Information  X 
Enter a valid email address

Real Good Food Co (RGD)

  Print      Mail a friend

Friday 01 August, 2014

Real Good Food Co

Final Results

RNS Number : 9646N
Real Good Food Company Plc (The)
01 August 2014
 

The Real Good Food Company plc (AIM:RGD)

 

Final Results for the year ended 31 March 2014 

 

The Real Good Food Company plc ("the Group") is a diversified food business, serving a number of market sectors including retail, manufacturing, wholesale, foodservice and export. The Group is a major distributor of sugar in the UK, and manufactures a wide range of baking ingredients, jams and sweet bakery products. Its portfolio of brands includes Whitworths Sugar, Renshaw and R&W Scott.

 

KEY POINTS

 

 

31 March

2014

£'000s

As restated

31 March 2013

£'000s




Revenue

272,576

265,754

EBITDA

3,296

10,466

(Loss)/Profit before taxation1

(992)

6,631

EPS:



Basic (adjusted) 1

(0.34)p

7.50p

Diluted (adjusted) 2

(0.34)p

7.0p

Working Capital (Fixed Assets/Stock/Trade Debtors & Trade Creditors)

46,941

42,555

Net Borrowings (Incl Cash)

31,133

24,952

Net Debt/EBITDA

9.5

2.4

1 before significant items

2 As the group is loss making in the year under review the diluted earnings per share is the same as the basic earnings per share

 

·      Results overshadowed by impact of sugar supply dispute with British Sugar ("BS")

 

·      Despite the BS dispute, Napier Brown has secured significant retail and wholesale contracts, driving Whitworths brand growth

 

·      Stallingborough Sugar Hub now operational, boosting Napier Brown's capability to handle imported sugar from all sources

 

·      Focus on establishing commercially led autonomous divisions gaining momentum

 

·      Renshaw Sales and EBITDA up 4.7% and 10.4% respectively

 

·      Haydens Sales up 7.6% and improved operational performance increased EBITDA by £0.6 million

 

·      Real Good Food Europe established in Brussels, offering better access to opportunities across the EU, initially to Renshaw and R&W Scott

 


Pieter Totté,
 Chairman, comments:

"It would be easy to focus on the impact on our results caused by what we believe to be anti-competitive behaviour by British Sugar, but we have previously disclosed the background to this matter in our 21st February Trading Statement.

"The reduction in Group EBITDA to £3.3 million hides significant progress in a number of operating divisions. In particular, the Renshaw result was very encouraging, while at Haydens it is clear that the new business model is beginning to deliver.

"We remain in close dialogue with the Competition and Markets Authority ("CMA") and are hopeful that the regulator will take the necessary steps to ensure that competition law is enforced. However, as we indicated in our recent updates, the current sugar contract year does not end until 30th September, coinciding with our half year so despite continued strong trading at Renshaw and Haydens, our first half performance will still be materially affected. Beyond that, negotiations for the new sugar contract year are progressing and we are working on a number of strategic sourcing initiatives on the back of our investment in the Stallingborough Sugar Hub which will bring long term benefits."

 

 

ENQUIRIES

 

 

Real Good Food                              


Pieter Totté, Chairman

Tel: 020 3056 1516

Mike McDonough, Finance Director

Tel: 0151 706 8200



Shore Capital & Corporate

(Nomad and Joint Broker)

Tel: 020 7408 4090

Stephane Auton

Patrick Castle




Daniel Stewart and Company Plc

(Joint Broker)

Tel: 020 7776 6550

Martin Lampshire




Cubitt Consulting

Tel: 020 7367 5100

Gareth David

Cebuan Bliss


 



 

Chairman's Statement

2013/14 Review

"It would be easy to focus on the impact on our results caused by what we believe to be anti-competitive behaviour by British Sugar, but we have previously disclosed the background to this matter in our 21st February Trading Statement. We strongly believe in our case and think that British Sugar's actions contravene the requirements of the regulatory authorities. Napier Brown has a proud history of bringing competition to the market and we are simply asking to continue to operate under a regulatory regime which has been successful for the past 25 years. Once we have some guidance from the Competition and Markets Authority ("CMA") on our complaint we will respond accordingly but in the meantime I will focus on the remainder of the Group where we are pleased to report significant progress.

The reduction in Group EBITDA to £3.3 million hides significant progress in a number of the operating divisions. Renshaw's result was very encouraging as we are now beginning to see the results of the company re-branding exercise flow through into performance. Sales, margins and EBITDA all recorded significant YOY growth. The same was true at Haydens where it is clear that the new business model is beginning to deliver. R&W Scott is at an earlier stage in the process of becoming a fully stand-alone business but progress is encouraging. Garrett Ingredients' performance was clearly affected by the sugar dispute though the most significant development there was the creation of a new management structure and team. Real Good Food Europe (RGFE), which was effectively a start-up during 2013/14, gives us a platform for additional export sales growth.

Net Debt (after Cash) has increased by £6.2 million during the year largely driven by the planned increase in capital expenditure and the strategic investment in our Stallingborough Sugar Hub which is now operational. The negative impact on cash generation arising from the British Sugar dispute was largely offset by improved working capital management.

 

Forward Plans

Our detailed strategy in the sugar market will inevitably be affected by whatever conclusion the CMA comes to as regards our complaint. We are undertaking the necessary contingency planning but most of all are looking for clarity as soon as possible. We know that the Napier Brown business is viewed by customers within the UK as performing an important function in the market and we will build on this. We have appointed two new commercial roles to the board of Napier Brown with a Sales Director for Industrial and a Commercial Director for Retail.

