Final Results

Real Good Food Company Plc (The) 27 March 2007 Date: 27 March 2007 On behalf of: The Real Good Food Company plc ('RGFC' or 'the Company') Embargoed until: 0700 hours The Real Good Food Company plc Preliminary Results 2006 The Real Good Food Company plc ('RGFC'), the food manufacturing group, operating in the ambient, chilled and frozen sectors of the market, today announces its preliminary results for the 12 months to 31 December 2006. The highlights are: • Total revenues of £250.8m (2005: £117.7m) • Profit before tax, exceptionals and goodwill amortisation up 35% to £9.5m (2005: £7.1m) • Basic earnings per share of 2.6 pence (2005: 7.2p loss) • Integration of Napier Brown Foods ('NBF') into devolved accountability model completed successfully • Year end net debt reduced by 5% to £56.6m Commenting on the results, Pieter Totte, Non-Executive Chairman of The Real Good Food Company plc, said: 'Following the reverse takeover of Napier Brown Foods in September 2005, we have sought to consolidate and strengthen the Company across all divisions to build a solid platform for future growth in Sugar, Fish, Baking Ingredients and Bakery. I am delighted to report that overall trading in our three largest divisions has met our expectations. 'The successful integration of Napier Brown Foods has resulted in an excellent full year contribution from the business against a volatile sugar market. Overall, the Company has enjoyed significant organic growth in all divisions. 'Our focus for 2007 will be to concentrate on developing our assets to take advantage of the significant commercial opportunities that will arise in the medium term. RGFC is well on its way to becoming a significant player in the UK food sector and we look forward to updating shareholders again at the AGM in May 2007.' Enquiries to: The Real Good Food Company plc Tel: 020 7234 0570 Pieter Totte Non Executive Chairman www.realgoodfoodplc.com John Gibson Group Managing Director Lee Camfield Group Finance Director Redleaf Communications Tel: 020 7822 0200 Emma Kane Duncan McCormick Samantha Robbins Shore Capital Clive Black Tel: 0151 600 3701 Guy Peters Tel: 020 7468 7912 CHAIRMAN'S STATEMENT Introduction I am pleased to report the Group's Preliminary Results for the twelve months to 31 December 2006. This has been a year of consolidation, following the reverse acquisition of Napier Brown Foods ('NBF') in September 2005. Each of the management teams in Sugar, Fish, Baking Ingredients and Bakery have been concentrating on building a platform for future growth. Overall trading in our three largest divisions has met our expectations. The Group achieved a normalised profit (profit before tax, exceptionals and goodwill amortisation) of £9.5m compared to a normalised trading profit of £7.1m for the comparable period in 2005. This excellent result came from the full year contribution from NBF combined with organic growth in all divisions, improving margins, particularly in Bakery Ingredients, and good cost control across the Group. The divisional highlights are: Sugar Sales increasing steadily throughout the year with improved volumes in retail and special sugars. Fish Increased volumes and good margins at a time of significant raw material inflation. Bakery Ingredients Improved margins and operating efficiency improvements. Bakery Revenues increased by 6% although benefits were more than offset by cost overruns. Strategy Our devolved business unit model has been successfully introduced into Baking Ingredients and Sugar. The autonomous management teams here have worked well in 2006 and are focussed on meeting the challenges ahead. All of the finance, IT and commercial functions of Napier Brown Foods have been successfully transferred to Normanton, the Head Office of the Sugar Division, or to Liverpool for the Bakery Ingredients Division. Only a small Group Head Office team remains in St Katharine's Dock, London. Our focus for 2007 will be to concentrate on developing our assets to take advantage of the significant commercial opportunities that will arise in the medium term. Current Trading In Sugar, the European Union (EU) market remains competitive with structural surpluses overhanging the market. The EU Commission has indicated that quota cuts will be made unless restructuring uptake increases significantly. NBF sales are ahead of last year and slightly