TIDMRGD
RNS Number : 8398M
Real Good Food PLC
26 January 2021
26 January 2021
Real Good Food plc
("RGF" or "the Company")
Half year results for six months ended 30 September 2020
Improving underlying performance being masked by lower volumes
pro tem
Real Good Food plc, (AIM: RGD) the diversified food business,
today announces its half year results for the six months ended 30
September 2020.
Financial highlights:
-- During a period badly affected by the covid-19 lockdown and
restrictions, revenue from continuing operations decreased by 26.4%
to GBP23.9 million (2019: GBP32.4 million).
-- The impact of lower revenues was partially mitigated by cost
savings, new business, and the Government's furlough scheme;
underlying adjusted EBITDA* was GBP0.3 million (2019: GBP2.8
million).
-- Investor loans and Convertible Loan Notes (CLNs) have been
extended from 17 May 2021 to 19 May 2022; no change to the interest
rate or redemption premium on Investor loans but the minimum annual
return on the CLNs reduced from 30% to 12% with effect from 31
December 2020.
-- Loss before tax was GBP4.0 million (2019: loss of GBP2.5 million).
-- Net debt at 30 September 2020 stood at GBP45.1million (30
September 2019; GBP39.9 million; 31 March 2020 GBP44.4 million),
being largely Shareholder Loans.
-- Credit facility with Leumi ABL Limited increased by GBP2.0
million to GBP10.9 million to provide additional headroom during
difficult trading conditions.
Operational highlights :
-- Food Ingredients (Brighter Foods) - underlying adjusted
EBITDA was GBP1.1 million (2019: GBP2.5 million). Revenue in the
six-month period was GBP4.0 million lower than the first half of
last year, having been impacted by revenues at its largest customer
reducing by GBP4.8 million due to the covid-19 lockdowns
-- Cake Decoration (Renshaw and Rainbow Dust) - underlying
adjusted EBITDA was a loss of GBP0.6 million (2019: GBP0.6 million
profit). Revenues from the wholesale and sugarcraft markets (both
in the UK and Europe) were down significantly on the prior year
with restaurants and consumer outlets experiencing shut-downs and
lower trading during covid-19. The interim period is typically the
quietest in the year for this division. Cake Decoration outsourced
its warehousing and distribution in March 2020 resulting in an
improvement to customer service.
-- Both businesses have continued to innovate with a total of 35
new products being launched by Brighter Foods and 40 by Renshaw
with anticipated annualised (and normalised) revenues of GBP8
million and GBP2 million respectively.
Current trading and outlook
-- The impact of covid-19 was most severe in Q1, during the
first lockdown. However, with lockdown restrictions easing, it is
pleasing to see that trading has improved in both divisions with
Q3, post the interim period end (October 2020 to December 2020)
revenues in-line with FY20, and Board expectations. Q4 expectations
within Brighter Foods remain positive, notwithstanding the latest
national lockdown, whilst Q4 is traditionally a quieter period for
Cake Decoration.
-- Within Cake Decoration, where the operating structure has
been significantly improved, the focus is on strengthening customer
relationships, enhancing customer service, and growing revenues
through new product launches and category expansion. There have
been new client wins in the first half of the year both in the
Retail and B2B markets; overseas markets have recovered well.
-- 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 were ahead of last year's.
-- The Board remain committed to reducing the Group's debt
burden and reviewing all initiatives to improve and simplify its
capital structure.
* Underlying adjusted EBITDA represents earnings before
depreciation, amortisation, impairments, significant items, finance
costs and tax.
Mike Holt, Executive Chairman, said:
"Although the Group inevitably had a difficult first half, due
to the impact of covid-19 and Brexit uncertainties, as reported
earlier this month, Q3 performance was much improved on the first
half and in-line with last year. Both our businesses are getting
stronger and more resilient due to operational efficiencies made
during the last 12 months.
Once covid-19 restrictions are lifted, Brighter Foods is
well-placed to continue the growth reported in FY20 - capitalising
on its additional capacity, market opportunities and new product
innovation capabilities - and Renshaw should continue to benefit
from its recent restructuring and greater focus on product
innovation and customer service."
Enquiries:
Real Good Food plc Tel: 0151 541 3790
Mik e Holt, Executive Chairman
Maribeth Keeling, Chief Financial 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. http://www.realgoodfoodplc.com
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
Chairman's Statement
This year has been very different to the one the Board had
expected, with the challenges from the covid-19 pandemic and the
implications for the Group regarding Brexit.
Our plan for the current financial year was to leverage the
capacity investment made during FY20 in Brighter Foods, to
accelerate operational changes made within Renshaw and to generate
revenue growth from new products and better customer service
delivery. It is frustrating therefore that the covid-19 pandemic
and Brexit uncertainties have constrained these objectives, albeit
the Board believes that the Group did well to hold revenues to
within 26% of the first half of last year under the circumstances.
However, given the operational gearing of the business,
particularly within Renshaw, the reduction in revenues meant that
there was a greater drop in profitability such that the Group
operated at an adjusted EBITDA level for the first half of GBP0.3m
(2019: EBITDA of GBP2.8m). During the period, the Group claimed
GBP1.2 million under the Government's Job Retention Scheme. Further
cost savings were made at group level, albeit this was offset by
additional costs of cGBP0.3m which were incurred in making our
factories and work areas in the businesses covid-19 safe.
Although covid-19 and Brexit have taken a lot of our focus in
the past six months, the Group has continued to manage many market
challenges, particularly in the Cake Decoration business. The icing
and marzipan sector is a mature market and there continues to be
pressure from competitors..
The improvement programme in Cake Decoration, which started in
FY20, has focused on developing strategic partnerships with
customers and distributors and driving fundamental operational
improvements. Benefits from these initiatives are beginning to come
through. Cake Decoration has continued to develop the innovation of
new products with product launches recently seen with Tesco,
Waitrose, and Marks & Spencer.
Brighter Foods, having ended last year with very significant
revenue growth, was impacted by the sectors it sells into being
substantially closed during the first lockdown, principally the
travel and 'food on the go' sectors. However, the management team
worked closely with their customers to identify new potential
outlets, which was successful in recovering revenues in Q2 (July
-September).
Cash became even more of a focus for the Group since March due
to the pandemic, with the Directors initially holding weekly
meetings to discuss and monitor cash projections reverting to
bi-weekly when the initial lockdown ended. The Group has used the
Government furlough scheme, and the deferred VAT and PAYE payments
to conserve cash during the lockdown period and secured a deed of
variation with the minority shareholders of Brighter Foods which
deferred some cash outflow as well as improving the alignment of
interests. Total deferred VAT and PAYE under these Government
Support Schemes is GBP1.9m and is expected to start being paid
down.
As previously reported, in July 2020 the Group secured
additional funding with Leumi increasing the overall facility by
GBP2.0 million to GBP10.9 million. The increased facility is
secured against debtors in the Group's Brighter Foods business and
has been provided on the same terms as the original receivables'
facility.
The Independent Directors finalised an Amendment Deed, with the
Group's three major shareholders, to extend the repayment date of
the Investor Loans to 19 May 2022, on the same terms. The Amendment
Deed also amended the convertible loan notes (CLNs) such that the
minimum annual return on the CLNs will reduce from 30% to 12% with
effect from 31 December 2020. The ultimate goal though is to have a
more simplified and normal capital structure as the Group continues
to improve its profitability and cash flow.
