TIDMRGD
RNS Number : 3832M
Real Good Food PLC
21 September 2021
21 September 2021
Real Good Food plc
("RGF" or "the Group")
Final Results for the Year Ended 31 March 2021
Overview
Financial highlights
-- Revenue from continuing businesses decreased by 9.5% to
GBP37.3 million (2020: GBP41.2 million), in a year affected by
covid-19.
-- The Group delivered an adjusted underlying EBITDA* on
continuing businesses of GBP0.2 million (2020: loss of GBP1.6
million), despite the impact of covid-19 on the continuing
business.
-- Cake Decoration, the Group's continuing business, was
profitable (before depreciation, amortisation and significant
items) and generated an adjusted EBITDA* of GBP0.8 million (2020:
GBP1.8 million).
-- Central costs reduced significantly by GBP2.9 million to
GBP0.6 million (2020: GBP3.5 million).
-- Net debt significantly reduced post year end, following the
sale of Brighter Foods in May 2021:
- Year-end net debt of GBP48.8 million (2020: GBP45.4 million).
- Following the sale of Brighter Foods, net debt was reduced by GBP26.4 million.
-- The Board renegotiated interest rates on convertible loan
notes to a simple 12% per annum with effect from 1 January 2021,
and in September 2021 extended the redemption dates to 2023.
-- The shareholder loans were extended in September 2021 to be repayable in May 2023.
Operational highlights
-- Brighter Foods was sold to The Hut Group (THG) on 11 May 2021
for a cash consideration of GBP43 million. The sale price broadly
equated to 8.6 times FY20 EBITDA and 11.7 times (unaudited) EBITDA
for the 12 months ended 31 March 2021.
-- Cake Decoration (trading under the brand names of Renshaw and
Rainbow Dust Colours) demonstrated an ability to win new business
from its streamlined cost base:
- Launched 66 new products in the year with in-year revenues of
c. GBP1.6 million and secured an important new blue-chip
customer.
- Improved year-on-year frosting revenues by 17%, following
investment in its soft icing plant in this growing market.
Current trading
-- Group revenues and profit are in line with Board
expectations, and ahead of pre-pandemic levels (FY20), for the
first five months of the new financial year, with good retail and
international sales.
-- Performance (underlying increased margins and increased
revenues) achieved despite the recent logistics challenges seen
across the UK economy.
-- Cake Decoration has a solid foundation to launch more
innovative products whilst working with customers to maximise its
sales opportunities.
-- Renshaw continues to win industry recognition, having been
shortlisted in The Grocer, New Product Awards 2021, for its Luxury
Bakers Caramel and Silver Shimmer Icing Kit.
-- The Board remains focussed on reviewing all initiatives to
continue to improve the capital structure of the Group; including
the intention to delist the Group from AIM to save costs and
provide greater agility and flexibility to maximise shareholder
value.
* Underlying adjusted EBITDA (see note 3)
1 Kantar 52-week YOY to March 21st, 2021
Mike Holt, Executive Chairman commented:
"Much has happened since 31 March 2020 in terms of making
progress and restoring shareholder value. The Group has coped with
the challenges of covid and has continued to improve underlying
profitability. In addition, the debt burden was halved following
the successful sale of Brighter Foods. Renshaw and Rainbow Dust
Colours, our two remaining businesses, continue to improve their
performance, and after a good start to the year, prospects are
encouraging."
Enquiries :
Real Good Food plc Tel: 0151 541 3790
Mike Holt, Executive Chairman
Maribeth Keeling, Group Finance Director
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 Group has two businesses that make
up the Cake Decoration division, Renshaw and Rainbow Dust Colours,
with leading brands in their chosen markets.
Chairman's Statement
Overview
As for most companies, the year to 31 March 2021 was a period of
unprecedented uncertainty and challenges due to covid-19 and
Brexit. There were three national lockdowns and restrictions on
public gatherings impacting revenues and productivity within both
the Group's businesses. The priority for the Group during this
period was to conserve cash and to keep employees safe and healthy,
both physically and mentally. The Group's continuing businesses
claimed GBP1.2m (continuing and discontinued businesses: GBP1.7m)
under the Government's Job Retention Scheme and at its peak 254
employees (48% of staff) were on furlough. Despite these
conditions, it is pleasing to be able to report that the Group has
continued to progress and to restore shareholder value.
Our plan for the financial year was to accelerate operational
changes made within Renshaw and to generate revenue growth from new
products and better customer service delivery. Whilst not
immediately apparent from our financial results, due to covid-19
and post Brexit disruption, the Group has continued to improve and
is moving forward with further operational improvement initiatives
within Renshaw and Rainbow Dust Colours. In particular, the
management team is leveraging our heritage brand through new and
exciting product innovation and customer service. New product
launches have been made with Marks and Spencer, Tesco, Asda, Aldi
and more recently with Lidl.
New product revenues from the launch of 66 new products,
accounted for 7.6% (GBP1.6 million) of sales last year for Cake
Decoration. Currently there are 413 new products in various stages
of development. This is important given that the sugar paste market
is in gradual decline and the demand for marzipan is not
growing.
The plan for the year was also to leverage investments made
during FY20 within Brighter Foods.
Shortly after year end, we sold Brighter Foods Limited to The
Hut Group for GBP35.6 million which valued the business at GBP43
million. Given the high value of indebtedness of the Group, due to
some poor acquisitions in the past, the current Board had been
minded to dispose of Brighter Foods at the right value. The timing
of the sale coincided with the end of the lock-in period of the
Chief Executive Officer and Founder of Brighter Foods. At GBP43
million, the sale represented 8.6 times annualised FY20 EBITDA and
11.7 times (unaudited) FY21 EBITDA.
The sale enabled us to effectively halve the level of
shareholder loans (from GBP45.6 million to GBP22.0 million) and to
eliminate the pension scheme deficit (by the injection of GBP8.5
million into the scheme's assets).
Dividend
As with previous years, the Board is not recommending the
payment of a dividend for the year. The focus is on reducing the
level of debt and investing in Renshaw and Rainbow Dust Colours to
deliver the best possible returns for shareholders.
Corporate Governance
The Group is governed through the Board and its Audit Committee
and Remuneration Committee. The Board is very conscious of its
related party connections and dealings. As appropriate, myself,
Gail Lumsden (Senior Independent Non-Executive Director) and
Maribeth Keeling (Chief Financial Officer) meet independently of
the Board to discuss matters concerning Loan Note Holders and major
Shareholders.
Strategy
The Group's strategy is set out in more detail later in the
Strategic Review. But in summary, the aim is to maximise value for
shareholders by leveraging productive capacity by growing revenue
(through product innovation and new customers) and improving
operational performance. The Group is open to divesting parts of
the remaining and continuing businesses for the right value at the
right time. The Group has a valued heritage and the strategy is to
leverage this with new products and class leading service.
De-listing
As stated at the time of announcing the sale of Brighter Foods
Limited on 22 April 2021, the Board has been considering all
options to save costs and to return shareholder value. At the AGM,
the Independent Directors, with the support of the rest of the
Board, will be proposing that the Company cancels the listing of
the Company's shares on AIM. This will save approximately
GBP150,000 a year in costs and provide greater agility and
flexibility to maximise shareholder value. The volume of shares
traded is very small and an AIM listing adds a disproportionate
expense and burden on the Company. The Company has arranged for a
matched bargain facility to be in place by JP Jenkins.
Outlook
Since year-end, the Group has seen a pick-up in revenues across
every sector. After five months of trading, revenues are 33% up on
the same period last year and, more importantly, 1.3% ahead of the
first five months of FY20. FY22 year-to-date EBITDA is a profit,
trading ahead of FY21 EBITDA and FY20 EBITDA; this is particularly
pleasing given the short-term challenges and increased costs of
logistics due to driver shortages and limited availability of
shipping containers.
Prospects for the remainder of the year are good and the Board
is confident of reporting further progress. It's also encouraging
to note that the business is being recognised for its innovation
and quality of new products.
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
2020/21 performance
The report includes Cake Decoration as the continuing
business.
