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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Real Good Food Plc | LSE:RGD | London | Ordinary Share | GB0033572867 | ORD 2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.45 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMRGD
RNS Number : 0737V
Real Good Food PLC
29 November 2019
29 November 2019
Real Good Food plc
("Real Good Food" or "the Company")
Half year results for six months ended 30 September 2019
Improved underlying performance benefitting from focus on two core divisions
Real Good Food plc, (AIM: RGD) the diversified food business, today announces its half year results for the six months ended 30 September 2019.
Financial highlights:
-- Revenue from continuing operations increased by 7% to GBP32.4 million (2018: GBP30.4 million)
-- Underlying adjusted EBITDA* from continuing operations increased 201% to GBP2.8 million (2018: GBP0.9 million)
- Reflecting strong growth in Food Ingredients and cost savings across the Group -- Significantly reduced loss before tax of GBP2.5 million (2018: loss of GBP9.1 million)
-- Net debt at 30 September 2019 of GBP39.9 million (30 September 2018: GBP29.9 million; 31 March 2019: GBP35.7 million), being principally comprised of shareholder loans. The September 2018 net debt balance includes the sale proceeds from Hayden's of GBP12 million
-- New GBP8.9 million credit facility secured in August 2019 with Leumi ABL Ltd, enabling the Group to reduce the level of shareholder debt by GBP4.5m
- Intention to move towards a more normalised and simplified capital structure as the Group continues to improve its profitability and cash flow
Operational highlights of the year to date:
-- Further strengthening of the Board and senior management team with the appointments of: - Steve Moon as Chief Executive of Cake Decoration in August - Gail Lumsden as independent Non-Executive Director in October - Paul Richardson as Executive Director in October -- Continued progress in line with strategy of developing two core, profitable businesses:
- Food ingredients (Brighter Foods) - 77% increase in underlying adjusted EBITDA to GBP2.5 million (2018: GBP1.4 million) reflected significant growth with new and existing customers and benefit of recent investment in additional capacity
- Cake Decoration (Renshaw) - underlying adjusted EBITDA reduced to GBP0.6 million (2018: GBP1.3 million) due to short term challenges in its retail market and operational issues, despite good progress with its turnaround
Current trading and outlook
-- Trading remains in line with our expectations for the year in both divisions:
- Food Ingredients is well-placed to capitalise on its unique capabilities to meet the growing demand for production capacity within the snack bars sector
- Cake Decoration sales are in line with expectations, with a major improvement programme launched focussed on developing strategic partnerships with customers and distributors and driving operational improvements
* Underlying adjusted EBITDA represents earnings before depreciation, amortisation, impairments, significant items, finance costs and tax.
Mike Holt, Non-executive Chairman, said:
"The Group has made significant progress over the past six months, especially within Food Ingredients where capacity has doubled and is almost fully utilised with strong order intake and commitments from both new and existing customers. Whilst Cake Decoration has had a difficult period, its new Chief Executive has launched a major improvement programme focussed on developing strategic partnerships with customers and distributors and driving fundamental operational improvements, the benefits of which are beginning to come through.
The Group now has two core businesses with clear growth strategies, and the leadership and resources to deliver upon them. With a lower cost base in place and the Group's improving performance increasingly evident, the Board is confident of delivering further progress in the second half and beyond."
Enquiries:
Real Good Food plc Tel: 0151 541 3790 Mike Holt, Non-executive Chairman Paul Richardson Executive Director Maribeth Keeling Chief Financial Officer finnCap Limited (Nomad and Broker) Tel: 020 7220 0500 Matt Goode / Carl Holmes / James Thompson (Corporate Finance) MHP Communications (Financial PR) Tel: 020 3128 8100 Reg Hoare / Katie Hunt rgf@mhpc.com About Real Good Food Real Good Food plc is a food manufacturing business serving several market sectors including retail (own label and private label), manufacturing and export. The Company has two businesses, Cake Decoration (Renshaw and Rainbow Dust Colours) and Food Ingredients (Brighter Foods), with leading brands in their chosen markets. http://www.realgoodfoodplc.com
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
Chairman's Statement
I am pleased to report that Real Good Food has made significant progress over the past six months and is reporting a profit at EBITDA level, significantly ahead of the same period last year.
This improved financial performance principally reflects stellar results at Food Ingredients where capacity has doubled and is almost fully utilised with strong order intake and commitments from both new and existing customers. This, together with further cost savings at Group level, more than compensated for a more difficult trading period for Cake Decoration which faced some operational issues and the acquisition of a key US customer. However, since his appointment as MD Cake Decorations in August, Steve Moon has launched a major improvement programme focussed on developing strategic partnerships with customers and distributors and driving fundamental operational improvements. Benefits from these initiatives are beginning to come through. It's pleasing to note that a deal was signed last month with Decopac making them the sole distributor for Cake Decoration products in the North American sugarcraft, in-store bakery and foodservice markets.
As previously reported, in August 2019 the Group secured a new credit facility with Leumi which is the first of several steps being taken to reduce investor loans and loan notes; the goal being to have a more simplified and normal capital structure as the Group continues to improve its profitability and cash flow.
To further strengthen the Board, I am pleased to welcome Paul Richardson and Gail Lumsden as directors of the Company. Paul joined the Board as an Executive Director on 15 October. His experience brings expertise in culture, strategy implementation, governance and compliance, which will complement the strategic and operational focus of the Managing Directors of our Brighter Foods and Renshaw businesses. Gail joined the Board as an independent Non-Executive Director on 24 October, replacing Steve Dawson who stepped down due to other commitments. Gail has significant experience driving profitable growth and leading change worldwide in both large corporates and SMEs which will be of great benefit to the Group. Gail will chair the Remuneration Committee. We now have a better balance of executive, non-executive, and independent non-executive directors on the Board, in line with our commitment to improve corporate governance. The balance of the Board will be kept under review as the Group's financial performance and position improves further.
The Board remains confident that the actions being taken by management are the right ones and that they will deliver benefits in the current year and provide a solid foundation for the future.
Overview
Results
The period under review saw continuing corporate activity, including further restructuring of the Group to focus on our two core divisions, being Cake Decoration and Food Ingredients. The refinancing of the Group with a new term loan, increased asset based loans and a revolving credit facility enabling us to repay some of the investor loans. At the same time, the underlying performance of continuing operations improved, reflecting the cost savings made across the Group. Overall a profit was reported on continuing operations at the Group underlying adjusted EBITDA level (underlying adjusted EBITDA is defined as earnings before significant items, impairment, interest, tax, depreciation and amortisation) of GBP2.8 million (2018: GBP0.9 million), an increase of over 200 percent. Measuring the Group's performance against underlying adjusted EBITDA shows the operational performance of the Group without the distorting effects of the costs of finance and other significant items.