ahead of expectations, whilst margins are slightly below last year but in line with plan. Five Star Fish sales are significantly ahead of last year. Raw material inflation continues in the sector and it is likely that the first half of the year will again be characterised by work on price increases. Volumes in Bakery Ingredients are in line with last year, albeit in what is seasonally a very quiet period for the business. After a disappointing result in 2006, the Bakery Division has made a satisfactory start to this year. Volumes are ahead of last year and the cost reduction programme has given some benefits. Overall, the Board is satisfied with the start to the current financial year, although recent interest rate rises will have an impact on financing costs in the current year. We look forward to further updating shareholders at the Annual General Meeting in May 2007. FINANCE DIRECTOR'S REPORT Revenue Group sales were up 113% to £250.8m reflecting the full year contribution from the acquired NBF business and organic growth in both the Fish and Bakery Divisions. Strong sales growth was experienced within the Fish and Bakery Divisions up 13.7% and 6.2% respectively; the revenue growth within Fish was aided by the recovery (via price increases) of raw material cost increases. Within the Sugar Division proforma sales fell 6% reflecting both the lower price realisations in the UK market and the reduced sales in Quarter 1 2006. Sales within Bakery Ingredients, excluding discontinued nut sales, were up 1.6%. Margins The Group's gross profit margin reduced by six percentage points to 14.1% reflecting the full year effect of the acquired NBF business. Operating margins (before interest, exceptional costs and goodwill amortisation) were also diluted, from 7.7% to 5.3%, reflecting the lower average margins within the Sugar Division. However, operating margins in the second half improved over the first half reflecting the stronger seasonal contribution from the Bakery Ingredients Division. Profit Before Tax Profit before tax, exceptional items and goodwill amortisation has increased by 35% to £9.5m, reflecting the increased contribution from the acquired NBF business along with the benefits of the Group restructuring programme into devolved accountability at operating division level. The programme has seen the closure of the Sugar Division offices in London with activities transferred to our Normanton factory site. Basic earnings per share in the year were 2.6p (2005: 7.2p loss). Exceptional Costs During the year, the Group incurred £1.1m of exceptional costs (2005: £4.3m) due to the transfer of finance, administration and IT activities for the Sugar Division from London to Normanton and the completion of the closure of the nut plant in Runcorn. This sees the conclusion of the restructuring of the Group following the acquisition in late 2005 of NBF. Cash Flow and Debt Net debt at the year end was £56.6m, compared to £59.4m at the end of 2005. During the year scheduled loan repayments of £3.5m were made, in addition a further £0.4m was repaid, being the disposal proceeds for the sale of the remaining Sefcol property. A 53% increase in EBITDA to £15.2m aided the delivery of a strong cash flow during the year. Funds from operating activities, after exceptional costs, generated £12.4m. Interest payments were significantly up at £4.5m, reflecting the increased debt position in September 2005, whilst tax payments were £0.7m. Capital expenditure was £2.1m and the sale of the second Sefcol property, as mentioned above, generated some £0.4m, after disposal costs. Cash acquisition costs of £2.5m were incurred during the year, reflecting the final payment of £1.0m to the vendors of Five Star Fish, £0.5m relating to the final payment for the acquisition of James Budgett Sugars and the final fee payments in relation to the acquisition of NBF last year, leaving total cash generation before loan repayments of £3.6m. Pensions A subsidiary of the Group, NBF, operates a defined benefit pension scheme. The scheme is closed with benefits no longer accruing. The IFRS 17 valuation of the scheme identified a £1,223k deficit as at 31 December 2006, up £72k on the previous year. During the year the Group contributed £175k to the scheme. OPERATING COMPANY REVIEWS Sugar Division £'000s 2006 2005 12 months 4 months Turnover(1) 180,053 61,942 