Overall revenue from continuing businesses decreased from
GBP41.2 million to GBP37.3 million, a decrease of GBP3.9 million
(9.5%) within Cake Decoration. The business was impacted by
covid-19 with overall revenues down in the first half of the year
by 23% versus FY20 and recovering in the second half of the year by
3% versus FY20.
The majority of the revenue decline was in the Group's first
quarter (which coincided with the first UK lockdown) and
predominantly in the Wholesale and Manufacturing sectors which were
down by GBP2.5m (-9%), International revenues were up year-on-year
with Europe broadly in line, and the US with a year-on-year
increase of GBP1.1m (+18%). The International sector also had
challenges with its export logistics including the global shortage
of containers and the impact of border controls owing to
Brexit.
The UK came under pressure owing to the declining market for
sugarpaste (-8.4%), however, UK Cake Decoration sales of sugarpaste
outperformed the market by 2.4% in the year. Frostings revenues
rose by 17% versus FY20, which is a growing market where Renshaw is
developing and selling premium products.
Retail, despite covid-19, saw revenues increase by 7%
year-on-year.
Brighter Foods business was sold in May 2021 for a consideration
of GBP43m. Brighter Foods is included as a discontinued operation
in the FY21 accounts. The decrease in revenues of 21.9% versus
prior year within Brighter Foods reflects the impact of covid-19
and the closure of the 'food on the go' and health food market.
Brighter Foods' largest customer had to close its doors in March
2021 in line with the government covid-19 guidance and had limited
sales in the year.
Both businesses used the government job retention scheme
claiming GBP1.7m in total (GBP1.2m in Cake Decoration). Food
Ingredients maintained operating profit as a result of reduced
operating costs. In Cake Decoration, underlying adjusted EBITDA
decreased from GBP1.8 million in 2020 to GBP0.8 million in 2021,
due to the covid-19 impact which reduced revenues, partly offset by
the lower overhead costs and the furlough income of GBP1.2m.
The turnaround of the Cake Decoration business continued in
FY21, with overhead restructuring being expedited during the year.
Overheads are now significantly reduced: the business has
restructured the engineering function to meet the demands of the
business with maintenance being undertaken outside of production
periods. Additionally, there are a number of initiatives ongoing
within the Cake Decoration business to improve profitability. The
Cake Decoration business has reviewed the overseas businesses
improving the customer experience. In America, the warehouse was
closed during the year and the customers are now serviced directly
from the Liverpool site. Cake Decoration is working with a
distributor in Europe for its smaller customers, thereby improving
the customer experience. There are also a range of other options
being evaluated to enhance returns from this business. One key
opportunity for sales growth has been in new product development
and customers: indeed a review was undertaken of the current
products leading to the delisting of c.110 and introducing c.66 new
products to market, and a new blue-chip retailer was also secured.
Cake Decoration will continue to evolve and look for opportunities
to add value to the business. Importantly, the Cake Decoration
infrastructure and operational facilities are able to deliver the
sales growth and improved profitability that the Board believe
achievable.
The Group's central resources are now limited to finance and the
plc board. Opportunities are continually sought to reduce these
further, consistent with good governance. The Group shareholder
debt remains significant; the debt, however, was reduced by
GBP23.6m following the sale of Brighter Foods, and the interest
rates on the loans were reduced from 1 January 2021. The interest
burden, almost all of which is rolled-up, will remain for the
foreseeable future.
31 March 31 March
2021 2020
GBP'000s GBP'000s
----------------------------------------------- --------- ---------
Loss before taxation of continuing businesses (6,108) (23,060)
----------------------------------------------- --------- ---------
Depreciation of property, plant, and equipment 1,639 1,708
Impairment charge - 12,909
Amortisation of intangibles 52 159
Significant items (203) 1,022
Finance costs 4,665 5,445
Other finance costs 182 169
----------------------------------------------- --------- ---------
EBITDA (adjusted) Profit 227 (1,648)
----------------------------------------------- --------- ---------
Capital structure
The Group manages the capital structure and reviews the
requirements in response to economic conditions.
The Group has a total credit facility of GBP8.87 million with
Leumi ABL Limited. The facilities comprise of a GBP5.45m revolving
credit facility and a GBP1.3m term loan both on 60 months ending
August 2024. There is also a GBP2.12m plant and machinery facility
on 36 months ending August 2022. During the year, the business
increased the credit facility by GBP2.0 million secured on the
Brighter Foods' sales. On the disposal of Brighter Foods, this
facility was cancelled.
The maximum draw down value during FY21 occurred in December
2020, being GBP2.3m (FY20 occurred in September 2019, being
GBP2.0m). The lowest month in FY21 was July 2020, being GBP0.4m (in
FY20 it 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 and the presence of bank debt, the Group was
restricted to asset-backed finance held by J F Renshaw and its
revolving credit facility. As at 31 March 2021 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
Given the impact of covid-19 on the FY21 results, the business
has set budgets for FY22 based on FY20.
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. To date, the sales performance of the
continuing business is in line 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
Group is working to ensure that both businesses have a strong
sustainable base to capitalise on opportunities that may arise from
the current environment. Brexit and covid-19 caused some
uncertainties in FY21, however the expectation is that logistics of
moving goods to Europe will ease during FY22.
After a particularly challenging year in the period to 31 March
2021, where employees and all stakeholders have experienced
situations never seen before, the Board wishes to thank all the
Group's and businesses' stakeholders for their understanding and
continued support. Although covid-19 did impact FY21, the Group
sales performance in quarter 4 FY21 was ahead of the pre covid-19
sales.
Group strategy
The Board's strategy is to have a profitable cash generative
business. Cake Decoration has a new invigorated strategy for the
business. The outturn from FY21 has shown a year-on-year increase
in revenues for the fourth quarter and this has continued into
FY22. The changes made by Cake Decoration in the last couple of
years have provided the business with a platform to concentrate on
what it is good at. The outsourcing of the warehousing and
distribution to a third-party provider continues to result in
improvements in customer service. The New Product Development (NPD)
and Marketing teams continue to drive focus on innovation and sales
growth, and secured a new blue chip customer and delisted c. 110
and brought to market c. 66 new products in the year.
Central resources are now limited to finance and general
management.
Summary and Outlook
We believe we have the leadership, the senior management, and
the resources capable of delivering a further uplift in performance
in the Cake Decoration business, and a central cost base that is
more fit for purpose. The Board continues to evaluate a range of
options, to maximise shareholder returns.
The country came out of the lockdown period in July 2021, and
the business was and continues to be positioned to take advantage
of the sales opportunities in new sectors and new innovations with
a refocussed sales and marketing team. The Board continues actions
to generate and conserve cash. The Group remains focused on
continuing to improve its performance, reduce net debt further 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 evident in the underlying business. The Board is
confident in the future prospects of the Group.
Divisional Business Review
Real Good Food
Cake Decoration
2020/21 Performance
FY20/21 was due to be a transitional year for the Cake
Decoration division, with a significant restructure taking place in
FY20 and the benefits expected to be seen in FY21. However, with
three lockdown periods in the financial year, significantly
impacting sales and EBITDA versus FY20. The FY21 result for Cake
Decoration showed revenue progress in new product launches and a
new blue-chip customer, however this was overshadowed by the
shortfall in the wholesale and manufacturing sectors, both of which
saw their customers having to close during the lockdown period. The
second half of the year saw total revenues increase by 3% versus
FY20. This is significant because even though the UK sugarpaste
market declined by 8.4%(2) , the UK sugarpaste revenues only
declined by 6% and sales of sugarpaste in the second half of the
year were up on the previous year by 12%. Renshaw's performance
outperformed the underlying market decline. Retail, despite
covid-19 saw revenues increase by 7% year on year. The investment
in the soft icing plant has resulted in year-on-year improved
revenues of 17%, and this is expected to continue to grow in FY22
as frostings and other soft icing products are becoming
increasingly popular due to their ease of use for the novice baker
and decorator. Although still slightly behind, sales in the
wholesale and manufacturing sectors had growing momentum in the
final quarter. The International market is an important market for
Cake Decoration; in FY20 we signed an exclusive agreement with the
largest distributor of cake supplies in the US, Decopac, to help
the Cake Decoration business grow market share in the US market.