The loss before tax was GBP2.5 million (2018: loss of GBP9.1 million). Following a review at the half year, there has been no further impairment of the Cake Decorations business reflecting the significant operating cost reductions and the turnaround project underway. The Directors are confident that the business has strong long-term growth potential and that it will be restored to greater profitability over the coming months.
Hot Features
Premium
6 months ended 30 Sept 2019 6 months ended 30 Sept 2018
GBP000's GBP000's
------------------------------------------------------ --------------------------- ---------------------------
Loss before tax from continuing operations (2,506) (9,092)
Depreciation of property, plant and equipment 1,075 753
Amortisation of intangibles 735 737
Impairment - 6,281
Significant items 547 382
Finance costs 2,855 1,783 Other finance costs 88 85 ------------------------------------------------------ --------------------------- --------------------------- Underlying adjusted EBITDA from continuing operations 2,794 929 ------------------------------------------------------ --------------------------- ---------------------------
In order to normalise the Group's funding arrangements, the Group refinanced in August 2019 with Leumi ABL Ltd securing a total credit facility of GBP8.9m. As part of the refinancing, the Group was also able to reduce the level of shareholder debt by GBP4.5m. Although the Group's level of debt outstanding remains high, the refinancing provides stability to enable the Group to move forward and invest in growth opportunities.
Investment in growth
The investment during FY19 in Brighter Foods (Food Ingredients) with a new production facility has resulted in significant sales growth in FY20. The business continues to be well-placed to capitalise on its unique capabilities to meet the growing demand for production capacity within the snack bars sector. The commissioning of an investment in Renshaw's (Cake Decoration) soft icing capacity is also progressing to plan, positioning the Company well for the uplift in demand seen within this category; industry data (Kantar) shows soft icing as a category has a retail market value of GBP20.6m and grew by 17.6% in the year to 8 September 2019.
Outlook and Current Trading
For the year to date, the performance of each of the businesses is aligned with the Board's expectations and central costs are also in line. The Cake Decoration market in the UK, particularly in the retail sector, is proving increasingly competitive but we are confident that we can leverage our fund of experience and expertise to deliver what our customers need and want. The Cake Decoration business has recently welcomed a new Managing Director, Steve Moon, whose experience of the sector and business improvement credentials are such that we have high hopes of him continuing the successful implementation of the newly articulated strategy for that business.
The Food Ingredients division's growth plans are also now progressing under well-established, experienced management and the future for both businesses look justifiably bright. The uncertainties of Brexit for the business community continue, of course, and we are mindful that the Cake Decoration business has European marketing and distribution operations which may be impacted.
After two challenging years in the period to 31 March 2019, the board wishes to thank all the Group's and businesses' stakeholders for their understanding and patience to date. We are now entering a period when the rewards for that patience should start to become evident.
Overall, following a difficult period and significant change, the Group now has two core businesses with clear growth strategies, and the leadership and resources to deliver upon them. With a lower cost base in place and the Group's improving performance increasingly evident, the Board is confident of delivering further progress in the second half and beyond.
Finance Review (continuing operations)
Results of continuing operations: 6 months ended 30 Sept 2019 6 months ended 30 Sept 2018
GBP000's GBP000's
---------------------------------- --------------------------- ---------------------------
External Revenue 32,423 30,356
Gross profit 13,718 9,233
Underlying adjusted EBITDA 2,794 929
Operating profit/(loss) 437 (7,224)
Operating profit/(loss) % 1.3% (23.8%)
Loss before tax (2,506) (9,092)
Group revenue for the six months ended 30 September 2019 was GBP32.4 million (2018: GBP30.4 million), 7% ahead of the prior year as a result of increased trading in the Food Ingredients division, a result of the investment in FY19. Gross profit on the continuing business for the overall Group was GBP13.7 million (2018: GBP9.2 million). The Cake Decoration and Food Ingredients gross profit in the first half improved significantly.
Underlying adjusted EBITDA for continuing operations at GBP2.8 million was GBP1.9 million ahead of prior year reflecting the revenue growth and cost savings made across the Group. Loss before tax for the six months ended 30 September 2019 at GBP2.5 million was GBP6.6 million lower than the same period in the prior year. This reflected the gain within underlying adjusted EBITDA of GBP1.9 million which was offset by additional interest charges on loans of GBP1.1 million, and no impairment charge required unlike the previous year when GBP6.3 million was reported.
Net debt at 30 September 2019 amounted to GBP39.9 million (2018: GBP29.9 million). The increase in net debt arose from the additional borrowings following the refinancing, additional accrued interest on shareholder loans and the creation of leased asset commitments following the adoption of IFRS 16. Net debt was principally from loans and accrued interest from shareholders of GBP26.1 million, convertible loan notes ("CLNs") at fair value of GBP8.4 million, asset financing of GBP3.3 million, Brighter Foods government grant of GBP0.3 million, leased asset commitments of GBP0.5 million and revolving credit facilities of GBP2.0 million. Cash in the bank stood at GBP1.2 million. Net debt is calculated as total borrowings less cash and cash equivalents (see note 8).
IFRS 16 Leases
We have adopted IFRS 16 Leases from 1 April 2019, capitalising assets financed through operating leases, and substituting operating costs with interest and depreciation. The Group has applied the modified retrospective method with no changes to the comparative accounting periods and has measured the asset at the lease liability at 1 April 2019.
Dividend
No dividend is proposed for the six months ended 30 September 2019 (2018: nil).
Pension Scheme
The Group offers a defined contribution scheme for all current employees that is funded on a monthly basis. In addition, the Company operates a defined benefit scheme that was closed to new members in 2000.
In the 6 months to 30 September 2019 the deficit in the defined benefit scheme increased by GBP1.2 million to GBP8.6 million compared to 31 March 2019 including an additional provision under IFRIC14 for the excess of contributions over the liability previously recognised of GBP0.5 million. The plan assets increased by GBP1.4 million to GBP15.1 million and the plan liabilities are GBP23.8 million including the additional IFRIC14 liability compared to GBP21.2 million at 31 March 2019 (see note 6).
Cash Flow
The net decrease in cash and cash equivalents for the period was GBP1.7 million. The cash received together with funds received from the refinancing was principally used to repay some of the investor loans with GBP4.5 million, fund working capital of GBP3.4 million and investment in plant and machinery GBP1.4 million. The plant and machinery is for Food Ingredients and has allowed them to secure a new building from November 18 housing a new production line. The production line has been instrumental in increasing the sales in Food Ingredients by 81%.
