|
TIDMRGD
RNS Number : 7101G
Real Good Food Company Plc (The)
03 July 2012
The Real Good Food Company plc (AIM: RGD)
Results for the 15 months to 31 March 2012
The Real Good Food Company plc ("RGFC" or the "Group"), owns the largest independent non-refining distributor of sugar in Europe (Napier Brown), supplies bakery ingredients (Renshaw and R&W Scott ) and manufactures patisserie and desserts (Haydens Bakery)
HIGHLIGHTS
15 months to 12 months to
31 March 2012 December 2011 December 2010
GBP'000s GBP'000s GBP'000s
Revenue 305,529 249,040 200,104
EBITDA 9,185 9,112 5,635
EPS
Basic adjusted 6.2p 7.0p 2.8p
Diluted adjusted 5.7p 6.5p 2.6p
Working Capital
(Fixed Assets/Stock/Trade
Debtors
&Trade Creditors) 38,750 36,708 29,667
Net Borrowings
(Incl Cash) 28,655 25,853 22,636
Net Debt/EBITDA
*Based on 12 months to March
2012 3.3* 2.8 4.0
-- Strong performance driven by focus on brand development and by driving sales growth
-- EBITDA up 62% to GBP9.1m in 12 months to December 2011 (2010: GBP5.6m) - performance in 3 Months to 31 March 2012 reflects usual seasonal pattern of trading in quarter one (January to March)
-- Key trading divisions of Napier Brown, Garrett and Renshaw all increased their EBITDA performance year on year
-- Significant improvement in EPS adjusted (fully diluted excluding significant items) at 5.7p for 15 months to 31 March 2012 up 119% on 2.6p for 12 months to 31 December 2010
-- Significant improvement in Net Debt / EBITDA ratio, down from 4.0 at 31 December 2010 to 2.8 at 31 December 2011. (March 2012 reflects normal seasonality profile)
-- Net borrowings of GBP28.7m at 31 March 2012 are up against 2010 driven primarily by the increased value in the supply chain following the impact mainly of higher sugar costs, but still down on position at 31 March 2011
Pieter Totte, RGFC Executive Chairman, commented:
"In 2011 we delivered on our commitment to return to growth in sales and profitability. We are now embarking on an exciting period designed to transform the scale of the Group over the next three years. This strategy is rooted in robust plans produced by each individual business and we have restructured the Group to support these."
3 July 2012
ENQUIRIES:
Real Good Food
Pieter Totte, Chairman Tel: 020 3056 1516
Mike McDonough, Finance Director Tel: 0151 706 8200
Shore Capital & Corporate Tel: 020 7408 4090
Stephane Auton / Patrick Castle
Cubitt Consulting Tel: 020 7367 5100
Gareth David
Change of Accounting Reference Date
In April 2011 the board announced it was moving its reference date from 31 December to 31 March to better align its financial reporting with its trading seasonality. The October to December period being especially busy generating most of the year's operating profits (approx 58% of EBITDA is generated in 2011 calendar).
Prior to this change the group was faced with preparing annual budgets and market updates for the current year before the key trading period results were known. Whilst we have had a good track record in meeting expectations over the last two to three years the board believe this change will improve the quality and accuracy of reporting in the future.
To help retain transparency where relevant the 2011 calendar year results are presented in this report alongside the 15 Months to 31 March 2012 to aid comparison with the prior year.
Impact of Change
The Jan - March period is the Group's "quietest" trading period with EBITDA typically around the break even level driven by the combination of the lowest sales levels in the year in this quarter with a relatively flat overhead base through the year.
This is evident in the trading comparatives with sales of GBP305.5m for the 15 Months to 31 March 2012, GBP56.5m higher than the 12 months ended 31 Dec 2011 (GBP249.0m) but profitability flat with EBITDA at GBP9.2m and GBP9.1m respectively. Given this, the key comparatives and commentary in this report will focus on comparing like with like, with performance for the full year 2011 compared with 2010 (calendar) to ensure that the underlying year on year trading is visible.
CHAIRMAN'S STATEMENT
Overview
I am very pleased with our achievements during 2011: we have delivered significant growth in both sales and EBITDA as well as setting out a clear course for how we intend to build the business over the next three years.
All divisions recorded sales growth and Group EBITDA increased to GBP9.1m in 2011, an increase of GBP3.5m on 2010. A significant proportion of this came from Napier Brown as we responded successfully to the market changes but the overall profit performance was supported also by strong results from Renshaw and Garrett Ingredients. Overall profits for the 15 month period to 31 March 2012 were in line with expectations.
Working capital levels generally have been higher during 2011 as compared to 2010 as a result of both supporting our growth plans and reflecting higher commodity prices, particularly in sugar. As at 31 March 2012 working capital of GBP38.8m was up 8% on 31 March 2011 (GBP35.9m) but well within management expectations.
Net Debt as at 31 March 2012 was GBP28.7m (31 March 2011: GBP29.4m) in line with expectations with Net Debt/EBITDA levels reducing significantly from 4.0 in 2010 to 2.8 at 31 December 2011.
The changes in the sugar market following the Sugar Regime reform period now give Napier Brown a very clear strategic focus. Customers in the EU are looking for alternative sources of sugar to provide competition to the reducing number of big EU beet producers. With our experience in sugar sourcing and our well established routes to market we are well placed to provide this.
In this respect we are delighted that Omnicane, the biggest sugar producer in Mauritius, has decided to take a significant equity stake in RGFC. We have known them for many years and following their investment in the Company we have held positive discussions which lead us to believe that there are many mutual benefits to be realised from greater cooperation.
Omnicane, with its world class model of sugar cane refining combined with electricity co-generation, is a low cost producer of cane sugar. We believe that this model of refining cane sugar in the source country is the right one, not only for Mauritius but also for other cane producers across the world and we intend to work in partnership with Omnicane to develop this. Omnicane can provide the experience and expertise in cane refining and Napier Brown can provide the routes to market, particularly in Europe where customers want and need new supply sources.
Garrett Ingredients had an extremely successful period benefiting from the management focus we have given it and following a similar strategy to Napier Brown in widening its supply sources within dairy products. Its growth prospects come from developing both its product range and its customer base.
Renshaw has benefited from the growing interest in homebaking both in the UK and internationally and this growth has prompted us to review our vision for the brand. There is an exciting opportunity to broaden its focus from its original strength in the specialist crafting sector in the UK to a much wider consumer audience both in the UK and internationally. We see the web as a major facilitator for this.
Just as we have seen benefits separating Garrett Ingredients from Napier Brown and running it as a stand alone business unit, we have started the same process with R&W Scott at Carluke. By separating it from Renshaw and investing in local management we have given its brand and product portfolios renewed focus which should begin to pay dividends during the course of this year.
At Haydens, 2011 saw the opening of the Hopton Distribution site which both created a new business stream but also critically freed up space for us to invest in the bakery. We now have three business streams, ambient, chilled and frozen, and a broadening customer base particularly in foodservice.
We have now implemented the best structure for the Group to facilitate our stated aim of doubling sales over the next three years. Whilst each division is responsible for its growth plans, we now have, in addition to the PLC board, a Group Executive Board where individual Directors have group responsibilities across key areas such as HR, IT, Compliance & Governance, Operations and Marketing where it is clear cross divisional opportunities can be delivered.
Having the right people in the right roles is essential and we have to ensure that each business is resourced fully and effectively. The Group will help achieve this as well as ensuring consistent and high quality employment practices are observed across all our sites.
Our ambitious growth plans present some exciting challenges operationally and will require investment in new capacity. Again, at Group level we can assess the priorities and help smooth implementation of these projects to support the commercial plans.
Finally, we have discovered over the past two years some hidden gems in the brands we own and it is right that the Group provides quality support and direction in managing these assets. The recent new products have given us some indication of the potential for the Renshaw brand and we now have a significantly enhanced vision of its potential.
We believe R&W Scott can also be extended out from its core jam heritage. Meanwhile our revitalisation of the Whitworths brand in sugar has been enthusiastically greeted by the retail trade supporting as it does Napier Brown's overall strategy of providing customers with a differentiated supply option.
Outlook
In 2011 we delivered on our commitment to return to growth in sales and profitability. We are now embarking on an exciting period designed to transform the scale of the Group over the next three years. This strategy is rooted in robust plans produced by each individual business and we have restructured the Group to support these.
While the strategy is not dependent on any single business, we are fortunate to have the support of Omnicane as a major shareholder to work with us on our plans for Napier Brown, our biggest business. We also believe that Omnicane can also help us with our export ambitions.
I would like to take this opportunity to thank colleagues across all the sites in all our businesses for their enthusiasm and support without which we would not have achieved the progress I have reported.