Elsewhere, there are two related themes which are central to us delivering our forward plans: management structures and the transformation of our operating companies into stand-alone, market-led businesses.

The Renshaw example is a model for what we are looking to achieve across all of our businesses. Two years' ago we embarked on a re-branding of the company which acted as a catalyst for a transformation of its vision and strategy into the globally ambitious, market-facing, high added value commercial business which we see today. The 'Renshaw' brand is both renowned and respected by its customers as a leader in its categories. The new management team has been in place for a year and symbolically the board now includes three commercially focused Directors: a UK Sales Director, an International Sales Director and a Marketing Director. The business's main challenge is prioritising the opportunities that exist across a number of sales channels and geographies.

The model of investing in management and in the company brand is also beginning to deliver at R&W Scott although the process is less well-advanced. We have appointed a Commercial Director and an Operations Director, a UK B2B sales manager, an export manager and a product manager. This is a transformation in the quality of resource which is required to drive sales growth.

The new Haydens team has now been in place for about six months and there are now  two commercially focused Directors on the board. Haydens, while not ruling out the possibility of producing branded offerings, will remain a predominantly private label business. However, it will become a champion of its chosen product categories and will seek to lead the market in terms of innovation and product development. This new strategy is generating growth with existing customers and producing interest from new ones.

Garrett Ingredients has a long history of successfully serving its customers in its areas of market expertise. What became clear during the past year was that its management team was far too lean (effectively only two senior managers) if it were to expand in line with our ambitions. The new management team again has three commercially focused Directors as well as a Finance Director. This investment in management expertise will clearly increase the business's overheads but is a statement of the confidence we have in its growth potential.

Finally the decision to set up Real Good Food Europe is a reflection of our belief that sales growth is dependent on businesses having dedicated commercially-focused management. Renshaw was building its presence in European markets but at arms-length from its UK base in Liverpool. It was clear that if we were going to serve these customers properly and develop the business, we needed to better understand their markets and be represented locally. The new team in Brussels is totally customer-focused and excited by the opportunities.

Outlook

We remain in close dialogue with the Competition and Markets Authority ("CMA") and are hopeful that the regulator will take the necessary steps to ensure that competition law is enforced. However, as we indicated in our recent updates, the current sugar contract year does not end until 30th September, coinciding with our half year so despite continued strong trading at Renshaw and Haydens, our first half performance will still be materially affected. Beyond that, negotiations for the new sugar contract year are progressing and we are working on a number of strategic sourcing initiatives on the back of our investment in the Stallingborough Sugar Hub which will bring long term benefits."

 

Pieter Totté

Chairman

1 August  2014

Divisional Business Reviews

Napier Brown

2013/2014 Review

The financial performance was clearly dominated by the dispute with British Sugar. The business had a busy year with increased sales volumes across industrial, retail and wholesale. The winning of the Asda and Booker contracts significantly increased utilisation of the Normanton packing site and a number of pack formats were added to the Whitworths range to meet the requirements of these customers.

Commissioning of the Stallingborough Sugar Hub began in the final quarter and it started processing sugar from both Europe and Central America.  Much focus was given to gaining customer approvals for new supply sources which we believe to be in our customers' interest in the long term. Given the high profile of traceability in the food industry following recent scares, this process is taking longer than anticipated.

 



 31 March 2014

£'000s


31 March 2013

£'000s

Revenue

EBITDA

(1,605)

4,723

Operating (Loss)/Profit

(2,024)

4,353

Operating Profit %

n/a

2.8%

 

Future Plans

The business  has the advantage of entering the new contract season with the Stallingborough facility operational and will be able to offer customers fully traceable sugars from various sources. Plans are in place to increase efficiencies at the Normanton packing plant following the volume increases last year. From a sourcing perspective, there seems, in the short term, to be ample availability of sugar both in Europe and around the world and advanced discussions on a number of supply arrangements, including with British Sugar, are currently taking place.

Renshaw

2013/2014 Review

Sales increased by 4.7% while improved channel mix contributed to 11% growth in delivered margin. This was to an extent offset by increased overheads as the business continued to invest in resource, both commercial and operational, to enable the growth plans. EBITDA was £515,000 ahead of last year.

While all channels experienced sales growth, sales to retail were particularly healthy with Renshaw's expertise in colours providing the main focus. A number of new product launches, such as soft icings and 'colour melts', took place towards the end of the year. Brand marketing continued to focus both online and via exhibitions with a successful presence at the Coronation Festival at Buckingham Palace being a particular highlight.

 



31 March 2014

£'000s


31 March 2013

£'000s

Revenue

EBITDA

5,467

4,952

Operating Profit

4,398

4,125

Operating Profit %

10.2%

10.0%

 

Future Plans

One of the strengths of the Renshaw business is its multi-channel nature with growth opportunities across all sectors: manufacturing, wholesale, retail (both specialist and mainstream), export and now digital. 2014 will see increased presence in export markets in Europe (via Real Good Food Europe), the US where a bespoke Renshaw branded range has been launched as well as Asia and Australasia. On the product side a re-launch of the marzipan ranges is planned which will build on Renshaw's traditional strengths in this sector while there will be further range extensions within both standard and modelling sugarpastes.