Operating Profit(2) 7,373 4,494 Operating Profit % 4.1 7.2 (1) Including inter-company trading (2) Normalised operating profit before exceptional items, goodwill amortisation and central costs Napier Brown Foods supplies a range of sugar and dry ingredients to food manufacturers and packs sugar for retail grocery and foodservice customers from its facilities at Normanton, near Leeds. Sales were in line with expectations and ahead of the previous year for the last four months of last year. During the course of the year, sales grew consistently quarter by quarter after the difficult beginning to 2006. Volumes gained in retail and in special sugars, during the second half, contributed to a much improved performance in that period, with operating margins up 1.1% basis points in the second half. Increased efficiencies in production have come from the commissioning of a new Fawema high speed packing line, linked to a robot-controlled palletiser and shrink wrapper. Administration costs have been reduced and communication lines radically shortened by the transfer of all finance, IT and administrative staff to the site at Normanton. In July 2006, the new European Union Sugar Regime commenced and this will see a significant reduction in price and production in the EU from 2009. The slow pace of reform and subsequent market volatility has affected prices and margins throughout Europe. Napier Brown has been impacted but the strategic initiatives undertaken in a number of areas of the business will stand us in good stead for the future. As a flexible non-refiner, we believe we will be well placed to take advantage of the new supply arrangements and provide our customers with high quality products from a range of sources. Fish Division £'000s 2006 2005 12 months 12 months Turnover(1) 29,075 25,561 Operating Profit(2) 4,011 3,788 Operating Profit % 13.8 14.8 (1) Including inter-company trading (2) Normalised operating profit before exceptional items, goodwill amortisation and central costs Five Star Fish is a leading supplier of added-value, prepared frozen fish to the foodservice sector. It operates from a modern facility on the outskirts of Grimsby. Another record year for sales at Five Star Fish saw a 14% increase year on year, half coming from volume growth and half from price increases. The last year has seen significant raw material inflation and a tightening of supply, so considerable effort has been put into recovering these costs in the marketplace. The reduction in operating profit margin should be seen against this background. The factory has had to work hard to cope with a more complex range of raw material supplies. Sales of added-value products continue to increase within the overall mix as the margins on commodity lines erode in the face of increases in raw material costs. Export sales have been particularly strong. Much effort is being put into creating healthy, quality products for the schools sector, which is changing radically in the light of the 'Jamie Oliver effect'. Five Star Fish is leading the way with reduced frying time products, Omega 3 products and batters that bake rather than fry. Investments in additional frying and battering facilities, along with new coating technology, were made during the period. These will allow the business to move even further into added-value coatings, batters and flavourings. During the course of the year, John Fenty, part-time Executive Consultant and former Chairman of the company, indicated his desire to concentrate on other business commitments in the area and has subsequently resigned his formal position. Bakery Ingredients Division £'000s 2006 2005 12 months 4 months Turnover(1) 33,183 15,703 Operating Profit(2) 3,182 1,639 Operating Profit % 9.6 10.4 (1) Including inter-company trading (2) Normalised operating profit before exceptional items, goodwill amortisation and central costs Renshaw supplies a range of high quality food ingredients primarily to the bakery sector, comprising craft bakers and major cake manufacturers and also to grocery retailers. It operates two facilities, one in Liverpool and the other in Carluke, south-east of Glasgow. Sales for the year were in line with expectations and were similar to the prior period last year (4 months September to December), after adjusting for the discontinued nut activity. On a like for like basis, margins