Pieter Totte
Chairman
3 July 2012
DIVISIONAL REVIEW
Napier Brown (Sugar)
From its facility at Normanton, near Leeds, Napier Brown sources sugar from the UK, mainland Europe and worldwide supplying customers in the UK across all market sectors; manufacturing, retail, wholesale and foodservice
15 months ended 12 months ended 12 months ended
31 March 2012 31 December 2011 31 December 2010
GBP'000s GBP'000s GBP'000s
Revenue(1) 176,885 143,675 108,400
EBITDA 4,383 3,749 409
Operating profit(2) 3,703 3,220 (80)
Operating profit
% 2.1 2.2 -
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant items and central costs
2011/12 Review
2011 saw a dramatic change in the balance of supply and demand within the EU sugar market reflecting changes in the world market. The EU beet sugar production quotas and reduced import availability due to volatile world prices and currency fluctuations, produced shortages which in the UK were exacerbated by a significant failure of part of the beet crop. The shortage in the supply chain led to sugar prices increasing by approx. 40% at the start of 2011 allowing the market in general to return to more normal margins following the unsustainable levels triggered by regime change which affected profitability in 2008 through to 2010.
Revenue at GBP143.7m for 2011 was up 32.6% on 2010 with volume growth accounting for 5.2% of this with the remainder being driven by passing on increased sugar costs. EBITDA at GBP3.7M for 2011 reflects the recovery in margins over 2010. For the 15 month period both revenue and EBITDA reflect the usual lower activity in the January to March period in line with expectations.
The business had to move quickly to supplement its traditional supply routes in order to meet customer demands. This required us to buy sugar from a number of new sources all around the world: seven new countries in all. This exercise was logistically complex leading to an increase in costs and working capital but we were, at the same time, able to benefit from increased selling prices. More importantly the experience gained from handling these sugars and the new relationships we built up with sugar producers will stand us in good stead going forward.
Market prices remained high for the new contract season from October 2011 as supplies continued to be tight. Our contracted volumes increased as more major manufacturing customers decided to increase their number of suppliers and include Napier Brown within their supply portfolio. This combination of higher volumes and higher market prices led to significant revenue increases year on year.
Margins returned to more sustainable levels within the sector though delays in retail price increases and continued competition within the retail arena meant that margins remained depressed in this sector. The need to buy in sugars from a range of new sources increased working capital requirements.
Current Trading
Sales of retail sugars have improved over the past few months as the marketing plans we have been working on have begun to bear fruit. In retail we now have a very distinctive branded offering targeted at all retailers as opposed to relying on one or two price driven private label contracts.
A new marketing department has been set up and a brand manager, a category manager and a new account manager recruited. Brand and PR agencies have been appointed to revitalise the Whitworths brand and bring new ranges to the market. The new 'Whitworths for Baking' range of sugars in innovative, re-sealable pouches has gained good listings in major multiples and early orders are strong.
Meanwhile industrial sales have also been buoyant as we have increased our market share with strategic partners who recognise our ability to supply sugar through new routes thus providing security of supply, best-in-class service and competitive pricing.
Outlook
The business has embarked on a number of new initiatives to develop its strategy. 'Multi-sourcing' will be central to our business proposition and customers are keen for us to continue to offer alternative supply options to the major EU beet sugar producers. In this respect we continue to develop relationships with new supply sources and are planning to invest in an infrastructure which can handle a range of sugars from different sources efficiently and cost effectively.
We have already begun contracting sales for the new season from October and have gained a number of new customers. Meanwhile our new Whitworths branded ranges has enabled us to extend our customer base in retail while we continue to work on further innovations and new products for 2013.
Garrett Ingredients (Sugar & Dairy)
Based at Thornbury, near Bristol, Garrett sources dairy and other specialist food ingredients from across the UK, Eire and continental Europe for supply (along with sugar sourced from Napier Brown) to large, medium and small food manufacturing businesses across the UK.
15 months ended 12 months ended 12 months ended
31 March 2012 31 December 31 December 2010
2011
GBP'000s GBP'000s GBP'000s
Revenue(1) 38,181 30,776 25,584
EBITDA 3,231 2,747 1,182
Operating profit(2) 3,231 2,747 1,182
Operating profit
% 8.5 8.9 4.4
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant items and central costs
2011/12 Review
Turnover increased during 2011 by 20.3% to GBP30.8m driven by a 5.3% volume increase in dairy ingredients and higher commodity prices. Much of the focus during the year was ensuring product availability by increasing the supplier base in dairy powders, butters and cheese from the UK, Ireland and continental Europe. In addition two new distributor partnerships in the UK were signed with Friesland Campina for sweet condensed milk and Cargill for dextrose.
A high proportion of the division's sugar sales are 'spot' and sales prices increased during the early part of the year as sugar supplies were short due to the UK crop difficulties and, as with the Napier experience, this also allowed the business to rebuild sugar margins to "normal" levels following the upheavals during regime change. Garretts had the same experience in sugar as Napier with margins being restored to more sustainable levels as seen in the EBITDA performance for 2011 of GBP2.7m. The 15 month period captures the usually less profitable January to March period.
Current Trading
Garrett's historic strength with small food manufacturers is now being complemented with a growing customer base amongst larger manufacturers where dairy and sugar may not be a core ingredient and where Garrett can offer excellent service and security of supply. Dairy markets have been relatively quiet recently while sugar sales have continued to be strong.
The Sunshine Ice Cream mix brand has been relaunched for summer 2012 while work is underway with a number of customers to produce bespoke added value blends utilising the mixing plant at the R&W Scott site in Carluke.
The sales operation is being restructured following the appointment of Paul Carlisle as Sales Director and the setting up of a dedicated telesales operation at the head office in Thornbury. This is being supported by investment in IT systems and associated training.
Outlook
With the UK Dairy supply base consolidating, plans are in place to increase sourcing from further afield and open up trading channels with manufacturers and supply partners from continental Europe and beyond. An integral part of the three year plan is to increase the supply partner base, either as simply a customer for the supplier or as a dedicated distributor for the manufacturer's ingredients to the UK and Irish food manufacturing market.
Sales growth will come from both increasing the product range and the breadth of the customer base. Negotiations are underway on several potential new distributorships and supply agreements focusing on areas such as whey powder, where the number of UK manufacturers has decreased leading to reduced availability.
Renshaw (Bakery Ingredients)
Operating out of its Liverpool facility Renshaw is a leading manufacturer of high quality food ingredients, primarily to the baking sector both in the UK and for export with a strong reputation for quality, consistency and innovation.
15 months ended 12 months ended 12 months ended
31 March 2012 31 December 2011 31 December 2010
GBP'000s GBP'000s GBP'000s
Revenue(1) 46,368 38,624 34,325
EBITDA 5,816 5,966 5,437
Operating profit(2) 4,908 5,222 4,767
Operating profit
% 10.6 13.5 13.9
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant items and central costs.
2011/12 Review
2011 has seen another successful year with revenue growing by 12.5% to GBP38.6m (2010 GBP34.3m) driven by both domestic and international sales with EBITDA at GBP5.9m also up on 2010 (9.7%). The reported period (15 months to March 2012) appears to buck this trend, however, Renshaw is an exceptionally seasonal business with the bulk of its trading profits generated in the last few months of the calendar year. Quarter one 2012 has generated a small loss at EBITDA level, in line with our expectations, seasonality and prior years.
In the UK the Renshaw brand extended its presence in both the retail and craft sectors while export sales continued to show growth both in the core business in the USA as well as other markets such as Scandinavia. This was recognised when The Liverpool Daily Post awarded Renshaw the title 'Regional Exporter of the Year' for 2011.
Retailers and the media are maintaining a strong focus on both homebaking and cake decorating. Renshaw has sought to capitalise on this with a range of new innovative products that have begun to gain new distribution in both mainstream and specialist craft retailers.
Sales growth led to the Liverpool manufacturing site producing record tonnage during the year, including 76 new retail products. This was achieved through a combination of 24 hour working and a rationalisation of shift patterns to improve continuity and capacity. Investment in new extruding and packing equipment was also required to meet the demand.
Current Trading
Sales have remained strong both domestically and internationally and the business has invested in people to manage this growth across all the sales channels.
The Commercial team has been restructured to focus on the three main channels of Industrial, Consumer and Export while plans are in place to develop a new e-commerce channel. The Development team has been upgraded with new appointments including a focus on packaging. In addition a new dedicated Operations Director for the Liverpool site has recently joined the business.
