Real Good Food Share Discussion Threads

[140661] 16/1/2014 15:19

just spotted Omnicane's share price is standing at an all time high up 5% yesterday. Not sure it has much relevance other than suggesting they have more cash to invest in RGD. GLAH

[briangeeee] 13/1/2014 11:26

A little out of date. Scott's interim results were very poor, and given the tone of the article, I'd have expected to see some explanation or how they think an improvement will be generated.

[tonyfabrizi] 11/1/2014 08:48

high volume day yesterday, price up on the week.

[tonyfabrizi] 07/1/2014 20:38

RGD tipped in Investors Chronicle today

[briangeeee] 04/1/2014 14:20

"FACT: A pinch of sugar on the tongue is a tried and tested remedy for hiccups."

"FACT: Back in the 1950s, the iconic beehive hairstyle was often held in place using a simple mixture of sugar and water."

'Facts' from 1kg bags of Whitworths caster and icing sugar purchased today by my daughter from our local post office. Previously they stocked Tate & Lyle. My wife says she likes the new packaging FWIW! Good to see the increased local presence of the newly branded Whitworths range.

Let's hope we soon see some fight back from Renshaws against the domination from Dr. Oetker. Surely the supermarkets would like the opportunity to increase locally produced content if the range is right. Dr Oetker has annual revenue of €11b!

[spaceparallax] 18/12/2013 22:12

cheers Brian

[tonyfabrizi] 18/12/2013 08:43

Brian, good spot, do you know anything about Equity Development?

[briangeeee] 17/12/2013 16:30

RGD picked as one of Equity Development's picks for 2014.

CMS, CRE, FIF, GAH, GBO, IDOX, KMK, QPP, RGD, VISL

[140661] 17/12/2013 13:13

space, I do accept the company needs to start delivering and exceeding on its forecasts. I am prepared to give them more time but I am expecting to see a strong performance in the second half with positive sentiment moving forward.

If we look back at where the company was when PT took charge 4 years ago then its difficult to argue he has done a decent job at turning this business around. However, we now need to see the next step forward. Last years results showed a decent improvement on the prior year but this has not been continued in the first half. While PT would argue that much is being done to prepare the business for a strong move forward in 2014/15, we have heard this before so credibility is lacking. Delivery is now key.

On the positive side there has been strong buying since September and Omnicane continue to increase their shareholding. The new sugar handling facility becomes operational in January and the management changes across the businesses are now complete following the recent changes at Garretts. The time for excuses has passed and a period of over delivery is now required. If they can achieve this then a rerating should follow as the shares remain cheap on fundamentals. GLAH

[spaceparallax] 17/12/2013 11:06

Credibility is the issue here - management can get away with a little spin providing that it delivers in the medium term; however, when the likes of PT continually attempt to spin without delivering time after time it will undermine credibility and result in chart volatility as bulls and bears exploit.

[briangeeee] 17/12/2013 11:01

I remain positive about prospects, but they don't make it easy.

Their comment at the end of the Interim report is perhaps ironic:

"Most of the trading divisions of RGFC are seasonal, creating a large proportion of their EBITDA in the October to December period. This was the prime reason we changed our accounting reference date to the 31st March in order to improve both the quality and accuracy of our budget and investor reporting"

The change in accounting reference date confused the historic comparatives and undermined investor confidence. This statement is included at the end of a set of interim results which the house broker has taken to be a profits warning, downgrading their profits forecasts for the current and next year. So much for improved quality and accuracy of investor reporting!

[140661] 17/12/2013 09:13

BrianG, I agree with much of your analysis and would add the following:

Garretts, the company announced on Friday the new management team at Garretts. As you say a solid business which has generated a steady profit with a small team and low working capital.

Renshaws has had a lot of money thrown at it over the last 18 months and so far with no positive results but I am encouraged by the tone of the interims where it states this division is on track to meet management expectations for the year. When I last spoke to PT he was very positive about Renshaws so I am looking for a strong performance in the second half as the marketing initiatives begin to take effect.

Finally, interesting to see the announcement yesterday about Omnicane increasing their stake again, now at over 25%.

[briangeeee] 15/12/2013 23:43

Having thought that the recent interim results would mark the start of an upturn in the company's fortunes, I'm pretty disappointed and also increasingly wary about expecting them to deliver on their promises in future. The reputation of the company is continuing to be damaged by the Chairman's tendency to hugely over-promise. That said, there's much less of the over-bullish tone in these results. Hopefully it's the start of a new phase of over-delivery!