Despite covid-19, the revenues from Decopac increased by 25%
year-on-year with further growth expected in FY22. Renshaw Europe
recovered from the lockdown period with a good sales performance in
the second half of the year. As part of the Cake Decoration
strategy, Renshaw Europe appointed a distributor to service the
smaller customers in Europe improving the customer service.
During the year, further changes have been made to the overhead
structure to reduce costs and focus on customer service. Renshaw
remains a strong brand in the sector.
Further work and efforts will continue throughout FY22 to
refresh existing products, develop new products, bring new
customers on board and streamline our sales and operational
processes.
Forward plans
The business continues to pursue a growth strategy focused on
increased supply of everyday convenience products under its own and
customers' brands. The investment in the soft icings plant saw
frostings grow year on year in FY21, and all indications including
customer feedback suggest this is expected to continue in FY22.
Export growth continues to be focused on North America where the
company has identified the greatest potential to grow sales.
Following the successful closure of the US based warehouse in FY21,
with sales now being shipped directly from the factory in Liverpool
to the US, this has streamlined the process and improved customer
service. The business continues to implement operational changes
including the restructure of the engineering function to carry out
planned maintenance outside of production hours and improvements to
the factory planning system. These changes 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 remained open during the
lockdown period. Our priority is the safety of our staff whilst
supplying our customers with the quality product. All required
changes to meet covid-19 requirements have been carried out at the
sites. Going forward the expectation is that there will be no
further lockdown periods and no covid-19 restrictions such as
social distancing, that impacted the financial performance of the
Group in FY21.
2021 2020
12 months to March GBP'm GBP'm
------------------- ------ -------
Revenue 37.3 41.2
EBITDA (adjusted)* 0.8 1.8
Impairment charge - (12.6)
Operating (loss) (1.7) (13.4)
Operating (loss)% (4.6%) (32.5%)
------------------- ------ -------
* See note 3 for reconciliation
2 Kantar 52-week YOY to March 21st, 2021
Real Good Food
Food Ingredients
2020/21 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, and even before recent expansion was 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 is classed as a discontinued operation in the
FY21 accounts owing to the sale to The Hut Group plc in May
2021.
Forward plans
Brighter Foods was sold to The Hut Group (THG) on 11 May 2021
for a consideration of GBP43m.
2021 2020
12 months to March GBP'm GBP'm
------------------- ------ ------
Revenue 19.8 25.3
EBITDA (adjusted)* 3.6 5.0
Operating profit 2.6 2.9
Operating profit % 13.1% 11.5%
------------------- ------ ------
* See note 3 for reconciliation
Finance Review
Revenue
Group revenue of the continuing businesses for the 12 months
ending 31 March 2021 is GBP37.3 million (2020: GBP41.2 million), a
decrease of 9.5% on revenue to 31 March 2021. Cake Decoration sales
were impacted by covid-19, particularly in quarter 1, the initial
lockdown period. Wholesale and manufacturing sectors were most
affected with many of their customers having to close their
operations. The sales re
covered in the second half of the year with revenues ahead of H2
FY20 by 2.5%, retail revenues were 7% ahead of the previous year
and the Wholesale and Manufacturing sectors gained momentum in the
fourth quarter, although both sectors revenues were down on the
prior year.
Profit measure on operations
Gross profit on the continuing businesses for the overall Group
was GBP15.2 million (2020: GBP17.6 million). At 40.7%, the gross
profit in the year, was adverse to the prior year by 2%, owing to
the sales mix and the effect of covid-19 including the costs
associated with social distancing in the factory. Delivered margin
is defined as gross profit less costs of delivery.
The operating loss in the year of GBP1.3 million is reported
after depreciation and amortisation charges of GBP1.7m, significant
items benefit of GBP0.2m and a furlough payment received of
GBP1.2m. The benefit in the significant costs arises from the
revaluation of the Brighter Foods put option of GBP1.3m; the other
significant costs are GBP1.1m which relate to the restructuring in
the Cake Decoration business.
The adjusted EBITDA of the underlying continuing business is
GBP0.2m.
The items adjusted for are:
Significant Items: GBP(1.1)m
Revaluation of Brighter Put Option GBP1.3m
Total GBP0.2m
The significant costs incurred relate to the restructuring costs
in the Cake Decoration business and head office costs, and are for
redundancy costs, project costs and closure costs associated with
the warehouse in the US. In Head Office, the costs are for legal
and financial costs associated with the disposal of Brighter Foods
and benefit from a significant reduction in the provision for the
minority shareholders' put option. The number of indirect employees
reduced year on year by 17 across the business.
There has been no requirement for an impairment charge on
goodwill or fixed assets in FY21. The Board, having considered the
trading forecasts, have reasonable expectations that the
recoverable amount would support the value in the accounts.
After finance costs of GBP4.8 million, this resulted in a loss
before tax for the year of GBP6.1 million (2020: loss of GBP23.1
million) for continuing businesses. This equates to a basic loss
per share of 6.50 pence on continuing operations (loss of 22.14
pence in 2020), (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 and European lockdown in
March 2021. The business modelling included looking at varying
levels of revenues and the effect of movements on cash planning to
ensure appropriate action was taken if required.
As part of the cash planning, the Group increased the revolving
credit facility by GBP2m, to include Brighter Foods. This
additional facility was completed in August 2020, and following the
disposal of Brighter Foods in May 2021, the additional facility was
removed.
The Group used the Government job retention scheme (GBP1.2m in
Cake Decoration), and deferred PAYE payments (GBP0.6m) to conserve
cash during the lockdown period. Repayments of the PAYE have been
made in line with the government 'time to pay' plan.
The net debt at the end of FY21 stood at GBP48.8m versus
GBP45.4m in FY20. This is predominantly shareholder loans of which
GBP15.2m is in the form of convertible loan notes.
Net debt is a key performance indicator for the Group and is
explained in note 8.
2021 2020
12 months to March GBP'000s GBP'000s
--------------------------------------------------------- --------- ---------
Revenue 37,292 41,243
Gross profit 15,164 17,628
Delivered margin 11,549 14,633
Delivered margin % 31.0% 35.5%
Underlying EBITDA (adjusted)* 227 (1,648)
Operating (loss) before impairment and significant items (1,464) (3,515)
Operating loss after impairment and significant items (1,261) (17,446)
Operating loss % (3.4%) (42.3%)
Loss before tax (6,108) (23,060)
--------------------------------------------------------- --------- ---------
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. The forecasts, agreed with the business consider
reasonable possible changes in trading performance.
The forecast for FY22 for the continuing businesses, is based on
the national lockdown restrictions being removed in July 2021. Some
of the sectors we serve have experienced growth during the covid-19
pandemic, namely retail and international. The sectors most
affected by the pandemic owing to their customers having to close
their own businesses are wholesale and manufacturing, these sectors
are now returning to pre covid sales. The new customers and product
launches during FY21 will have a full year impact in FY22. The
overhead savings and operational efficiencies made in FY21 will
have a full year impact in FY22.
The Board consider the forecasts to be reasonable and these
assumptions have been projected.
The Board reviewed the sensitivity of the sales and have
modelled the effects of these.
The Directors considered the following scenarios:
Scenario 1:
Reduction in revenue of 5% all year; and
Scenario 2:
Reduction in revenue of 5% and the gross margin reduced by 10%
all year.
In Scenario 1 without any mitigating action the Group will not
run out of cash and will have sufficient liquidity headroom with
the low point for cash being September 2022 when cash would reduce
to GBP2.1million as a result of the stock build for quarter 3,
(October to December).
In Scenario 2 without any mitigating action the Group would run
out of cash in May 2022, some 14 months from the monthly reduction
in revenue and gross margin from the start of FY22. If there was a
reduction in gross margin of 10%, this would be as a result of
commodity price increases that would be passed onto customers. The
mitigating action would be taken quickly and would result in a
price increase to customers, with a time lag factored in as
negotiations took place with customers. A prudent approach of a 75%
recovery in FY22 would result in the business not running out of
cash with the low point for cash being September 2022 when cash
would be GBP1.3million, owing to the stock build.
The Group has various levers that it can use to mitigate the
shortfall including:
-- Cessation of non-essential spend
-- Review of overhead costs
The banking covenants that are in place for FY22 have been
amended taking into account the seasonality of the Cake Decoration
business.