Outlook
It is clear that the homebaking trends which are being experienced in the UK are being replicated in many other countries and research has begun into identifying the areas of greatest potential. Our vision is to develop the Renshaw brand globally as an expert in cake decorating and we see the creation of a branded e-commerce sales channel as central to this.
R&W Scott (Bakery Ingredients)
R&W Scott at its Carluke facility south-east of Glasgow produces chocolate coatings and sauces, jams and dry powder blends for the industrial, retail, wholesale and foodservice markets.
15 months ended 12 months ended 12 months ended
31 March 2012 31 December 2011 31 December 2010
GBP'000s GBP'000s GBP'000s
Revenue(1) 14,437 11,791 8,468
EBITDA (1,044) (829) 18
Operating profit(2) (1,338) (1057) (192)
Operating profit
% (9.3) (9.0) (2.3)
(1) Excluding inter-company trading
(2) Normalised operating profit before interest, significant items and central costs
2011/12 Review
2011 proved to be a tough year for the business which incurred significant material cost increases which were not being recovered in sales price increases until late in the year. As a consequence of the delay in passing on costs and due to production inefficiences on a changing sales mix EBITDA for 2011 fell to a loss of (GBP0.8M) over the previous year with the 15 month period presenting a similar picture whilst underlying volumes were static against the prior year.
In order to address this the Carluke site was established as a separate trading division from Renshaw during the latter half of 2011, under its old trading name R&W Scott, in order to bring more commercial focus to its key product areas of chocolate coatings, sauces, jams and dry powder blends.
2011 saw overall volumes at the site increase to 7,400 tonnes helped by the re-siting of the dry powder mix from Napier Brown in Normanton. To support this volume growth, further capital investment was made in the site in the areas of malted filling capacity, refining capability and retail packing as well as upgrades from an environmental and health and safety perspective.
Current trading
I am pleased to report that the current year has started strongly and has returned to profitability. Delivered margin (gross profit after distribution before overheads) aspirations for 2012/13 are to move from the 12% achieved in 2011/12 to above 20%. Run rate in the first quarter is in line with plan due to improved pricing, increased output of higher value added lines and focus on improvement initiatives. Business development plans are in place to continue to drive margin improvement and return EBITDA back to positive.
Outlook
The vision for R&W Scott is to transform the Carluke site from being a manufacturer of largely commodity products to an added value, innovative and commercial business utilising the site's considerable brand heritage, skills and capabilities.
A new site based management team has been established to bring focus to the business across all sales channels; industrial, foodservice and retail. Using our experience to create new recipes, made in innovative ways and that have lifestyle appeal, is the key to brand development, improved product offerings and to delivering growth. The first example of this is the revitalisation of the R&W Scott brand with an exciting new range of naturally sweet retail jams due to appear in supermarkets later this year.
The business plans to increase turnover to GBP25m within 3 years and the site has both the capacity and capability to deliver this. Product development in tune with the needs of the consumer today will drive the business to be a brand led enterprise supported by investment in facilities, plant and new product support.
Haydens Bakeries (Bakery Division)
From its site in Devizes, Wiltshire Haydens Bakeries produces an extensive range of high added value, hand finished, ambient, chilled and frozen patisserie and dessert products to retail and foodservice customers. Through its Hopton Distribution subsidiary, it also consolidates distribution of bakery products from other manufacturers to Waitrose.
15 months ended 12 months ended 12 months ended
31 March 2012 31 December 2011 31 December 2010
GBP'000s GBP'000s GBP'000s
Revenue(1) 29,658 24,184 23,327
EBITDA (604) (398) 415
Operating profit(2) (1,333) (961) (238)
Operating profit
% (4.5) (4.0) (1.0)
(1) Including inter-company trading
(2) Normalised operating profit before interest, significant items and central costs
2011/12 Review
As reported previously Haydens had a difficult year in 2011 on two fronts. Significant material cost increases which were not reflected in sales price increases until quarter four and the factory development started later than planned preventing management from delivering the cost reduction opportunities from production efficiencies and improved material usage.
Revenue growth of 3.7% in 2011 was not sufficient to offset the combined impact of these pressure points resulting in EBITDA dropping to a loss (GBP0.4m) in 2011 with the trend largely the same for the 15 month period.
Commercially the business continued to thrive with over thirty new products launched focusing on the bakery's core processes. These new products included premium dessert products for the 'Heston' brand in Waitrose through to individually packaged Danish products and were developed under the supervision of Executive Chef, Ross Sneddon who has recently been awarded the honour of Master Chef-Patisserie. New formats of Haydens' high quality products are part of the division's strategy to broaden its exposure to new customer channels such as impulse, convenience and foodservice.
The new Distribution Centre for Waitrose opened in April 2011 and this has enabled the 3 year bakery modernisation programme to begin with blast chilling and freezing capability planned to be in place by mid-2012. These changes are critical to delivering production cost and material usage efficiencies as well as reaching new sales channels. Meanwhile there has also been investment in tart and pie capacity required to meet growing demand.
Current Trading
There continues to be strong demand for the Company's added value products, with over 15 new patisserie and dessert launches in the late spring of this year. Additionally, new food service products were launched in line with Hayden's strategy to develop the full potential in this sector.
In the immediate future, the focus is on increasing efficiencies and reducing costs through the implementation of the factory development programme, delayed from last year. This is now live and stage 1 benefits should start to materialise from the 3(rd) quarter of this year.
Outlook
The division has a clear strategic plan to focus its new product development in its areas of expertise and broaden its customer base by exploiting its quality credentials across a range of trade channels. The capability to utilise ambient, chilled and frozen supply chains is central to this.
The factory development programme is being delivered by a new highly motivated Operations team, led by newly appointed John Larsen. The team is committed to delivering significant return on this investment within the current financial year. This plan, coupled with aspirations for strong sales growth in the second half of the year, is providing the management with reason for optimism.
FINANCE DIRECTOR'S REPORT
Accounting reference date
As commented on at the start of this report, the change in the accounting reference date will improve the Group's budgeting and forecasting routines, and consequently in providing stakeholders with commentary and trading updates. At this time, however, we "tag on" our lowest trading quarter to our normal twelve month period creating some "noise" around understanding the underlying performance and trend. In order to overcome this, emphasis in the commentary is placed on comparatives with like for like "calendar" performance for 2011 versus 2010. Additional commentary on the 31 March 2012 position is included where appropriate.
Revenue
Group revenue from continuing operations for the 15 months to 31 March 2012 was GBP305.5m 2011 (Jan to Dec) at GBP249.0m, on a like for like basis was approx 25% up (GBP48.9M) on 2010 at GBP200.1m. Of this GBP48.9m year on year increase, approximately 80% (GBP39.4m) is from the Napier & Garretts businesses with GBP30.2m of this increase "value driven", reflecting the increased commodity costs, primarily sugar, and passed on in sales prices to customers.
Overall on a like-for-like basis the Group grew in volume terms by 5.3% in 2011.
Key Comparatives 15 months ended 12 months ended 12 months ended
(Continuing Operations 31 March 31 December 31 December
excluding Significant 2012 2011 2010
items)
GBP'000s GBP'000s GBP'000s
Revenue 305,529 249,040 200,104
Gross Profit 39,626 33,472 23,879
Delivered Margin
(Gross Profit after
Distribution costs) 26,617 22,887 15,826
EBITDA 9,185 9,112 5,637
Operating profit
(EBITDA less Depn) 6,564 7,041 3,609
Operating profit % 2.1% 2.8% 1.8%
PBT
(After Financing &
Pension costs) 4,910 5,737 2,343
Margins
Delivered Margin for the 15 month period was GBP26.6m resulting in EBITDA of GBP9.2m with 2011 calendar year at GBP22.9m up 44.6% on 2010 (GBP15.8m). This increase is a result, primarily, of trading margins in sugar returning to more normal sustainable levels following the upheavals in the Sugar Regime that adversely affected profitability from 2008 through 2010.
Profit before Tax and Interest
Overall profits for the 15 month period and 2011 calendar year were in line with expectations driven by the recovery in Sugar in Napier and Garretts.
Financing Costs
Financing costs for the 15 months at GBP1.9M were in line with the 2011 "run rate" of GBP1.5m (2010 GBP1.4m).
Significant Items
During the 15 months the Group incurred one-off costs of GBP0.55m due mostly to the reorganisation of the Haydens operation, GBP0.43m, a continuation of the modernisation programme started in 2010. GBP0.12m was incurred in the liquidation and winding up of dormant subsidiaries and the hive down of Haydens trading from the Plc entity into its own limited company. The tidying up of this structure will reduce administration and increase transparency for stakeholders.