Divisional Business Reviews
Cake Decoration
Cake Decoration manufactures sugarpaste, marzipan, soft icings, mallows and caramels, under the Renshaw Professional brand and for private label. The division also produces a range of edible glitters, dusts, powders, food paints and pens for the sugar craft sector, through the Rainbow Dust Colours brand. Renshaw Europe and Renshaw Americas sell these products in their respective territories.
6 months ended 30 Sept 2019 6 months ended 30 Sept 2018
GBP000's GBP000's
--------------------------- --------------------------- ---------------------------
External Revenue 19,922 22,186
Underlying adjusted EBITDA 637 1,298
Loss before tax (571) (5,503)
External revenue was GBP19.9 million (2018: GBP22.2 million) a decline of 10%. There have been challenges within the Retail sector, with pressure on sales in icing and marzipan driven by underlying market decline. Renshaw North America signed an exclusive distribution agreement with Decopac, the largest supplier of cake decorations to professional cake decorators and bakeries in the US in September 2019. The underlying adjusted EBITDA at GBP0.6 million is a decline of GBP0.7 million on the prior year, driven by pressure on margins and the delay in commissioning soft icing's new equipment, which is due for completion in January 2020. The loss before tax stood at GBP0.6 million. Sales of soft icings is a double-digit growth opportunity and one that J F Renshaw is well placed to benefit from.
Full year sales are anticipated to be in line with management expectations, with ongoing cost savings to deliver benefit in FY20.
Impairment Review
The Cake Decoration division is a core division for the Group and is currently in turnaround. The investments made in manufacturing capability in the last couple of years have not yet started to deliver the returns that could be expected and the Board believes that the current results, reflected here, is not a reflection of the potential of this division. Plans to improve the strategic positioning, service delivery and commercial performance of this business are in progress. There is no impairment charge required in the current period. The impairment review for the period to 30 September 2018 resulted in an impairment charge of GBP6.3 million.
Food Ingredients
Brighter Foods manufactures snack bars, both branded and own label, targeted at the growing health and 'healthy lifestyle' markets.
continuing operations only: 6 months ended 30 Sept 2019 6 months ended 30 Sept 2018
GBP000's GBP000's
---------------------------- --------------------------- ---------------------------
External Revenue 12,490 6,908
Underlying adjusted EBITDA 2,547 1,443
Profit before tax 1,552 638
The period saw an increase in revenue of 81% with underlying adjusted EBITDA at GBP2.5 million (2018: GBP1.4 million), or GBP1.1 million ahead of prior year, which was in line with management's expectations. This performance reflected significant growth with both new and existing customers using the additional capacity available. Profit before tax of GBP1.6 million (2018: GBP0.6 million) is GBP0.9 million ahead of the prior year.
A review of the intangible assets in Food Ingredients has resulted in no requirement for any impairment (2018: Nil).
Head Office
The Group functions of Finance, Human Resources and Information Services provide support and best practice guidance to the businesses as required.
6 months ended 30 Sept 2019 6 months ended 30 Sept 2018
GBP000's GBP000's
--------------------------- --------------------------- ---------------------------
External Revenue 11 -
Underlying adjusted EBITDA (390) (1,785)
Loss before tax (3,487) (4,190)
The underlying adjusted EBITDA loss was GBP0.4 million, an improvement of GBP1.4 million on the prior year owing to the continuing cost savings made centrally. The loss before tax of GBP3.5 million reflects the reduction in significant costs in the period, which were more than offset by the additional interest charges on the shareholder loans.
This report was approved by the Board on 28 November 2019 and is signed on its behalf by:
Paul Richardson
Executive Director
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 which comprises the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, and related notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
Manchester
United Kingdom
28 November 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Consolidated Statement of Comprehensive Income
unaudited unaudited audited
Notes 6 months ended 6 months ended 12 months ended
30 Sept 2019 30 Sept 2018 31 Mar 2019
GBP000's GBP000's GBP000's
-------------------------------------------------------- ----- -------------- -------------- ---------------
Revenue 32,423 30,356 61,560
Cost of sales (18,705) (21,123) (43,533)
-------------------------------------------------------- ----- -------------- -------------- ---------------
Gross profit 13,718 9,233 18,027
Distribution expenses (1,629) (1,635) (3,415)
Administrative expenses (11,105) (8,159) (15,738)
Impairment charge 7 - (6,281) (18,675)
Significant items 7 (547) (382) (1,717)
-------------------------------------------------------- ----- -------------- -------------- ---------------
Operating profit/(loss) 437 (7,224) (21,518)
Finance costs (2,855) (1,783) (4,406)
Other finance costs (88) (85) (166)
-------------------------------------------------------- ----- -------------- -------------- ---------------
Loss before tax (2,506) (9,092) (26,090)
Income tax (expense)/ credit (3) 6 349
-------------------------------------------------------- ----- -------------- -------------- ---------------
Loss from continuing operations (2,509) (9,086) (25,741)
Loss from discontinued operations - (3,390) (6,243)
-------------------------------------------------------- ----- -------------- -------------- ---------------
Net loss (2,509) (12,476) (31,984)
-------------------------------------------------------- ----- -------------- -------------- ---------------
Attributable to:
Owners of the parent (2,860) (12,686) (32,321)
Non-controlling interests 351 210 337
-------------------------------------------------------- ----- -------------- -------------- ---------------
Net loss (2,509) (12,476) (31,984)
-------------------------------------------------------- ----- -------------- -------------- ---------------
Items that will not be reclassified to profit or loss
Foreign exchange differences on translation of
subsidiaries (2) (67) (32)
Actuarial (loss)/gain on defined benefit plan (840) 575 441
Pension provision IFRIC 14 6 (517) - -
Tax relating to items which will not be reclassified 231 (98) (75)
-------------------------------------------------------- ----- -------------- -------------- ---------------
Other comprehensive (loss)/income (1,128) 410 334
-------------------------------------------------------- ----- -------------- -------------- ---------------
Total comprehensive loss for the period (3,637) (12,066) (31,650)
-------------------------------------------------------- ----- -------------- -------------- ---------------
Attributable to:
Owners of the parent (3,988) (12,276) (31,987)
Non-controlling interests 351 210 337
-------------------------------------------------------- ----- -------------- -------------- ---------------
Total comprehensive loss for the period (3,637) (12,066) (31,650)
-------------------------------------------------------- ----- -------------- -------------- ---------------
30 Sept 2019 30 Sept 2018 31 Mar 2019
-------------------------------------------------------- ----- -------------- -------------- ---------------
