Real Good Food Share Discussion Threads

[briangeeee] 28/6/2013 21:35

Some comment on Proactive Investor.

www.proactiveinvestors.co.uk/companies/news/58405/the-real-good-food-company-no-longer-a-curates-egg-58405.html

Full-year results from The Real Good Food Company (LON:RGD) reveal a company where every part of the business is now pulling its weight.

The group, which owns Napier Brown (Europe's biggest non-refining sugar distributor), as well as Renshaw and R&W Scott (bakery ingredients), Garrett Ingredients (dairy ingredients) and Haydens Bakery (patisserie and desserts), said all trading divisions have positive underlying earnings (EBITDA) now that Haydens and R&W Scott have moved back into the black.

Speaking to Proactive Investors, executive chairman Pietr Totté said Real Good Food is now a growth story, not a turnaround situation, and that he has every single business unit "where I want them".

Having worked hard on changing the culture of the group, he believes the passion and enthusiasm he wants to see has now filtered through right to the shop floor, and this leaves the group well placed "to grow both the top line and bottom line".

He singled out the performance of Haydens as "the year's big success".
"I am really pleased about Haydens, we've really seen it through. Customers are responding, the products are good, demand is up. We were always working with Waitrose as the main customer there, then secondly Marks & Spencer. That is now a much wider base and there is a lot of interest in the marketplace," Totté said.

He also enthused about the group's smallest business, R&W Scott, which moved into profit after a new managing director, John Easton, rationalised the business, ensuring the Scottish business has a sound base on which to build.
"What is more important, he's got his brand new range of products almost completed now, and, I would say, it is increasing as we speak. He is reinforcing, particularly his sales force," Totté revealed.

As for the sugar business, which is "over half the business", Totté said the new site at Stallinborough, next to the deep sea port of Immingham, the UK's largest port by tonnage, should be in "full swing" by Christmas time.

Totté said this is a crucial development for the company, as the site will receive bulk sugar, and allow the company to perform quality checks before the sugar is transferred into road tankers for onward distribution, either to the company's own packing or manufacturing sites, or directly to third party customers.

"It's a big investment, and a major plus point for us. It basically makes us more efficient; we can bring more sugars in, in an efficient manner, and it has a fantastic quality control mechanism in there as well, that customers are extremely keen on."

[140661] 28/6/2013 06:24

Shore cap research out this morning

I have copied the first page below. No material change in forecasts for current year which are up slightly as its too early in the year but interestingly their forecast for 2015 are up more meaningfully and the debt figure for March 2014 and has come down by £2m.

Real Good Food Co.+
Solid progress in challenging markets
Real Good Food Company (RGFC) has reported solid progress in its preliminary results to the 31st March 2013, in our view. Whilst the third quarter was a challenging period in the run up to Christmas, as industry food retail volumes were subdued, the group has reported a significant improvement in profitability. It has also delivered results in line with the guidance it provided in the trading update in March. Aside from the pleasing improvement in profit delivery, we would also highlight the group's strong cash generation during the year with net debt at the year end coming in c£2m ahead of guidance at £25.0m. Looking ahead, RGFC has a strong partner in Omnicane to support its cost-effective supply of sugar in the medium term. We also believe the company now has a robust operational infrastructure to help drive the business forward in the coming years with divisional management teams in place. This provides us with confidence that the group can deliver a further year of growth on our broadly unchanged profit forecasts for FY2014F. No Recommendation.

Preliminary results: RGFC reported a 2.8% increase in revenue over the prior year to £265.8m. Operating profit increased significantly with growth of 29.0% to £8.2m (FY2012A: £6.4m) and underlying PBT increased by 36.7% to £6.8m from £4.9m as finance costs were similar year-on-year. This translated into a 44.5% increase in adjusted diluted EPS to 7.2p with the higher rate of growth due to an a lower effective tax rate in the year offsetting an increase in the weighted average number of shares following the placing of 4.1m shares in June 2012.

Investment in sugar: The group continues to develop its multiple sugar-sourcing strategy and the year saw the cementing of an important relationship, in our view, as Omnicane became a significant shareholder in RGFC. Furthermore, progress is being made in the group's ability to cost-effectively handle imported bulk sugar with the investment in a sugar uploader at a new site at Stallingborough.