Working Capital & Net 31 March 31 December 31 December
Debt 2012 2011 2010
GBP'000s GBP'000s GBP'000s
Working Capital
(Fixed Assets/Stock/Trade
Debtors & Trade Creditors) 38,750 36,708 29,667
Net Borrowings
(Incl Cash) 28,655 25,883 22,636
Net Debt/EBITDA
*Based on 12 months
to March 2012 3.3* 2.8 4.0
Cash Flow and Debt
Working Capital levels have increased (24% as at 31 December 2011) over 2010 levels reflecting primarily increased material costs which are not expected to ease in the short term. The group has also maintained higher stock levels especially in sugar following the problems experienced in the supply chain last year.
These factors have pushed debt levels up, with Net Debt up 14% at 31 December 2011 compared to 31 December 2010, although this is in line with expectations and well within our funding facilities.
Net Debt (after Cash) as at 31 March 2012 was GBP28.7m (31 March 2011 GBP29.4m) reflecting the normal seasonality through the year.
However, underlying Debt levels as compared to EBITDA (Net Debt to EBITDA) have reduced significantly from 4.0 in 2010 to 2.8 at Dec 2011. March 2012 has moved up since Dec 2011 but this is in line with expectations and follows our normal seasonality pattern.
Pensions
Two subsidiaries, Napier Brown Foods Limited and Renshawnapier Limited, operate a defined benefit pension scheme which is closed to new members. The IAS 19 valuation of the scheme at 31 March 2012 identified a GBP1.1m deficit, a deterioration of GBP1.1m since December 2010. The scheme's assets have largely retained their value since 2010 with the deficit mainly driven by the fall in discount rates at the present time increasing the present value of future benefits. The Group is proactive with the trustees in managing the scheme, not losing sight of the fact key market drivers are weak and presenting a negative view at this time. During the period the Group contributed GBP177k (2010: GBP117k) to the scheme.
Key Performance Indicators
The Board of Directors monitors a range of financial and non-financial key performance indicators, reported on a periodic basis, to measure the Group's performance over time. The key performance indicators are set out below:
The 2011 Calendar as compared with 2010 breaks out the underlying trends with improvement across all areas, with the 15 month period to 31 March 2012 capturing the seasonality of the January to March quarter which dilutes the picture.
31 March 31 December 31 December
2012 2011 2010
Revenue growth(1) n/a 24.5% (7.2%)
Operating margin(2) 2.1% 2.8% 1.8%
Debt cover (net debt:EBITDA)(3) 3.3* 2.8 4.0
Interest cover(4) 4.8 7.0 4.5
Health & Safety score(5) n/a 83% 80%
1 Revenue growth is calculated for continuing operations.
-
2 Operating margin is stated for continuing operations only
- and is calculated by dividing operating profit before tax,
interest and significant items by revenue from continuing
operations.
3 Debt cover is calculated by dividing total net debt by
- continuing EBITDA. EBITDA is defined as earnings before
significant items, interest, tax, depreciation and intangible
asset amortisation.
* Based on 12 months to March 2012
4 Interest cover is calculated by dividing EBITDA by net
- interest payments (gross interest payable less interest
receivables).
5 Health & Safety score represents the weighted average score
- across all sites as determined by our health and safety
score index which was introduced in 2008 and is measured
by an external consultant.
Mike McDonough
Group Finance Director
3 July 2012
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
15 months ended 31 March 2012
15 months ended 31 March 12 months ended 31 December
2012 2010
Significant
Before Significant Before Items
Significant Items Significant (Note
Items (Note 3) Total Items 3) Total
CONTINUING OPERATIONS GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
REVENUE 305,529 - 305,529 200,104 - 200,104
Cost of sales (265,903) - (265,903) (176,225) - (176,225)
------------- ------------ ---------- ------------- ------------ ----------
GROSS PROFIT 39,626 - 39,626 23,879 - 23,879
Distribution costs (13,009) - (13,009) (8,053) - (8,053)
Administration
expenses (20,053) (550) (20,603) (12,217) (395) (12,612)
OPERATING PROFIT 6,564 (550) 6,014 3,609 (395) 3,214
Finance income - - - 5 - 5
Finance costs (1,896) - (1,896) (1,365) - (1,365)
Other finance
income 242 - 242 94 - 94
------------- ------------ ---------- ------------- ------------ ----------
PROFIT BEFORE TAXATION 4,910 (550) 4,360 2,343 (395) 1,948
Income tax expense (859) 113 (746) (536) 111 (425)
------------- ------------ ---------- ------------- ------------ ----------
PROFIT FROM CONTINUING
OPERATIONS 4,051 (437) 3,614 1,807 (284) 1,523
============= ============ ========== ============= ============ ==========
OTHER COMPREHENSIVE
INCOME
Actuarial (losses)
/ gains on defined
benefit plans (1,499) - (1,499) 488 - 488
Income tax relating
to components of
other comprehensive
income 360 - 360 (137) - (137)
TOTAL COMPREHENSIVE
INCOME FOR THE
YEAR 2,912 (437) 2,475 2,158 (284) 1,874
============= ============ ========== ============= ============ ==========
Earnings per share
from continuing
and discontinued
operations:
- basic 5.6p 2.3p
- diluted 5.1p 2.2p
Earnings per share
from continuing
operations:
- basic 5.6p 2.3p
- diluted 5.1p 2.2p
Consolidated STATEMENT OF Changes in equity
15 months ended 31 March 2012
Issued
Share Share Premium Share Option Retained
Capital Account Reserve Earnings Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Balance as at 1 January
2010 1,300 68,870 73 7,787 78,030
Shares options to be issued - - 34 - 34
Deferred tax on share
options 46 46
Total comprehensive income
for the year - - - 1,874 1,874
Balance as at 31 December
2010 1,300 68,870 153 9,661 79,984
--------- -------------- ------------- ---------- ---------
Balance as at 1 January
2011 1,300 68,870 153 9,661 79,984
Shares options to be issued - - 38 - 38
Deferred tax on share
options - - 335 - 335
Shares issued in period - 4 - - 4
Total comprehensive income
for the year - - - 2,475 2,475
Balance as at 31 March
2012 1,300 68,874 526 12,136 82,836
========= ============== ============= ========== =========
consolidated STATEMENT OF FINANCIAL POSITION
15 months ended 31 March 2012
31 March 2012 31 December 2010
GBP'000s GBP'000s
NON CURRENT ASSETS
Goodwill 75,796 75,796
Other intangible assets 521 625
Property, plant and equipment 17,057 15,603
Deferred tax asset 912 351
94,286 92,375
-------------- -----------------
CURRENT ASSETS
Inventories 17,380 9,546
Trade and other receivables 24,444 24,373
Cash and cash equivalents 2,506 3,187
44,330 37,106
-------------- -----------------
TOTAL ASSETS 138,616 129,481
============== =================
CURRENT LIABILITIES
Trade and other payables 20,082 19,891
Borrowings 24,366 17,258
Derived financial instruments - 30
Current tax liabilities 570 589
-------------- -----------------
45,018 37,768
-------------- -----------------
NON CURRENT LIABILITIES
Borrowings 6,796 8,565
Deferred tax liabilities 2,886 3,164
Retirement benefit obligations 1,080 -
-------------- -----------------
10,762 11,729
-------------- -----------------
TOTAL LIABILITIES 55,780 49,497
-------------- -----------------
NET ASSETS 82,836 79,984
============== =================
EQUITY
Share capital 1,300 1,300
Share premium account 68,874 68,870
Share option reserve 526 153
Retained earnings 12,136 9,661
-------------- -----------------
TOTAL EQUITY 82,836 79,984
============== =================
These financial statements were approved by the Board of Directors and authorised for issue on 3 July 2012. They were signed on its behalf by:
P W Totte M J McDonough
Chairman Director
CONSOLIDATED cash flow statement
15 months ended 31 March 2012
15 months ended 12 months ended
31 March 2012 31 December
2010
GBP'000s GBP'000s
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Profit before taxation 4,360 1,948
Finance costs 1,896 1,365
Finance income - (5)
IAS 19 income (242) (94)
Depreciation of property, plant &
equipment 2,449 1,785
Amortisation of intangibles 172 241
Operating Cash Flow 8,635 5,240
(Increase)/Decrease in inventories (7,834) 24
Increase in receivables (70) (922)
Increase in payables 221 904
---------------- ----------------
Cash generated from operations 952 5,363
Income taxes paid (932) (23)
Interest paid (1,896) (1,341)
---------------- ----------------
Net cash from operating activities (1,876) 3,999
---------------- ----------------
CASH FLOW FROM INVESTING ACTIVITIES
Interest received - 5
Shares issued in period 4 -
Purchase of intangible assets (68) (215)
Purchase of property, plant & equipment (3,903) (2,162)
---------------- ----------------
Net cash used in investing activities (3,967) (2,372)
---------------- ----------------
CASH FLOW USED IN FINANCING ACTIVITIES
Additional/(Repayment) of borrowings 5,540 (3,708)
Repayment of obligations under finance
leases (201) (272)
Pension contributions (177) (117)
Net cash used in financing activities 5,162 (4,097)
---------------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (681) (2,470)
================ ================
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning
of period 3,187 5,657
Net movement in cash and cash equivalents (681) (2,470)
---------------- ----------------
Cash and cash equivalents at end
of period 2,506 3,187
================ ================
Cash and cash equivalents comprise:
Cash 2,506 3,187
Overdrafts - -
---------------- ----------------
2,506 3,187
================ ================
NOTES TO THE FINANCIAL STATEMENTS
15 months ended 31 March 2012
1. presentation of financial statements
General information
The Real Good Food Company plc is a public limited company incorporated in England and Wales under the Companies Act (registered number 4666282). The Company is domiciled in England and Wales and its registered address is 229 Crown Street, Liverpool, Merseyside, L8 7RF. The Company's shares are traded on the Alternative Investment Market (AIM).