The covenants for FY22 are EBITDA being within 75% of the
forecast and greater than GBP5 million tangible net worth. These
covenants 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 and as a result have
extended the repayment period of the current loans from 19 May 2022
to 19 May 2023.
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
information.
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 2021 of GBP7.5
million (2020: GBP7.9 million). The Plan assets increased by GBP0.8
million to GBP14.5 million (2020: GBP13.7 million) and the Plan
liabilities are GBP21.9 million compared to GBP20.8 million at 31
March 2020. Following the sale of Brighter Foods on the 11 May
2021, a payment of GBP8.5 million was made to the Napier Brown
Retirement Plan eliminating the current pension scheme deficit
liability.
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 2021 (2020: nil).
Consolidated Statement of Comprehensive Income
Year ended 31 March 2021
12 months
12 months ended
ended 31 March
31 March 2020
2021 (restated*)
Notes GBP'000s GBP'000s
------------------------------------------------------------ ----- --------- ------------
Revenue 2,3 37,292 41,243
Cost of sales (22,128) (23,615)
------------------------------------------------------------ ----- --------- ------------
Gross profit 15,164 17,628
Income from Government Furlough Scheme 1,205 -
Other operating income 48 10
Distribution expenses (3,615) (2,995)
Administrative expenses (14,266) (18,158)
------------------------------------------------------------ ----- --------- ------------
Operating loss before impairment and significant
items (1,464) (3,515)
Impairment charge on goodwill - (12,622)
Impairment charge on tangible fixed assets - (287)
Significant items 4 203 (1,022)
------------------------------------------------------------ ----- --------- ------------
Operating loss after impairment and significant costs 5 (1,261) (17,446)
Finance costs 6 (4,665) (5,445)
Other finance costs 7 (182) (169)
------------------------------------------------------------ ----- --------- ------------
Loss before tax (6,108) (23,060)
Income tax charge 27 1,692
------------------------------------------------------------ ----- --------- ------------
Loss from continuing operations (6,081) (21,368)
Profit from discontinued operations (assets held
for sale) 2,617 2,913
------------------------------------------------------------ ----- --------- ------------
Net loss (3,464) (18,455)
------------------------------------------------------------ ----- --------- ------------
Attributable to:
Owners of the parent (3,856) (19,121)
Non-controlling interests 392 666
------------------------------------------------------------ ----- --------- ------------
Net loss (3,464) (18,455)
Items that will or may be reclassified to profit
or loss
Foreign exchange differences on translation of subsidiaries 65 (106)
Items that will not be reclassified to profit or
loss
Actuarial losses on defined benefit plan 11 (107) (1,097)
Tax relating to items which will not be reclassified (102) 215
------------------------------------------------------------ ----- --------- ------------
Other comprehensive loss (144) (988)
------------------------------------------------------------ ----- --------- ------------
Total comprehensive loss for the year (3,608) (19,443)
------------------------------------------------------------ ----- --------- ------------
Attributable to:
Owners of the parent (4,000) (20,109)
Non-controlling interests 392 666
------------------------------------------------------------ ----- --------- ------------
Total comprehensive loss for the year (3,608) (19,443)
------------------------------------------------------------ ----- --------- ------------
* The result for the year ended 31 March 2020 has been restated
to reflect the change in continuing and discontinued
operations.
12 months 12 months
ended ended
31 March 31 March
2021 2020 (restated*)
Notes GBP'000s GBP'000s
--------------------------------------------------------- ----- --------- -----------------
Basic and diluted loss per share - continuing operations 9 (6.50)p (22.14)p
Basic earnings per share - discontinued operations 9 2.63p 2.92p
Diluted earnings per share - discontinued operations 9 0.82p 0.96p
--------------------------------------------------------- ----- --------- -----------------
Consolidated Statement of Changes in Equity
Year ended 31 March 2021
Foreign
Issued Share Share Exchange
Share Premium Other Option Translation Retained Non-Controlling Total
Capital Account Reserves Reserve Reserve Earnings Total Interest Equity
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Balance as at
31 March
2019 1,987 3,286 (4,796) 238 (19) 23,786 24,482 2,140 26,622
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
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Total
comprehensive
(loss)/gain
for the
year
Loss for the
year - - - - - (3,856) (3,856) 392 (3,464)
Other
comprehensive
(loss)/gain
for the
year - - - - 65 (209) (144) - (144)
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Total
comprehensive
(loss)/gain
for the
year - - - - 65 (4,065) (4,000) 392 (3,608)
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Transactions
with owners
of the Group,
recognised
directly in
equity
Shares options
lapsed
in year - - - (200) - - (200) - (200)
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Total
contributions
by and
distributions
to owners of
the Group - - - (200) - - (200) - (200)
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Balance as at
31 March
2021 1,991 3,294 (4,796) 3 (60) (282) 150 3,198 3,348
-------------- -------- -------- -------- --------- ----------- --------- --------- --------------- ---------
Consolidated Statement of Financial Position
Year ended 31 March 2021
31 March 31 March
2021 2020
Notes GBP'000s GBP'000s
---------------------------------------------- ----- --------- ---------
NON-CURRENT ASSETS
Goodwill 32,722 37,753
Other intangible assets 9 61
Tangible fixed assets 8,548 16,199
Investments - 81
Deferred tax asset 1,426 1,508
---------------------------------------------- ----- --------- ---------
42,705 55,602
---------------------------------------------- ----- --------- ---------
CURRENT ASSETS
Inventories 3,597 6,823
Trade and other receivables 7,248 10,232
Current tax assets - 182
Cash collateral 8 215 215
Cash and cash equivalents 622 1,363
---------------------------------------------- ----- --------- ---------
11,682 18,815
---------------------------------------------- ----- --------- ---------
Assets classed as held for sale 20,157 1,148
---------------------------------------------- ----- --------- ---------
TOTAL ASSETS 74,544 75,565
---------------------------------------------- ----- --------- ---------
CURRENT LIABILITIES
Trade and other payables 8,087 9,097
Borrowings 10 2,659 2,717
Lease liabilities 10 93 390
NCI put option 1,553 2,900
---------------------------------------------- ----- --------- ---------
12,392 15,104
---------------------------------------------- ----- --------- ---------
Liabilities classed as held for sale 4,442 -
---------------------------------------------- ----- --------- ---------
NON-CURRENT LIABILITIES
Borrowings 10 46,624 43,059
Lease liabilities 10 - 567
Long-term liabilities - NCI put option - 1,520
Derivative liability - convertible loan notes 17 -
Deferred tax liabilities 216 223
Retirement benefit obligation 11 7,505 7,936
---------------------------------------------- ----- --------- ---------
54,362 53,305
---------------------------------------------- ----- --------- ---------
TOTAL LIABILITIES 71,196 68,409
---------------------------------------------- ----- --------- ---------
NET ASSETS 3,348 7,156
---------------------------------------------- ----- --------- ---------
EQUITY
Share capital 1,991 1,991
Share premium account 3,294 3,294
Other reserves (4,796) (4,796)
Share option reserve 3 203
Foreign exchange translation reserve (60) (125)
Retained earnings (282) 3,783
---------------------------------------------- ----- --------- ---------
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT 150 4,350
Non-controlling Interest 3,198 2,806
---------------------------------------------- ----- --------- ---------
TOTAL EQUITY 3,348 7,156
---------------------------------------------- ----- --------- ---------
Consolidated Cash Flow Statement
Year ended 31 March 2021
31 March 31 March
2021 2020
Notes GBP'000s GBP'000s
-------------------------------------------------------- ----- --------- ---------
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss) before taxation (3,491) (20,147)
Finance and other finance costs 6,7 4,856 5,617
Share options reserve credit (200) -
Foreign Exchange movement 308 (115)
Goodwill impairment charge - 12,622
Impairment charge on fixed assets - 287
Share based payment expense - (35)
Loss on disposal of investment 31 -
Loss on disposal of property, plant and equipment 7 -
Past service cost on pension 11 - 16
Fair value of derivative liability 17 (294)
Fair value of NCI put option (1,302) (577)
Depreciation of property, plant, and equipment 2,435 2,375
Amortisation of intangibles 52 1,538
-------------------------------------------------------- ----- --------- ---------
Operating Cash Flow 2,713 1,287
Decrease in inventories 676 17
Decrease/(increase) in receivables 23 (2,327)
Pension contributions 11 (720) (733)
Decrease in cash collateral - 1,785
Increase in payables 953 1,279
-------------------------------------------------------- ----- --------- ---------
Cash from operations 3,645 1,308
Income taxes received - 52
Interest paid (86) (189)
Interest on leases (26) (27)