Real Good Food Europe

2013/2014 Review

The business has now been established as a stand-alone unit with 2013/14 being effectively the 'set-up' year. A sales office was established in Brussels and a multi-lingual sales team recruited to build sales opportunities. A gradual programme of customer transfers of existing Renshaw business took place across the year while the business also began a programme of new business development including successful participation at baking exhibitions in both Brussels and Paris. The business was pleased to win the 2013 'Best newcomer' award at the 2013 Golden Bridge Awards organised by the British and Belgium Chambers of Commerce.

 



31 March 2014

£'000s


31 March 2013

£'000s

Revenue

EBITDA

(391)

-

Operating (Loss)

(391)

-

Operating Profit %

n/a

-

 

Future Plans

Sales have begun to meet our expectations in the early months of this year. With a strongly motivated sales team fluent in 8 different languages, 2014/15 should generate significant sales growth, particularly on the Renshaw produced product ranges. A number of new opportunities are already developing across the Benelux countries and France in particular, with RGFE able to adapt to the specific requirements of different markets. A warehouse has been leased on the outskirts of Brussels which will increase RGFE's ability to offer a flexible and tailored customer service which is critical in this added value sector. The second focus will be exploring opportunities for the R&W Scott ranges.

R&W Scott

2013/2014 Review

EBITDA was £98,000 below last year, but with the division better placed to improve going forward. Sales are down as a result of withdrawing from some low margin business to business contracts and increased inter-company sales. Delivered margins improved with the more added value sales mix in line with the strategy while overheads increased as investment was made in sales, marketing and technical resources to manage the growth plan.  The transition from a manufacturing site to a stand- alone business is almost complete with the recruitment of local finance resource now underway. Most of the overhead increase required to make this transition has now taken place.

 

 

 



31 March 2014

£'000s


 31 March 2013

£'000s

Revenue

EBITDA

327

425

Operating Profit

66

166

Operating Profit %

0.7%

1.5%

 

Future Plans

An enormous amount of work was undertaken on new product development during last year with very little yet reflected in sales. 2014/15 will see the start of a major industrial jams and sauces contract and retail product launches in multipacks of jams, sauces and chocolate spreads. Many of these new products are being sold both in retail and business to business channels. An export drive is also underway focusing on the multipacks of jam and opportunities are being sought with Real Good Food Europe. R&W Scott is working with a local branding agency to develop a brand strategy founded on the business's quality reputation and Scottish heritage.

Garrett Ingredients

2013/2014 Review

Volumes fell in both sugar and dairy. In sugar, dramatic falls in spot prices also put pressure on margins particularly as Garrett was caught in the downstream effect of the British Sugar dispute. In the second half of the year it proved impossible to compete satisfactorily in the spot market. The Dairy market is prone to shorter term market fluctuations and while margins were well managed, volumes were down on the previous year.

It became clear that, in order to meet the growth ambitions, substantial investment in the management team was required with, in particular, the splitting of the Dairy Trading and Managing Director roles. This took place in the second half of the year and the senior structure was completed with the appointment of an experienced Commercial Director in April.

 


31 March 2014

£'000s


31 March 2013

£'000s

Revenue

EBITDA

1,204

2,151

Operating Profit

1,169

2,151

Operating Profit %

3.8%

6.9%

 

Future Plans

The new management team is now in place and is devising a strategy and plan to get the business back into growth. The review of the distribution strategy has proved successful and Garretts will in future be managing its own logistics and customer service and separating itself from Napier Brown thereby providing a higher level of customer service. Opportunities for new distributorships are being pursued and the business now has the breadth of management capability to deliver these.

Haydens Bakery

2013/2014 Review

Profit performance was encouraging with EBITDA growing by £576,000

Sales increased by 7.6% and favourable material and labour efficiencies further enhanced margins, more than offsetting material price inflation. Overheads were ahead of last year, a combination of inflation and investment in additional resource both to fulfil customer service and technical requirements and additions to the sales team as part of the growth plan. The senior management team was also re-shaped during the year and is now fully in place to take the business to its next growth phase.

Sales growth came from both existing customers (e.g. Waitrose and Costa) and new ones with supply beginning to Morrisons in 2013.

 


31 March 2014

£'000s


31 March 2013

£'000s

Revenue

EBITDA

917

341

Operating Profit / (Loss)

109

(417)

Operating Profit %

0.4%

n/a

 

Future Plans

The new management team has identified a narrower set of product sectors which represent the business's real areas of expertise and these will be the focus for growth both with existing and new customers. These are tarts, Danish pastries, Yum Yums, pies and crumbles and sweet buns. These will not only provide a focus for product development, but will also simplify the manufacturing operation by reducing complexity and increasing scale in core areas. The re-structure of the sales team is already proving successful in bringing new business across retail and foodservice channels.



 

Finance Director's Report

 

Overview

The current year's results are dominated by the dispute with British Sugar.   The reduction in EBITDA from £10.47 million last year to £3.29 million this year is all within Napier Brown and Garrett Ingredients trading which are both directly affected.

Revenue

Group revenue from continuing operations for the 12 months to 31 March 2014 was £272.6 million, an increase of 2.6% on the 12 months to 31 March 2013 reflecting the overall volume growth across the group.  

Movements in base commodity costs in the year were managed effectively across the divisions with the exception of Sugar where the market reductions  were not fully reflected in our purchase price triggering the dispute with British Sugar.