Basic and diluted loss per share - total operations 3 (2.88)p (14.64)p (35.49)p
Basic and diluted loss per share - continuing operations (2.88)p (10.73)p (28.64)p
Basic and diluted loss per share - discontinued
operations - (3.91)p (6.85)p
---------------
Consolidated Statement of Financial Position
unaudited unaudited audited
Notes 30 Sept 2019 30 Sept 2018 31 Mar 2019
GBP000's GBP000's GBP000's
---------------------------------------------------------- ----- ------------ ------------ -----------
NON-CURRENT ASSETS
Goodwill 9 50,375 62,769 50,375
Other intangible assets 864 2,431 1,599
Tangible fixed assets 17,632 14,640 16,578
Investments 81 81 81
Deferred tax asset 1,490 1,129 1,259
---------------------------------------------------------- ----- ------------ ------------ -----------
70,442 81,050 69,892
---------------------------------------------------------- ----- ------------ ------------ -----------
CURRENT ASSETS
Inventories 6,637 7,042 6,840
Trade and other receivables 10,426 8,043 8,614
Current tax assets 5 - 52
Cash collateral 215 2,000 2,000
Cash and cash equivalents 1,178 10,473 2,909
---------------------------------------------------------- ----- ------------ ------------ -----------
18,461 27,558 20,415
---------------------------------------------------------- ----- ------------ ------------ -----------
Assets in disposal groups classified as held for sale 10 148 7,837 148
---------------------------------------------------------- ----- ------------ ------------ -----------
TOTAL ASSETS 89,051 116,445 90,455
---------------------------------------------------------- ----- ------------ ------------ -----------
CURRENT LIABILITIES
Trade and other payables 9,096 11,457 10,629
Borrowings 8 2,402 4,417 668
NCI put option 1 2,377 - -
Current tax liability - 54 -
---------------------------------------------------------- ----- ------------ ------------ -----------
13,875 15,928 11,297
---------------------------------------------------------- ----- ------------ ------------ -----------
NON-CURRENT LIABILITIES
Borrowings 8 38,719 35,996 37,961
NCI put option 1 2,705 4,796 4,997
Derivative liability - Convertible Loan Notes 8 278 345 294
Deferred tax liabilities 1,881 2,043 1,881
Retirement benefit obligation 6 8,615 5,777 7,403
---------------------------------------------------------- ----- ------------ ------------ -----------
52,198 48,957 52,536
---------------------------------------------------------- ----- ------------ ------------ -----------
Liabilities directly associated with assets in disposal
groups classified as held for sale - 3,843 -
---------------------------------------------------------- ----- ------------ ------------ -----------
TOTAL LIABILITIES 66,073 68,728 63,833
---------------------------------------------------------- ----- ------------ ------------ -----------
NET ASSETS 22,978 47,717 26,622
---------------------------------------------------------- ----- ------------ ------------ -----------
EQUITY
Share capital 1,991 1,971 1,987
Share premium account 3,294 3,262 3,286
Share option reserve 219 310 238
38
Other reserve (4,796) (4,796) (4,796)
Foreign exchange translation reserve (21) (54) (19)
Retained earnings 19,800 45,011 23,786
---------------------------------------------------------- ----- ------------ ------------ -----------
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT 20,487 45,704 24,482
Non-controlling interest 2,491 2,013 2,140
---------------------------------------------------------- ----- ------------ ------------ -----------
TOTAL EQUITY 22,978 47,717 26,622
---------------------------------------------------------- ----- ------------ ------------ -----------
Consolidated Statement of Changes in Equity
For the six Issued Share Share Other Foreign Retained Total Non-Controlling Total
months ended Share Premium Option Reserve Translation Earnings Interest Equity
30 September Capital Account Reserve Reserve
2019
(unaudited)
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
Balances at 1
April 2019 1,987 3,286 238 (4,796) (19) 23,786 24,482 2,140 26,622
Total - -
comprehensive
loss for the
period
Loss for the
period - - - - - (2,860) (2,860) 351 (2,509)
Other
comprehensive
loss - - - - (2) (1,126) (1,128) - (1,128)
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
Total
comprehensive
loss for the
period - - - - (2) (3,986) (3,988) 351 (3,637)
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
Transactions
with owners of
the Group,
recognised
directly in
equity
Shares issued
in the
period, net
of costs 4 8 - - - - 12 - 12
Share based
payments - - (19) - - - (19) - (19)
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
Total
contributions
by and
distributions
to owners of
the Group 4 8 (19) - - - (7) - (7)
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
Balances at 30
September
2019 1,991 3,294 219 (4,796) (21) 19,800 20,487 2,491 22,978
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
For the six Issued Share Share Other Foreign Retained Total Non-Controlling Total
months ended Share Premium Option Reserve Translation Earnings Interest Equity
30 September Capital Account Reserve (restated) Reserve (restated)
2018
(unaudited)
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------- -------- -------- -------- ---------- ----------- --------- -------- --------------- ---------
Balances at 1
April 2018 1,569 2,720 310 (4,796) 13 57,220 57,036 1,803 58,839
Total
comprehensive
loss for the
period
Loss for the
year - - - - - (12,686) (12,686) 210 (12,476)
Other
comprehensive
loss - - - - (67) 477 410 - 410
-------------- -------- -------- -------- ---------- ----------- --------- -------- --------------- ---------
Total
comprehensive
loss for the
period - - - - (67) (12,209) (12,276) 210 (12,066)
-------------- -------- -------- -------- ---------- ----------- --------- -------- --------------- ---------
Transactions
with owners of
the Group,
recognised
directly in
equity
Shares issued
in the period 402 542 - - - - 944 - 944
Acquisition of - - - - - - - - -
majority
interest
-------------- -------- -------- -------- ---------- ----------- --------- -------- --------------- ---------
Total
contributions
by and
distributions
to owners of
the Group 402 542 - - - - 944 - 944
-------------- -------- -------- -------- ---------- ----------- --------- -------- --------------- ---------
Balances at 30
September
2018 1,971 3,262 310 (4,796) (54) 45,011 45,704 2,013 47,717
-------------- -------- -------- -------- ---------- ----------- --------- -------- --------------- ---------
For the twelve Issued Share Share Other Foreign Retained Total Non-Controlling Total
months ended Share Premium Option Reserve Translation Earnings Interest Equity
31 March 2019 Capital Account Reserve Reserve
(audited)
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
Balances at 1
April 2018 1,569 2,720 310 (4,796) 13 55,741 55,557 1,803 57,360
Total
comprehensive
loss for the
period
Loss for the
year - - - - - (32,321) (32,321) 337 (31,984)
Other
comprehensive
loss - - - - (32) 366 334 - 334
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
Total
comprehensive
loss for the
period - - - - (32) (31,955) (31,987) 337 (31,650)
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
Transactions
with owners of
the Group,
recognised
directly in
equity
Shares issued
in the period 418 566 - - - - 984 - 984
Share based
payments - - (38) - - - (38) - (38)
Deferred tax
on
share-based
payments - - (34) - - - (34) - (34)
Total
contributions
by and
distributions
to owners of
the Group 418 566 (72) - - - 912 - 912
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