-------------------------------------------------------- ----- --------- ---------
Net cash inflow from operating activities 3,533 1,144
-------------------------------------------------------- ----- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment (567) (1,819)
Proceeds from sale of investment 50 -
Disposal of discontinued business, net of cash disposed
of - 550
-------------------------------------------------------- ----- --------- ---------
Net cash outflow from investing activities (517) (1,269)
-------------------------------------------------------- ----- --------- ---------
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in year - 4
Repayment of lease liabilities 10 (402) (504)
Repayment / (Inflow) of term loans 10 (865) 3,420
Repayment of other loans 10 (35) (1,636)
Repayment of investor loans 10 - (4,519)
Drawdowns on revolving credit facilities 42,816 28,261
Repayments on revolving credit facilities (42,876) (26,409)
-------------------------------------------------------- ----- --------- ---------
Net cash outflow from financing activities (1,362) (1,383)
-------------------------------------------------------- ----- --------- ---------
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 1,654 (1,508)
-------------------------------------------------------- ----- --------- ---------
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period 1,363 2,909
Effects of currency translations on cash and cash
equivalents 63 (38)
Net movement in cash and cash equivalents 1,654 (1,508)
-------------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at end of period 3,080 1,363
-------------------------------------------------------- ----- --------- ---------
Continuing operations 622 1,363
Discontinued operations 2,458 -
-------------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at end of period 3,080 1,363
-------------------------------------------------------- ----- --------- ---------
Notes to the Financial Information
Year ended 31 March 2021
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 accounting standards 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 2021 or 2020. Statutory accounts for 2020 have been
delivered to the Registrar of Companies, and those for 2021 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 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 the company and third-party premises,
specifically as a result of Covid-19. They were, unable to satisfy
themselves by alternative means concerning the inventory balance
held by that component at 31 March 2020, which is 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 for the
year ended 31 March 2021. Any adjustment to the inventory balance
at 31 March 2020 would also have an impact on the comparative
figure shown in the consolidated statement of comprehensive income
for profit from discontinued operations and on the comparative
consolidated cash flow statement for the period then ended. (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 20
September 2021.
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 2021, the Group did not
dispose of any major lines or businesses. However, the Group sold
Brighter Foods Limited in May 2021 and this has been classified as
held for sale in the accounts. At 31 March 2021, some remaining
assets in relation to the previously disposed businesses are
classed as held for sale, in addition to the net assets of Brighter
Foods Limited.
Any references to discontinued operations throughout this report
refers to Brighter Foods Limited.
IFRS standards and interpretations adopted
New standards and amendments which are effective from 1 January
2020, and have been adopted within the Group's accounting policies
are:
-- Amendments to IFRS 3 Business combinations - definition of a
business (effective for periods beginning after 1 January
2020);
-- Amendments to IAS 1 Presentation of financial statements and
IAS 8 Accounting policy changes in accounting estimates and errors
- definition of material (effective for periods beginning after 1
January 2020);
-- Amendments to IFRS 9, Financial Instruments, IAS 39 Financial
Instruments and IFRS 17 Financial Instruments: disclosures -
interest rate benchmark reform (effective for periods beginning
after 1 January 2020); and
-- Amendments to the conceptual framework.
The adoption of the amendments to IFRS 3, IAS 1, IAS 8, IFRS 9,
IAS 39, IFRS 17 and the conceptual framework 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 GBP37.3 million Manufactures, sells, and supplies cake
(2020 GBP41.2m) decorating products and ingredients for
the baking sector.
------------------- ---------------- ----------------------------------------
Held for sale GBP19.8 million Manufactures and supplies a range of
(Food Ingredients) (2020 GBP25.3m) snack bars to the retail sector.
------------------- ---------------- ----------------------------------------
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 one main division: Cake Decoration. The
Head Office has a finance function that supports the subsidiary as
required.
Head Office
Cake and non-trading Continuing Discontinued Total
Decoration subsidiaries Operations Operations Group
12 months ended 31 March 2021 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------------------- ----------- ---------------- ----------- ------------ ---------
Total revenue 40,206 - 40,206 19,788 59,994
Intercompany sales (2,914) - (2,914) - (2,914)
--------------------------------------------- ----------- ---------------- ----------- ------------ ---------
External revenue 37,292 - 37,292 19,788 57,080
Cost of sales (22,128) - (22,128) (12,992) (35,120)
--------------------------------------------- ----------- ---------------- ----------- ------------ ---------
Gross profit 15,164 - 15,164 6,796 21,960
Income from Furlough Scheme 1,205 - 1,205 461 1,666
Other operating income - 48 48 49 97
Distribution expenses (3,615) - (3,615) (411) (4,026)
Administrative expenses (13,657) (609) (14,266) (4,100) (18,366)
--------------------------------------------- ----------- ---------------- ----------- ------------ ---------
Operating (loss) / profit before
impairment and significant items (903) (561) (1,464) 2,795 1,331
Significant Items (763) 966 203 (169) 34
--------------------------------------------- ----------- ---------------- ----------- ------------ ---------
Operating (loss)/profit after impairment
and significant items (1,666) 405 (1,261) 2,626 1,365
Finance costs (95) (4,570) (4,665) (9) (4,674)
Other finance costs - (182) (182) - (182)
--------------------------------------------- ----------- ---------------- ----------- ------------ ---------
(Loss)/profit before tax (1,761) (4,347) (6,108) 2,617 (3,491)
Income tax credit/(expense) - 27 27 - 27
--------------------------------------------- ----------- ---------------- ----------- ------------ ---------
(Loss)/profit after tax as per comprehensive
statement of income (1,761) (4,320) (6,081) 2,617 (3,464)
--------------------------------------------- ----------- ---------------- ----------- ------------ ---------
Head Office
Cake and non-trading Continuing Discontinued Total
Decoration subsidiaries Operations Operations Group
12 months ended 31 March 2020 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------------------ ----------- ---------------- ----------- ------------ ---------
Total revenue 48,621 - 48,621 25,323 73,944
Intercompany sales (7,378) - (7,378) - (7,378)
------------------------------------------ ----------- ---------------- ----------- ------------ ---------
External revenue 41,243 - 41,243 25,323 66,566
Cost of sales (23,615) - (23,615) (15,980) (39,595)
------------------------------------------ ----------- ---------------- ----------- ------------ ---------
Gross profit/(loss) 17,628 - 17,628 9,343 26,971
Other operating income _ 10 10 - 10
Distribution expenses (2,995) - (2,995) (444) (3,439)
Administrative expenses (14,353) (3,805) (18,158) (5,974) (24,132)
------------------------------------------ ----------- ---------------- ----------- ------------ ---------
Operating profit/(loss) before impairment
and significant items 280 (3,795) (3,515) 2,925 (590)
Significant items (1,081) 59 (1,022) (9) (1,031)
Impairment charge (12,622) (287) (12,909) - (12,909)
------------------------------------------ ----------- ---------------- ----------- ------------ ---------
Operating (loss)/profit after impairment
and significant items (13,423) (4,023) (17,446) 2,916 (14,530)
Finance costs (198) (5,247) (5,445) (3) (5,448)
Other finance costs - (169) (169) - (169)
------------------------------------------ ----------- ---------------- ----------- ------------ ---------
(Loss)/profit before tax (13,621) (9,439) (23,060) 2,913 (20,147)
Income tax credit/(expense) - 1,692 1,692 - 1,692
------------------------------------------ ----------- ---------------- ----------- ------------ ---------
(Loss)/profit after tax as per
comprehensive statement of income (13,621) (7,747) (21,368) 2,913 (18,455)
------------------------------------------ ----------- ---------------- ----------- ------------ ---------
Geographical segments
The Group earns revenue from countries outside the United
Kingdom, as shown below:
Cake Discontinued
Decoration Operations
12 months ended 31 March 2020 GBP'000s GBP'000s
------------------------------ ----------- ------------
UK 28,266 22,309
Europe 4,631 3,014
USA 7,293 -
Rest of World 1,053 -
------------------------------ ----------- ------------
Total 41,243 25,323
------------------------------ ----------- ------------
The Group has two customers which constitute over 10% of
revenue: one providing 21% of revenue, and the other 13%.