The principal activities of the Group are the sourcing, manufacture and distribution of food to the retail and industrial sectors.
Basis of preparation
These consolidated financial statements are presented on the basis of International Financial Reporting Standards (IFRS) as adopted by the European Union and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and have been prepared in accordance with AIM rules and the Companies Act 2006, as applicable to companies reporting under IFRS.
These consolidated financial statements have been prepared in accordance with Group accounting policies and under the historical cost convention, except where modified by the revaluation of certain financial instruments and commodities.
New IFRS standards and interpretations adopted
The following IFRS standards, amendments and interpretations are not yet effective and have not been adopted early by the group.
The adoption of these standards, amendments and interpretations is not expected to have a material impact on the Group's profit for the period or equity. The adoptions may affect disclosures in the Group's financial statements.
2. SEGMENT REPORTING
Business segments
The group has historically traded with its operating segments being Sugar, Bakery Ingredients and Bakery and the Group's management and reporting structure was traditionally set out along those lines. However in 2011 with the separating of the R&W Scott business from Renshaw we have now migrated to a structure that reflects the management teams in place and also ensures all aspects of trading activity has the specific focus it needs in order to achieve our growth plans
15 months ended 31 March
2012
Continuing
Operations Significant Total
Napier Garrett Renshaw R&W Scott Haydens Total items Group
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Total Revenue 189,406 38,967 46,572 14,437 29,658 319,040 - 319,040
Revenue
- Internal (12,521) (786) (204) - - (13,511) - (13,511)
External
Revenue 176,885 38,181 46,368 14,437 29,658 305,529 - 305,529
Operating
Profit 3,703 3,231 4,908 (1,338) (1,333) 9,171 (550) 8,621
Head Office
and
consolidation
adjustments (2,607) - (2,607)
Net Finance -
Costs (943) (195) (495) (142) (121) (1,896) - (1,896)
Pension
finance
income - - - - - 242 - 242
----------- --------- ---------- ------------ --------- ------------ ------------ ---------
Profit/(loss)
before tax 3,168 2,628 4,413 (1,480) (1,454) 4,910 (550) 4,360
Tax (546) (453) (761) 255 251 (1,254) - (1,254)
Unallocated
Tax - - - - - 395 113 508
----------- --------- ---------- ------------ --------- ------------ ------------ ---------
Profit/(loss)
after tax
as per
comprehensive
statement
of income 2,622 2,175 3,652 (1,225) (1,203) 4,051 (437) 3,614
----------- --------- ---------- ------------ --------- ============ ============ =========
Sales between segments are charged at prevailing market rates.
2. SEGMENT REPORTING (continued)
15 months ended 31 Unallocated
March 2012 Napier Garrett Renshaw R&W Scott Haydens (1) Total Group
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Segment assets 27,122 4,646 15,694 6,752 7,288 61,502
Unallocated assets
Goodwill 75,796
Other intangible
assets 0
Property, plant
and equipment 28
Deferred tax assets 912
Trade and other
receivables 275
Cash and cash equivalents 103
------------
Total assets 138,616
------------
Segment liabilities (26,699) (4,739) (8,710) (1,503) (3,247) (44,898)
Unallocated liabilities
Trade and other
payables
Borrowings (8,808)
Current tax liabilities 318
Deferred tax liabilities (2,392)
------------
Total liabilities (55,780)
------------
Net operating assets 423 (93) 6,984 5,249 4,041 82,836
--------- --------- --------- ---------- --------- ------------
Non current asset
additions 369 - 907 318 2,363 14 3,971
Depreciation 598 - 826 294 722 9 2,449
Amortisation 82 - 82 - 7 1 172
(1) Unallocated
Relates primarily to the Head Office and non current asset additions, depreciation and amortisation which cannot be meaningfully allocated to individual operating divisions.
Geographical segments
The Group earns revenue from countries outside the United Kingdom, but as these only represent 3.0% of the total revenue of the Group, segmental reporting of a geographical nature is not considered relevant
2. SEGMENT REPORTING (continued)
12 months Ended 31 December
2010
Continuing
R&W Operations Significant Total
Napier Garrett Renshaw Scott Bakery Total items Group
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Total Revenue 109,883 26,230 34,503 8,468 23,327 202,411 - 202,411
Revenue -
Internal (1,483) (646) (178) - - (2,307) - (2,307)
External Revenue 108,400 25,584 34,325 8,468 23,237 200,104 - 200,104
Operating
Profit (80) 1,182 4,767 (192) (238) 5,439 (395) 5,044
Head Office
and
consolidation
adjustments (1,830) - (1,830)
Net Finance
Costs (638) (151) (369) (91) (86) (1,335) - (1,335)
Unallocated
Net Finance
Costs - - - - -
------------ ------------ ---------
94 94
Pension finance
income - - - - - (25) - (25)
------------ ------------ ---------
Profit/(loss)
before tax (718) 1,031 4,398 (283) (324) 2,343 (395) 1,948
Tax 97 (289) (933) 79 31 (1,015) - (1,015)
Unallocated
Tax - - - - - 479 111 590
----------- --------- ---------- ---------- --------- ------------ ------------ ---------
Profit/(loss)
after tax
as per
comprehensive
statement
of income (621) 742 3,465 (204) 293 1,807 (284) 1,523
=========== ========= ========== ========== ========= ============ ============ =========
Sales beween segments are charged at prevailing market rates.
2. SEGMENT REPORTING (continued)
12 months ended Unallocated
31 December 2010 Napier Garrett Renshaw R&W Scott Haydens (1) Total Group
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Segment assets 20,794 3,501 16,232 6087 6,303 52,917
Unallocated assets
Goodwill 75,796
Other intangible
assets 1
Property, plant
and equipment 5
Deferred tax assets 351
Inventory -
Trade and other
receivables 287
Derived financial
assets
Current tax assets -
Cash and cash
equivalents 124
------------
Total assets 129,481
------------
Segment liabilities (20,184) (3,326) (7,034) (1,370) (3,947) (35,861)
Unallocated liabilities
Trade and other
payables (406)
Borrowings (10,511)
Derived financial
instruments -
Current tax liabilities (308)
Deferred tax liabilities (2,411)
Provisions
------------
Total liabilities (49,497)
------------
Net operating assets 609 1,756 9,197 4,717 2,356 79,984
--------- --------- --------- ---------- --------- ------------
Non current asset
additions 404 - 776 126 1072 2,378
Depreciation 420 - 526 210 624 5 1,785
Amortisation 67 - 144 - 28 2 241
Unallocated
Relates primarily to the Head Office and non current asset additions, depreciation and amortisation which cannot be meaningfully allocated to individual operating divisions.
Geographical segments
The Group earns revenue from countries outside the United Kingdom, but as these only represent 3.1% of the total revenue of the Group, segmental reporting of a geographical nature is not considered relevant.
3. SIGNIFICANT ITEMS
15 months 12 months
ended ended
31 March 31 December
2012 2010
GBP'000s GBP'000s
Management restructuring costs (429) (395)
Group restructuring costs (121) -
---------- --------------
(550) (395)
Taxation credit on significant items 113 111
---------- --------------
(437) (284)
========== ==============
During the year the Group incurred a number of significant costs as detailed above. The management restructuring costs reflect a number of fundamental reorganisations within our operating divisions during the year. The Group restructuring cost relate to liquidation of dormant subsidiaries necessary to simplify the Group structure.