Balances at 31
March 2019 1,987 3,286 238 (4,796) (19) 23,786 24,482 2,140 26,622
-------------- -------- -------- --------- --------- ----------- --------- -------- --------------- ---------
Consolidated Cashflow Statement
unaudited unaudited audited
6 months ended 6 months ended 12 months ended
Notes 30 Sept 2019 30 Sept 2018 31 Mar 2019
GBP000's GBP000's GBP000's
-------------------------------------------------------------- ----- -------------- -------------- ---------------
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Loss before taxation (2,506) (12,482) (32,333)
Finance and other finance costs 2,943 1,868 4,572
FX movement - 82 (98)
Share based payment credit (19) - (38)
Loss arising from disposal of discontinued business - 2,006 5,202
Loss on disposal of intangible assets - - 123
Loss on disposal of property plant and equipment - - 135
Depreciation of property, plant and equipment 1,075 1,725 2,656
Impairment charge - 6,281 18,675
Past service gain on pension - - 106
Fair value of derivative liability (16) - 294
Fair value of NCI put option 85 - 201
Amortisation of intangibles 735 749 1,464
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Operating Cash Flow 2,297 229 959
Decrease/(increase) in inventories 203 (161) 186
(Increase)/decrease in receivables (1,811) 917 613
Pension contributions 6 (287) (173) (347))
(Decrease)/increase in payables (3,280) (6,715) (3,511)
Decrease in Cash Collateral 1,785 - -
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Cash used in operations (1,093) (5,093) (2,100)
Income taxes paid/(received) 50 - (68)
Interest paid (86) (138) (493)
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Net cash outflow from operating activities (1,129) (6,041) (2,661)
-------------------------------------------------------------- ----- -------------- -------------- ---------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of intangible assets - (2) (10)
Purchase of property, plant and equipment (1,374) (1,292) (4,474)
Disposal of discontinued business, net of cash disposed of - 13,342 16,669
Payment of deferred consideration - - (4,520)
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Net cash (outflow)/ inflow from investing activities (1,374) 12,048 7,665
-------------------------------------------------------------- ----- -------------- -------------- ---------------
CASH FLOW FROM FINANCING ACTIVITIES
Shares issued in year, net of transaction costs 12 944 984
Inflow/(repayment) of loans 8 3,420 (1,750) (1,750)
(Repayment)/inflow of Investor Loans 8 (3,059) 856 856
Inflow of funds from convertible loan notes - 8,545 8,545
Drawdowns on revolving credit facilities 8 13,551 39,350 57,266
Repayments to revolving credit facilities 8 (11,514) (42,726) (65,935)
Repayment of asset based finance (1,636) - -
Capital repayments on asset finance 8 - (3,463) (4,783)
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Net cash inflow/(outflow) from financing activities 774 1,756 (4,817)
-------------------------------------------------------------- ----- -------------- -------------- ---------------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,729) 7,763 187
-------------------------------------------------------------- ----- -------------- -------------- ---------------
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period 2,909 2,731 2,731
Effects of currency translation on cash and cash
equivalents (2) (21) (10)
Net movement in cash and cash equivalents (1,729) 7,763 188
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Cash and cash equivalents at end of period 1,178 10,473 2,909
-------------------------------------------------------------- ----- -------------- -------------- ---------------
Notes to the Interim Statements
1. Preparation of the interim statements
General information
Real Good Food plc is a public limited company incorporated in England and Wales under the Companies Act (registered number 04666282). The Company is domiciled in England and Wales and its registered address is 61 Stephenson Way, Wavertree, Liverpool L13 1HN. The Company's shares are traded on the Alternative Investment Market (AIM).
The principal activities of the Group are the sourcing, manufacture, marketing and distribution of food and industrial ingredients.
The interim report will be posted on the Company's website and will be released via the Stock Exchange. Further copies of the interim report and Annual Report and Accounts may be obtained from the address above.
Basis of preparation
These condensed consolidated interim statements are compliant with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as adopted by the European Union and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) but does not include all disclosures required by IAS 34. The unaudited financial information for the six months ended 30 Sept 2019 and 30 Sept 2018 are not statutory accounts and as such, have not been audited, but have been reviewed by our auditors. The comparative financial information provided for the twelve months ended 31 March 2019 are not a complete set of statutory accounts. For the full 31 March 2019 statutory accounts, please refer to the Companies House website. The accounts are prepared on a going concern basis.
Discontinued operations
A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification of a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is presented as if the operation had discontinued from the start of the comparative period.
IFRS standards and interpretations adopted
The Group has applied the same accounting policies in its interim consolidated financial statements as in its 31 March 2019 annual financial statements, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2019 and will be adopted in the 2020 annual financial statements. A new standard impacting the Group has been adopted in these financial statements and has given rise to changes in the Group's accounting policies as follows:
-- IFRS 16 Leases
Details of the impact of this standard is given below:
We have adopted IFRS 16 Leases from 1 April 2019, capitalising assets financed through operating leases, and substituting operating costs with interest and depreciation. The Group has applied the modified retrospective method with no changes to the comparative accounting periods.
All figures in GBP'000s Property Plant Total Assets recognised at 1 April 2019 578 209 787 Discounted liability recognised at 1 April 2019 553 202 755 Operating expenses reduced in 6 months to 30 September 2019 168 84 252 Additional depreciation in 6 months to 30 September 2019 166 83 249 Additional finance cost in 6 months to 30 September 2019 7 4 11
At 30 September 2019, fixed assets are increased by GBP0.5 million, short term borrowings are increased by GBP0.4 million and long term borrowings by GBP0.1 million.
Non-Controlling interest put option
Following the purchase of Brighter Foods Limited, the Group entered into a shareholder agreement regarding the management stake whereby the senior management of Brighter Foods Limited can elect to sell 50% of the management stake to the Group after March 2020, and 50% after March 2021. The consideration for the entire management stake will be based upon an agreement valuation formula, linked to profit, cash and capital expenditure of Brighter Foods limited in the years ending 31 March 2020 and 31 March 2021, and is capped at GBP8.0 million in aggregate.
The present value of the amount payable is GBP5.1 million (2018: GBP4.8 million) of the exercise of the non-controlling interest put option, is recognised in long-term liabilities and equity.