Key Comparatives (continuing operations excluding significant items)

 

 

31 March 2014

£'000s

 

31 March 2013

£'000s

Revenue

Gross profit

33,389

37,285

Delivered Margin

(Gross profit after distribution costs)

19,561

25,620

EBITDA *

3,296

10,466

Operating profit *

669

8,241

(EBITDA less depreciation)



Operating profit %

0.2%

3.1%

(Loss)/ Profit before taxation



(After financing & pension costs)

(992)

6,631

* before significant items

 

Margins

Delivered margin for the year at £19.6 million was £6.1 million down over the prior year with Napier and Garretts, who were both significantly affected by the BS dispute down £6.9 million and £0.5 million respectively. The rest of the Group at £15.1 million was up £1.3 million on the prior year.   

Loss  before Tax and Interest

Overall we generated a loss before tax and significant items for the year of £1.0 million (PBT continuing operations including pension "running costs") a reduction of£7.6 million over the previous year 12 months driven by a £7.2 million EBITDA reduction mainly in Napier Brown and Garretts as commented previously with the balance of £0.4 million primarily increased depreciation reflecting the planned increase in capital expenditure in the year. Investment in the Stallingborough Sugar Hub accounts for the increase of this year's spend of £6.9 million over the £2.7 million invested in the prior year.

Financing Costs

Financing costs for the year at £1.6 million were largely in line with the prior year.



 

Significant Items

During the year the Group incurred one-off costs of £0.5 million which included £0.35 million for the complete reshaping of the executive team at Garrett Ingredients, including the appointment of a new managing director, commercial director, business development director and finance director. £0.15 million was also incurred in Renshaw with major changes to the direction and management in the senior commercial team.

Working Capital & Net Debt

 

31 March 2014

£000's

31 March 2013

£000's

                                                               

Working Capital

46,941

42,555

(Fixed assets/stock/trade debtors & trade creditors)



Net Borrowings (Incl Cash)

31,133

24,952

Net Debt/EBITDA

9.5

2.4

 

Cash Flow and Debt

Working Capital levels increased by £4.4 million during the year. Within this Fixed Assets were up a net £4.3 million (£6.9 million Capital expenditure less £2.6 million depreciation) reflecting our investment programme with the balance, an increase of £0.1 million, being the movements across the more fluid stock, debtor and creditor positions.

Net Debt (after Cash) as at 31 March 2014 was £31.1 million, up £6.2 million on the prior year (31 March 2013 £24.9 million) largely driven by the increased capital expenditure. The negative impact on cash generation arising on the British Sugar dispute was largely offset by improved working capital management.

Our ability to service this debt remains despite the headline change in the Debt ratio (Net Debt to EBITDA) from last year.

Pensions

The Group operates one defined benefits scheme which was closed to new members in 2000. As reported last year an extension to the existing recovery plan has been was agreed with "base" contribution levels for the year ended 31 March 2013 of £265k with annual increments of 3% for the following two years. In addition to this the Group has agreed to make an additional, one off, contribution of £166k which is payable at the rate of £11k per month starting from November 2013. The Group is confident this will continue to meet the trustees' needs and the pension regulator's guidance.

The latest IAS19 valuation as at March 2014 indicates £3.67 million deficit, an increase of £0.13 million since March 2013.



 

Key Performance Indicators

The Board of Directors monitors a range of financial and non-financial key performance indicators, reported on a periodic basis, to measure the Group's performance over time. The key performance indicators are set out below:


31 March 2014

£m

31 March 2013

£m

Revenue growth1

2.6%

2.8%

Operating margin2

0.2%

3.1%

Debt cover (Net debt / EBITDA)3

9.5

2.4

Interest cover4

2.0

7.1

Health & Safety score5

92%

88%

 

1. Revenue growth is calculated for continuing operations.

2. Operating margin is stated for continuing operations only and is calculated by dividing operating profit before tax, interest and significant items by revenue from continuing operations.

3. Debt cover is calculated by dividing total net debt by continuing EBITDA. EBITDA is defined as earnings before significant items, interest, tax, depreciation and intangible asset amortisation.

4. Interest cover is calculated by dividing EBITDA by net interest payments (gross interest payable less interest receivables).

5. Health & Safety score represents the weighted average score across all sites as determined by our health and safety score index which was introduced in 2006 and is measured by an external consultant. Figures quoted refer to the calendar year.

 

 

Mike McDonough 

Finance Director

1 August 2014

Consolidated Statement of Comprehensive Income

Year ended 31 March 2014

 



Year ended 31 March 2014

Year ended 31 March 2013

as restated

Continuing Operations

Before

significant

items

£'000s

Significant

items

(Note 6)

£'000s

Total

£'000s

Before

significant

items

£'000s

Significant

items

(Note 6)

£'000s

Total

£'000s

REVENUE


272,576

-

272,576

265,754

-

265,754

Cost of sales


(239,187)

-

(239,187)

(228,469)

-

(228,469)

GROSS PROFIT


33,389

-

33,389

37,285

-

37,285

Distribution costs


(13,828)

-

(13,828)

(11,665)

-

(11,665)

Administration expenses


(18,892)

(544)

(19,436)

(17,379)

(505)

(17,884)

OPERATING PROFIT


669

(544)

125

8,241

(505)

7,736

Finance income


-

-

-

-

-

-

Finance costs


(1,602)