4. dIRECTORS' REMUNERATION
15 months 12 months
ended ended
31 March 31 December
2012 2010
GBP'000s GBP'000s
Fees 268 208
Executive salaries and benefits 698 403
Share-based payments 22 24
---------- -------------
988 635
========== =============
The emoluments of the Directors for the period were as follows:
Share 12 months
Short term Based 15 months ended
Employee payments Post Employment ended 31 31 December
Benefits* Benefits Benefits March 2012 2010
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
M J McDonough 239 - 20 - 259 193
P W Totte 439 22 - - 461 223
P Ridgwell 96 - - - 96 79
P C Salter 133 - - - 133 108
C O Thomas 39 - - - 39 32
------------- ------------ --------- ------------------ ------------ -------------
946 22 20 - 988 635
============= ============ ========= ================== ============ =============
* Short term Employee Benefits (Salaries and fees) include both fees received as an officer of the Company and separate consultancy fees.
Key management personnel are considered to be the Company Directors
4. dIRECTORS' REMUNERATION (continued)
Directors' interests in share options
Option Type Date of Number Number of Exercise Earliest Exercise
Grant of options Price Exercise Expiry
options at 31 December Date Date
at 31 March 2010
2012
P W Totte
Un-approved options
2009 July 2009 1,000,000 1,000,000 5.25p July 2012 July 2019
Un-approved options
2010 May 2010 142,857 142,857 24.50p May 2013 May 2020
Un-approved options
2011 March 2011 3,817,725 - 25.0p April 2011 Mar 2021
P Ridgwell
Un-approved options
2009 July 2009 476,190 476,190 5.25p July 2012 July 2019
Un-approved options
2010 May 2010 61,224 61,224 24.50p May 2013 May 2020
P C Salter
Un-approved options
2009 July 2009 285,714 285,714 5.25p July 2012 July 2019
Un-approved options
2010 May 2010 102,040 102,040 24.50p May 2013 May 2020
C O Thomas
Un-approved options
2009 July 2009 304,762 304,762 5.25p July 2012 July 2019
Un-approved options
2010 May 2010 40,816 40,816 24.50p May 2013 May 2020
Warrants Dec 2003 369,000 369,000 67.75p Dec 2007 Dec 2013
M J McDonough
Approved options
2009 June 2009 476,190 476,190 5.25 July 2012 July 2019
Approved options
2010 May 2010 20,408 20,408 24.50p May 2013 May 2020
Un-approved options
2010 May 2010 40,816 40,816 24.50p May 2013 May 2020
3,817,725 new options were granted to Directors during the period (2010 - 408,161). Options have been granted to directors whose performances and potential contribution were judged to be important to the operations of the Group, as incentives to maximise their performance and contribution.
The mid-market price of the ordinary shares on 31 March 2012 was 58.5p and the range during the period was 24.1p to 73.5p.
During the period retirement benefits were accruing to 1 (2010 - 1) Directors in respect of money purchase pension schemes.
No Director exercised share options during the year.
5. Taxation
15 months 12 Months
ended ended31 December
31 March 2010
2012
GBP'000s GBP'000s
CURRENT TAX
UK Current tax on profit of the period 1,102 576
UK Current tax on significant items (113) (111)
Adjustments in respect of prior years (98) (7)
----------- -----------------
Total current tax 891 458
Deferred Tax
Deferred tax charge re pension scheme 101 26
Origination and reversal of timing differences 36 104
Adjustments in respect of prior years 45 (56)
Deferred tax asset re losses brought forward - -
Adjustment in respect of change in
deferred tax rate (327) (107)
----------- -----------------
Total deferred tax (145) (33)
----------- -----------------
Tax on profit on ordinary activities 746 425
=========== =================
Factors affecting tax charge for the period:
The tax assessed for the period is lower (2010 - lower) than the standard rate of corporation tax in the UK 26.39% (2010 - 28%). The differences are explained below:
15 months 12 months
ended 31 ended 31
March 2012 December
2010
GBP'000s GBP'000s
TAX RECONCILIATION
Profit per accounts before taxation 4,360 1,948
Tax on profit on ordinary activities at
standard CT rate of 26.39% (2010 28%) 1,150 545
Expenses not deductible for tax purposes 48 51
Impact of change in tax base for leasehold - -
Additional deduction for R&D expenditure (64) -
Deferred tax asset re losses brought forward - -
Temporary difference movements at lower (9) -
tax rate
Adjustment in respect of change in deferred
tax rate (327) (107)
Adjustments to tax in respect of prior
years (52) (64)
------------ ----------
Tax charge for the period 746 425
============ ==========
6. EARNINGS per share
Basic earnings per share
Basic earnings per share is calculated on the basis of dividing the profit/(loss) attributable to ordinary shareholders of the company by the weighted average number of ordinary shares in issue during the year.
15 months ended 12 months
31 March 2012 ended 31 December
2010
Continuing Continuing
Operations Operations
Earnings after tax attributable to ordinary shareholders (GBP000's) 3,614 1,523
Weighted Average No. of shares in issue (000's) 65,017 65,014
---------------- -------------------
Basic earnings per share 5.6p 2.3p
================ ===================
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares. Potential dilutive ordinary shares arise from share options and warrants. For these, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the exercise price attached to outstanding share options. Thus the total potential dilutive weighted average number of shares considers the number of shares that would have been issued assuming the exercise of the share options.
15 months 12 months ended
ended 31 31 December
March 2012 2010
Continuing Continuing
Operations Operations
Earnings after tax attributable to ordinary shareholders (GBP000's) 3,614 1,523
Total Potential Weighted Average No. of shares in issue (000's) 71,385 68,311
------------ ----------------
Diluted earnings per share 5.1p 2.2p
============ ================
Adjusted earnings per share
An adjusted earnings per share and a diluted adjusted earnings per share, which exclude significant items, has also been calculated as in the opinion of the Board this allows shareholders to gain a clearer understanding of the trading performance of the Group.
15 months 12 months
ended 31 ended 31
March 2012 December
2010
Continuing Continuing
Operations Operations
Earnings after tax attributable to ordinary
shareholders (GBP000's) 3,614 1,523
Add back significant items (note 6) 550 395
Add back tax on significant items (113) (111)
------------ --------------
Adjusted earnings after tax attributable
to ordinary shareholders (GBP000's) 4,051 1,807
============ ==============
Weighted Average No. of shares in issue
(000's) 65,017 65,014
------------ --------------
Basic earnings per share 6.2p 2.8p
============ ==============
Total Potential Weighted Average No.
of shares in issue (000's) 71,385 68,311
------------ --------------
Basic diluted earnings per share 5.7p 2.6p
============ ==============
7. goodwill
Group
GBP'000s
Cost
Brought forward 1 January 2011 75,796
===============
Carried forward 31 March 2012 75,796
===============
Goodwill acquired on business combinations is allocated at
acquisition to the Cash Generating Units that are expected
to benefit from that business combination. Before any recognition
of impairment losses, the carrying amount of goodwill has been
allocated as follows:
31 December
31 March 2012 2010
GBP'000s GBP'000s
Sugar and Bakery Ingredients
division* 75,796 75,796
Carried forward 31 March 2012 75,796 75,796
* The goodwill relating to the Sugar and Bakery Ingredients Divisions arose out of the single acquisition of Napier Brown Foods by The Real Good Food Company plc in 2005. It has not been possible to allocate this goodwill between individual Cash Generating Units.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be impaired.
The recoverable amounts of the Cash Generating Units are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates and expected changes to selling prices and direct costs.
The rate used to discount the forecast cash flows is the Group's pre-tax weighted average cost of capital of 7.19% (2010 - 4.61%). The Group prepares cash flow forecasts derived from the most recent financial plans approved by the board for the next three years and extrapolates this over a further 16 years at a zero growth rate.A period of 19 years has been applied as the Directors used this period to assess the viability of the acquisition when the business was acquired in 2005. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. Using these parameters and allowing for disposal income at the end of this time scale the recoverable amounts exceed the carrying value by GBP84.7 million. Actual results were 12% above the forecast cash flows used for the impairment review in the previous year.
An increase in the Group's weighted average cost of capital to above 17.11% (2010 - 10.4%) would cause the Board to impair the carrying value of goodwill.
