REG - Real Good Food PLC - Final Results
03/10/2022 07:00
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RNS Number : 4490B Real Good Food PLC 03 October 2022
3 October 2022
Real Good Food plc
("RGF" or "the Group")
Final Results for the Year Ended 31 March 2022
Real Good Food plc, (AIM: RGD) today announces its final results for the year
ended 31 March 2022.
Overview
Financial highlights
• Revenue from continuing businesses increased by 8.3% to £40.4
million (2021: £37.3 million).
• Adjusted underlying EBITDA* from continuing activities for the
Group was £0.7 million (2021: £0.2 million), despite the impact of covid on
the continuing business.
• Brighter Foods sold to The Hut Group (THG) in May 2021 generating
£36.4 million cash for the Group.
• Net debt significantly reduced to £25.5 million (2021: £48.8
million).
Operational highlights
• Cake Decoration launched 69 new products in the year with in-year
revenues of c. £1.8 million.
• Initiated a rebranding, range rationalisation and recipe
improvement programme.
• Unprecedented increases in the cost of raw materials and energy in
recent months continue unabated and pose significant challenges.
• In response, the Group has hunkered down, controlled costs and
protected revenues where possible.
Current trading
• Post year end programme to reduce costs saving £1.4 million per
year from the end of Q3.
• FY23 expected to be a very challenging and loss-making year but
the business is being strengthened to be more resilient and ready to benefit
from a more favourable trading environment.
• The Group has the support of its Loan Holders and major
shareholders to navigate this difficult time.
• The Board remains open to divesting the continuing businesses for
the right value at the right time.
*Underlying adjusted EBITDA (see note 3)
Mike Holt, Executive Chairman commented:
"The Group made a good start to the year and expected to build on this during
the seasonally busier second half of the year. Market conditions changed
during Q3 and have remained extremely challenging as noted in our trading
updates in April and earlier today. To mitigate this, we are putting into
effect a more radical programme of reform to reduce costs, protect revenues
and preserve the inherent value of the Group. This involves the refinancing of
the Group and discussions are underway with potential lenders. "
Chairman's Statement and Business Review
Overview
With the easing of covid restrictions and post-Brexit uncertainty, the Group
started the year well. For the first six months to 30 September 2021, revenue
and EBITDA were well ahead of last year. Underlying adjusted EBITDA was £0.7
million compared to a (covid-impacted) loss of £0.8 million in the prior year
and an EBITDA profit of £0.2 million for the first half of FY20 (our
pre-covid benchmark).
Further progress was expected in our seasonally busier second half of the
year, but revenue was much lower than had been anticipated (particularly
during our peak Q3 period) due to severe shortages and erratic deliveries of
certain key ingredients and services, compounded by high absence rates because
of the Omicron variant of covid, which affected our ability to fulfil customer
orders. Significant input cost increases during Q4 also impacted profitability
due to the inevitable lag effect on cost-to-price pass through to customers.
These are sector-wide issues but their effect on us was more pronounced due to
our seasonality. Underlying adjusted EBITDA was marginally positive for the
six months to 31 March 2022, compared to a £1.1 million profit in the prior
year and £1.9 million loss in FY20 (our pre-covid benchmark). International
sales, which had been expected to show double digit growth, were 35% lower in
the second half of the year and 14% lower for the full year; due to a
combination of supply chain shortfalls and the loss of some USA business to
local supply.
For the year as a whole the Group improved on its FY21 performance but not
FY20, with a £0.7 million underlying adjusted EBITDA on continuing
activities. Whilst disappointing and frustrating, the results mask
improvements that did add value in the year and will add future value once
prevailing market conditions normalise. New product revenues from the launch
of 69 new products, accounted for 4.5% (£1.8 million) of sales, this includes
the introduction of bakers' caramel for the retail market and other luxury
products, which make stylish and quality cake decorating at home easier and
more accessible. Work also started on reformulating product recipes to reduce
the cost and complexity of product manufacture and this rather than new
product launches will be a key focus area for the new financial year.
Brighter Foods
In May 2021, we sold our majority stake in Brighter Foods Limited to The Hut
Group for £35.6 million which valued the business at £43.0 million. The
timing of the sale coincided with the end of the lock-in period of Brighter's
Chief Executive and Founder. At £43.0 million, the sale represented 8.6 times
annualised FY20 EBITDA and 11.7 times FY21 EBITDA. The sale enabled us to
effectively halve the level of shareholder loans (from £45.6 million to
£22.0 million) and to eliminate the pension scheme deficit on an "on-going
basis" (by the injection of £8.5 million into the Scheme's assets).