-

(1,602)

(1,560)

-

(1,560)

Other finance income


(59)

-

(59)

(50)

-

(50)

(LOSS) / PROFIT BEFORE TAXATION


(992)

(544)

(1,536)

6,631

(505)

6,126

Income tax expense


758

120

878

(1,467)

121

(1,346)

(LOSS)/PROFIT FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT


(234)

(424)

(658)

5,164

(384)

4,780

OTHER COMPREHENSIVE INCOME








Actuarial (losses)/gains on defined benefit plans


(394)

-

(394)

(2,597)

-

(2,597)

Income tax relating to components of other comprehensive income


(3)

-

(3)

613

-

613

OTHER COMPREHENSIVE (LOSS)/INCOME


(397)

-

(397)

(1,984)

-

(1,984)

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


(631)

(424)

(1,055)

3,180

(384)

2,796

Earnings per share from continuing operations:








- basic




(0.95)p



7.0p

- diluted




(0.95)p



6.4p

As the group is loss making in the year under review the diluted earnings per share is the same as the basic earnings per share

 

 

 



 

Consolidated Statement of Changes in Equity

Year ended 31 March 2014

 


Issued

Share

Capital

£'000s

Share

Premium

Account

£'000s

Share

Option

Reserve

£'000s

Retained

Earnings

£'000s

Total

£'000s

Balance as at 31 March 2012

1,300

68,874

526

12,136

82,836

Share options to be issued

-

-

45

-

45

Deferred tax on share options

-

-

(31)

-

(31)

Shares issued in period

89

2,370

-

-

2,459

Total comprehensive income for the period

-

-

-

2,796

2,796

Balance as at 31 March 2013

1,389

71,244

540

14,932

88,105

Share options to be issued

-

-

46

-

46

Deferred tax on share options

-

-

(82)

-

(82)

Total comprehensive loss for the period

-

-

-

(1,055)

(1,055)

Balance as at 31 March 2014

1,389

71,244

504

13,877

87,014

 

 

 



 

.

Consolidated Statement of Financial Position

Year ended 31 March 2014


31 March

2014

£'000s

31 March

2013

£'000s

NON-CURRENT ASSETS



Goodwill

75,796

75,796

Other intangible assets

1,102

1,412

Property, plant and equipment

22,291

17,685

Deferred tax asset

1,319

1,385


100,508

96,278

CURRENT ASSETS



Inventories

19,108

15,037

Trade and other receivables

34,260

30,213

Current tax assets

641

-

Other financial assets

499

-

Cash and cash equivalents

8,568

7,134


63,076

52,384

TOTAL ASSETS

163,584

148,662

CURRENT LIABILITIES



Trade and other payables

29,820

21,282

Borrowings

31,221

23,032

Other financial liabilities

499

-

Current tax liabilities

-

750


61,540

45,064

NON-CURRENT LIABILITIES



Borrowings

8,480

9,054

Accruals and deferred income

191

-

Deferred tax liabilities

2,686

2,899

Retirement benefit obligations

3,673

3,540


15,030

15,493

TOTAL LIABILITIES

76,570

60,557

NET ASSETS

87,014

88,105

EQUITY



Share capital

1,389

1,389

Share premium account

71,244

71,244

Share option reserve

504

540

Retained earnings

13,877

14,932

TOTAL EQUITY

87,014

88,105



 

Consolidated Cash Flow Statement

Year ended 31 March 2014



31 March

2014

£'000s

 

31 March

2013

£'000s

As restated

CASH FLOW FROM OPERATING ACTIVITIES

Adjusted for:

 (Loss)/ profit before taxation

 Finance costs

 Finance income

 Other finance income

 Depreciation of property, plant and equipment

 Amortisation of intangibles

 

 

(1,536)

1,602

-

59

2,275

352

 

 

6,260

1,560

-

(84)

1,992

233

Operating Cash Flow

 (Increase)/Decrease in inventories

 (Increase) in receivables

 Pension contributions

 Increase in payables

2,752

(4,071)

(4,047)

(320)

8,741

9,961

2,343

(5,533)

(187)

1,220

Cash generated from operations

 Income taxes paid

 Interest paid

3,055

(745)

(1,602)

7,804

(1,019)

(1,560)

Net cash from operating activities

708

5,225

CASH FLOW FROM INVESTING ACTIVITIES

 Proceeds from disposal of property, plant and equipment

 Purchase of intangible assets

 Purchase of property, plant and equipment

 

22

(42)

(6,903)

 

32

(1,124)

(2,652)

Net cash used in investing activities

(6,923)

(3,744)

CASH FLOW USED IN FINANCING ACTIVITIES

 Shares issued in period

 Additional  loans

 Additional finance leases

   Repayment of loans

   Additional / (Repayment of) Borrowings

   Repayment of obligations under finance leases

 

-

1,120

517

(1,989)

8,053

(52)

 

2,459

4,866

-

(2,779)

(1,367)

(32)

Net cash used in financing activities

7,649

3,147

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

1,434

4,628

CASH AND CASH EQUIVALENTS

 Cash and cash equivalents at beginning of period

 Net movement in cash and cash equivalents

 

7,134

1,434

 

2,506

4,628

Cash and cash equivalents at end of period

8,568

7,134

Cash and cash equivalents comprise:

 Cash

 Overdrafts

 

8,568

-

 

7,134

-


8,568

7,134

 

 

Notes to the Financial Statements

Year ended 31 March 2014

 

1.  Segment reporting

Business segments

The divisional structure reflects the management teams in place and also ensures all aspects of trading activity have the specific focus they need in order to achieve our growth plans. Real Good Food Europe (RGFE) has been added for clarity.