Cake Discontinued
Decoration Operations
12 months ended 31 March 2021 GBP'000s GBP'000s
------------------------------ ----------- ------------
UK 25,795 19,788
Europe 4,465 -
USA 6,191 -
Rest of World 841 -
------------------------------ ----------- ------------
Total 37,292 19,788
------------------------------ ----------- ------------
The Group has one customer which constitutes over 18% of revenue
in the Cake Decoration division.
Reconciliation of operating Head Office
(loss)/profit to underlying Cake and non-trading Continuing Discontinued Total
adjusted EBITDA to 31 March Decoration subsidiaries Operations Operations Group
2021 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------- ----------- ---------------- ----------- ------------ ---------
Operating (loss)/profit (1,666) 405 (1,261) 2,626 1,365
Significant items 763 (966) (203) 169 (34)
Depreciation 1,614 25 1,639 796 2,435
Amortisation 87 (35) 52 - 52
----------------------------- ----------- ---------------- ----------- ------------ ---------
Underlying adjusted EBITDA 798 (571) 227 3,591 3,818
----------------------------- ----------- ---------------- ----------- ------------ ---------
Head Office
Reconciliation of operating Cake and non-trading Continuing Discontinued Total
(loss)/profit to underlying adjusted Decoration subsidiaries Operations Operations Group
EBITDA to 31 March 2020 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------------------------------- ----------- ---------------- ----------- ------------ ---------
Operating (loss)/profit (13,423) (4,023) (17,446) 2,916 (14,530)
Significant items 1,081 (59) 1,022 9 1,031
Impairment charge 12,622 287 12,909 - 12,909
Depreciation 1,521 187 1,708 667 2,375
Amortisation 34 125 159 1,379 1,538
-------------------------------------- ----------- ---------------- ----------- ------------ ---------
Underlying adjusted EBITDA 1,835 (3,483) (1,648) 4,971 3,323
-------------------------------------- ----------- ---------------- ----------- ------------ ---------
Head Office
Cake and non-trading Continuing Discontinued Total
Decoration subsidiaries Operations Operations Group
31 March 2021 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Segment assets 52,180 3,355 55,535 19,009 74,544
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Segment liabilities 11,305 55,449 66,754 4,442 71,196
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Net operating assets / (liabilities) 40,875 (52,094) (11,219) 14,567 3,348
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Non-current asset additions 444 - 444 185 629
Depreciation (1,614) (25) (1,639) (796) (2,435)
Amortisation (87) 35 (52) - (52)
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Head Office
Cake and non-trading Continuing Discontinued Total
Decoration subsidiaries Operations Operations Group
31 March 2020 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Segment assets 57,032 (1,570) 55,462 20,103 75,565
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Segment liabilities 13,835 51,451 65,286 3,123 68,409
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Net operating assets / (liabilities) 43,197 (53,021) (9,824) 16,980 7,156
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Non-current asset additions 330 - 330 1,489 1,819
Depreciation (1,521) (187) (1,708) (667) (2,375)
Amortisation (34) (125) (159) (1,379) (1,538)
------------------------------------- ----------- ---------------- ----------- ------------ ---------
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 2021, Head Office costs of GBP0.8 million
(2020: GBP1.1m) have been re-allocated to the Cake Decoration
division.
4. Significant items
12 months
12 months ended
ended 31 March
31 March 2020
2021 (restated*)
GBP'000s GBP'000s
---------------------------------------------------------------- --------- ------------
Costs relating to disposal of Brighter Foods (269) -
Professional fees in relation to refinancing costs (38) -
Movement in provisions relating to the non-controlling interest
put option 1,302 -
Change in value of convertible loan notes derivative liability - 294
Professional fees in relation to Liverpool factory (113) -
Closure of Renshaw US warehouse (171) -
Management restructuring (508) (1,316)
---------------------------------------------------------------- --------- ------------
Significant items - Continuing business 203 (1,022)
---------------------------------------------------------------- --------- ------------
Continuing business 203 (1,022)
Discontinued business (169) (9)
---------------------------------------------------------------- --------- ------------
Total significant items 34 (1,031)
---------------------------------------------------------------- --------- ------------
* The significant items for the year ended 31 March 2020 have
been restated to reflect the change in continuing and discontinued
operations.
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 2021 significant item expenditure is
explained in the note below:
1. The legal and due diligence costs involved in preparing the
Brighter Food business for disposal.
2. The legal costs associated with including Brighter Foods in the CID facility with ABL Leumi.
3. Project management costs for projects running in the Crown Street factory.
4. Costs associated with closing the Renshaw US warehouse, the
lease terminating in July 2021, with stockholding relocated to
Crown Street Liverpool.
5. Redundancy costs of the restructuring plan started in FY20.
6. Brighter Foods incurred exceptional costs in relation to a
proposed sale, as the disposal has occurred, Brighter Foods is now
shown as a discontinued operation.
The year to 31 March 2020 had the following significant
costs:
1. The fair value of the CLNs was reduced in FY20 from the FY19
estimate. This was a significant item in the accounts.
2. Restructure costs relating to the Cake Decorations business and Head Office infrastructure.
5. Operating loss
Operating loss for continuing operations
12 months
12 months ended
ended 31 March
31 March 2020
2021 (restated*)
Notes GBP'000s GBP'000s
------------------------------------------------- ----- --------- ------------
External Sales 37,292 41,243
------------------------------------------------- ----- --------- ------------
Staff Costs (12,276) (13,239)
Inventories:
- cost of inventories as an expense (included in
cost of sales) (16,294) (16,889)
Depreciation of property, plant, and equipment (1,639) (1,708)
Amortisation of intangible assets (52) (159)
Significant items 4 203 (1,022)
Impairment charges - (12,909)
Research and development expenditure (626) (665)
Impairment of trade receivables (38) (27)
Foreign exchange gains/(losses) (308) 138
Other net operating expenses (7,523) (12,209)
Total (38,553) (58,689)
------------------------------------------------- ----- --------- ------------
Operating loss (1,261) (17,446)
------------------------------------------------- ----- --------- ------------
* The operating profit note for the year ended 31 March 2020 has
been restated to reflect the change in continuing and discontinued
operations.
6. Finance costs
12 months 12 months
ended ended
31 March 31 March
2021 2020
GBP'000s GBP'000s
-------------------------------------------------------- --------- ---------
Interest on bank loans, overdrafts, and investor loans (4,600) (5,466)
-------------------------------------------------------- --------- ---------
Interest on lease liabilities (26) (12)
Interest on non-controlling interest put option 43 46
Finance cost on substantial modification of convertible
loan notes** (91) -
Past service cost on pension (note 11) - (16)
-------------------------------------------------------- --------- ---------
(4,674) (5,448)
-------------------------------------------------------- --------- ---------
Continuing business (4,665) (5,445)
-------------------------------------------------------- --------- ---------
Discontinued business (9) (3)
-------------------------------------------------------- --------- ---------
** On 2nd December 2020, a substantial modification to the
convertible loan note terms was made requiring derecognition of the
existing loans and recognition of new loans. As a result of this
modification, the value of the liability increased leading to a
loss in the year.