Owing to the resignation of Paul Richardson, who left the Group
for a full-time position, I became the Group's Executive Chairman
with the Managing Directors of the two businesses reporting
directly through to me. The balance of the Board will be kept under
review as the Group's financial performance and position improves
further.
The Board remains confident that the actions being taken by
management are the right ones and that they will deliver benefits
once the covid-19 restrictions are eased, providing a solid
foundation for the future.
Overview
Results
Revenues for the first six months of the year were down 26.4% to
GBP23.9 million (2019: GBP32.4 million), but the Board is confident
that this relates mainly to the covid pandemic. Neither business
has lost customers, but both have seen customers purchasing in much
lower volumes. The savings expected from the changes made in FY20
have been realised but have been masked by the temporary impact of
lower revenues. Overall a small profit was reported at the Group
underlying adjusted EBITDA level (underlying adjusted EBITDA is
defined as earnings before significant items, impairment, interest,
tax, depreciation, and amortisation) of GBP0.3 million (2019:
GBP2.8 million). Measuring the Group's performance against
underlying adjusted EBITDA shows the operational performance of the
Group without the distorting effects of the costs of finance and
other significant items.
The loss before tax was GBP4.0 million (2019: loss of GBP2.5
million). Following a review at the half year, there has been no
further impairment of the Cake Decoration business. An impairment
of GBP12.6 million was made at the 31 March 2020 year end. The
Directors are confident that the business has strong long-term
growth potential and that it will be restored to greater
profitability over the coming months.
6 months ended 30 Sept 2020 6 months ended 30 Sept 2019
GBP000's GBP000's
------------------------------------------------------ --------------------------- ---------------------------
Loss before tax from continuing operations (3,975) (2,506)
Depreciation of property, plant, and equipment 1,223 1,075
Amortisation of intangibles 25 735
Impairment - -
Significant items 399 547
Finance costs 2,546 2,855
Other finance costs 91 88
------------------------------------------------------ --------------------------- ---------------------------
Underlying adjusted EBITDA from continuing operations 309 2,794
------------------------------------------------------ --------------------------- ---------------------------
Following the Group refinancing in August 2019 with Leumi ABL
Limited securing a total credit facility of GBP8.87 million , as
part of the covid-19 cash planning, the Group increased the credit
facility with Leumi ABL Limited by GBP2.0 million secured on the
debtors of Brighter Foods. The facility is on the same terms as the
original agreement.
Investment in growth
The investment made during FY19/FY20 in Brighter Foods,
increasing plant capacity by c90%, and in FY20 in Renshaw, with the
completion of the soft icing plant, the Board expects both
investments to continue to deliver the growth already seen pre
covid-19. Brighter Foods, in particular, continues to be
well-placed to capitalise on its unique capabilities to meet the
growing demand for production capacity within the snack bars
sector.
Outlook and Current Trading
Following the covid-19 pandemic and the forced lockdown, the
Group updated its budgets and adjusted for the expected impact of
covid-19. For the year to date, the performance of each of the
businesses is aligned with the Board's expectations and central
costs remain within budget.
The Cake Decoration market in the UK, particularly in the retail
sector, is proving increasingly competitive but we are confident
that we can leverage our experience and expertise to deliver what
our customers need and want. The Cake Decoration business is
continuing the successful implementation of the newly articulated
strategy for that business, streamlining operational processes, and
putting the customer at the forefront of what we do. The
back-office functions are also being reorganised to improve the
customer service.
Brighter Foods growth plans will recommence once covid-19
restrictions have been lifted. Currently both businesses are
incurring additional costs relating to the way in which the
production facilities are set up to allow for social distancing.
The experienced management and the future for both businesses look
justifiably bright.
The uncertainties of Brexit for the business community have been
eased slightly by the confirmation on 24 December 2020 that there
will be no tariffs, however the logistics, particularly for the
Cake Decoration business will need to be closely monitored.
After a uniquely challenging period to 30 September 2020 owing
to covid-19, the Board wishes to thank all of the Group's and
businesses' stakeholders for their understanding and patience to
date. Covid-19 will have an impact on the whole of FY21, however in
the Q3, revenues were in-line with the prior year, marginally ahead
of the Board's revised expectation. With further restrictions
announced for January 2021, revenues for the year are expected to
be in-line with the Board's modest expectations.
Overall, the Board remains optimistic and confident that the
Group has two resilient core businesses with clear growth
strategies, and the leadership and resources to deliver upon them.
With a lower cost base in place, and new customers being gained in
both businesses, once the lockdown restrictions are lifted the
businesses will be in a position to accelerate the growth that was
expected in FY21.
Finance Review
Results of continuing operations: 6 months ended 30 Sept 2020 6 months ended 30 Sept 2019
GBP000's GBP000's
---------------------------------- --------------------------- ---------------------------
External Revenue 23,877 32,423
Gross profit 8,514 13,718
Underlying adjusted EBITDA 309 2,794
Operating (loss) /profit (1,338) 437
Operating (loss) / profit % (5.6)% 1.3%
Loss before tax (3,975) (2,506)
Group revenue for the six months ended 30 September 2020 was
GBP23.9 million (2019: GBP32.4 million), GBP8.5 million (26.4%)
behind the prior year as a result of covid-19. The national
lockdown in the United Kingdom and also in Europe had a significant
impact on revenues. In Q1 (April to June) all non-essential shops
were forced to close and the hospitality sector was virtually shut.
The revenues for Q1 were GBP5.3 million (35.8%) behind the prior
year. The lockdown continued into the second quarter, and although
the revenues improved on Q1, Q2 revenues were behind the prior year
by GBP3.2 million (18.6%), reflecting some recovery in the retail
and manufacturing sectors, although the wholesale sector remained
challenging. Brighter Foods revenues were impacted by the travel
ban affecting the 'food on the go' sector, with the majority of
people working from home. Gross profit for the overall Group was
GBP8.5 million (2019: GBP13.7 million), a decline of GBP5.2m on the
prior year, also impacted by higher operational costs owing to the
changes required within the factories to have a covid-19 safe
working environment.
Underlying adjusted EBITDA for continuing operations at GBP0.3
million was behind prior year by GBP2.5 million reflecting the
lower revenue and additional covid-19 operational costs required in
the business. There were cost savings made across the Group
including in Cake Decoration, predominantly through redundancies
which will benefit the second half of the financial year. The
turnaround that started in FY20 was accelerated in FY21 to
expediate the long-term savings for the Group. Loss before tax for
the six months ended 30 September 2020 was GBP4.0 million, GBP1.5
million higher than the same period in the prior year, reflecting
the lower revenues and resulting EBITDA.
Covid-19
It is difficult to identify the true cost of covid-19 and the
shutdown, however Brighter Foods revenues were impacted by GBP4.8
million with one customer having to shut their business and
initially having a limited on-line offering. In the Cake Decoration
division, its European revenues were down by 21.8% for the half
year to September 20, with the wholesale sector down by 45.6% on
the same period.