improved during the year as a result of better raw material purchasing and improvements in operational efficiencies. The introduction of modern manufacturing technologies and procedures is taking more time to implement than originally envisaged but substantial progress has been made during the latter part of 2006 with more to come in 2007. Customer service improvements and new product / customer development have been major focuses during the year and improvements here will stand the business in good stead for 2007. Developments into other sectors of the food market, beyond bakery, will be targeted during 2007. During the period, the closure of the Runcorn nut plant was completed and the freehold site has subsequently been sold for £0.5m. The new senior management team has begun well and has been supplemented by further middle management appointments. The team at Renshaw is now capable of achieving step function change in performance in this business in the years to come. Bakery Division £'000s 2006 2005 12 months 12 months Turnover(1) 17,173 16,196 Operating Profit(2) 67 388 Operating Profit % 0.4 2.4 (1) Including inter-company trading (2) Normalised operating profit before exceptional items, goodwill amortisation and central costs Haydens Bakeries produces chilled and ambient premium patisserie and dessert products to retail grocery customers. It operates from a site in Devizes, Wiltshire. During the period under review, Haydens' profitability deteriorated in spite of increased sales, some 6% up on the previous year. This was primarily due to cost overruns in product launches for both new and existing customers, increased overheads and a very poor trading performance in the summer. The exceptionally warm weather gave rise to operational issues at the plant, reduced consumer demand for bakery products and consequently high wastage levels. Waitrose remains by some way, the largest customer, selling to both the Bakery and Chilled Prepared Food departments and providing distribution services. Sales to Marks and Spencer have consolidated, while progress has been made servicing their In-store Bakeries with fried products. During the year a new frying line was commissioned successfully and a second is on order for delivery in the summer of 2007 to meet increased demand for fried laminated products. Phil Wicks, who joined the business in September 2005, has resigned to explore other career opportunities and Stephen Heslop, Managing Director of Bakery Ingredients, has been appointed to the newly created position of Managing Director, Bakery/Ingredients Division and will become responsible for Devizes' activities as well as Renshaw's activities. A programme of overhead cost reductions commenced at the beginning of January 2007 with targeted head count reductions in operations and a review of the senior management team, particularly in the commercial area. Increased emphasis on yield improvements will be sought but with a more disciplined approach than has been present in the past. SUMMARY A significant year in the development of The Real Good Food Company plc (RGFC) including: • The successful integration of NBF, a substantial acquisition on the previous year; • Positive outcomes in a volatile sugar market; • Good progress in our three major divisions. RGFC is well on its way to becoming a significant player in the UK food sector. Pieter Totte CHAIRMAN The Real Good Food Company plc THE REAL GOOD FOOD COMPANY PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT YEAR ENDED 31 DECEMBER 2006 Year ended 31 December 2006 Year ended 31 December 2005 £'000s £'000s (As Restated) Before Before Goodwill Goodwill Goodwill Goodwill Amortisation Amortisation Amortisation Amortisation and and and and Exceptional Exceptional Exceptional Exceptional Items Items Total Items Items Total Notes TURNOVER Continuing operations 2 250,810 - 250,810 116,390 - 116,390 Discontinued operations - - - 1,260 - 1,260 250,810 - 250,810 117,650 - 117,650 Cost of sales (215,352) - (215,352) (93,378) - (93,378) GROSS PROFIT 35,458 - 35,458 24,272 - 24,272 Distribution costs (9,143) - (9,143) (6,854) - (6,854) Administration expenses 3 (12,909) (4,682) (17,591) (8,386) (3,148) (11,534) OPERATING PROFIT 13,406 (4,682) 8,724 9,032 (3,148) 5,884 Continuing operations 13,406 (4,682) 8,724 9,372 (3,148) 6,224 Discontinued operations - - - (340) - (340) EXCEPTIONAL