12 months ended

31 March 2014

Napier

£'000s

Garrett

£'000s

  Renshaw £'000s

R&W
Scott

£'000s

Haydens

£'000s

RGFE £'000s

Continuing

Operations

Total

£'000s

Sig-
nificant

items

 £'000s

Total

Group

£'000s

Total Revenue

172,089

31,803

43,495

10,440

27,255

481

285,563

-

285,563

Revenue - Internal

(9,756)

(1,392)

(543)

(1,296)

-

-

(12,987)

-

(12,987)

External Revenue

162,333

30,411

42,952

9,144

27,255

481

272,576

-

272,576

Operating (Loss)/Profit before Head Office

(2,024)

1,169

4,398

66

109

(391)

3,327

(544)

2,783

Head Office and consolidation adjustments

-

-

-

-

-

-

(2,658)

-

(2,658)

Operating (Loss)/Profit

(2,024)

1,169

4,398

66

109

(391)

669

(544)

125

Net Finance Costs

(1,046)

(113)

(280)

(59)

(104)

-

(1,602)

-

(1,602)

Pension Finance Income

-

-

-

-

-

-

(59)

-

(59)

Profit/(loss) before tax

(3,070)

1,056

4,118

7

5

(391)

(992)

(544)

(1,536)

Tax

706

(243)

(947)

(1)

(1)

90

(396)

-

(396)

Unallocated Tax

-

-

-

-

-

-

1,154

120

1,274

Profit/(loss) after tax as per comprehensive statement of income

(2,364)

813

3,171

6

4

(301)

(234)

(424)

(658)

 

Sales between segments are charged at prevailing market rates.

There are no customers that contributed more than 10% of the Group's external sales from continuing operations for the year ended 31 March 2014

 

2.  Significant items


31 March

2014

£'000s

31 March

2013

£'000s

Management restructuring costs

(544)

(395)

Group refinancing costs

-

(110)


(544)

(505)

Taxation credit on significant items

120

121


(424)

(384)

 

During the year the Group incurred a number of significant costs as detailed above. The management restructuring costs reflect a number of fundamental reorganisations within Garrett Ingredients and Renshaw during the period. Refinancing costs, last year relate to "break costs" associated with the refinancing exercise we completed with PNC, our existing provider in December 2012.

 

 

 

 

3.  Taxation


31 March

2014

£'000s

31 March

2013

£'000s

Current tax



UK Current tax on profit of the period

(356)

1,404

UK Current tax on significant items

(120)

(121)

Adjustments in respect of prior years

(170)

(59)

Total current tax

(646)

1,224

Deferred tax

 


Deferred tax charge re pension scheme

52

58

Origination and reversal of timing differences

53

114

Adjustments in respect of prior years

(6)

49

Adjustment in respect of change in deferred tax rate

(331)

(99)

Total deferred tax

(232)

(122)

Tax on (loss) / profit on ordinary activities

(878)

1,346

 

 


31 March

2014

£'000s

 

31 March

2013

£'000s

Tax reconciliation



(Loss)/profit per accounts before taxation

(1,536)

6,126

Tax on (Loss)/profit on ordinary activities at standard CT rate of 23% (2013 - 24%)

(354)

1,470

Expenses not deductible for tax purposes

21

48

Additional deduction for R&D expenditure

(17)

(18)

Share option relief

-

(39)

Losses carried back at higher marginal rate

(20)

-

Adjustment in respect of change in deferred tax rate

(331)

(102)

Adjustments to tax in respect of prior years

(177)

(13)

Tax charge for the period

(878)

1,346

 

4.  Earnings per share

Basic earnings per share

Basic earnings per share is calculated on the basis of dividing the profit/(loss) attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the year.


 

31 March

2014

£'000s Continuing operations

 

31 March

2013

£'000s Continuing operations

(Loss)/Earnings after tax attributable to ordinary shareholders (£000's)

(658)

4,780

Weighted average number of shares in issue (000's)

69,466

68,405

Basic earnings per share

(0.95)p

7.0p

 



 

Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares. Potential dilutive ordinary shares arise from share options and warrants. For these, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the exercise price attached to outstanding share options. Thus the total potential dilutive weighted average number of shares considers the number of shares that would have been issued assuming the exercise of the share options.

 


31 March

2014

£'000s Continuing operations

31 March

2013

£'000s Continuing operations

Earnings after tax attributable to ordinary shareholders (£'000s)

(658)

4,7804

Total potential weighted average number of shares in issue (000's)

75,575

74,111

Diluted earnings per share*

(0.95)p

6.4p

 

Adjusted earnings per share

An adjusted earnings per share and a diluted adjusted earnings per share, which exclude significant items, have also been calculated as in the opinion of the Board this allows shareholders to gain a clearer understanding of the trading performance of the Group.