Both businesses used the Government furlough scheme to safeguard
jobs. For the period under review, a total of GBP1.2 million was
claimed in order to maintain jobs for our employees during this
time of disruption. In addition, the Group deferred VAT (GBP1.0m)
and PAYE payments (GBP0.9m) to conserve cash during the
lockdown
period. Repayments are being made in line with the Government 'time to pay' plan.
Dividend
No dividend is proposed for the six months ended 30 September
2020 (2019: nil).
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.
In the 6 months to 30 September 2020 the deficit in the defined
benefit scheme increased by GBP0.8 million to GBP8.7 million
compared to 31 March 2020 including the provision under IFRIC14 for
the excess of contributions over the liability previously
recognised of GBP0.9 million. The plan assets increased by GBP1.1
million to GBP14.8 million and the plan liabilities are GBP23.6
million including the additional IFRIC14 liability compared to
GBP21.7 million at 31 March 2020 (see note 6).
Cash Flow
The net increase in cash and cash equivalents for the period was
GBP1.0 million. Net debt at 30 September 2020 amounted to GBP45.1
million (2019: GBP39.9 million). The increase in net debt arose
from the accrued interest on shareholder loans and the creation of
leased asset commitments following the adoption of IFRS 16. Net
debt was principally from loans and accrued interest from
shareholders of GBP29.2 million, convertible loan notes ("CLNs") at
fair value of GBP14.0 million, asset financing of GBP2.5 million,
Brighter Foods government grant of GBP0.2 million, leased asset
commitments of GBP0.9 million and revolving credit facilities of
GBP0.6 million. Cash in the bank stood at GBP2.3 million. Net debt
is calculated as total borrowings less cash and cash equivalents
(see note 8).
Divisional Business Reviews
Cake Decoration
Cake Decoration manufactures sugarpaste, marzipan, soft icings,
mallows, and caramels, under the Renshaw Professional brand and for
private label. The division also produces a range of edible
glitters, dusts, powders, food paints and pens for the sugar craft
sector, through the Rainbow Dust Colours brand. Renshaw Europe and
Renshaw Americas sell these products in their respective
territories.
6 months ended 30 Sept 2020 6 months ended 30 Sept 2019
GBP000's GBP000's
--------------------------- --------------------------- ---------------------------
External Revenue 15,319 19,922
Underlying adjusted EBITDA (637) 637
Loss before tax (1,729) (571)
External revenue is GBP15.3 million (2019: GBP19.9 million) a
decline of GBP4.6 million (23.1%). Owing to the covid-19 lockdown
imposed in the UK and across Europe, Cake Decoration was affected
in every sector versus the prior year. UK retail sales were down by
GBP0.3 million (6 %) in the first six months, the manufacturing
sector down by GBP0.5 million (20 %) and wholesale sector by GBP1.4
million (46 %). Since September, retail sales have recovered to
near pre-covid expected revenues during Q3; wholesale revenues
started to recover with its largest wholesale customer, taking
volumes of circa 80% versus the prior year but have dipped again
during the third lockdown. Manufacturing performed reasonably well
in the run up to Christmas.
The sector is also facing challenges, with pressure on revenues
in icing and marzipan driven by underlying market decline. The
revenues in Cake Decoration up to April 2020 had, outperformed the
market decline, and without the pandemic there would have been no
reason to suggest this would not continue. The sale of soft icings
is a growing market and one that Renshaw is benefitting from, with
two new blue-chip customers signed recently. The exclusive
distribution agreement signed with Decopac for the North America
market has not yet performed as expected, however this is expected
to develop in the latter part of FY21. The underlying adjusted
EBITDA loss of GBP0.6 million is a decline of GBP1.3 million on the
prior year, driven by the reduced revenues of GBP4.6 million and
the additional operating costs of running the factory in a covid-19
compliant way, including having to run the lines slower to allow
for social distancing. The restructure of the cost base continues
with exceptional costs of GBP0.3 million, to streamline the
back-office functions and secure further savings in FY21.
The business also announced the closure of the warehouse in
America, with the American customers being serviced by the United
Kingdom.
Full year revenues are anticipated to be in line with management
expectations, with ongoing cost savings to deliver benefit in
FY21.
Impairment Review
The Cake Decoration division is a core division for the Group
and is currently undergoing an operational improvement programme to
increase its margins and profitability on a sustainable basis,
be-fitting the Renshaw brand. The investments made in manufacturing
capability and the strengthening of the management team should
allow the business to grow, once the business is free of covid-19
restrictions. Plans to improve the strategic positioning, service
delivery and commercial performance of this business are in
progress. Cognisant of the impact of both covid-19 and Brexit
uncertainty on near-term profitability, an impairment charge of
GBP12.6 million was booked in FY20 annual accounts, which we
reported on last month.
Food Ingredients
Brighter Foods manufactures snack bars, both branded and own
label, targeted at the growing health and 'healthy lifestyle'
markets.
continuing operations only: 6 months ended 30 Sept 2020 6 months ended 30 Sept 2019
GBP000's GBP000's
---------------------------- --------------------------- ---------------------------
External Revenue 8,523 12,490
Underlying adjusted EBITDA 1,138 2,547
Profit before tax 724 1,552
The period saw a decrease in revenue of GBP4.0 million (31.8%),
with underlying adjusted EBITDA at GBP1.1 million (2019: GBP2.5
million), GBP1.4 million behind prior year. Brighter Foods has been
impacted by covid-19 with its customers predominantly in the health
and 'food on the go' sectors, which have had to close under
Government directed lockdowns or been severely impacted owing to
the requirement for people to work from home and not travel. Since
September, Brighter Foods traded broadly in-line with last year
during Q3 and, despite the current lockdown, it is anticipated that
Q4 should be ahead of last year's.
The management team has worked to reduce the impact of the lower
revenues and reduce costs where possible. Profit before tax of
GBP0.7 million (2019: GBP1.6 million) is GBP0.8 million behind the
prior year.
A review of the intangible assets in Food Ingredients has
resulted in no requirement for any impairment (2019: Nil).
Head Office
The Group functions have further reduced and now comprise only
Finance, in addition to the plc Board.
6 months ended 30 Sept 2020 6 months ended 30 Sept 2019
GBP000's GBP000's
--------------------------- --------------------------- ---------------------------
External Revenue 35 11
(192)
Underlying adjusted EBITDA (22867 (390)
Loss before tax (2,970) (3,487)
The underlying adjusted EBITDA loss was GBP0.2 million lower
than the prior year. The loss before tax of GBP3.0 million reflects
the reduction in significant costs in the period.