Going Concern
The Directors have considered the Group's business activities together with the factors likely to affect its planned future performance. The forecasts, based on sensitised versions of those submitted by the businesses, consider reasonable possible changes in trading performance and these assumptions have been projected which show that the business is able to operate with a sufficient level of headroom, providing all current debt facilities remain in place. The principal shareholders of the Group have shown considerable support for the working capital requirements and, having carefully considered the liquidity of the Company in line with the current strategy and future performance, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the next 12 months. Looking beyond that horizon, the Board is fully conscious of the significant potential cash demands from the repayment of shareholder loans, for example, and such matters will receive appropriate consideration, of course, well in advance of the due dates.
2. Segment analysis
Geographical Segments
The Group earns revenue from countries outside the United Kingdom, these represent 19.7% of the total revenue of the Group to 30 Sept 2019 (6 months to Sept 2018: 21.9%). The Cake Decoration division accounts for all of this turnover.
Business segments
The divisional structure reflects the management teams in place and also ensures all aspects of trading activity have the specific focus that they need in order to achieve our growth plans.
The Group operates in two divisions, Cake Decoration and Food Ingredients. The Head Office functions of Finance, Human Resources and Information Services provide support to the divisions in varying scale.
Unaudited segment analysis for these divisions for the six months ended 30 September 2019 is provided below, along with reconciliations to the underlying adjusted EBITDA:
The Group operates in two main divisions: Cake Decoration and Food Ingredients. The Premium Bakery division was discontinued in the period to 31 March 2019. The Head Office functions of Finance, Technical and Information Services provide support to the divisions in varying scale.
Cake Decoration Food Ingredients Head Office Total Group
GBP000's GBP000's GBP000's GBP000's
---------------------------------- --------------- ---------------- ----------- -----------
Total Revenue 23,563 12,490 11 36,064
Intercompany Sales (3,641) - - (3,641)
---------------------------------- --------------- ---------------- ----------- -----------
External Revenue 19,922 12,490 11 32,423
Cost of sales (11,100) (7,605) - (18,705)
---------------------------------- --------------- ---------------- ----------- -----------
Gross Profit 8,822 4,885 11 13,718
Distribution expenses (1,393) (236) - (1,629)
Administrative expenses (7,484) (3,097) (524) (11,105)
Significant items and impairments (426) (121) (547)
---------------------------------- --------------- ---------------- ----------- -----------
Operating profit/(loss) (481) 1,552 (634) 437
Finance costs (90) - (2,765) (2,855)
Other finance costs - - (88) (88)
---------------------------------- --------------- ---------------- ----------- -----------
Profit/(loss) before tax (571) 1,552 (3,487) (2,506)
Income tax expense - - (3) (3)
---------------------------------- --------------- ---------------- ----------- -----------
Net profit/(loss) (571) 1,552 (3,490) (2,509)
---------------------------------- --------------- ---------------- ----------- -----------
Reconciliation of operating profit/(loss) to underlying Cake Decoration Food Ingredients Head Office Total Group
adjusted EBITDA
GBP000's GBP000's GBP000's GBP000's
--------------------------------------------------------- --------------- ---------------- ----------- -----------
Operating (loss)/profit (481) 1,552 (634) 437
Significant items and impairments 426 - 121 547
Depreciation 692 293 90 1,075
Amortisation - 702 33 735
--------------------------------------------------------- --------------- ---------------- ----------- -----------
Underlying adjusted EBITDA 637 2,547 (390) 2,794
--------------------------------------------------------- --------------- ---------------- ----------- -----------
Comparative unaudited segment analysis for the six months ended 30 Sept 2018 is:
Cake Food Premium Head Office Continuing Discontinued Total Group
Decoration Ingredients Bakery Operations Operations
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
----------------- ------------- ------------- ------------- ----------- ------------- ------------- -----------
Total Revenue 26,843 6,908 1,262 - 35,013 21,145 56,158
Intercompany
Sales (4,657) - - - (4,657) (346) (5,003)
----------------- ------------- ------------- ------------- ----------- ------------- ------------- -----------
External Revenue 22,186 6,908 1,262 - 30,356 20,799 51,155
Cost of sales (14,842) (5,125) (1,001) (155) (21,123) (17,888) (39,011)
----------------- ------------- ------------- ------------- ----------- ------------- ------------- -----------
Gross Profit 7,344 1,783 261 (155) 9,233 2,911 12,144
Distribution
expenses (1,409) (140) (86) - (1,635) (890) (2,525)
Administrative
expenses (5,069) (1,000) (208) (1,882) (8,159) (5,272) (13,431)
Significant items
and impairments (6,297) (4) (4) (358) (6,663) (39) (6,702)
----------------- ------------- ------------- ------------- ----------- ------------- ------------- -----------
Operating
(loss)/profit (5,431) 639 (37) (2,395) (7,224) (3,290) (10,514)
Finance costs (72) (1) - (1,710) (1,783) (100) (1,883)
Other finance
costs - - - (85) (85) - (85)
----------------- ------------- ------------- ------------- ----------- ------------- ------------- -----------
(Loss)/profit
before tax (5,503) 638 (37) (4,190) (9,092) (3,390) (12,482)
Income tax
credit/(expense)
expense/(credit) - 11 - (5) 6 - 6
----------------- ------------- ------------- ------------- ----------- ------------- ------------- -----------
Net (loss)/profit (5,503) 649 (37) (4,195) (9,086) (3,390) (12,476)
----------------- ------------- ------------- ------------- ----------- ------------- ------------- -----------
Reconciliation Cake Food Premium Bakery Head Office Continuing Discontinued Total Group
of operating Decoration Ingredients Operations Operations
profit/(loss)
to underlying
adjusted EBITDA
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
--------------- -------------- ------------- -------------- ----------- ------------- ------------- -----------
Operating
(loss)/profit (5,431) 639 (37) (2,395) (7,224) (3,290) (10,514)
Significant
items and
impairments 6,297 4 4 358 6,663 39 6,702
Loss on
disposal - - - - - 2,010 2,010
Depreciation 418 110 6 219 753 972 1,725
Amortisation 14 690 - 33 737 12 749
--------------- -------------- ------------- -------------- ----------- ------------- ------------- -----------
Underlying
adjusted
EBITDA 1,298 1,443 (27) (1,785) 929 (257) 672 --------------- -------------- ------------- -------------- ----------- ------------- ------------- -----------
Comparative audited segment analysis for the twelve months ended 31 Mar 2019 is:
Cake Decoration Food Ingredients Head Office Continuing Discontinued Total Group
Operations Operations
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