Forecasts and valuation: Following the FY2013 results, we leave our group profit estimate for FY2014F broadly unchanged and add new forecasts for FY2015F. RGFC shares trade on an FY2014F PER of 5.7x and EV/EBITDA ratio of 4.5x. NR.

GLAH

[cockneyrebel] 27/6/2013 18:20

You obviously can't read either 140661 (probably why your name is a number :-)).

I just spelt it out above - but you emphasise my point perfectly.

CR

[140661] 27/6/2013 18:14

CR, Ok you dont have a holding, you are not short and you dont like the company. We clearly disagree so why dont you go and pass on your great wisdom on shares where you have a position as it will be more relevant and appreciated. GLAH

[spaceparallax] 27/6/2013 15:00

balance is good; when it's short and sweet

[cockneyrebel] 27/6/2013 13:57

I wouldn't even have posted today spaceparallax were it not for 140666's accusation of me having another handle and his assertion that I'm clueless. I posted on the results once and that was it.

I don't have a holding, I'm not short but I do think it's very easy for punters to get suckered in here, especially those new to investing that get seduced into low PE's. One of the mistakes I made when I was a novice.

As for nefarious, no - the opposite. I bought these in good faith when I started the header and I learned a lot holding them. The smoke and mirror accounting, Totte's form etc. Let's say I feel rather guilty I started the thread, I feel duped by the trading updates around that time and almost responsible to point out the negatives here, now and again. Is that such a bad thing when there's relentless posts here from 140666 and his cosy chats with PT and how great PT tells him things are? Is that really how a CEO of a co should be carrying on?

Just a we bit of balance now and again perhaps.

CR

[spaceparallax] 27/6/2013 13:43

CR,

I retain only a modest interest here and just pop in occasionally to monitor. Whilst I'm familiar with your posting over the years your posts of recent times here do suggest a nefarious agenda, whether or not that's your intention.

[cockneyrebel] 27/6/2013 13:30

140661 - for all your name calling of me you are pretty clueless imo. I am not one of the multi-handled posters on ADVFN, I've had this one handle for 13 year while the likes of you come and go.

Nobody here has ever told me what's best for RGD - high sugar prices or low - no holders seem to know.

Why are the margins low and the PE low that the Times refer to? Well that's because RGD are a 'DISTRIBUTOR'. They aren't in control of their own destiny. When things get tough and the manufacturer puts up the price of sugar they can't just go to Tesco and say 'hey, our prices are going up' because Tesco just say they'll get supplies elsewhere. When Tesco feel the pinch they demand lower prices from their suppliers. So as a distributor, like any other distributor, RGD are piggy in the middle, the one that gets squeezed.

£400m turnover, low margin as Times says - great if you can get the margins up but not so clever if margins fall and you have debt as high as your mkt cap and need to raise cash.

That's why the fwd PE is 6 and why it deserves to be 6 imo, if that. Car dealers and Housebuilders used to trade on PE's of 3-4 and will again so a PE of 6 isn't that unusual.

That's all without mentioning Totte's past performance as a director - you wouldn't want your football club manager to have his track record imo.

All imo/dyor etc

CR

[jeff h] 27/6/2013 10:58

Real Good Food (RGF) has sales of more than a quarter of a million pounds but a market capitalisation of less than £30m. The Times's Tempus said the reason for that may be because it is making wafer-thin margins and is overlooked by the market.

The company, which owns the Whitworths sugar brand and supplies cakes and patisserie to Waitrose, is undergoing a reorganisation in an effort to double its turnover within three years. A year ago the company made a deal with the largest producer in Mauritius, which raised its stake to 20 per cent and secured supplies. This combined with a new import facility in Britain will mean an additional £350m to £400m of turnover by 2015-16. "In all this, the results for the year to the end of March are a work in progress," Tempus said. "RGF is not followed much by analysts, but this could change if those growth plans bear fruit. For now, the shares sell on a paltry six times earnings. Potentially interesting, if not for the risk-averse."

[140661] 27/6/2013 09:02

smurfy on the off chance you really have a true interest and are not another nickname of CR, let me give you my assessment of why the PE is low.