This report was approved by the Board on 25 January 2021 and is
signed on its behalf by:
Mike Holt
Executive Chairman
Independent review report to Real Good Food plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2020 which comprises the Consolidated
Statement of Comprehensive Income, Consolidated Statement of
Financial Position, Consolidated Statement of Changes in Equity,
Consolidated Cash Flow Statement and related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2020 is not prepared, in all material respects, in
accordance with the rules of the London Stock Exchange for
companies trading securities on AIM.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
Manchester
United Kingdom
25 January 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated Statement of Comprehensive Income
unaudited unaudited audited
Notes 6 months ended 6 months ended 12 months ended
30 Sept 2020 30 Sept 2019 31 Mar 2020
GBP000's GBP000's GBP000's
-------------------------------------------------- ----- -------------- -------------- ---------------
Revenue 23,877 32,423 66,576
(15,363)
Cost of sales ) (18,705) (39,595)
-------------------------------------------------- ----- -------------- -------------- ---------------
Gross profit 8,514 13,718 26,981
Distribution expenses (1,464) (1,629) (3,439)
Administrative expenses (7,989) (11,105) (24,132)
Impairment charge on goodwill 9 - - (12,622)
Impairment charge on tangible fixed assets - - (287)
Significant items 7 (399) (547) (1,031)
-------------------------------------------------- ----- -------------- -------------- ---------------
Operating (loss) / profit (1,338) 437 (14,530)
Finance costs (2,546) (2,855) (5,448)
Other finance costs (91) (88) (169)
-------------------------------------------------- ----- -------------- -------------- ---------------
Loss before tax (3,975) (2,506) (20,147)
Income tax credit / (expense) 17 (3) 1,692
-------------------------------------------------- ----- -------------- -------------- ---------------
Net loss (3,958) (2,509) (18,455)
-------------------------------------------------- ----- -------------- -------------- ---------------
Attributable to:
Owners of the parent (4,071) (2,860) (19,121)
Non-controlling interests 113 351 666
-------------------------------------------------- ----- -------------- -------------- ---------------
Net loss (3,958) (2,509) (18,455)
-------------------------------------------------- ----- -------------- -------------- ---------------
Items that will not be reclassified to profit or
loss
Foreign exchange differences on translation of
subsidiaries (25) (2) (106)
Actuarial loss on defined benefit plan (708) (840) (176)
Pension provision IFRIC 14 6 - (517) (921)
Tax relating to items which will not be
reclassified 133 231 215
-------------------------------------------------- ----- -------------- -------------- ---------------
Other comprehensive loss (600) (1,128) (988)
-------------------------------------------------- ----- -------------- -------------- ---------------
Total comprehensive loss for the period (4,558) (3,637) (19,443)
-------------------------------------------------- ----- -------------- -------------- ---------------
Attributable to:
Owners of the parent (4,671) (3,988) (20,109)
Non-controlling interests 113 351 666
-------------------------------------------------- ----- -------------- -------------- ---------------
Total comprehensive loss for the period (4,558) (3,637) (19,443)
-------------------------------------------------- ----- -------------- -------------- ---------------
30 Sept 2020 30 Sept 2019 31 Mar 2020
-------------------------------------------------- ----- -------------- -------------- ---------------
Basic and diluted loss per share - total
operations 3 (4.09)p (2.88)p (19.22)p
Basic and diluted loss per share - continuing
operations (4.09)p (2.88)p (19.22)p
Consolidated Statement of Financial Position
unaudited unaudited audited
Notes 30 Sept 2020 30 Sept 2019 31 Mar 2020
GBP000's GBP000's GBP000's
---------------------------------------------------------- ----- ------------ ------------ -----------
NON-CURRENT ASSETS
Goodwill 9 37,753 50,375 37,753
Other intangible assets 35 864 61
Tangible fixed assets 15,252 17,632 16,199
Investments 81 81 81
Deferred tax asset 1,658 1,490 1,508
---------------------------------------------------------- ----- ------------ ------------ -----------
54,779 70,442 55,602
---------------------------------------------------------- ----- ------------ ------------ -----------
CURRENT ASSETS
Inventories 6,568 6,637 6,823
Trade and other receivables 9,576 10,426 10,232
Current tax assets 182 5 182
Cash collateral 215 215 215
Cash and cash equivalents 2,341 1,178 1,363
---------------------------------------------------------- ----- ------------ ------------ -----------
18,882 18,461 18,815
---------------------------------------------------------- ----- ------------ ------------ -----------
Assets in disposal groups classified as held for sale 10 1,148 148 1,148
---------------------------------------------------------- ----- ------------ ------------ -----------
TOTAL ASSETS 74,809 89,051 75,565
---------------------------------------------------------- ----- ------------ ------------ -----------
CURRENT LIABILITIES
Trade and other payables 11,366 9,096 9,097
Borrowings 8 1,433 2,402 2,717
Lease liabilities 8 267 - 390
NCI put option 1 4,420 2,377 2,900
---------------------------------------------------------- ----- ------------ ------------ -----------
17,486 13,875 15,104
---------------------------------------------------------- ----- ------------ ------------ -----------
NON-CURRENT LIABILITIES
Borrowings 8 45,247 38,719 43,059
Lease liabilities 8 495 - 567
Long-term liabilities - NCI put option 1 - 2,705 1,520
Derivative liability - Convertible Loan Notes 6 278 -
Deferred tax liabilities 257 1,881 223
Retirement benefit obligation 6 8,735 8,615 7,936
---------------------------------------------------------- ----- ------------ ------------ -----------
54,740 52,198 53,305
---------------------------------------------------------- ----- ------------ ------------ -----------
Liabilities directly associated with assets in disposal - - -
groups classified as held for sale
---------------------------------------------------------- ----- ------------ ------------ -----------
TOTAL LIABILITIES 72,226 66,073 68,409
---------------------------------------------------------- ----- ------------ ------------ -----------
NET ASSETS 2,583 22,978 7,156
---------------------------------------------------------- ----- ------------ ------------ -----------
EQUITY
Share capital 1,991 1,991 1,991
Share premium account 3,294 3,294 3,294
Share option reserve 188 219 203
38
Other reserve (4,796) (4,796) (4,796)
Foreign exchange translation reserve (150) (21) (125)
Retained earnings (863) 19,800 3,783
---------------------------------------------------------- ----- ------------ ------------ -----------
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT (336) 20,487 4,350
Non-controlling interest 2,919 2,491 2,806
---------------------------------------------------------- ----- ------------ ------------ -----------
TOTAL EQUITY 2,583 22,978 7,156
---------------------------------------------------------- ----- ------------ ------------ -----------
Consolidated Statement of Changes in Equity
For the six Issued Share Share Other Foreign Retained Total Non-Controlling Total
months ended 30 Share Premium Option Reserve Exchange Earnings Interest Equity
September 2020 Capital Account Reserve Translation
(unaudited) Reserve
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------- -------- -------- -------- -------- ----------- -------- -------- --------------- --------
Balances at 1
April 2020 1,991 3,294 203 (4,796) (125) 3,783 4,350 2,806 7,156
Total
comprehensive
loss for the
period
Loss for the
period - - - - - (4,071) (4,071) 113 (3,958)
Other
comprehensive
loss for the
period (25) (575) (600) - (600)
-------- -------- -------- -------- ----------- -------- -------- --------------- --------
Total
comprehensive
loss for the
period - - - - (25) (4,646) (4,671) 113 (4,558)
-------- -------- -------- -------- ----------- -------- -------- --------------- --------
Transactions
with owners of
the Group,
recognised