Renshaw Rebranding
In 2021, Renshaw conducted research on the Cake Decorations Market(1).
Qualitative insights were gathered from a consumer consulting board of 40
bakers, and these were then tested with a group of 1000 UK bakers of various
skill levels from beginners to professionals(1). A study into the beliefs and
behaviours of lapsed and declining consumers of RTR (ready to roll) icing(2)
was also undertaken; last year, 1.6 million new shoppers entered the category
but 1.5million exited(3), so addressing their key concerns, the greatest being
a lack of confidence, could make a transformational difference to
the category.
The results have led to a more inclusive brand proposition. The new improved
recipe will continue to provide the functionality that regular users love,
whilst also making it easier to knead, roll and correct slight imperfections
which anyone can make, to ensure a positive experience even for the first-time
user. The vanilla flavour has been increased to enhance the eating experience
whilst for consumer packs there's also a fun and approachable new look and
name change. From September, consumer packs will encourage cake decorators to
"just roll with it" if things take a direction they hadn't originally planned,
to celebrate the perfectly imperfect creations that make a handmade product so
special. In response to consumer feedback the product will be renamed Fondant
Icing (after all it's not strictly "ready to roll" as a quick knead wakes up
the gum system and makes the product easier to use).
There has also been a range rationalisation, as even professionals were
confused at times with which product to use. Each product in the more focused
portfolio has a clear description front of pack to help guide the consumer,
and on the back, there are simple step by step instructions and top tips plus
a QR code with content to educate and inspire.
The objective of the rebrand, supported by ongoing communications throughout
the year will be to stem, (and potentially reverse over time) the decline we
have seen in fondant icing, retaining more of the new and existing shoppers
and encourage greater frequency of purchase.
1. Axis Consulting Quantitative Research of 1000 home bakers
2. Kantar. How do we revolutionise the icing category? 7 Sept 2021
3. Kantar, Market Data Update May 2022.
Wavertree Property
Shortly after the year end, we sold our Wavertree property to Tutum Property
Limited. The property was purchased in 2015 and housed the Renshaw Academy
until August 2019. Since then, it had been used as the New Product Development
Centre and by Renshaw's marketing team. These were relocated onto Renshaw's
main manufacturing site at Crown Street, Liverpool bringing the Renshaw
business together on one site. The sale made a small loss but generated net
cash proceeds of £0.9 million of which, £0.3 million has been spent on
creating an Innovation Centre adjacent to the factory at Crown Street.
Dividend
Consistent with previous years, the Board is not recommending the payment of a
dividend for the year. The Board's focus is on reducing the level of debt and
investing in Renshaw and Rainbow Dust Colours to deliver the best possible
returns for shareholders.
Corporate Governance
The Group is governed through the Board and its Audit Committee and
Remuneration Committee. The Board is very conscious of its related party
connections and dealings. As appropriate, myself, Gail Lumsden (Senior
Independent Non-Executive Director) and Maribeth Keeling (Chief Financial
Officer) meet independently of the Board to discuss matters concerning Loan
Note Holders and major Shareholders.
Strategy
Following the sale of Brighter Foods, the Group now has two trading units
focused on the design and manufacture of products for decorating cakes,
biscuits and desserts; JF Renshaw and Rainbow Dust Colours. The Group sells
branded and private label products across multiple channels.
Within the UK, the main markets are retail products for home bakers, and
ingredients for manufacturers of cakes, biscuits, and desserts, along with
bakery shops and foodservice outlets serviced via a wholesaler network.
Internationally, CDD, (Cake Decoration Division) operate in retail, and the
specialist home bakery market. Here customers are now spending less than they
did during covid lockdowns. Although new customers to the category are still
baking, they are doing so less often.
In UK retail, CDD has moved with the consumer who is becoming increasingly
price conscious. CDD has therefore focused on delivery of appropriate products
to not just the major multiples but also specialist retailers and bargain
stores. Although the Home Baking market has declined since the growth seen
during lockdowns, at £1.5 billion RSP(3) (retail sales prices) it remains
ahead of pre-covid levels. The prediction for the year ahead is that sales
across retail will see a further decline as recessionary spending habits kick
in, whilst many will continue to bake as a way of relaxing, for others it may
be more economical to switch to a bought in product.
