, the Group posted a
past service credit into the accounts in the year ended 31 March
2017 in respect of certain pension increases being considered
discretionary. Fresh legal advice clarifies these payments are
mandatory and so GBP1.5 million has been added to the defined
benefit obligation to cover this requirement. This correction has
been adjusted via brought forward reserves from 2017, thus matching
the cost and benefit, rather than taken in the current period
accounts.
Risks
The scheme is exposed to a number of risks, including:
Asset volatility: The Plan's defined benefit obligation is
calculated using a discount rate set with reference to corporate
bond yields; however, the Plan invests significantly in equities.
These assets are expected to outperform corporate bonds in the
long-term but provide volatility and risk in the short term.
Changes in bond yields: a decrease in corporate bond yields
would increase the Plan's defined benefit obligation; however, this
would be partially offset by an increase in the value of the Plan's
bond holdings.
Inflation risk: a proportion of the Plan's defined benefit
obligation is linked to inflation; therefore, higher inflation will
result in a higher defined benefit obligation (subject to the
appropriate caps in place). The majority of the Plan's assets are
either unaffected by inflation, or only loosely correlated with
inflation, therefore an increase in inflation would also increase
the deficit.
Life expectancy: if Plan members live longer than expected, the
Plan's benefits will need to be paid for longer, increasing the
Plan's defined benefit obligation.
The Trustees and Company manage risks in the Plan through the
following strategies:
Diversification: In order to counter asset volatility and
changes in bond yields, investments are well diversified, such that
the failure of any single investment would not have a material
impact on the overall level of assets.
Investment Strategy: The Trustees are required to review their
investment strategy on a regular basis and consult with the Company
on any changes. The Trustees' investment strategy is set out in the
Statement of Investment Principles.
Funding positions: The Trustees are required to assess the
funding position annually by means of a formal actuarial report
which must be shared with the Company.
Sensitivity analysis
The impact to the value of the defined benefit obligation of a
reasonably possible change to one actuarial assumption, holding all
other assumptions constant, is presented in the table below:
Reasonably
Possible Obligation Obligation
Change Increase Decrease
Discount Rate (+/- 0.5%) 8% 7%
RPI Inflation (+/- 0.5%) 3% 3%
(+/-) 1
Assumed Life expectancy Year 4% 4%
------------------------ ---------- ---------- ----------
Small changes to other assumptions, such as the allowance for
commutation of pension for cash at retirement, and the proportion
of members assumed to be married at retirement, do not have such a
significant effect on the obligations of the Plan.
12. Post-year end activities
1. An increase in the Leumi revolving credit facility was agreed
on the 28 July 2020, increasing the facility by GBP2m, taking the
overall facility to GBP10.87m. This action formed part of the
covid-19 response to cash management. The funding was against
Brighter Foods debtors.
2. Mike Holt, Non-Executive Chairman of the Company agreed to
become the Executive Chairman of the Group from the 21 October
2020, a position he previously held following the departure of Hugh
Cawley in September 2019. This change reflects the increased work
being undertaken since the departure of Paul Richardson in 6 April
2020.
3. Amendment to shareholders' Agreement: on the 19 October 2020
RGF announced that it has entered into a Deed of Amendment amending
the terms of the shareholders' agreement dated 4 April 2017 (the
"SHA") between, amongst others the Group and the "Minority
Shareholders" that regulates their relationship in relation to
Brighter Foods Limited - the Group holds 84.34% and the Minority
Shareholders hold 15.66% of the issued share capital of Brighter
Foods. The Board of RGF believe that the Deed is in the best
interest of all stakeholders as it reduces the immediate cash
outflow of the Group and aligns the interests of the Minority
Shareholders (who form part of the core management team of Brighter
Foods) with RGF in improving earnings and ultimately maximising the
value of the business to RGF. Under the terms of the SHA, a put
option pursuant to which the Minority Shareholders can compel the
Group to acquire 50% of the Minority Interest has become
exercisable (the "2020 Option"). The price to be paid by the Group
based on EBIT and cash flows of Brighter Foods for the year ended
31 March 2020 is approximately GBP2.8m. Pursuant to the Deed the
Minority Shareholders have agreed, to forego their right to
exercise the 2020 Option, with the SHA being amended such that the
Minority Shareholders will now have a put option over the whole of
the Minority Interest exercisable following the agreement of the
audited accounts of Brighter Foods for the year ending 31 March
2021. The Group retains its call option over the whole of the
Minority Interest, exercisable should the 2021 Option not be
exercised. In consideration for the changes to the SHA being made
by the Deed, the Group has agreed to pay the Minority Shareholders
GBP1.0m on the date the Deed is entered into and a further
GBP500,000 on 20 November 2020. The outstanding balance of the 2020
Payment, approximately GBP1.3m, has been deferred until the
exercise of the 2021 Option. Interest becomes payable on the
GBP1.3m at the rate of 10% from March 2021.
4. The Company's three major shareholders, NB. Ingredients
Limited ("Napier Brown"), Omnicane International Investors Limited
("Omnicane"), and certain funds managed by Downing LLP ("Downing")
(together the "Major Shareholders"), have finalised an amendment
deed relating to the funding agreements. The Agreements have been
amended such that the final repayment dates of each of the
Agreements have been extended to 19 May 2022 (the "Final Repayment
Date") with no change to the interest rate payable by the Company
pursuant to each Agreement. In addition, the Amendment Deed amends
the convertible loan notes ("CLNs") such that the minimum annual
return on the CLNs will reduce from 30% per annum to 12% per annum,
effective from 31 December 2020. Amounts due in respect of the
period up to, and including, 31 December 2020 remain unchanged. For
the avoidance of doubt, the redemption premium on the Loan Notes
instruments remains payable at 15%. As part of entering into the
Amendment Deed the Company has undertaken that it will not enter
into any transaction (or transactions in aggregate) that would
result in a fundamental change of business of the Company without
the prior consent of each of the Major Shareholders. This
obligation would cease in the event of the repayment of the
outstanding facilities with the Major Shareholders.
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END
FR UWRVRRBUUAAA
(END) Dow Jones Newswires
December 18, 2020 10:10 ET (15:10 GMT)
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