directly in
equity
Shares issued - - - - - - - - -
in the period, - - - - - - - -
net of costs
Share based - (15) - - - (15) - (15)
payments - - - - - - - - -
-------- -------- -------- -------- ----------- -------- -------- --------------- --------
Total
contributions
by and
distributions
to owners of
the Group - - (15) - - - (15) - (15)
-------- -------- -------- -------- ----------- -------- -------- --------------- --------
Balances at 30
September 2020 1,991 3,294 188 (4,796) (150) (863) (336) 2,919 2,583
-------- -------- -------- -------- ----------- -------- -------- --------------- --------
For the six Issued Share Share Other Foreign Retained Total Non-Controlling Total
months ended Share Premium Option Reserve Exchange Earnings Interest Equity
30 September Capital Account Reserve Translation
2019 (audited) Reserve
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------- -------- -------- -------- --------- ----------- -------- -------- --------------- --------
Balances at 1
April 2019 1,987 3,286 238 (4,796) (19) 23,786 24,482 2,140 26,622
Total
comprehensive
loss for the
period
Loss for the
period - - - - - (2,860) (2,860) 351 (2,509)
Other
comprehensive
loss for the
period - - - - (2) (1,126) (1,128) - (1,128)
-------------- -------- -------- -------- --------- ----------- -------- -------- --------------- --------
Total
comprehensive
loss for the
period - - - - (2) (3,986) (3,988) 351 (3,637)
-------------- -------- -------- -------- --------- ----------- -------- -------- --------------- --------
Transactions
with owners of
the Group,
recognised
directly in
equity
Shares issued
in the
period, net
of costs
year period 4 8 - - - - 12 - 12
Share based
payments - - (19) - - - (19) - (19)
Total
contributions
by and
distributions
to owners of
the Group 4 8 (19) - - - (7) - (7)
-------------- -------- -------- -------- --------- ----------- -------- -------- --------------- --------
Balances at 30
September
2019 1,991 3,294 219 (4,796) (21) 19,800 20,487 2,491 22,978
-------------- -------- -------- -------- --------- ----------- -------- -------- --------------- --------
For the twelve Issued Share Share Other Foreign Retained Total Non-Controlling Total
months ended Share Premium Option Reserve Exchange Earnings Interest Equity
31 March 2020 Capital Account Reserve Translation
(audited) Reserve
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------- -------- --------- -------- -------- ------------------ -------- -------- --------------- --------
Balances at 1
April 2019 1,987 3,286 238 (4,796) (19) 23,786 24,482 2,140 26,622
Total
comprehensive
loss for the
period
Loss for the
year - - - - - (19,121) (19,121) 666 (18,455)
Other
comprehensive
loss for the
period - - - - (106) (882) (988) - (988)
-------------- -------- --------- -------- -------- ------------------ -------- -------- --------------- --------
Total
comprehensive
loss for the
period - - - (106) (20,003) (20,109) 666 (19,443)
-------------- -------- --------- -------- -------- ------------------ -------- -------- --------------- --------
Transactions
with owners of
the Group,
recognised
directly in
equity
Shares issued
in the year
year period 4 8 - - - - 12 - 12
Share based
payments - - (35) - - - (35) - (35)
Total
contributions
by and
distributions
to owners of
the Group 4 8 (35) - - - (23) - (23)
-------------- -------- --------- -------- -------- ----- ----------- ------------------ --------------- --------
Balances at 31
March 2020 1,991 3,294 203 (4,796) (125) 3,783 4,350 2,806 7,156
-------------- -------- --------- -------- -------- ----- ----------- ------------------ --------------- --------
Consolidated Cashflow Statement
unaudited unaudited audited
6 months ended 6 months ended 12 months ended
Notes 30 Sept 2020 30 Sept 2019 31 Mar 2020
GBP000's GBP000's GBP000's
-------------------------------------------------------------- ----- -------------- -------------- ---------------
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Loss before taxation (3,975) (2,506) (20,147)
Finance and other finance costs 2,637 2,943 5,617
FX movement - - (115)
Goodwill impairment charge - - 12,622
Impairment charge on fixed assets - - 287
Share based payment credit (15) (19) (35)
Past service cost on pension - - 16
Fair value of derivative liability 6 (16) (294)
Fair value of NCI put option - 85 (577)
Depreciation of property, plant, and equipment 1,223 1,075 2,375
Amortisation of intangibles 25 735 1,538
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Operating Cash Flow (99) 2,297 1,287
Decrease/(increase) in inventories 255 203 17
Decrease/(increase) in receivables 870 (1,811) (2,327)
Pension contributions 6 (250) (287) (733)
Increase/(decrease) in payables 2,278 (3,280) 1,279
Decrease in cash collateral - 1,785 1,785
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Cash from/ (used in) operations 3,054 (1,093) 1,308
Income taxes paid - 50 52
Interest paid - (86) (189)
Interest on lease liabilities - - (27)
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Net cash inflow/(outflow) from operating activities 3,054 (1,129) 1,144
-------------------------------------------------------------- ----- -------------- -------------- ---------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment 73 (1,374) (1,819)
Disposal of discontinued business, net of cash disposed of - - 550
Net cash inflow/(outflow) from investing activities 73 (1,374) (1,269)
-------------------------------------------------------------- ----- -------------- -------------- ---------------
CASH FLOW FROM FINANCING ACTIVITIES
Shares issued in period, net of transaction costs - 12 4
Inflow/(repayment) of loans 8 - 3,420 3,420
(Repayment)/inflow of Investor Loans 8 (9) (3,059) (4,519)
Repayment of borrowings - - (504)
Drawdowns on revolving credit facilities 8 11,994 13,551 28,261
Repayments of revolving credit facilities 8 (13,279) (11,514) (26,409)
Repayment of other loans (841) (1,636) (1,636)
Net cash inflow/(outflow) from financing activities 2,135 774 (1,383)
-------------------------------------------------------------- ----- --------------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 992 (1,729) (1,508)
-------------------------------------------------------------- ----- -------------- -------------- ---------------
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period 1,363 2,909 2,909
Effects of currency translation on cash and cash
equivalents (14) (2) (38)
Net movement in cash and cash equivalents 992 (1,729) (1,508)
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Cash and cash equivalents at end of period 2,341 1,178 1,363
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Notes to the Interim Statements
1. Preparation of the interim statements
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).
The principal activities of the Group are the sourcing,
manufacture, marketing and distribution of food and industrial
ingredients.
The interim report will be posted on the Company's website and
will be released via the Stock Exchange. Further copies of the
interim report and Annual Report and Accounts may be obtained from
the address above.
Basis of preparation
These condensed consolidated interim statements are compliant
with the recognition and measurement principles of International
Financial Reporting Standards (IFRS) as adopted by the European
Union and interpretations issued by the International Financial
Reporting Interpretations Committee (IFRIC) but does not include
all disclosures required by IAS 34. The unaudited financial
information for the six months ended 30 September 2020 and 30
September 2019 are not statutory accounts and as such, have not
been audited, but have been reviewed by our auditors. The
comparative financial information for the year ended 31 March 2020
included within this report does not constitute the full statutory
accounts for that period. The statutory Annual Report and Accounts
for 2020 have been filed with the Registrar of Companies. The
Independent Auditor's Report on that Annual Report and Accounts for
2020 was (i) qualified - due to Covid-19 restrictions the auditor
was not able to observe the counting of physical inventories at 31
March 2020 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 were 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.