ITEMS Reorganisation costs 3 - (1,117) (1,117) - (3,277) (3,277) Loss on termination of an 3 - - - - (1,025) (1,025) operation PROFIT/(LOSS) ON ORDINARY 13,406 (5,799) 7,607 9,032 (7,450) 1,582 ACTIVITIES BEFORE INTEREST & TAXATION Interest receivable 300 - 300 209 - 209 Interest payable (4,544) - (4,544) (2,174) - (2,152) Other finance income 372 372 - PROFIT/(LOSS) ON ORDINARY 9,534 (5,799) 3,735 7,067 (7,450) (383) ACTIVITIES BEFORE TAXATION Taxation 4 (2,026) - (2,026) (1,871) - (1,871) PROFIT/(LOSS) FOR THE FINANCIAL YEAR 7,508 (5,799) 1,709 5,196 (7,450) (2,254) Basic earnings per share (pence) 11.6 - 2.6 16.9 - (7.2) Diluted earnings per share (pence) 11.6 - 2.6 16.0 - n/a THE REAL GOOD FOOD COMPANY PLC CONSOLIDATED BALANCE SHEET 31 DECEMBER 2006 2006 2005 £'000s £'000s FIXED ASSETS (As Restated) Intangible assets:- Negative goodwill (387) (410) Positive goodwill 86,218 89,134 Net goodwill 85,831 88,274 Tangible fixed assets 18,754 18,451 104,585 107,175 CURRENT ASSETS Stock 14,685 14,390 Deferred tax asset - 253 Debtors 29,224 29,828 Cash at bank and in hand 12,412 11,999 56,321 56,470 CREDITORS: Amounts falling due within one year (31,449) (34,748) NET CURRENT ASSETS 24,872 21,722 TOTAL ASSETS LESS CURRENT LIABILITIES 129,457 128,897 CREDITORS: Amounts falling due after more than one year (58,952) (60,413) PROVISIONS FOR LIABILITIES Deferred tax (826) - Other provisions (596) (746) NET ASSETS EXCLUDING PENSION DEFICIT 69,083 67,738 PENSION SCHEME DEFICIT (856) (806) NET ASSETS INCLUDING PENSION DEFICIT 68,227 66,932 CAPITAL AND RESERVES Called up share capital 1,297 1,297 Share premium account 68,773 68,773 Other reserves 53 34 Profit and loss account (1,896) (3,172) SHAREHOLDERS FUNDS - ALL EQUITY 68,227 66,932 THE REAL GOOD FOOD COMPANY PLC CONSOLIDATED CASH FLOW STATEMENT YEAR ENDED 31 DECEMBER 2006 Notes 2006 2005 £'000s £'000s Net cash inflow from operating activities 5 12,438 4,468 Returns on investment and servicing of finance Interest received 300 209 Interest element of finance lease repayments (48) (29) Interest paid on bank loans, overdrafts and loan stock (4,496) (2,145) Net cash outflow from returns on investments and servicing of finance (4,243) (1,965) Taxation paid (660) (482) Capital expenditure Purchase of tangible fixed assets (1,928) (1,172) Sale of tangible fixed assets 630 2,059 (1,298) 887 Acquisitions and disposals (2,489) (54,849) Net cash inflow/(outflow) before use of liquid resources and financing 3,597 (51,941) Financing (4,169) 62,229 (Decrease)/Increase in cash 5 (422) 10,288 THE REAL GOOD FOOD COMPANY PLC NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2006 1. BASIS OF PREPARATION The financial statements have been prepared in accordance with applicable accounting standards under the historical cost convention. 2. TURNOVER A geographical analysis of turnover is given below: Year ended Year ended 31 December 31 December 2006 2005 £'000s £'000s United Kingdom 244,434 114,861 Europe 4,750 2,304 Rest of the World 1,626 485 250,810 117,650 3. GOODWILL AMORTISATION AND EXCEPTIONAL ITEMS Year ended Year ended 31 December 31 December 2006 2005 £'000s £'000s Exceptional costs*: - Reorganisation costs 1,117 3,277 Loss on termination of an operation - 1,025 1,117 4,302 Other exceptional costs and amortisation:- Amortisation 4,682 2,874 Abortive acquisitions** - 274 4,682 3,148 * During the year the Company incurred costs in respect of reorganisation costs. In accordance with FRS 3 'Reporting Financial Performance' these have been classified as exceptional items after the operating loss and before interest. These costs were allowed for taxation purposes which resulted in a reduction of the overall tax charge of £0.3m. ** These costs related to an aborted acquisition and due to their size and nature are considered by the Directors to be exceptional. However, they do not fall into the category of exceptional items, as defined by FRS 3 'Reporting Financial Performance', which must be shown separately in the face of the profit and loss account. These costs were therefore included within administration costs. THE REAL GOOD FOOD COMPANY PLC NOTES TO THE FINANCIAL STATEMENTS (continued) YEAR ENDED 31 DECEMBER 2006 4. TAXATION Year ended Year ended 31 December 31 December 2006 2005 £'000s £'000s Analysis of tax charge for the year Current tax (see note below) UK Corporation