Meanwhile, the UK sales of ready-made bakery goods have grown by 1.3%/£185
million over the last year to £14.6 billion RSP. CDD has enhanced its
relationship with customers through innovation and cross selling Renshaw and
Rainbow Dust products into this channel.
Predictions for the year ahead are more difficult; on the plus side we have
seen in previous recessionary environments a strong demand for affordable
indulgences, and as mentioned above a potential trade off with home baking.
But with unprecedented cost increases across fuel, energy and food, disposable
income will be reduced which could lead to a drop in consumption.
In summary, the aim is to maximise value for shareholders by leveraging
productive capacity by growing revenue (through product innovation and new
customers) and improving operational performance. The Group is open to
divesting parts of the remaining and continuing businesses for the right value
at the right time. The Group has a valued heritage, and the strategy is to
leverage this with new products and class leading service.
Outlook
The unprecedented increases in the cost of raw materials and energy in recent
months continue unabated and pose significant challenges to the whole sector.
Since 1 January 2022, the cost of sugar has doubled, and glycerine and butter
have increased by 87% and 82% respectively. It is anticipated that for the
current financial year (to 31 March 2023), the increased cost of raw materials
and other costs of production will exceed £5 million given current cost
levels. These increases are being passed through to customers but, in an
environment of spiralling cost inflation, the lag effect is more prominent.
Price increases have been secured but they have become incessant. They are
also likely to depress demand with household incomes being under pressure from
rising energy pricing and other costs. Volumes for the first five months of
the new financial year are 29% down on the same period of last year and 16%
lower than our pre-covid benchmark (FY20). Assuming the current hyper-cost
inflation and its impact on demand continues, the Group will be loss-making at
EBITDA level.
The Group is determined to hunker down, control costs, maximise savings
opportunities and protect revenues. Wage inflation has been held at 3% and a
voluntary redundancy programme was agreed in May 22 which will reduce 51 jobs
during Q3 saving £1.4 million per year. Given the pressure on the business,
a more radical reform of the Group has just been signed off by the Board and
Loan Note Holders to significantly reduce overhead costs, re-set pricing and
achieve further manufacturing efficiencies in order to return the business to
profitable growth. Successful implementation of the recovery plan is
expected to return between £2 million and £4 million in EBITDA under current
market conditions. Negotiations with customers have already begun to address
the widening gap caused by cost inflation and market distortions that have
arisen in recent years.
The Board is confident that the right actions are being taken and has secured
the support of Loan Note Holders, including the pledge of additional funding
of £1.0 million, the documentation has not yet been signed. The Group is
also, with the support from advisors, in discussions to secure an additional
£1.5 million of new funding as part of a refinancing of the asset backed
facility with a new funder, currently provided by Leumi ABL.
Mike Holt
Executive Chairman
Finance Review
Revenue
Group revenue of the continuing businesses for the 12 months ended 31 March
2022 was £40.4 million (2021: £37.3 million), an increase of 8.3% on revenue
to 31 March 2021. With the relaxation of covid restrictions, sales in the
Wholesale and Manufacturing sectors began to return to pre covid levels. The
first half of the year saw strong sales of £20.0 million up 29.9% versus H1
in FY21, however sales in Q3 (October to December), and January were much
lower than expected due to severe shortages and erratic deliveries of certain
raw materials, compounded by high absence rates in the factory due to the
Omicron variant, which affected our ability to fulfil customer orders. Sales
in the second half were therefore flat year on year.
Profit measure on operations
Gross profit on the continuing businesses for the overall Group was £16.1
million (2021: £15.2 million). At 39.9%, the gross profit margin was below
the prior year by 0.8%, owing to significant increases in key material costs
and higher distribution costs for overseas deliveries. The lag effect on
passing through cost increases onto customers is on average two to three
months, but the impact is more pronounced during our seasonally busier second
half.
The operating loss in the year of £17.1 million is reported after
depreciation and amortisation charges of £1.4 million, impairment of £16.1
million and significant items of £0.3 million. The significant costs arise
from further restructuring in the Cake Decoration business and the closure of
the Wavertree site.
The adjusted EBITDA profit of the underlying continuing business is
£0.7million.