It's interesting to note that the prior year's audited Interm comparative profit figures have been adjusted downwards. There may be a valid reason, but none is given.

Anyway, looking at the individual divisions (seemingly now six):

Garretts are making continual small improvements, and looking to take on more distribution agreements. Surprisingly, they were the most profitable division this H1 (with Renshaw second). I think they'll slowly continue to strengthen over time, nothing dramatic, but that's what investors want. Their new in-house delivery capability will help with quality and leads. Another recent surprise is that Tom Fowler seems to have parted ways with RGD. Given that he's been expunged from the website, and no positive mention the recent announcement of a replacement, I can only imagine he's either resigned or fallen out with PT. Garretts has been one of the better performers, so superficially it appears disappointing he's gone.

Renshaws seem to have most to prove. They've spent heavily on re-branding, developing their web presence, marketing and QA, and have very little to show for it to date. Their first half performance was poor, with revenue flat and costs up substantially. I believe they've a new US customer starting in January, but have no idea of financial significance. They've been spending heavily on new staff and marketing for some time now, and there shouldn't be such a lag between that sort of spend and top line growth. Looking at what's on the shelf in Tesco, I see the Dr Oetker range expanding, but no similar expansion in Renshaw branded product.

R&W Scott is at an early stage of it's turn-around, but doesn't seem to be heading in the right direction, with no good explanation for its poor year-on-year performance. External revenue is down from £5.9m to £4.7m, despite substantial capex. Perhaps this is them pulling out of low margin business, but is a very disappointing result nonetheless. There was the possibility of a very large order for sauces at the end of the summer, but I guess that hasn't come to anything as there was no mention in the interim results.

Napier Brown has certainly been the IR focus for the company in recent months, with the Asda & Booker contracts announcement, publication of sugar report, and construction of the Immingham sugar hub. The stunning news in the results was that despite all the positive noises, external revenue is down from £84.2m to £74.6m (-13%). Again, there was no good explanation for this drop in revenues and profits from £473k to £319k. It's possible I suppose that operations have been impacted somehow by preparation for the increasing Whitworths retail business at Normanton, but if it is, they haven't used that as an excuse. In the Chairman's statement, it's commented that the "well publicised" dramatic drop in EU sugar market prices has caused some difficulties until the buying book is brought into line. At the AGM, the opposite picture was portrayed of the sales book being built early, and speculatively delaying purchases to take advantage of a falling market price. I suspect they're talking about the coming season contracts, but once again the forward looking commentary seems way more positive than the results. We should have a better idea by the full year results, but it will be out of character for them to surprise on the upside, although there are a few factors pointing in that direction. The recent sugar report indicates that contracted volumes for the coming year (Sept onwards) are up by 30%. I know that doesn't map directly to revenues, but it would tie with the positive sentiment at the AGM, and hopefully margins should be significantly improved.

Haydens looks to be going well, with revenue up from £11.8m to £13.1m, and losses reduced from £503k to £213k. I was impressed at AGM by the new Haydens management team's focus on operational efficiency and tailoring their operation to customer demand. I expect the full year result at Haydens to impress, and next year I'd expect H1 to be at least breakeven post tax.

Europe seems to be classified as a new operating division, possibly because it acts as more than just a sales office for Renshaw - I don't really know, but it seems a good idea to split out its reporting. Anyway, it's new, and made a £128k loss. Would have made the Renshaw figures look even worse if it had been included!

[spaceparallax] 11/12/2013 15:59

140...

You are a remarkable optimist. Whilst I believe that RGD will do okay in the medium to long term, those looking for short term gain are unlikely to be rewarded except with copious amounts of hot air from PT. No doubt sugar will come good eventually, but we've been holding our breath for a long time since the acqn of Napier

[140661] 10/12/2013 08:40

A week ago RGD announced its interim results and saw its share price react negatively. This was not a real surprise as the shares had enjoyed a tremendous run over the preceeding 4 months almost doubling and the interims were a bit disappointing. So is this the time to sell or was the 20% retrenchment an opportunity to buy?

Clearly a lot of PI's deceided to exit and I hope they made a decent profit. Interestingly the shares have started to climb back up and are 10% above the lows they hit last wednesday lunchtime.