8. Borrowings AND CAPITAL MANAGEMENT
31 March 31 March 31 December 31 December
2012 2012 2010 2010
Group Company Group Company
GBP'000s GBP'000s GBP'000s GBP'000s
Unsecured borrowings
at amortised cost
Loan notes 2,774 - 2,774 -
Secured borrowings
at amortised cost
Bank term loans 6,016 6,016 7,784 7,784
Revolving credit
facilities 22,340 1,135 15,032 1,098
Hire purchase 32 32 233 106
---------- ---------- ------------- -------------
31,162 7,183 25,823 8,978
========== ========== ============= =============
Amounts due for
settlement within
12 months 24,366 3,161 17,258 3,187
Amounts due for
settlement after
12 months 6,796 4,022 8,565 5,791
---------- ---------- ------------- -------------
31,162 7,183 25,823 8,978
========== ========== ============= =============
Features of the Group's borrowings are as follows:
The Group's financial instruments comprise cash, a term loan, hire purchase and finance leases, revolving credit facility, overdraft and various items arising directly from its operations such as trade payables and receivables. The main purpose of these financial instruments is to finance the Group's operations.
The main risks from the Group's financial instruments are interest rate risk and liquidity risk. The Group also has some currency exposure in relation to its sugar trade and also some currency exposure in relation to the purchase of almonds from the United States, however, this is mitigated by matching against foreign currency sales. The Board reviews and agrees policies, which have remained substantially unchanged for the year under review, for managing these risks.
The Group's policies on the management of interest rate, liquidity and currency exposure risks are set out in the Report of the Directors.
The Group operates a number of term loans and revolving credit facilities with PNC Business Credit. The property term loan currently bears interest at 3% above base rate and is repayable via monthly instalments of GBP71,000 and then a bullet repayment of GBP3,529,000 in July 2013. At the year end GBP4.6m was outstanding under this facility. Our fixed asset term loan also currently bears interest at 3% above base rate and is repayable by monthly instalments of GBP85,000 until July 2013. At the year end GBP1.3m was outstanding under this loan. Our final term loan currently bears interest at 4% above base rate and is repayable via monthly instalments of GBP62,000 up to June 2012. At the year end GBP0.1m was outstanding under this facility.
The Group's revolving credit facilities, which are available until July 2013, comprise of Sterling and Euro denominated invoice discounting facilities and an inventory asset facility. The invoice discounting facilities currently bear interest at 2.65% above Sterling and Euro base rates respectively and are secured against the underlying trade receivables. The total amount outstanding under these facilities at the end of the period was GBP15.6m, whilst the maximum permitted borrowings are GBP24.4m. The inventory finance facility currently bears interest at 2.95% above base rate and at the period end GBP6.7m was outstanding under this facility which has a maximum borrowing limit of GBP8.5m and is secured upon the finished goods and certain raw material inventories of the Group.
The fixed interest rate liabilities relate to amounts payable on hire purchase agreements. The weighted average interest rate of these liabilities was 6.0% (2010 - 6.93%) and the weighted average period for which the interest rates are fixed was 6 months (2010 - 15 months).
The Group had outstanding loan notes amounting to GBP2,773,908 (2010 - GBP2,773,908) due to Napier Brown Ingredients Limited as disclosed in note 9. The loan note holders have previously agreed to waive the accrued interest in relation to these notes, which were also interest free during 2011. No agreement is in place for 2012 onwards.
The financial assets of the Group are surplus funds, which are offset against borrowings under the facility, and there is no separate interest rate exposure.
PNC Business Credit has a debenture incorporating a fixed and floating charge over the undertaking and all property and assets present and future including goodwill, book debts, uncalled capital, buildings, fixtures, intangible assets, fixed plant and machinery. In addition our banking arrangements with KBC contain certain cross guarantees. Hire purchase and finance lease liabilities are secured upon the underlying assets.
Forward foreign exchange contracts
The Group has no forward foreign exchange contracts in place as at end of March 2012.
Liquidity risk management
The Board reviews the Group's liquidity position on a monthly basis and monitors its forecast and actual cash flows against maturing profiles of its financial assets and liabilities.
The following table details the Group's maturity profile of its financial liabilities.
2012 Less than 1 - 3 3 months 1 - 5 5 + years
1 month months to 1 year years GBP'000s Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Trade and other
payables 9,308 10,774 - - - 20,082
Loan notes - - - 2,774 - 2,774
Bank term loans 218 372 1,404 4,022 - 6,016
Revolving credit
facilities - - 22,340 - - 22,340
Finance leases 21 11 - - - 32
---------- ---------- ----------- ---------- ---------- ----------
9,547 11,157 23,744 6,796 - 51,244
========== ========== =========== ========== ========== ==========
2010 Less than 1 - 3 3 months 1 - 5 5 + years
1 month months to 1 year years GBP'000s Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Trade and other
payables 7,246 12,645 - - - 19,891
Loan notes - - - 2,774 - 2,774
Bank term loans 170 510 1,360 5,744 - 7,784
Revolving credit
facilities - - 15,032 - - 15,032
Finance leases 21 59 106 47 - 233
---------- ---------- ----------- ---------- ---------- ----------
7,437 13,214 16,498 8,565 - 45,714
========== ========== =========== ========== ========== ==========
The profile of the trade payables has been taken as being consistent with the Group's payment terms to suppliers.
Analysis of market risk sensitivity
Currency risks:
The Group is exposed to currency risk on purchases made of almonds from the United States. The risk associated with these purchases is mitigated by matching with sales in foreign currencies. The effect of a 10c strengthening of the US dollar against Sterling exchange rate at the balance sheet date on the trade payables carried at that date would, with all other variables being held constant, have resulted in a decrease in pre tax profits of GBP7k. The impact of a 10c strengthening of the US Dollar against Sterling at the balance sheet date on our trade receivables carried at that date would, all other variables being held constant, have resulted in an increase in pre-tax profits of GBP78k.
The Group is also exposed to currency risk on purchases of sugar from Europe. The risk associated with these purchases is mitigated by matching with sales in foreign currencies. These sales form part of our Invoice Discounting facilities with PNC, which generate a Euro loan obligation. The effect of a EUR0.05 strengthening of the Euro versus Sterling exchange rate at the balance sheet date on our overall Euro net position carried at that date would, all other variables being held constant, have resulted in a decrease in pre-tax profits of GBP168k.
Interest rate risks:
The Group has an exposure to interest rate risk arising from fluctuations in Sterling and Euro base rates. The impact of a 1% increase in the applicable interest rates at the balance sheet date on the variable rate debt carried at that date would, all other factors remaining unchanged, have resulted in a decrease in pre tax profits of GBP284k.
Obligation under finance leases
2012 2010
GBP'000s GBP'000s
Finance lease liabilities - minimum lease
payments
Due within one year 32 195
Due within one to five years - 49
---------- ----------
32 244
Future finance charges on finance leases (-) (11)
---------- ----------
Present value of finance lease liabilities 32 233
========== ==========
The present value of finance lease liabilities
is as follows:
---------- ----------
Due within 1 year 32 186
Due within 1 to 5 years - 47
---------- ----------
32 233
========== ==========
It is the Group's policy to lease certain property, plant and equipment under finance leases. For the period ended 31 March 2012 the average effective borrowing rate was 6.0% (2010 - 6.93%). Interest rates are fixed at the contract dates. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in Sterling.
The fair value of the Group's lease obligations approximates to their carrying amount.
9. related party transactions
Napier Brown Foods Limited was a former subsidiary of Napier Brown Ingredients Limited. At the year end a loan note of GBP2,773,908 was owed to Napier Brown Ingredients Limited in which P G Ridgwell, who is a Director of The Real Good Food Company plc, has a beneficial interest. The loan note holders agreed to waive their rights to the accrued interest on this loan note to December 2011. The accounts assume that this waiver will continue to March 2012, thus accrued interest on the loan amounted to GBPnil (2010 - GBPnil) at 31 March 2012.
Transactions between the Company and its subsidiaries are as follows: -
Trading transactions - purchase of goods
15 months ended 12 months ended
31 March 2012 31 December 2010
GBP'000s GBP'000s
Renshawnapier Limited 827 808
31 March 2012 31 December
GBP'000s 2010
Amounts due to GBP'000s
Renshawnapier Limited 31,734 24,040
Napier Brown Foods Limited Nil Nil
Renshawnapier Limited is a related party because it is a 100% owned subsidiary of Napier Brown Foods Limited which is a 100% subsidiary of The Real Good Food Company plc.
Purchases from related parties have been made at market prices; settlement of the debt is made under normal trading terms.
Amounts due from related parties
31 December
31 March 2012 2010
GBP'000s GBP'000s
Renshawnapier Limited Nil Nil
Napier Brown Foods Limited 40,333 39,258
The Group has provided loans to its subsidiary companies at rates which reflect the rates charged by its own bankers. Loans and interest are repayable by monthly instalments.