7. Other finance costs
12 months 12 months
ended ended
31 March 31 March
2021 2020
GBP'000s GBP'000s
------------------------------------------------- --------- ---------
Interest on pension scheme liabilities (note 11) (465) (497)
Interest on pension scheme assets (note 11) 312 328
Interest on effect of asset ceiling/IFRIC 14 (29) -
------------------------------------------------- --------- ---------
(182) (169)
------------------------------------------------- --------- ---------
8. Notes supporting the cash flow statement
The cash collateral figure for the Group is GBP0.2million (FY20
GBP0.2m). 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 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
----------------------------------------------------- ----------- --------------- ---------
Cash Flows (37) (923) (960)
Non-cash flows
- Interest accruing on loans 4,376 - 4,376
- Finance loss on change of terms for convertible
loan notes 91 _ 91
Loans and borrowings classified as non-current at
March 2020 becoming current before March 2021 (865) 865 -
----------------------------------------------------- ----------- --------------- ---------
At 31 March 2021 46,624 2,659 49,283
----------------------------------------------------- ----------- --------------- ---------
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
2021 2020
Group Group
Note GBP'000s GBP'000s
----------------------------- ---- --------- ---------
Short term borrowings 10 (2,659) (2,717)
Short term lease liabilities 10 (93) (390)
Long term borrowings 10 (46,624) (43,059)
Long term lease liabilities 10 - (567)
Cash 622 1,363
----------------------------- ---- --------- ---------
Total Net Debt (48,754) (45,370)
----------------------------- ---- --------- ---------
Group
Net cash
and current Non-current
borrowings borrowings Net debt
GBP'000s GBP'000s GBP'000s
---------------------------- ------------ ----------- ---------
At 1 April 2019 (2,241) 37,961 35,720
Cash flow(1) 1,882 (1,723) 159
Other non-cash movements(2) 2,103 7,388 9,491
---------------------------- ------------ ----------- ---------
At 31 March 2020 1,744 43,626 45,370
Cash flow 386 (1,748) (1,362)
Other non-cash movements - 4,746 4,746
---------------------------- ------------ ----------- ---------
At 31 March 2021 2,130 46,624 48,754
---------------------------- ------------ ----------- ---------
(1 Includes investor loans of GBP3.7m and accrued interest of
GBP0.5m repaid in 2020 from new borrowings of GBP3.6m.)
(2 Includes additional Accrued interest of GBP5.0m on investor
loans and convertible loan notes and redemption premiums of GBP3.1m
on shareholder loan.)
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
2021 2021 Continuing Discontinued
Continuing Discontinued Operations Operations
Operations Operations (restated*) (restated*)
----------------------------------------------------- ----------- ------------- ------------ -------------
Loss after tax attributable to ordinary shareholders
(GBP'000s) (6,473) 2,617 (22,034) 2,913
Weighted average number of shares in issue
for basic EPS ('000s) 99,564 99,564 99,505 99,505
Employee share options ('000s) 340 340 1,830 1,830
Convertible loan notes ('000s) 220,980 220,980 200,571 200,571
Weighted average number of shares in issue
for diluted EPS ('000s) 320,884 320,884 301,906 301,906
----------------------------------------------------- ----------- ------------- ------------ -------------
Basic and diluted (loss)/earnings per share (6.50)p 2.63p (22.14)p 2.92p
----------------------------------------------------- ----------- ------------- ------------ -------------
* The loss after tax attributable to ordinary shareholders for
the year ended 31 March 2020 has been restated to reflect the
change in continuing and discontinued operations.
The total loss per share for 2021 is (3.87)p for continuing and
discontinued operations (2020 continuing and discontinued loss per
share: (19.22)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 for continuing
operations. However, the discontinued operations can be diluted.
The impact of this is earnings per share of 0.82p (2020: 0.96p). 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
(6.50)p on the continuing operations and earnings of 2.63p on the
discontinued operations (2020: loss of (22.14)p on the continuing
operations and earnings of 2.92p on the discontinued
operations).
The weighted average number of shares in issue for the year was
99,564,430 and the number of options outstanding was 33,333.
If these were all exercised the cash raised would be equivalent
to that which would be raised by issuing 339,750 shares at the
average share price during the year. There were also 8,806,571
convertible loan notes outstanding, of which the weighted average
number of shares was 220,979,796. Therefore, the weighted average
number of dilutive potential ordinary shares is 320,883,976.
10. Borrowings and capital management
31 March
31 March 2021 2020
Group Group
GBP'000s GBP'000s
----------------------------------------------- ------------- ---------
Secured borrowings at amortised cost
Bank term loans 2,050 2,916
Revolving credit facilities 1,794 1,853
Leases 93 957
Other loans - 102
Investor loans* 30,240 28,336
Convertible loan notes** 15,199 12,341
Government grants - 228
----------------------------------------------- ------------- ---------
49,376 46,733
----------------------------------------------- ------------- ---------
Borrowings due for settlement within 12 months 2,659 2,717
Lease liabilities due for settlement within
12 months 93 390
Borrowings due for settlement after 12 months 46,624 43,059
Lease liabilities due for settlement after
12 months -- 567
----------------------------------------------- ------------- ---------
Total 49,376 46,733
----------------------------------------------- ------------- ---------
* The investor loans shown consists of GBP20.6 million principal
amount, GBP6.5 million accrued interest up to 31 March 2021 and
redemption premiums of GBP3.1 million.
** Convertible loan notes shown at 31 March 2021 consist of
GBP8.8 million investment (2020: GBP8.8 million), GBP6.3 million
accrued interest (2020: GBP3.6 million), and GBPnil million of
transaction costs (2020: GBP(0.1) million) being spread over the
remaining life of the liability and a finance cost GBP0.1m
resulting from a substantial modification to the Convertible Loan
Note terms requiring derecognition of the existing loans and
recognition of new loans.
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, and then subsequently post
year end extended to May 2023.
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 ("CLN's") 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 19 May 2022, then subsequently extended post year
end to May 2023. 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 2023, 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 12 per cent 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 2021,
the derivative liability was valued at GBP17k (2020: GBPnil).
The convertible loan notes shown consist of a host loan at
amortised cost of GBP8.8 million, GBP6.3 million of finance costs
and GBP0.1 million of cost resulting from substantial modification
to the convertible loan notes up to 31 March 2021.
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 2021, the Group continued with
the borrowing facilities in place and secured loans from investors.
As at 31 March 2021, 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 Limited,
Rainbow Dust Colours Limited and Brighter Foods Limited 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 the financial information.
-- The Group secured facilities against specific plant and
machinery with Leumi ABL Limited GBP2.1 million for 36 months
ending August 2022. 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 2021 were as follows:
Date Amount Method of Funding Major Shareholder(s)
------------ -------- ------------------- ----------------------------------------
May 2018 GBP8.8m Secured convertible NB Holdings Ltd (GBP3.4m), Omnicane
loan notes 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 GBP4.0m Secured loan notes NB Holdings Ltd (GBP1.33m), Omnicane
2017 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 (GBP1.35m), Omnicane
Investors Ltd (GBP1.35m)
------------ -------- ------------------- ----------------------------------------
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 2021, 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 Wavertree
property.
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
---------------------------- --------- ---------- --------- --------- --------- ---------
2021
Trade and other payables 7,138 893 56 - - 8,087
Investor loans - - - 20,562 - 20,562
Convertible loan notes - - - 8,807 - 8,807
Bank term loans 72 144 649 1,185 - 2,050
Revolving credit facilities - - 1,794 - - 1,794
Leases 8 15 70 - - 93
NCI put option liability 1,553 - - - - 1,553
---------------------------- --------- ---------- --------- --------- --------- ---------
8,771 1,052 2,569 30,554 - 42,946
Interest - - - 13,029 - 13,029
Redemption premiums - - - 3,084 - 3,084
---------------------------- --------- ---------- --------- --------- --------- ---------
Total 8,771 1,052 2,569 46,667 - 59,059
---------------------------- --------- ---------- --------- --------- --------- ---------
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
---------------------------- --------- ---------- --------- --------- --------- ---------
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 GBP112k. A 10% weakening of the US dollar would
result in a decrease of pre-tax profits of GBP92k.
-- With an excess of EUR liabilities to EUR assets a 10%
strengthening of the Euro would result in a decrease in pre-tax
profits of GBP37k.
A 10% weakening of the Euro would result in an increase of
pre-tax profits of GBP30k.