------------------ --------------- ---------------- ----------- ------------------ ----------------- -----------
Total Revenue 56,340 15,151 - 71,491 26,365 97,856
Intercompany Sales (9,931) - - (9,931) (346) (10,277)
------------------ --------------- ---------------- ----------- ------------------ ----------------- -----------
External Revenue 46,409 15,151 61,560 26,019 87,579
Cost of sales (31,716) (11,585) (232) (43,533) (21,615) (65,148)
------------------ --------------- ---------------- ----------- ------------------ ----------------- -----------
Gross Profit 14,693 3,566 (232) 18,027 4,404 22,431
Distribution
expenses (3,074) (341) - (3,415) (1,227) (4,642)
Administrative
expenses (9,662) (1,998) (4,078) (15,738) (9,267) (25,005)
Significant items
and impairments (19,264) (42) (1,086) (20,392) (46) (20,438)
------------------ --------------- ---------------- ----------- ------------------ ----------------- -----------
Operating
profit/(loss) (17,307) 1,185 (5,396) (21,518) (6,136) (27,654)
Finance costs (141) - (4,265) (4,406) (107) (4,513)
Other finance
costs - - (166) (166) - (166)
------------------ --------------- ---------------- ----------- ------------------ ----------------- -----------
Profit/(loss)
before tax (17,448) 1,185 (9,827) (26,090) (6,243) (32,333)
Income tax
expense/(credit) 18 (122) 453 349 - 349
------------------ --------------- ---------------- ----------- ------------------ ----------------- -----------
Net profit/(loss) (17,430) 1,063 (9,374) (25,741) (6,243) (31,984)
------------------ --------------- ---------------- ----------- ------------------ ----------------- -----------
Reconciliation of Cake Decoration Food Ingredients Head Office Continuing Discontinued Total Group
operating Operations Operations
profit/(loss) to
underlying
adjusted EBITDA
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
------------------ --------------- ---------------- ----------- ------------------ ----------------- -----------
Operating
profit/(loss) (17,307) 1,185 (5,396) (21,518) (6,136) (27,654)
Significant items
and impairments 19,264 42 1,086 20,392 46 20,438
Loss on Disposal 5,202 5,202
Depreciation 1,016 242 315 1,573 1,083 2,656
Amortisation 12 1,376 66 1,454 10 1,464
------------------ --------------- ---------------- ----------- ------------------ ----------------- -----------
Underlying
adjusted EBITDA 2,985 2,845 (3,929) 1,901 205 2,106
------------------ --------------- ---------------- ----------- ------------------ ----------------- -----------
3. Earnings per ordinary share
Basic earnings per share
Basic earnings per share is calculated on the basis of dividing the loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue at the end of the period.
unaudited unaudited audited
6 months ended 6 months ended 12 months ended
30 Sept 2019 30 Sept 2018 31 Mar 2019
------------------------------------------------------------------- -------------- -------------- ---------------
Loss after tax attributable to ordinary shareholders (GBP'000s) (2,860) (12,686) (32,321)
Continuing (2,860) (9,296) (26,078)
Discontinued - (3,390) (6,243)
Weighted average number of shares in issue for basic EPS ('000s) 99,445 86,628 91,032
Employee share options & CLNs ('000s) 149,552 130,079 144,918
Weighted average number of shares in issue for diluted EPS ('000s) 248,997 216,707 235,950
------------------------------------------------------------------- -------------- -------------- ---------------
Basic and diluted loss per share (2.88)p (14.64)p (35.49)p
------------------------------------------------------------------- -------------- -------------- ---------------
Continuing basic and diluted loss per share (2.88)p (10.73)p (28.64)p
-
Discontinued basic and diluted loss per share )p (3.91)p (6.85)p
------------------------------------------------------------------- -------------- -------------- ---------------
For the six months to 30 September 2019, the weighted average number of shares in issue was 99,444,732 and the number of options outstanding was 149,552,476 (including CLNs). If these were all exercised the cash raised would be equivalent to that which would be raised by issuing 131,534,884 shares at the average share price for this period.
Diluted earnings per share
The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of all outstanding share options. The potential ordinary shares are considered antidilutive as they decrease the loss per share. Therefore, diluted EPS is the same as basic EPS.
4. Dividends
The Directors are not recommending an interim dividend (2018: nil).
5. Taxation
The charge for taxation is based on the results for the period and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes.
Provision is made in full for taxation deferred in respect of timing differences that have originated but not reversed by the balance sheet date, except for gains on disposal of fixed assets which will be rolled over into replacement assets. No provision is made for taxation on permanent differences. Deferred tax is not discounted.
6. Pension arrangements
The Group operates a defined contribution scheme for all employees, including provision to comply with auto-enrolment requirements laid down by law.
In addition, the Group operates one defined benefit scheme, the Napier Brown Retirement Benefits Scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The contributions made by the employer over the six-month period have been GBP286,651 (2018: GBP173,058).
Assumptions
The assets of the scheme have been included at market value and the liabilities have been calculated using the following principal actuarial assumptions:
unaudited unaudited audited
30 Sept 2019 30 Sept 2018 31 Mar 2019
% per annum % per annum % per annum
--------------------------------------- ------------ ------------ -----------
Rate of increase in pension payment 3.10 3.10 3.10
Discount rate 1.75 2.85 2.40
Inflation assumption 3.30 3.20 3.30
Revaluation rate for deferred pensions 2.30 2.20 2.30
-----------
Scheme deficit
The fair value of the assets in the scheme and the present value of the liabilities in the scheme are:
unaudited unaudited audited
30 Sept 2019 30 Sept 2018 31 Mar 2019
GBP'000s GBP'000s GBP'000s
------------------------------------ ------------ ------------ -----------
Total fair value of assets 15,137 13,562 13,774
Present value of scheme liabilities (23,235) (19,339) (21,177)
------------------------------------ ------------ ------------ -----------
Effect of IFRIC14 (517) - -
------------------------------------ ------------ ------------ -----------
(Deficit) in the scheme (8,615) (5,777) (7,403)
------------------------------------ ------------ ------------ -----------
The scheme is a closed scheme and therefore under the projected unit method the current service cost would be expected to increase as the members of the scheme approach retirement.
The present value of contributions payable exceeds the net liability and in accordance with IFRIC14, we have recognized this additional liability.
Pension Deficit Funding Arrangement (July 2019)
During the negotiations with the trustee of the scheme as part of the scheme's regular triennial valuation as at 31 March 2018, it became clear that some earlier documentation from 2003 had not had the intended effect.