Going Concern
The Directors have considered the Group's business activities
together with the factors likely to affect its planned future
performance with respect to covid-19, including the third lockdown
announced in December 2020, and Brexit and are taking appropriate
action.
The forecasts, agreed with the businesses, consider reasonable
possible changes in trading performance and these assumptions have
been projected and shared with the Company's advisors. Having
already traded through two lockdowns, both businesses are more
aware of the impact with their own customer base and sectors in
which they trade.
The Directors considered the following sensitised scenarios:
Scenario 1: Reduction in revenue of c14% and
Scenario 2: Reduction in EBITDA of c30%
In both stressed scenarios the group has sufficient liquidity
headroom for at least the next 12 months, with lowest headroom at
August 2021, when cash becomes tighter coinciding with the stock
build for Christmas and the expected NCI 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
RGF has used the Government job retention scheme during the
period with GBP1.2m claimed.
The Group will take action as appropriate, should sales not be
in line with expectations.
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 revised forecasts, based
on sensitised versions of those submitted by the businesses,
consider various scenarios including a significant reduction in
sales with a delay in reducing stockholding and possible changes in
trading performance. These assumptions have been projected which
show that the business is able to operate with a sufficient level
of headroom, providing all current debt facilities remain in
place.
The banking covenants in place being positive EBITDA and
positive tangible net worth are not breached on the stressed
scenarios referred to above.
The principal shareholders of the Group have shown considerable
support for the working capital requirements. The three major
shareholders finalised an amendment deed (amended on 2 December
2020) 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, with no change to the
interest rate payable by the company. The agreement amends the
Convertible Loan Notes ('CLNs') such that the annual return on the
CLNs will reduce from 30% per annum to 12% per annum, effective
from 31 December 2020.
Having carefully considered the liquidity of the Group in line
with the current strategy and future performance, the Directors
have a reasonable expectation that the Group have adequate
resources to continue in operational existence for the next 12
months. Looking beyond that horizon, the Board is fully conscious
of the significant potential cash demands from the repayment of
shareholder loans, for example, and such matters will receive
appropriate consideration, of course, well in advance of the due
dates.
Assets held for sale
Following the sale of the trade and assets of Real Good Food
Ingredients Limited, the Group was left with an office building
near Bristol, which was no longer required. The property has been
advertised for sale with local estate agents since July 2018, and
we hope to find a suitable buyer.
As such, the asset is classified as held for sale within the
consolidated statement of financial position at 30 September
2020.
Following the restructure of the RGF Group Head Office, the
property at Wavertree, Liverpool is no longer required, with
remaining staff relocating to the Crown Street property. The
property is currently advertised for sale.
The asset is classified as held for sale within the consolidated
statement of financial position at 30 September 2020.
Non-Controlling interest put option
Following the purchase of Brighter Foods Limited, the Group
entered into a shareholder agreement regarding the management stake
whereby the senior management of Brighter Foods Limited can elect
to sell 50% of the management stake to the Group after March 2020,
and 50% after March 2021. The consideration for the entire
management stake will be based upon an agreement valuation formula,
linked to profit, cash and capital expenditure of Brighter Foods
Limited in the years ending 31 March 2020 and 31 March 2021, and is
capped at GBP8.0 million in aggregate.
Following agreement with the minority shareholders in Brighter
Foods, a Deed of Amendment was entered into on 19 October 2020
amending the terms of the shareholder agreement dated 4 April 2017
('SHA'). The Board of RGF believes 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 had become exercisable (the "2020 Option"). The
price to be paid by the Group based on EBIT and cash flows of
Brighter for the year ended 31 March 2020 is approximately GBP2.8m
(the "2020 Payment").
Pursuant to the Deed the Minority Shareholders have agreed,
amongst other things, 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 for the year ending 31 March 2021 (the
"2021 Option"). 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 agreed to pay the Minority Shareholders GBP1.0
million on the date the Deed was entered into and a further GBP0.5
million was paid on 20 November 2020. The outstanding balance of
the 2020 Payment, approximately GBP1.3 million, has been deferred
until the exercise of the 2021 Option. Interest becomes payable on
the GBP1.3 million at the rate of 10% from March 2021.
The present value of the amount payable in respect of the put
option of GBP4.4 million (2019: GBP5.1 million) is recognised in
current liabilities and equity.
2. Segment analysis
Geographical Segments
The Group earns revenue from countries outside the United
Kingdom, these represent 25.6% of the total revenue of the Group to
30 September 2020 (6 months to 30 September 2019: 19.7%). The
change in the percentage is a result of the sales to America not
having the same impact as the UK and the European sales. Both
divisions have overseas sales.
Business segments
The divisional structure reflects the management teams in place
and also ensures all aspects of trading activity have the specific
focus that they need in order to achieve our growth plans.
The Group operates in two divisions, Cake Decoration and Food
Ingredients. The Head Office finance function provide support to
the divisions in varying scale.
Unaudited segment analysis for these divisions for the six
months ended 30 September 2020 is provided below, along with
reconciliations to the underlying adjusted EBITDA:
The Group operates in two main divisions: Cake Decoration and
Food Ingredients. The Head Office consists of Finance and the plc
Board. The segment analysis for the six months ended 30 September
2020 is:
Cake Decoration Food Ingredients Head Office Total Group
GBP000's GBP000's GBP000's GBP000's
------------------------------------------------------- --------------- ---------------- ----------- -----------
Total Revenue 17,039 8,523 35 25,597
Intercompany Sales (1,720) - - (1,720)
------------------------------------------------------- --------------- ---------------- ----------- -----------
External Revenue 15,319 8,523 35 23,877
Cost of sales (9,641) (5,699) (23) (15,363)
------------------------------------------------------- --------------- ---------------- ----------- -----------
Gross Profit 5,678 2,824 12 8,514
Distribution expenses (1,265) (177) (22) (1,464)
Administrative expenses (5,828) (1,886) (275) (7,989)
Significant items and impairments (295) (38) (66) (399)
------------------------------------------------------- --------------- ---------------- ----------- -----------
Operating (loss)/profit after impairment and
significant items (1,710) 723 (351) (1,338)
Finance costs (19) 1 (2,528) (2,546)
Other finance costs - - (91) (91)
------------------------------------------------------- --------------- ---------------- ----------- -----------
(Loss)/profit before tax (1,729) 724 (2,970) (3,975)
Income tax credit - - 17 17
------------------------------------------------------- --------------- ---------------- ----------- -----------
Net (loss)/profit (1,729) 724 (2,953) (3,958)
------------------------------------------------------- --------------- ---------------- ----------- -----------
Reconciliation of operating (loss)/profit to underlying Cake Decoration Food Ingredients Head Office Total Group
adjusted EBITDA
GBP000's GBP000's GBP000's GBP000's
--------------------------------------------------------- --------------- ---------------- ----------- -----------
Operating (loss)/profit (1,710) 723 (351) (1,338)
Significant items and impairments 295 38 66 399
Depreciation 760 375 88 1,223
Amortisation 18 2 5 25
--------------------------------------------------------- --------------- ---------------- ----------- -----------