Debt is £25m so a concern but is this really a problem? Not from a debt management perspective as the company announced in June a new 5 year debt facility on improved terms so there is no upcoming renewal concern. There is clearly a P&L hit but this is manageable and the PE for the earnings calculation is after interest so this is in the figures. The business is growing and management are clearly of the opinion that debt will be coming down over the next few years. So in summary the debt is not a positive and if PT were to sell one of his less key divisions, similar to Finsbury Food earlier this year, then the shares would probably react very positively but its not a problem for the business.

Limited broker coverage and small market cap. The only broker following RGD is house broker Shore Capital. They have a well respected research and broking team on food services but the lack of other coverage is a problem. Second, the company's low market cap means most institutions are uninterested due to size. So there is no institutional buying at present. However, the company's second largest shareholder, Omnicane have been buying shares over the last 6 months and this looks likely to continue. Omnicane can buy another 6% of the company and have a current average price of 56p so I am expecting them to continue hoovering up loose stock until the price reaches mid 50's or they hit 30% shareholding.

In my opinion these are the two key reasons why the shares trade at a discount to their real value. Why might this change?

First, improved performance. The prelims demonstrated solid growth and based on my discussions with management I know they are confident this is going to continue. Shore Cap are due to put out a note today and it will be interesting to see if they increase their forecasts for the next two years. I will post once I have the note.

Omnicane relationship. Omnicane are a 24% shareholder in RGD, have been actively increasing their stake and are building a close relationship with RGD. In my opinion this is key to RGD's future as Omnicane have the ability through their own sugar supply business and their contacts to double/treble RGD's sugar business over the next 18-24 months. If this were to happen RGD's sugar business alone would have a turnover of £750m and would be generating £15-20m profit.

IMHO if this happens the shares will be a multiple of the current share price. So I see little downside as the business is growing nicely plus you have major upside if the Omnicane relationship delivers. A strong buy in my opinion. GLAH and DYOR.

[140661] 27/6/2013 08:27

FELIX, good to hear you have no interest in RGD but just keep making misleading comments aimed at knocking the price, yes we believe you ha ha.

[smurfy2001] 27/6/2013 07:43

Hi, is there a reason for the low p/e? Just read the company made good profit?

EDIT: Just read post 3260. On well

[felix99] 27/6/2013 07:17

never shorted RGD - used to own plenty of them . Just got a little disenfranchised post Omnicane I guess and the lack of cashflow despite reporting good figures all the time.

When cashflow doesnt come through with profits there is something leaking somewhere - and I personally wouldnt want to be holding when the cause of the leak is found.

Each to his own. In this market there is plenty of a larger size than this I would rather own and as I think mkt will tread sideways at best I would rather be in a decent yielding stock than this.

[140661] 26/6/2013 17:06

Spacep, Felix, CR and Typo all have the same blatantly obvious agenda to support their shorts but they are going to come badly unstuck in the near future, lets hope so. 100k buy at 44p just reported, someone sensible mopping up cheap stock, wish it was me!

[spaceparallax] 26/6/2013 16:59

Felix, I think we can see what you're trying to achieve.

[140661] 26/6/2013 16:24

FELIX, you are wrong as James correctly points out no company includes movement in pension deficit in its EPS calculation.

Typo, as you acknowledge a good set of figures and coming from you that's a real compliment given you have been very negative on this stock. You did not mention cash generation which has been very strong during the year at £5m and you have previously flagged this as an issue so I am sure you agree a major improvement all round.

Finally, in terms of your comment about the balance sheet being propped up by goodwill there is still a surplus of net assets of £17m even attributing zero value to goodwill and that completely ignores the higher property values that are inherent in the balance sheet but not recorded. They note that the replacement value of the properties was recently calculated at £92m which is significantly ahead of carrying value.

[felix99] 26/6/2013 14:52

My point was the way RGD skirt over it and not whether it is correct to include or exclude it in the EPS valcs per se.



Have a look at MLIN - above . They seem to show far more clearly what is being included and excluded in the EPS calcs and earnnigs than RGD do.

Anyway enough I need to do some work.