31 March

2014

£'000s Continuing operations

 

31 March

2013

£'000s Continuing operations

Earnings after tax attributable to ordinary shareholders (£'000s)

(658)

4,780

Add back significant items (note 2)

544

505

Add back tax on significant items

(120)

(121)

Adjusted earnings after tax attributable to ordinary shareholders (£'000s)

(234)

5,164

Weighted average number of shares in issue (000's)

69,466

68,405

Basic earnings per share

(0.34)p

7.50p

Total potential weighted average number of shares in issue (000's)

75,579

74,111

Basic diluted earnings per share*

(0.34)p

7.0p

* As the Group is loss making in the year under review the diluted earnings per share is the same as basic earnings per share.

5.  Goodwill


Group

£'000s

Cost


Carried forward 31 March 2013

75,796

Carried forward 31 March 2014

75,796

 

The Goodwill originally arose on the acquisition of Napier Brown Foods Ltd and its subsidiary RenshawNapier Ltd (formerly Napier Brown & Company Ltd) in 2005 in which, then as now, the trading activity of Renshaw, R&W Scott, Napier Brown and Garrett Ingredients resides. They all are part of one legal entity and were acquired as such at the time without any separate evaluation or consideration.

The strategy in recent years has been to establish each of these as separate trading businesses, "divisions", with their own management teams and increasing autonomy leading in the near future to the likely re-establishment of them as separate Limited companies. 

The board believe the time is now right to consider them as separate entities and allocate the Goodwill across the divisions based on an assessment of their individual ongoing cash generating performance.



 

An assessment of the underlying cash generation, based on current EBITDA performance less ongoing maintenance capex, has been used to determine the future cash generation profile for each of the divisions with the exception of Napier Brown where the ongoing performance has been assessed setting aside the effect of the dispute with BS which affects the "sugar year" October 2013 to September 2014. In line with the established impairment tests logic this profile has been used to establish the Net Present Value of the individual future income streams.

The board is keen to point out the outcome reflects the specific dynamics and nature of each division and that the respective values should not be viewed as a "judgement" on each. All the divisions have exciting growth plans that are being implemented and all will contribute to the future success of the Group.

 


31 March

2014

£'000s

31 March

2013

£'000s

Sugar and Bakery Ingredients divisions

-

75,796

Napier Brown

12,000

-

Garrett Ingredients

5,000

-

Renshaw

57,796

-

R&W Scott

1,000

-

Carried forward 31 March 2014

75,796

75,796

 

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be impaired.

The recoverable amounts of the Cash Generating Units are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates and expected changes to selling prices and direct costs.

The rate used to discount the forecast cash flows is the Group's pre-tax weighted average cost of capital of 6.67% (2013 - 4.88%). A period of 19 years has been applied to the projected cashflows, based on the logic above assuming no annual growth, as the Directors used this period to assess the viability of the acquisition when the business was acquired in 2005. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. Using these parameters and allowing for disposal income at the end of this timescale the recoverable amounts exceed the carrying value by £29.8 million. Actual EBITDA results this year were in line, with the exception of Napier Brown, with the projections used in the new divisional assessment.  This year's results overall were not in line with the assumptions used for last year's impairment as a result of the BS dispute which has been commented on in the Chairman's statement and the Napier Brown and Garrett Ingredients business reviews.

An increase in the Group's weighted average cost of capital to above 10.5% (2013 17.11%) would cause the Board to impair the carrying value of goodwill.

6.  Borrowings and capital management


31 March 2014

Group

£'000s

31 March 2014

Company

£'000s

31 March 2013

Group

£'000s

31 March 2013

Company

£'000s

Unsecured borrowings at amortised cost





 Loan notes

2,774

-

2,774

-

Secured borrowings at amortised cost





 Bank term loans

7,200

7,200

8,103

8,103

 Revolving credit facilities

29,262

-

21,209

-

 Hire purchase

465

-

-

-


39,701

7,200

32,086

8,103

Amounts due for settlement within 12 months

31,221

1,836

23,032

1,823

Amounts due for settlement after 12 months

8,480

5,364

9,054

6,280


39,701

7,200

32,086

8,103

 



 

7.  Pensions arrangements

The group operates one defined benefits scheme which was closed to new members in 2000. As reported last year an extension to the existing recovery plan has been was agreed with "base" contribution levels for the year ended 31 March 2014 of £264k with annual increments of 3% for the following two years. In addition to this the group has agreed to make an additional, one off, contribution of £166k which is payable at the rate of £11k per month starting from November 2013. The group is confident this will continue to meet the trustees' needs and the pension regulator's guidance.

For the purposes of IAS 19 the data provided for the 1 April 2009 actuarial valuation has been approximately updated to reflect liabilities on the accounting basis at 31 March 2014. This has resulted in a deficit in the scheme of £3,673,000.

It is the policy of the Group to recognise all actuarial gains and losses in the year in which they occur in the statement of comprehensive income.