Underlying adjusted EBITDA (637) 1,138 (192) 309
--------------------------------------------------------- --------------- ---------------- ----------- -----------
Comparative unaudited segment analysis for the six months ended
30 Sept 2019 is:
Cake Decoration Food Ingredients Head Office Total Group
GBP000's GBP000's GBP000's GBP000's
---------------------------------- --------------- ---------------- ----------- -----------
Total Revenue 23,563 12,490 11 36,064
Intercompany Sales (3,641) - - (3,641)
---------------------------------- --------------- ---------------- ----------- -----------
External Revenue 19,922 12,490 11 32,423
Cost of sales (11,100) (7,605) - (18,705)
---------------------------------- --------------- ---------------- ----------- -----------
Gross Profit 8,822 4,885 11 13,718
Distribution expenses (1,393) (236) - (1,629)
Administrative expenses (7,484) (3,097) (524) (11,105)
Significant items and impairments (426) - (121) (547)
---------------------------------- --------------- ---------------- ----------- -----------
Operating (loss)/profit (481) 1,552 (634) 437
Finance costs (90) - (2,765) (2,855)
Other finance costs - - (88) (88)
---------------------------------- --------------- ---------------- ----------- -----------
(Loss)/profit before tax (571) 1,552 (3,487) (2,506)
Income tax expense
expense/(credit) - - (3) (3)
---------------------------------- --------------- ---------------- ----------- -----------
Net (loss)/profit (571) 1,552 (3,490) (2,509)
---------------------------------- --------------- ---------------- ----------- -----------
Reconciliation of operating (loss)/profit Cake Decoration Food Ingredients Head Office Total Group
to underlying adjusted EBITDA
GBP000's GBP000's GBP000's GBP000's
------------------------------------------- --------------- ---------------- ----------- -----------
Operating (loss)/profit (481) 1,552 (634) 437
Significant items and impairments 426 - 121 547
Depreciation 692 293 90 1,075
Amortisation - 702 33 735
------------------------------------------- --------------- ---------------- ----------- -----------
Underlying adjusted EBITDA 637 2,547 (390) 2,794
------------------------------------------- --------------- ---------------- ----------- -----------
Comparative audited segment analysis for the twelve months ended
31 Mar 2020 is:
Cake Decoration Food Ingredients Head Office Total Group
GBP000's GBP000's GBP000's GBP000's
------------------------------------------------- --------------- ---------------- ----------- -----------
Total Revenue 48,621 25,333 - 73,954
Intercompany Sales (7,378) - - (7,378)
------------------------------------------------- --------------- ---------------- ----------- -----------
External Revenue 41,243 25,333 66,576
Cost of sales (23,615) (15,980) - (39,595)
------------------------------------------------- --------------- ---------------- ----------- -----------
Gross Profit 17,628 9,353 - 26,981
Distribution expenses (2,995) (444) - (3,439)
Administrative expenses (14,353) (5,974) (3,805) (24,132)
Significant items and impairments (13,703) (9) (228) (13,940)
------------------------------------------------- --------------- ---------------- ----------- -----------
Operating (loss)/profit after impairment and
significant items (13,423) 2,926 (4,033) (14,530)
Finance costs (198) (3) (5,247) (5,448)
Other finance costs - - (169) (169)
------------------------------------------------- --------------- ---------------- ----------- -----------
(Loss)/profit before tax (13,621) 2,923 (9,449) (20,147)
Income tax credit - - 1,692 1,692
------------------------------------------------- --------------- ---------------- ----------- -----------
Net (loss)/profit (13,621) 2,923 (7,757) (18,455)
------------------------------------------------- --------------- ---------------- ----------- -----------
Reconciliation of operating (loss)/profit to Cake Decoration Food Ingredients Head Office Total Group
underlying adjusted EBITDA
GBP000's GBP000's GBP000's GBP000's
--------------------------------------------------- --------------- ---------------- ----------- -----------
Operating (loss)/profit (13,423) 2,926 (4,033) (14,530)
Significant items and impairments 13,703 9 228 13,940
Depreciation 1,521 667 187 2,375
Amortisation 34 1,379 125 1,538
--------------------------------------------------- --------------- ---------------- ----------- -----------
Underlying adjusted EBITDA 1,835 4,981 (3,493) 3,323
--------------------------------------------------- --------------- ---------------- ----------- -----------
3. Earnings per ordinary 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 at the end
of the period.
unaudited unaudited audited
6 months ended 6 months ended 12 months ended
30 Sept 2020 30 Sept 2019 31 Mar 2020
------------------------------------------------------------------- -------------- -------------- ---------------
Loss after tax attributable to ordinary shareholders (GBP'000s) (4,071) (2,860) (19,121)
Weighted average number of shares in issue for basic EPS ('000s) 99,564 99,445 99,505
Employee share options & Convertible loan notes (CLNs) ('000s) 215,710 149,552 202,401
Weighted average number of shares in issue for diluted EPS ('000s) 219,276 248,997 301,906
------------------------------------------------------------------- -------------- -------------- ---------------
Basic and diluted loss per share (4.09)p (2.88)p (19.22)p
------------------------------------------------------------------- -------------- -------------- ---------------
For the six months to 30 September 2020, the weighted average
number of shares in issue was 99,564,430 and the number of options
outstanding was 242,203,550 (including CLNs) of which the weighted
average was 215,710,330. If these were all exercised the cash
raised would be equivalent to that which would be raised by issuing
216,679,761 shares at the average share price for this period.
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 antidilutive as they decrease the loss per share.
Therefore, diluted EPS is the same as basic EPS.
4. Dividends
The Directors are not recommending an interim dividend (2019:
nil).
5. Taxation
The charge for taxation is based on the results for the period
and takes into account taxation deferred because of timing
differences between the treatment of certain items for taxation and
accounting purposes.
Provision is made in full for taxation deferred in respect of
timing differences that have originated but not reversed by the
balance sheet date, except for gains on disposal of fixed assets
which will be rolled over into replacement assets. No provision is
made for taxation on permanent differences. Deferred tax is not
discounted.
6. Pension arrangements
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 Group operates one defined benefit scheme, the
Napier Brown Retirement Benefits Scheme. The assets of the scheme
are held separately from those of the Group in an independently
administered fund. The contributions made by the employer over the
six-month period have been GBP249,999 (2019: GBP286,651), having
deferred the May, June and July 2020 payments owing to covid-19.
These are to be repaid over a six-month period starting April
2021.
Assumptions
The assets of the scheme have been included at market value and
the liabilities have been calculated using the following principal
actuarial assumptions:
unaudited unaudited audited
30 Sept 2020 30 Sept 2019 31 Mar 2020
% per annum % per annum % per annum
--------------------------------------- ------------ ------------ -----------
Rate of increase in pension payment 3.00 3.10 2.70
Discount rate 1.50 1.75 2.30
Inflation assumption 3.00 3.30 2.70
Revaluation rate for deferred pensions 2.50 2.30 2.20
-----------
Scheme deficit
The fair value of the assets in the scheme and the present value
of the liabilities in the scheme are:
unaudited unaudited audited
30 Sept 2020 30 Sept 2019 31 Mar 2020
GBP'000s GBP'000s GBP'000s
------------------------------------ ------------ ------------ -----------
Total fair value of assets 14,831 15,137 13,735
Present value of scheme liabilities (23,566) (23,235) (20,750)
------------------------------------ ------------ ------------ -----------
Effect of IFRIC14 - (517) (921)
------------------------------------ ------------ ------------ -----------
(Deficit) in the scheme (8,735) (8,615) (7,936)
------------------------------------ ------------ ------------ -----------
The scheme is a closed scheme and therefore under the projected
unit method the current service cost would be expected to increase
as the members of the scheme approach retirement.