Following a deed of 15 December 2003, in 2004 Napier Brown Holdings Ltd made a payment of GBP2.5 million to the trustee of the Scheme, which was intended to discharge it from further liability to the Scheme. This was prior to RGF acquiring Napier Brown Foods plc in August 2005. However, the documentation which would have been needed to achieve Napier Brown Holdings Ltd's discharge as a statutory employer was not correctly put into place at that time and its omission only surfaced during the course of the 2018 valuation discussions; both RGF and Napier Brown Foods plc itself had thought that Napier Brown Holdings Ltd had been discharged from liability in relation to the Scheme in 2004. However, Napier Brown Holdings Ltd in fact remained a statutory employer with potential liability in relation to the scheme, despite its earlier payment. The flexible apportionment arrangement entered in July 2019 regularised that position so that Napier Brown Holdings Ltd is no longer a statutory employer in the Scheme. Although the apportionment was executed at the same time as the valuation documents and the 2019 funding arrangements were put in place, it was a separate exercise from the other agreements on payments to the Scheme.
7. Significant Items and Impairments
The Group's underlying profit figure excludes a number of items which are material or non-recurring and are detailed separately to ensure the underlying operating performance of the business is clearly visible, without the distortion of these costs. The significant costs incurred by the Group, are summarised below:
unaudited unaudited audited
6 months ended 6 months ended 12 months ended
30 Sept 2019 30 Sept 2018 31 Mar 2019
GBP000's GBP000's GBP000's
------------------------------------------- -------------- -------------- ---------------
Goodwill and fixed asset impairments - (6,281) (18,675)
Investigation works - - (315)
Commercial disputes - - (118)
Capital projects - - (38)
Legal costs for finance restructuring - (172) -
Professional fees in relation to financing (121) (171) (380)
Management restructuring (426) (78) (582)
Asset write off - - (330)
------------------------------------------- -------------- -------------- ---------------
Total Significant Items and Impairments (547) (6,702) (20,438)
------------------------------------------- -------------- -------------- ---------------
Continuing operations (547) (6,663) (20,392)
Discontinued operations - (39) (46)
------------------------------------------- -------------- -------------- ---------------
8. Borrowings
The table below shows the movement on the Borrowings over the past 12 months.
unaudited unaudited audited
30 Sept 2019 30 Sept 2018 31 Mar 2019
GBP000's GBP000's GBP000's
------------------------------------------- ------------ ------------ -----------
Revolving credit facility 2,043 3,774 -
Investor loans 24,106 23,981 25,165
Investor loans - cash collateral - 2,000 2,000
Convertible loan notes 10,857 8,418 9,550
Asset finance 3,348 1,937 1,636
Leased asset commitments (IFRS 16) 514 - -
Government grants 253 303 278
Total Borrowings 41,121 40,413 38,629
------------------------------------------- ------------ ------------ -----------
Amount due for settlement within 12 months 2,402 4,417 668
Amount due for settlement after 12 months 38,719 35,996 37,961
------------------------------------------- ------------ ------------ -----------
Convertible Loan Notes
The Company had issued loan notes with a conversion price of 5 pence to its major shareholders, Napier Brown, Omnicane and Downing totalling GBP8.8 million during 2018. The loans are repayable on 17 May 2021, unless they are redeemed before that date and accrue daily interest at a rate of 12 percent per annum. On maturity, unless the convertible loan notes are converted into ordinary shares, a redemption premium fee will be payable. The redemption fee will be an amount which, when added to the interest accrued on the relevant notes, provides a total return equal to the amount which would have accrued in respect of such notes from the date of the convertible loan note instrument until and including the date the notes are redeemed in full had the interest rate been 30 percent per annum.
A host loan at amortised cost and an embedded derivative liability, being measured at fair value with changes in value being recorded in profit or loss, have been recognised. At 30 September 2019 the derivative liability amounted to GBP0.3 million (2018: GBP0.3 million).
Investor Loans
The terms of the investor loans were amended in August 2019. All loans, other than the Convertible Loan Notes, accrue interest at a rate of 10%, and are now repayable in full on 17 May 2021. A small amount of quarterly interest continues to be repaid to Downing LLP. Following the refinancing in August 2019, GBP4.5 million of these loans were repaid to shareholders, comprising GBP3.7 million of loans, GBP0.5 million of interest and redemption premiums of GBP0.3 million.
Refinancing
In order to normalise the Group's funding arrangements, the Group refinanced in August 2019 with Leumi ABL Ltd securing a total credit facility of GBP8.9m. As part of the refinancing, the Group was also able to reduce the level of shareholder debt by GBP4.5m. Although the Group's level of debt outstanding remains high, the refinancing provides stability to enable the Group to move forward and invest in growth opportunities.
9. Goodwill
A goodwill impairment exercise was undertaken.
Each cash generating unit was assessed for its recoverable amount based upon the higher of fair value less costs of disposal, and value-in-use calculations. The cashflows used in the value-in-use calculation are EBITDA (adjusted) less capital expenditure based upon the latest Board approved forecasts in respect of the following three years. The discount rate applied is 10.0% (Mar 19: 10.0%) based on the market calculated weighted average cost of capital for similar companies. The long-term growth assumptions reflect a 5-year period with a terminal value applied to the fifth year. The impairment review shows that no impairment is required for the goodwill in the Cake Decoration segment (2018: GBP6.3 million).
Sensitivity Analysis
An illustration of the sensitivity to reasonable possible changes in the discount rate assumption or the 3-year planned EBITDA in Cake Decoration are shown below:
-- An increase of 0.5% in the weighted cost of capital of 10.0% to 10.5% would not cause an impairment on the carrying value of goodwill.
-- Applying a 5% reduction to the planned EBITDA in FY 20 and FY 21 would not cause an impairment on the carrying value of goodwill.
unaudited unaudited audited
30 Sept 2019 30 Sept 2018 31 Mar 2019
GBP000's GBP000's GBP000's
--------------- ------------ ------------ -----------
Total Goodwill 50,375 62,769 50,375
--------------- ------------ ------------ -----------
10. Assets classed as held for sale
The group owns an office building near Bristol, previously used by a business sold in the year to 31 March 2019. The building has been put up for sale and are classed as held for sale within the consolidated statement of financial position at 30 September 2019:
GBP000's
------------------------------ --------
Property, plant and equipment 148
Assets held for sale 148
------------------------------ --------
.
11. Contingent Liability
In common with comparable food groups, the Group is involved in disputes in the ordinary course of business which may give rise to claims. Provision representing the known cost of defending and concluding claims is made in the financial statements in accruals as part of other payables for claims where costs are likely to be incurred.
The Group carries a wide range of insurance cover and no separate disclosure is made of the detail of claims or the costs covered by insurance. There has been one additional claim raised since the publication of the Annual accounts, we are at an early stage of investigating the claim and do not expect to make any payment to settle the matter.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR LVLLLKFFLFBB
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