Present values of defined benefit obligations, fair value of assets and deficit


31 March

2014

 £'000s

31 March

2013

 £'000s

31 March

2012

£'000s

31 December

2010

£'000s

31 December

2009

£'000s

Present value of defined benefit obligation

19,033

19,153

17,085

16,212

15,945

Fair value of plan assets

(15,360)

(15,613)

(16,005)

(16,308)

(15,363)

Deficit/(surplus) in plan

3,673

3,540

1,080

(96)

582

Amount not recognised in accordance with

IAS 19 paragraph 58b

-

-

-

96

-

Gross amount recognised

3,673

3,540

1,080

-

582

Deferred tax at 20% (2013 - 23%)

(735)

(814)

(259)

-

(163)

Net liability

2,938

2,726

821

-

419

 

Reconciliation of opening and closing balances of the present value of the defined benefit obligations         


31 March

2014

£'000s

31 March

2013

£'000s

Defined benefit obligation at start of period

19,153

17,085

Interest cost

879

816

Actuarial losses

12

2,805

Benefits paid, death in service insurance premiums, expenses and past service costs

(1,011)

(1,553)

Defined benefit obligation at end of period

19,033

19,153

 

Reconciliation of opening and closing balances of the fair value of plan assets


31 March

2014

£'000s

31 March

2013

£'000s

Fair value of scheme assets at start of the period

15,613

16,005

Expected return on scheme assets

720

766

Actuarial (losses)/gains

(382)

208

Contributions paid by the Group

320

187

Benefits paid, death in service insurance premiums and expenses

(911)

(1,553)

Fair value of scheme assets at end of the period

15,360

15,613

 

The actual return on the scheme assets over the period ended 31 March 2014 was £338,000 (2013 - £974,000).



 

Total expense recognised in the Statement of Comprehensive Income within other finance income


31 March

2014

£'000s

31 March

2013

£'000s

Interest on liabilities

879

816

Expected return on scheme assets

(720)

(766)

Past service cost

(100)

-

Total income

59

50

 

Statement of recognised income and expenses


31 March

2014

£'000s

31 March

2013

£'000s

Actual return on assets less interest

(382)

208

Experience gains and losses arising on the scheme liabilities: loss

-

(1,923)

Actuarial gains /(losses) arising from changes in demographic assumptions

352

(26)

Actuarial gains / (losses) arising from changes in financial assumptions

(364)

(856)

Total amount recognised in Statement of Other Comprehensive Income

(394)

(2,597)

 

Assets


31 March

2014

 £'000s

31 March

2013

 £'000s

31 March

2012

£'000s

UK equity

1,977

869

483

Overseas equity

5,141

4,058

5,107

Absolute return fund

3,929

3,444

-

Bonds

1,798

2,588

2,260

Gilts

645

406

2,655

Property

301

390

434

Cash

748

1,889

1,041

Alternative assets

821

1,969

4,025

Total assets

15,360

15,613

16,005

 

None of the fair values of the assets shown above include any of the Group's own financial instruments or any property occupied by, or other assets used by, the Group.        



 

Assumptions


31 March

2014

% per annum

31 March

2013

% per annum

31 March

2012

% per annum

31 December

2010

% per annum

Inflation

3.30

3.20

2.90

3.10

Salary increases

-

-

-

-

Rate of discount

4.65

4.70

5.00

5.70

Allowance for pension in payment increases of RPI or 5% p.a. if less

3.20

3.10

2.80

3.10

Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less

2.20

1.90

1.90

3.10

Allowance for commutation of pension for cash at retirement

75% of max allowance

75% of max allowance

75% of max allowance

75% of max  allowance

 

Assumption

Change in assumption

Change in liability

Discount rate

Increase/decrease of 0.5% p.a.

Decrease/increase by 7.0%

Rate of inflation

Increase/decrease of 0.5% p.a.

Increase/decrease by 2.0%




Rate of mortality

1 year increase in life expectancy

Increase by 4.0%

 

The mortality assumptions adopted at 31 March 2014 imply the following life expectancies:

Male retiring at age 65 in 2014

21.6 years

Female retiring at age 65 in 2014

23.8 years

Male retiring at age 65 in 2033

22.6 years

Female retiring at age 65 in 2033

25.0 years

 

The long term expected rate of return on cash is determined by reference to UK long dated government bond yields at the balance sheet date. The long term expected return on bonds is determined by reference to UK long dated government and corporate bond yields at the balance sheet date. The long term expected rate of return on equities is based on the rate of return on bonds with an allowance for outperformance.

 


31 March

2014

 £'000s

31 March

2013

 £'000s

31 March

2012

£'000s

31 December

2010

£'000s

31 December

2009

£'000s

Fair value of assets

15,360

15,613

16,005

16,308

15,363

Defined benefit obligation

(19,033)

(19,153)

(17,085)

(16,212)

(15,945)

Surplus/(deficit) in scheme

(3,673)

(3,540)

(1,080)

96

(582)

Experience adjustment on scheme assets

(382)

208

(984)

578

113

Experience adjustment on scheme liabilities

-

(1,923)

(46)

387

18

 

 



 

Audit Status

 

The preliminary announcement has been prepared under the historical cost convention, on a going concern basis and in accordance with the recognition and measurement principles of International Financial Reporting Standards and IFRIC interpretations as adapted by the EU ("IFRS"), but this announcement does not in itself contain sufficient information to comply fully with IFRS.

The directors have considered the working capital requirements of the group for a period of one year from the date of this announcement and believe that the going concern basis is appropriate due to the current cash balance and future prospects.

The preliminary announcement has been prepared on the basis of the same accounting policies as published in the audited financial statements of the group for the year ended 31 March 2014 and the accounting policies adopted in the audited financial statements of the group for the period ended 31 March 2014.

The financial information in this announcement does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The audited statutory financial statements for the period ended 31 March 2014, which have not yet been delivered to The Registrar of Companies, contain an unqualified audit report, do not include a reference to any matters to which the auditor might draw attention by way of emphasis and do not contain a statement under section 498(2) or 493 (3) of the Companies Act 2006.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR RBMPTMBAJBJI

a d v e r t i s e m e n t