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. Pension 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 2021. This has resulted in a deficit
in the Plan of GBP7,505k. 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 31 March
2021 2020 2019 2018 2017
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------- --------- --------- --------- --------- ---------
Present value of defined benefit
obligation 21,885 20,750 21,177 21,448 21,319
Fair value of Plan assets (14,527) (13,735) (13,774) (13,529) (13,946)
--------------------------------- --------- --------- --------- --------- ---------
Deficit in Plan 7,358 7,015 7,403 7,919 7,373
Effect of asset ceiling/IFRIC14 147 921 - - -
--------------------------------- --------- --------- --------- --------- ---------
Gross amount recognised 7,505 7,936 7,403 7,919 7,373
Deferred tax * (1,426) (1,508) (1,258) (1,094) (1,120)
--------------------------------- --------- --------- --------- --------- ---------
Net liability 6,079 6,428 6,145 6,825 6,253
--------------------------------- --------- --------- --------- --------- ---------
* Deferred tax rate 2020 & 2021: 19%, 2017, 2018 & 2019: 17%
Reconciliation of opening and closing balances of the present
value of the defined benefit obligations
31 March 31 March
2021 2020
GBP'000s GBP'000s
---------------------------------------------- --------- ---------
Defined benefit obligation at start of period 20,750 21,177
Interest cost 465 497
Actuarial losses / (gains) 1,698 (8)
Past service cost - 16
Benefits paid (1,028) (932)
---------------------------------------------- --------- ---------
Defined benefit obligation at end of period 21,885 20,750
---------------------------------------------- --------- ---------
Reconciliation of opening and closing balances of the fair value
of Plan assets
31 March 31 March
2021 2020
GBP'000s GBP'000s
---------------------------------------------------------------- --------- ---------
Fair value of Plan assets at start of period 13,735 13,774
Interest income on Plan assets 312 328
Return on assets less interest income 788 (168)
Contributions paid by the Group 720 733
Benefits paid, death-in-service insurance premiums and expenses (1,028) (932)
---------------------------------------------------------------- --------- ---------
Fair value of Plan assets at end of period 14,527 13,735
---------------------------------------------------------------- --------- ---------
UK equities 2,408 2,210
Other investments 12,119 11,525
---------------------------------------------------------------- --------- ---------
Total plan assets at end of period 14,527 13,735
---------------------------------------------------------------- --------- ---------
The actual return on the Plan assets over the period ended 31
March 2021 was GBP1,100k (2020: GBP(82)k).
Total expense recognised in the Statement of Comprehensive
Income within other finance income
31 March 31 March
2021 2020
GBP'000s GBP'000s
----------------------------------------------- --------- ---------
Interest on liabilities 465 497
Interest on assets (312) (328)
Interest on effect of asset ceiling / IFRIC 14 29 -
----------------------------------------------- --------- ---------
Net interest cost 182 169
Past service cost - 16
----------------------------------------------- --------- ---------
Total cost 182 185
----------------------------------------------- --------- ---------
Statement of recognised income and expenses
31 March 31 March
2021 2020
GBP'000s GBP'000s
------------------------------------------------------------ --------- ---------
Actuarial gain/(loss) on the Plan assets 788 (168)
Actuarial gain/(loss) on the Plan liabilities arising
from changes in demographic assumptions 17 (151)
Actuarial (loss)/gain on the Plan liabilities arising
from changes in financial assumptions (1,715) 143
Change in the effect of the asset ceiling / IFRIC14 803 (921)
------------------------------------------------------------ --------- ---------
Total amount recognised in Statement of Other Comprehensive
Income (107) (1,097)
------------------------------------------------------------ --------- ---------
Assets
31 March 31 March 31 March
2021 2020 2019
GBP'000s GBP'000s GBP'000s
--------------------- --------- --------- ---------
UK equity 2,408 2,210 2,667
Absolute return fund 1,412 1,522 1,013
Corporate Bonds 2,936 2,746 2,699
Gilts 2,769 3,112 3,137
Multi-Asset Funds 4,827 3,927 4,055
Cash 175 218 203
--------------------- --------- --------- ---------
Total assets 14,527 13,735 13,774
--------------------- --------- --------- ---------
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
2021 2020 2019 2018
GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------------------- ---------- ---------- ---------- ----------
Inflation 3.40 2.70 3.30 3.10
Salary increases - - - -
Rate of discount 2.00 2.30 2.40 2.65
Allowance for pension in payment increases
RPI max 5% 3.30 2.70 3.10 3.00
RPI min 3% max 5% 3.60 3.20 3.50 3.40
Allowance for revaluation of deferred pensions 2.70 2.20 2.30 2.10
----------------------------------------------- ---------- ---------- ---------- ----------
Allowance for commutation of pension for 90% of 90% of 90% of 90% of
cash at retirement max max max max
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 2018 and then making appropriate
adjustments for known experience and for differences in
assumptions.
The mortality assumptions adopted at 31 March 2021 and 31 March
2020 imply the following life expectancies from age 65:
31 March 31 March
2021 2020
------------------------------------------- -------- --------
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 25 years
------------------------------------------- -------- --------
The weighted-average duration of the defined benefit obligation
at 31 March 2021 was 15 years (2020: 15 years).
Historic funding positions
The funding positions applicable at the start of each period are
as follows:
12 months 12 months 12 months 12 months 12 months
ended ended ended ended ended
31 March 31 March 31 March 31 March 31 March
2021 2020 2019 2018 2017
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------------------------------------- --------- --------- --------- --------- ---------
Fair value of assets 14,527 13,735 13,774 13,529 13,946
Defined benefit obligation (21,885) (20,750) (21,177) (21,448) (21,319)
Effect of asset ceiling / IFRIC14 (147) (921) - - -
-------------------------------------------- --------- --------- --------- --------- ---------
(Deficit) in scheme (7,505) (7,936) (7,403) (7,919) (7,373)
Experience adjustment on scheme assets - (168) 518 (232) 652
-------------------------------------------- --------- --------- --------- --------- ---------
Experience adjustment on scheme liabilities - - 427 - (103)
-------------------------------------------- --------- --------- --------- --------- ---------
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. Disposal of Brighter Foods Limited on 11 May 2021 for an
aggregate cash consideration of GBP43.0 million on a cash free/debt
free basis to The Hut Group plc ("THG"). RGF, through its
subsidiary NBF, has an interest in 84.334 per cent. of the issued
share capital of Brighter Foods Limited with the balance owned by
Brighter's Managers. The Group received cash proceeds of GBP35.64
million.
2. In May 2021, the Group made a payment of GBP8.5m net
consideration to the Continuing Group's pension scheme (the Napier
Brown Retirement Plan) (the "Plan"), which is broadly equivalent to
the Plan's low dependency technical provisions basis. As such, it
is expected that the Group will not have to pay further deficit
contributions, which currently amount to GBP1.0 million per annum,
until a new schedule of contributions is agreed based on the
valuation to be agreed as at 31 March 2021 for the Plan; such
agreement would take into account this cash injection, which may
result in payments of up to GBP1.5 million (in aggregate) being
paid between 1 January 2023 and 30 June 2025 to close the gap
towards a buy-out basis.
3. In May 2021, the Group paid GBP23.1 million to the Loan Note
Holders, reducing the amount repayable from GBP45.6 million to
GBP22.5 million in respect of the loan notes, resulting in a
significant reduction in the financial liabilities attached to the
loan notes. Also, in May 2021 the Loan Note Holders waived GBP0.5m
of certain of the outstanding loan notes held by each of the Major
Shareholders (the "Loan Note Waivers") reducing the amount of loan
notes outstanding to GBP22.0 million. This waiver has been agreed
in respect of certain costs related to the Disposal. The GBP540,000
attributable to waiver is split between c.GBP350,000 of capital,
GBP100,000 relating to certain management compensation with the
remainder being in respect of interest and redemption premium.
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 Amendment Deed amends
the final repayment dates of each of the Agreements, including the
convertible loan notes; they have all been extended to 19 May 2023
(the "Final Repayment Date") with no further change to the interest
rate payable by the Company pursuant to each Agreement.
5. At the forthcoming AGM, the Independent Directors, with the
support of the rest of the Board, will be proposing that the
Company cancels the listing of the Company's shares on AIM. This is
expected to save approximately GBP150,000 a year in costs and
provide greater flexibility and agility to maximise shareholder
value.
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END
FR URAURAVUKUUR
(END) Dow Jones Newswires
September 21, 2021 02:00 ET (06:00 GMT)
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