The present value of contributions payable exceeds the net
liability and in accordance with IFRIC14, we have recognised this
additional liability.
7. Significant Items and Impairments
The Group's underlying profit figure excludes a number of items
which are material or non-recurring and are detailed separately to
ensure the underlying operating performance of the business is
clearly visible, without the distortion of these costs. The
significant costs incurred by the Group, are summarised below:
unaudited unaudited audited
6 months ended 6 months ended 12 months ended
30 Sept 2020 30 Sept 2019 31 Mar 2020
GBP000's GBP000's GBP000's
--------------------------------------------------------------- -------------- -------------- ---------------
Change in value of convertible loan notes derivative liability - - 294
Professional fees in relation to financing - (121) -
Management restructuring (399) (426) (1,325)
Total Significant Items and Impairments (399) (547) (1,031)
--------------------------------------------------------------- -------------- -------------- ---------------
8. Borrowings
The table below shows the movement on the Borrowings over the
past 12 months.
unaudited unaudited audited
30 Sept 2020 30 Sept 2019 31 Mar 2020
GBP000's GBP000's GBP000's
------------------------------------------- ------------ ------------ -----------
Revolving credit facility 568 2,043 1,853
Investor loans 29,210 24,106 28,336
Other loans 179 - 102
Convertible loan notes 14,036 10,857 12,341
Asset finance 2,483 3,348 2,916
Lease liabilities (IFRS 16) 762 514 957
Government grants 204 253 228
Total Borrowings 47,442 41,121 46,733
------------------------------------------- ------------ ------------ -----------
Amount due for settlement within 12 months 1,700 2,402 3,107
Amount due for settlement after 12 months 45,742 38,719 43,626
------------------------------------------- ------------ ------------ -----------
Convertible Loan Notes
The Company had issued loan notes with a conversion price of 5
pence to its major shareholders, NB. Ingredients Limited ("Napier
Brown"), Omnicane International Investors Limited ("Omnicane") and
funds managed by Downing LLP ("Downing") totalling GBP8.8 million
during 2018. The loans were due to be repaid on 17 May 2021,
however an agreement was made with the three major shareholders on
the 2 December 2020 extending the repayment date to 19 May 2022. In
addition, the Deed amends the minimum annual return on the CLNs
from 30% per annum to 12% per annum effective from 31 December
2020. On maturity, unless the convertible loan notes are converted
into ordinary shares, a redemption premium fee will be payable.
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 30 September
2020 the derivative liability amounted to GBP0.006 million (2019:
GBP0.3 million).
Investor Loans
The repayment date of the investor loans was amended on the 2
December 2020. All loans, including the Convertible Loan Notes, are
now repayable in full on 19 May 2022. A small amount of quarterly
interest continues to be repaid to Downing LLP.
Financing
Following the Group's refinancing in August 2019 with Leumi ABL
Limited securing a total credit facility of GBP8.87 million, in
relation to the impact of covid-19 and the Group's measures to
conserve cash, the Group has increased its receivables facility
with Leumi ABL Limited by a further GBP2.0 million. The total
credit facility provided by Leumi now amounts to GBP10.87
million.
The increased facility is secured against debtors in the Group's
Brighter Foods business and has been provided on the same terms as
the original receivables facility as announced on 23 August
2019.
9. Goodwill
A goodwill impairment exercise was undertaken. Each cash
generating unit was assessed for its recoverable amount based upon
the higher of fair value less costs of disposal, and value-in-use
calculations. The cashflows used in the value-in-use calculation
are EBITDA (adjusted) less capital expenditure based upon the
latest Board approved forecasts in respect of the following three
years. The discount rate applied is 10.0% (Mar 19: 10.0%) based on
the market calculated weighted average cost of capital for similar
companies. The long-term growth assumptions reflect a 5-year period
with a terminal value applied to the fifth year. The impairment
review shows that no impairment is required for the goodwill in the
Cake Decoration segment (2019: nil).
Sensitivity Analysis
An illustration of the sensitivity to reasonable possible
changes in the discount rate assumption or the 3-year planned
EBITDA in Cake Decorations only are shown below:
-- An increase of 0.5% in the weighted cost of capital of 10.0%
to 10.5% would cause an impairment on the carrying value of
goodwill of GBP1.1m in Cake Decorations.
-- Applying a 10% reduction to the planned EBITDA in FY22 and
subsequent years would cause an impairment on the carrying value of
goodwill of GBP3.2m in Cake Decorations.
unaudited unaudited audited
30 Sept 2020 30 Sept 2019 31 Mar 2020
GBP000's GBP000's GBP000's
--------------- ------------ ------------ -----------
Total Goodwill 37,753 50,375 37,753
--------------- ------------ ------------ -----------
10. Assets classed as held for sale
The group owns an office building near Bristol, previously used
by a business sold in the year to 31 March 2019. The building has
been put up for sale and is classed as held for sale within the
consolidated statement of financial position at 30 September
2020.
Following the restructure of the RGF Group Head Office, the
property in Wavertree, Liverpool is no longer required. The
property is currently advertised for sale. The asset is within the
Head office operating segment. The asset is classified as held for
sale within the consolidated statement of financial position as at
30 September 2020.
unaudited unaudited audited
30 Sept 2020 30 Sept 2019 31 Mar 2020
GBP000's GBP000's GBP000's
--------------------------------- ------------ ------------ -----------
Property near Bristol 148 148 148
Property in Wavertree, Liverpool 1,000 - 1,000
------------
Assets held for sale 1,148 148 1,148
--------------------------------- ------------ ------------ -----------
11. Contingent Liability
In common with comparable food groups, the Group is involved in
disputes in the ordinary course of business which may give rise to
claims. Provision representing the known cost of defending and
concluding claims is made in the interim statements in accruals as
part of other payables for claims where costs are likely to be
incurred.
The Group carries a wide range of insurance cover and no
separate disclosure is made of the detail of claims or the costs
covered by insurance. There have been no further claims raised
since the publication of the FY20 Annual Accounts.
There are two claims disclosed:
The Group received communication from the liquidators of Five
Star Fish Limited (FSF), claiming repayment of GBP610k in relation
to a debt allegedly owed by RGF to FSF. Having taken legal advice,
the Directors are of the view that this is not a valid claim
against the Company and accordingly no provision has been made
within the accounts.
A legal claim was received by RGF from a third party. Having
taken legal advice, the Directors, consider the claim to be
spurious and accordingly no provision has been made within the
accounts.
12. Post period end
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 March
2020.
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), finalised an amendment deed
(amended on 2 December 2020) 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
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 31 December 2020. Amounts due in respect of the period up
to, and including, 31 December 2020 remain unchanged. For avoidance
of doubt, the redemption premium on the Loan Note 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
IR LELLLFFLFBBV
(END) Dow Jones Newswires
January 26, 2021 02:00 ET (07:00 GMT)
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