[spaceparallax] 26/6/2013 14:32

Whilst Totte may spin the words, I don't doubt that the figures are prepared in accordance with industry rules.

[james97] 26/6/2013 14:10

FELIX99. You are completely incorrect no company brings movement in pension deficit into an EPS calculation.

Very good set of results. Loss making businesses moved to profit and very positive picture moving forward.

[felix99] 26/6/2013 13:50

EPS is defined as profit after tax / weighted shares in issue

In no way is it normal accounting practice to ignore the pension scheme deficit as can be shown by the fact it is there on the PNL ! - they just choose to ignore it and talk about a different number.

(Its like talking about EBITDA all the time and ignoring the interest on your loans and the cost of acquiring things which is another discussion entirely)

The EPS on the PNL I think is misleading as normally it would have a * next to it saying EPS as adjusted for and excluding the pension scheme deficit movements or discontinued operations or something like that.

I also think the EPS note is misleading as all it talks about is adjusting earnings to yet another figure excluding "significant" items. No where does it say it has ignored the pension scheme deficit and the figure it quotes as profit attributable to ordinary shareholders is £4,914k


whereas on the PNL the figure is £2,796k :-

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT


3,180 (384) 2,796

[typo56] 26/6/2013 13:41

I've been out all morning and only had a quick glance at the results but I think, on the face of it, there're not too bad.

It is a pity that they still smell of 'Tottification', as CR calls it. It means one is distrustful of the headlines and you feel the need to dig deeper and find out what may be lurking beneath, but I suppose that's the same with any AIM company or, for that matter, any company. Like I said, I've only had a quick glance but spotted a few things:

Revenue is only up 2.8% on 2012. Still, it's profit and cash that really matter.

Net borrowings are down about £3.7m, but of course they did have an unnecessary (ho, ho!) cash injection of almost £2.5m from Omnicane, so it's not quite as smart as the headlines might suggest.

There's a 14% reduction in inventories and a 24% increase in debtors. That might just be a end year timing thing but, as spaceparallax says, keep an eye on the debtors. The increase in debtors more than accounts for the increase in working capital. How sound are those 'Trade and other receivables'?

The pension situation seems to be discussed in some detail and I don't think this should be ignored.

I don't see any numbers to quantify financing on "improved terms". I assume this will be in the annual report, along with a statement as to any related party transactions with Omnicane.

They still have a lot of debt and a balance sheet propped up by a lot of goodwill, so it only takes a bit of a slip somewhere to come a cropper. However, I'm sure there are worse AIM companies to invest in and there's potential for them to be promoted by a pump & dump guru!

[140661] 26/6/2013 13:25

FELIX, no the EPS is 7.2p as stated in the announcement and as agreed by the auditors. The treatment of the pension cost is entirely consistent with normal accounting practices unless you can show me differently?

Space, yes these are very good results and I have yet to see any sensible comment to argue otherwise. Idiot comments about EPS falling next year are not based on anything credible other than a desperate attempt to keep the price down. Unfortunately investor interest remains low on the stock but this will hopefully change over the course of 2013, lots of exciting news coming I hope.

[felix99] 26/6/2013 13:08

excuse me butting in but isnt the real EPS 4.1p ?

All over this statement they talk EPS figures that ignore the pension scheme deficit essentially without really explaining that is what they have done.

The fact that mgt seem determined to ignore the pension scheme deficit shows a somewhat blinkered view.

Yes they have highlighted better performance excluding the pension scheme but the pension scheme is here to stay unless they think they can just ignore the liability?

So true P/e is nearer 10/11 than 6 which imho probably explains the lack of a rise?

Compare that to KENZ yielding nearly 3% on current year p/e of 8.6p and I know which of the two I would rather buy here any day of the week is all I can say .

GLA

[spaceparallax] 26/6/2013 12:08

Apologies 140...

Makes them a more impressive set than I'd first realised.

CR, whilst I'm no fan of the weasel words and double talk of Totte, I can't really see much rationale in your downbeat assessment.

[140661] 26/6/2013 11:43

CR, you are an idiot, I really cannot be bothered to respond to your stupid comments. I am very relaxed about where this share price is going which is much higher.