I remain wholly convinced this share will return well above 100% over the next 18 months and it seems I am not alone. The shares have enjoyed a strong run on the back of persistent buying since they announced the large contract wins with ASDA and Bookers on 10th October. These contracts started in late October so had no bearing on the first half performance.

In addition to these contract wins, the company should have its new sugar handling facility operation al in January. Again while this will have no immediate impact on the results, apart from added costs, the long term benefits in relation to RGD's sugar strategy are key. I have copied below the summary prepared as part of the sugar report RGD commissioned

"We are confident we have found a winner from a major legislative change in the €11bn European sugar market. Independent sugar distributor, Napier Brown (wholly owned by Real Good Food Company (RGD)), is gaining market share. We anticipate a doubling of its volumes in the coming years in an environment of volatile, cyclical prices. A combination of the 2017 ending of the EU sugar quota regime (well ahead of which market shares should dramatically free up) and a tie-in with Omnicane, a quality, low cost Mauritian sugar cane refiner, should significantly boost Napier Brown's profits from historic levels. Omnicane is a 24% shareholder in RGD.

Napier Brown contributed 40% of total RGD EBITA in FY13. It supplies c12% of UK's sugar volumes. We estimate a rise to c20%. This report focuses on how supply models are changing, and how this interacts with forthcoming abolition of EU sugar quotas. The simple big picture is: maximise supply robustness and get it to a widening range of customers effectively in a market where customers are looking to the post- quota world. That is what an independent distributor such as Napier Brown does.
 Napier Brown is not tied to specific producers so, unlike sugar suppliers who are, it will benefit from the greatly more fluid supply arrangements.

 Napier Brown is the largest independent European non-refining sugar distributor. Quotas' future demise date was agreed three months ago. Napier Brown has timed its import facility expansion to coincide, tapping the latent demand for more importing. The annual contract cycle runs from October and for 13/14 year, Napier Brown has circa 350,000 tonne sales booked, we understand. Historic sales are some 250,000 tonnes pa.

 Its expanded UK import facilities and its pending supply agreements for low-cost refined cane sugar should facilitate transformative growth. Likely new supply agreements with Omnicane for East African sugar are set to add 60- 70% to Napier Brown volumes. Cane will be significantly more competitive if refined in modern African facilities – Omnicane has a world class refinery in Mauritius. RGD and Omnicane will source sugar together.

 We back this trader with decades of expertise and service to be able to nudge margins ahead, based on cost effective refined product sourcing.

 Multi-source refined cane sugar import suppliers will do the best – Napier Brown fits the bill best out of all market participants. It has flexibility to mix sources, quality assures input and secures the most appropriate suppliers as market demands change. It already sells to 90% of largest UK sugar users, so looks to expand existing clients, not find new ones. All is set."

I accept that this report is biased towards RGD but the points it makes are real and the potential for RGD to build a highly valuable sugar business is equally real. I know from my discussions with the company that they believe the sugar business alone can achieve revenues of £500m and an EBITDA margin of circa 6%, ie £30m by 2017. This would be 3x last years figure for the group!

Add to this Renshaws which has undergone a significant amount of internal change over the last two years. This business is beginning to grow again and lets not forget it has been the major engine for growth over the last few years apart from last year where it was flat. The recent interims pick out Renshaws as improving and I suspect we will see this business achieve its highest performance yet in the current year with it set on a stroing upward progression. This business is probably worth the whole of RGD's market cap today.

Garretts is a great little business, producing a consistently high return. It will never be a big business but could easily be producing EBITDA of £3m next year.

The two historic loss makers, in Haydens and R&W Scott are improving, particularly Haydens which will be profitable this year for the first time.

So we have a food group which has enormous growth prospects in sugar, a highly profitable home baking business, a smaller but high return dairy business and a cake business which is on a strong upward projection.

Add to this the low current valuation and the small free float, I am guessing less than 20% of the shares are outside long term holders, with ongoing buyers in the market, and you can see why this share has the potential to be a big winner.

AIMHO and GLAH

[typo56] 05/12/2013 17:01

See, even after all these years you know the accounting rules a lot better than me!

Still being around after 15 years is a sure sign of mediocrity. Good investors and bad investors would be long gone, for different reasons. Like you, I've developed other interests and these days only dabble a bit in the market here and there, occasionally moderating the irrational exuberance of some ADVFN posters (which by their logic means I must be short)!