tax at 30% 1,588 16 Adjustments in respect of prior periods (409) 94 1,179 110 Deferred Tax Deferred Tax on Pension Scheme Liability 164 - Origination and reversal of timing differences 683 1,761 UK corporation tax charge on profits of the year 2,026 1,871 Factors affecting tax charge for the year: The tax assessed for the year is higher than the standard rate of corporation tax in the UK (30%). The differences are explained below:- Year ended Year ended 31 December 31 December 2006 2005 £'000s £'000s (As Restated) Profit/(Loss) on ordinary activities before tax 3,735 (383) Profit/(Loss) on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2005 - 30%) 1,121 (110) Effects of: Expenses not deductible for tax purposes 1,151 329 Ineligible depreciation - 3 Profit/(Loss) on disposal of ineligible assets (12) 57 Differences in fixed assets transfer value - (168) Capital allowances for the year (in excess)/less than depreciation (288) 367 Income not taxable (10) - FRS 17 income adjustments not taxable (164) - Additional deduction for R&D expenditure (14) (17) Other short term timing differences (181) (6) Marginal relief (11) (55) Adjustments to tax in respect of prior periods (409) 93 Utilisation of tax losses and other deductions (4) (383) Current tax charge for the year 1,179 110 THE REAL GOOD FOOD COMPANY PLC NOTES TO THE FINANCIAL STATEMENTS (continued) YEAR ENDED 31 DECEMBER 2006 5. RECONCILIATION OF OPERATING PROFIT TO NET CASHFLOW FROM OPERATING ACTIVITIES 2006 2005 £'000s £'000s Operating profit 8,724 5,901 Amortisation of goodwill 4,682 2,874 Depreciation 1,818 1,164 (Profit)/Loss on disposal of fixed assets (175) 475 Exceptional items (1,384) (4,302) Movement in working capital: Increase in stocks (296) (157) (Increase)/Decrease in debtors (284) 3,215 Decrease in creditors (647) (4,702) Net cash inflow from operating activities 12,438 4,468 6. RECONCILIATION OF NET CASHFLOW TO NET DEBT 2006 2005 £'000s £'000s (Decrease)/Increase in cash during the year (422) 10,288 Cash flow from movement in liquid funds 4,169 (57,522) Change in net debt arising from cash flow 3,747 (47,234) Other loan notes & finance leases acquired with subsidiary - (2,774) New finance leases (943) (375) Movement in net debt in the year 2,804 (50,383) Net debt brought forward (59,390) (9,007) Net debt at end of year (56,586) (59,390) 7. ANALYSIS OF NET DEBT At 1 January 2006 Cash Flow Non-cash movements At 31 December 2006 £'000s £'000s £'000s £'000s Cash at bank and in hand 11,999 413 - 12,412 Overdraft (4,652) (835) - (5,487) 7,347 (422) - 6,925 Bank loan (63,535) 3,890 - (59,645) Loan notes (2,774) - - (2,774) Hire purchase (428) 279 (943) (1,092) (59,390) 3,747 (943) (56,586) THE REAL GOOD FOOD COMPANY PLC NOTES TO THE FINANCIAL STATEMENTS (continued) YEAR ENDED 31 DECEMBER 2006 8. DIVISIONAL INFORMATION Operating Divisions Sugar Fish Bakery Bakery Head Consolidation Total Ingredients Office adjustments Turnover 180,053 29,075 33,183 17,173 - (8,674) 250,810 Cost of sales (162,045) (22,975) (25,558) (13,443) - 8,669 (215,352) Gross Margin 18,008 6,100 7,625 3,730 - (5) 35,458 Distribution costs (6,389) (785) (1,640) (329) - - (9,143) Administration costs (4,246) (1,304) (2,803) (3,334) (1,296) 74 (12,909) Normalised Profit/(loss) 7,373 4,011 3,182 67 (1,296) 69 13,406 Goodwill amortisation (4,682) Exceptional costs (1,117) Earnings before interest 7,607 & tax Interest (3,872) Tax (2,026) Profit after tax 1,709 9. DISTRIBUTION OF THE ANNUAL REPORT AND ACCOUNTS TO SHAREHOLDERS The announcement set out above does not constitute a full financial statement of the company's affairs for the year ended 31 December 2006. The Company's auditors have reported on the full accounts of the said years and have accompanied them with an unqualified report. The accounts have yet to be delivered to the Registrar of Companies. This annual report and accounts will be posted to all shareholders of the Company, and will be available on our web site www.realgoodfoodplc.com and for inspection by the public at the registered office of the Company during normal business hours on any weekday. Further copies will be available on request from The Real Good Food Company plc, International House, 1 St Katharine's Way, London E1W 1XB. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Real Good Food (RGD)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today