10. Pensions ARRANGEMENTS
The Group operates a defined benefit pension plan in the UK. A full actuarial valuation was carried out as at 1 April 2009 in accordance with the scheme funding requirements of the Pensions Act 2004 and the funding of the scheme is agreed between the Group and the trustees in line with those requirements. These in particular require the surplus/deficit to be calculated using prudent as opposed to best actuarial assumptions. The actuarial valuation showed a deficit of GBP5.3 million. However a further actuarial review was undertaken as at 31 March 2010 which revealed that the deficit had reduced to GBP2.7 million. This was a result of the recovery of the stock markets from the low in 2009 and improvements in gilt yields and discount rates. On the basis of this valuation the Group agreed with the trustees that it will eliminate the GBP2.7 million deficit over a period of 11 years and 9 months from 1 April 2009 by the continuation of contributions of GBP8,145 per month up to 31 July 2010, increasing to GBP12,000 per month between 1 August and 31 December 2010, GBP130,000 per annum in 2011, GBP155,000 per annum in 2012 and GBP265,000 per annum thereafter. In addition and in accordance with the actuarial valuation the Group has agreed with the trustees that it will meet the expenses of the scheme and levies to the Pension Protection Fund, along with further deficit contributions contingent on the Group's year end cash position relative to its banking covenants.
For the purposes of IAS19 the data provided for the 1 April 2009 Actuarial valuation has been approximately updated to reflect liabilities on the accounting basis at 31 March 2012. This has resulted in a deficit in the scheme of GBP1,080,000.
It is the policy of the company to recognise all actuarial gains and losses in the year in which they occur in the statement of comprehensive income.
Present values of defined benefit obligations, fair value of assets and deficit
31 March
2012 31 December 31 December 31 December 31 December
GBP'000s 2010 2009 2008 2007
GBP'000s GBP'000s GBP'000's GBP'000's
Present value
of defined benefit
obligation 17,085 16,212 15,945 15,094 16,268
Fair value of
plan assets (16,005) (16,308) (15,363) (14,830) (18,052)
---------- ------------- ------------- ------------- -------------
Deficit/(surplus)
in plan 1,080 (96) 582 264 (1,784)
Amount not recognised
in accordance
with IAS I9 paragraph
58b - 96 - - 1,249
Gross amount recognised 1,080 - 582 264 (535)
Deferred tax at
24% (2012) (259) - (163) (74) 535
---------- ------------- ------------- ------------- -------------
Net liability (821) - 419 190 -
========== ============= ============= ============= =============
Reconciliation of opening and closing balances of the present value of the defined benefit obligations
31 March 2012 31 December 2010
GBP'000s GBP'000s
Defined benefit obligation at start
of period 16,212 15,945
Interest cost 1,132 937
Actuarial losses/(gains) 611 (6)
Benefits paid, death in service insurance
premiums and expenses (870) (664)
--------------- ------------------
Defined benefit obligation at end
of period 17,085 16,212
=============== ==================
10. Pensions ARRANGEMENTS (continued)
Reconciliation of opening and closing balances of the fair value of plan assets
31 March 31 December
2012 2010
GBP'000s GBP'000s
Fair value of scheme assets at start of
the year 16,308 15,363
Expected return on scheme assets 1,374 1,031
Actuarial (losses)/gains (984) 578
Contributions by the Group paid 177 117
Adjustment for contribtions by the Group
not agreed - (117)
Benefits paid, death in service insurance
premiums and expenses (870) (664)
--------- ------------
Fair value of scheme assets at end of the
year 16,005 16,308
========= ============
The actual return on the scheme assets over the period ending 31 March 2012 was GBP390,000 (2010 - GBP1,609,000).
Total expense recognised in the statement of comprehensive income within other finance income
31 March 31 December
2012 2010
GBP'000s GBP'000s
Interest on liabilities 1,132 937
Expected return on scheme assets (1,374) (1,031)
--------- ------------
Total (income) (242) (94)
========= ============
Statement of recognised income and expenses
15 months 12 months
ended ended
31 March 31 December
2012 2010
GBP'000s GBP'000s
Difference between expected and actual
return on scheme assets: gain (984) 578
Experience gains and losses arising on
the scheme liabilities: gain (46) 387
Effects of changes in the demographic and
financial assumptions underlying the present
value of the scheme liabilities: (loss) (565) (381)
Reversal of the limit under IAS19 paragraph
58b 96 (96)
Total amount recognised in statement of
changes in equity (1,499) (488)
========== ============
10. Pensions ARRANGEMENTS (continued)
Assets
31 March 31 December 31 December
2012 2010 2009
GBP'000s GBP'000s GBP'000s
Equities 9,615 10,779 10,274
Bonds & Gilts 4,915 3,990 3,919
Property 434 408 449
Cash 1,041 1,131 721
---------- ------------- -------------
Total assets 16,005 16,308 15,363
========== ============= =============
None of the fair values of the assets shown above include any of the Group's own financial instruments or any property occupied by, or other assets used by, the Group.
Assumptions
As at As at As at
31 March 31 December 31 December
2012 2010 2009
% per annum % per annum % per annum
Inflation 2.90 3.10 3.10
Salary increases - - -
Rate of discount 5.00 5.70 6.00
Allowance for pension in
payment increases of RPI
or 5% p.a. if less 2.80 3.10 3.10
Allowance for revaluation
of deferred pensions of
RPI or 5% if less 1.90 3.10 3.10
Allowance for commutation 75% of max 75% of max 50% of max
of pension for cash at retirement allowance allowance allowance
Assumption Change in assumption Change in liability
Discount rate Increase / decrease Decrease / increase
Rate of inflation of 0.5% p.a. by 7.7%
Rate of Salary Increase / decrease Increase / decrease
Growth of 0.5% p.a. by 2.3%
Rate of mortality Increase / decrease Increase / decrease
of 0.5% p.a. by 0.0%
1 year increase in life Increase by 3.3%
expectancy
The mortality assumptions adopted at 31 March 2012 imply the following life expectancies:
Male retiring at age 65 in 2010 21.7 years
Female retiring at age 65 in 2010 23.8 years
Male retiring at age 65 in 2030 22.7 years
Female retiring at age 65 in 2030 25.0 years
The long-term expected rate of return on cash is determined by reference to UK long dated government bond yields at the balance sheet date. The long-term expected return on bonds is determined by reference to UK long dated government and corporate bond yields at the balance sheet date. The long-term expected rate of return on equities is based on the rate of return on bonds with an allowance for out-performance.
Expected long term rates of return
The expected long term rates of return applicable at the start of each period are as follows:
31 March 31 December 31 December
2012 2010 2009
% per annum % per annum % per annum
Equities 7.55 7.50 6.90
Bonds 4.60 5.60 5.64
Property 7.55 6.50 5.90
Cash 0.50 4.20 3.50
Overall for scheme 5.87 6.83 6.29
------------- ------------- -------------
31 March
2012 31 December 31 December 31 December 31 December
GBP'000s 2010 2009 2008 2007
GBP'000s GBP'000s GBP'000s GBP000's
Fair value of assets 16,005 16,308 15,363 14,830 18,052
Defined benefit
obligation (17,085) (16,212) (15,945) (15,094) (16,268)
---------- ------------- ------------- ------------- -------------
Surplus /(deficit)
in scheme (1,080) 96 (582) (264) 1,784
---------- ------------- ------------- ------------- -------------
Experience adjustment
on
scheme assets (984) 578 113 (3,937) 893
Experience adjustment
on
scheme liabilities (46) 387 18 (114) 464
========== ============= ============= ============= =============
11. AUDIT STATUS
The preliminary announcement has been prepared under the historical cost convention, on a going concern basis and in accordance with the recognition and measurement principles of International Financial Reporting Standards and IFRIC interpretations as adapted by the EU ("IFRS"), but this announcement does not in itself contain sufficient information to comply fully with IFRS.
The directors have considered the working capital requirements of the group for a period of one year from the date of this announcement and believe that the going concern basis is appropriate due to the current cash balance and future prospects.
The preliminary announcement has been prepared on the basis of the same accounting policies as published in the audited financial statements of the Group for the year ended 31 December 2010 and the accounting policies adopted in the audited financial statements of the Group for the period ended 31 March 2012.
Comparative figures for the year ended 31 December 2010 have been extracted from the statutory financial statements for that period which carried an unqualified audit report, did not include a reference to any matters to which the auditor drew attention by way of emphasis and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.
The financial information in this announcement does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The audited statutory financial statements for the period ended 31 March 2012, which have not yet been delivered to The Registrar of Companies, contain an unqualified audit report, do not include a reference to any matters to which the auditor might draw attention by way of emphasis and do not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR RTMATMBBMBFT
| 