[tiredoldbroker] 05/12/2013 16:13

Ah, my drilling days are over, lol... my work has taken me in some new directions, I have a charity fundraising project I'm involved with that's a bit out of left field but which I love, and my foodie things take up more and more time, so I do less investment stuff these days, and haven't posted anything for ages.

At first glance it looks like one benefit for Omnicane of going over 20% of RGD is that they can account for is as an associate, so they've picked up negative goodwill (the book value per share of RGD is above the share price paid, so they account for the surplus as an exceptional profit). Got to love those accounting rules!

Can't tell you how pleasant it is to see some old names still posting!

[typo56] 05/12/2013 10:04

Sorry, I know I've gone back a bit. I just thought TOB might take a look as he's a lot better than me at drilling into accounts.

[briangeeee] 05/12/2013 09:56

Typo, we discussed this goodwill issue back in May in posts 3214 - 3219. It's appalling that Omnicane's auditors allow them to get away with such misleading accounting, but I'm not sure it impacts on RGD directly until (like you say) there's a paper bid! I don't think that's really likely though as I can't see Patrick Ridgewell wanting such foreign paper.

[typo56] 04/12/2013 22:20

TOB, if you're short on entertainment take a look at Omnicane's financial statement for year ended 2012. It includes this:

Operational performance
Our Group's bottom line results in 2012 were at the same
level as in 2011 and this despite a significant reduction in
our sugar segment's results whilst our energy segment
fared well with results comparable to 2011. Goodwill
arising from investment in associate company Real Good
Food Company plc (RGF) was the main contributor which
helped maintain the 2012 results.

What do you make of that? Seems to me that they bought RGD shares below NAV (which of course includes historical goodwill/intangibles) but have valued their holding at NAV and booked this as an exceptional profit. Does this sound normal? Given there are quite a few companies trading below NAV, buying their shares would seem a rather easy way of improving your balance sheet!

There are probably a few other holders who would like their shares to be valued at NAV.

[cockneyrebel] 04/12/2013 17:13

Blimey - TOB - long time no hear.

I pointed out the bit about the British Bake Off yesterday. The wife spends a fortune cake decorating and making and all the stuff she buys is Dr Otker.

Worth reading Typo's links - I found some of this a few years ago and it's what made ne sell. I Don't think Totte has a clue to be honest. Seems to me Hayden was his cake business and in some weird and convoluted reverse take over with Napier Brown he seemed to think he'd get cheap access to sugar and reduce the Haydens costs. It obviously hasn't worked and he just seems to have picked up a sugar business that has so much competition and is hit by so many things such as global price fluctuation, currency and European rules that that it can't dig it's way out. Totte's way seems to be to expand further and buy time by muddying the waters with the cash they raise, part going to expand but part helping the exiting business keep going imo.

Operating cashflow is rubbish and the debt just increases at a faster rate than the profits. Totte seemsto have a PhD in this sort of thing with co' suddenly saying 'oops, we're insolvent'.

40p sounds generous imo. My bet is these are in their way back to the 22p support level with brokers already doing their annual forecast cutting on RGD before a Christmas cake is eaten.

All imo/dyor etc

CR

[briangeeee] 04/12/2013 14:38

Shore Cap have reduced market estimates for 2014 and 2015 to 6.6p and 8.2p.

[typo56] 04/12/2013 14:31

Nice to see you again TOB.

I know you're pretty thorough so have probably already considered management's track record. Totte's previous company's include:

Aquabella PLC
13 Feb 2008


29 Apr 2008
Appointment of administrators

Hill Station PLC
31 Aug 2006


7 Nov 2006
Suspended pending clarification of the Company's financial condition.


Of course, they may be simply down to bad luck and RGD may not suffer the same fate.

[felix99] 04/12/2013 14:24

Goodness me TOB long time no hear. Glad to know you are keeping well. If I recall you were into the patissiere side of things and I hope you are enjoying what you are doing.

I am sure you are still investing well as I recall you were one of the stars who actually did some research and knew what they were talking about.

Been a great year or two and whilst I have made a few quid on RGD a long time back it is a dead duck and shareholders are only going to reap whatever crumbs Omnicane decide to throw them when they decide to put them out of their misery.