The items adjusted for are:
Impairment charge: £16.1m
Significant Items: £0.3m
The impairment charge relates to purchased goodwill and aligns the
£41.3 million carrying value to what the Board considers recoverable based
on current trading forecasts and only the cost saving measures underway at the
balance sheet date. Had the full benefits of the recently launched radical
reform programme been taken into the account the impairment would only have
been £0.6 million.
After finance costs of £1.9 million (FY21: £4.7 million), a significant
reduction on FY21 owing to the repayment of some investor loans in FY22, the
loss before tax for the year was £19.0 million (2021: loss of £6.1 million)
for continuing businesses. This equates to a loss per share of 21.46 pence on
continuing operations (loss of 6.50 pence in 2021), (see note 10).
Cash flow and net debt
Conserving cash is a key objective for the Group. Following the sale of
Brighter Foods in May 2021 the Group netted cash proceeds of £35.4 million.
The proceeds were utilised as follows:
The Group made a payment of £8.5 million to the Group's pension scheme (the
Napier Brown Retirement Plan) (the "Plan"), broadly equivalent to the Plan's
low dependency technical provisions basis.
As such, it is expected that the Group will not have to pay further deficit
contributions, until a new schedule of contributions is agreed based on the
valuation as at 31 March 2022 for the Plan; such agreement would take into
account this cash injection, which may result in payments of up to £1.5
million (in aggregate) being paid between 1 January 2023 and 30 June 2025 to
close the gap towards a buy-out basis.
The Group paid £23.1 million to the Loan Note Holders, reducing the amount
repayable from £45.6 million to £22.5 million, with a further £0.5 million
waiver from the loan note holders reducing the debt to £22.0 million in
respect of the loan notes.
Approximately £3.0 million of net proceeds was retained to provide working
capital to support the financing needs of Renshaw and Rainbow Dust Colours.
The net debt at the end of FY22 stood at £25.5 million versus £48.8 million
in FY21. This predominantly comprises shareholder loans of which £16.3
million is in the form of convertible loan notes.
Net debt is a key performance indicator for the Group and is explained in note
9.
12 months to March 2022 2021
£'000s £'000s
Revenue 40,431 37,292
Gross profit 16,130 15,164
Delivered margin 12,170 11,549
Delivered margin % 30.0% 31.0%
Underlying EBITDA (adjusted)* 659 227
Operating (loss) before impairment and significant items (676) (1,464)
Operating loss after impairment and significant items (17,089) (1,261)
Operating loss % (42.3%) (3.4%)
Loss before tax (18,978) (6,108)
All figures refer to continuing businesses.
*See note 3 for reconciliation
Going Concern
The financial statements are prepared on a going concern basis, which the
Directors believe to be appropriate for the following reasons.
The forecasts are prepared on a Group basis and therefore include underlying
forecasts and assumptions for the subsidiaries and the Parent Company. For
this reason, the Group is referred to in the following paragraphs when
discussing forecasting and events as all are interdependent on one another.
The Group incurred a loss on continuing operations before tax and impairment
of £2.9m in the year to 31 March 2022 (2021: £6.1m loss) and at 31 March
2022 had net current assets of £5.1m (2021: £15.0m) and net assets of £5.1m
(2021: £3.3m). The Group manages its day-to-day working capital requirement
using various facilities with Leumi ABL. At the year end the available Group
finance facilities, provided by Leumi ABL, totalled £6.6m, of which £5.0m
was utilised. The Group shareholder loan notes and convertible loan notes,
totalled £23.6m and are classified as creditors due after one year, and are
repayable on 19 May 2023.
The Directors have prepared financial forecasts for the Group, comprising
income statements, balance sheets and cash flows through to March 2024 which
have been approved by the Board. In assessing the appropriateness of the
Group's accounts being prepared on a going concern basis, the Directors have
considered factors likely to affect its planned future performance and
reasonably possible downside sensitivity scenarios.
As noted in the Strategic Report and Business Review, the macroeconomic
headwinds are very challenging and are expected to continue for the immediate
future given the wider economic outlook. A radical reform of the business has
commenced, which requires the support of new funding, in order to return the
Group to profitability and to position it for sustainable growth once economic
conditions improve. The new funding requirement is £2.5m of which £1.0m has
been pledged, but not yet formally committed, by existing Loan Note Holders.
Due to the current (and severe) inflationary cost pressures impacting consumer
demand, and the ongoing difficulty in sourcing key ingredients and services,
sales volumes are forecast to be 20% lower than FY22. New customers and
product launches during FY22 and FY23, the unwinding of inventory on hand,
actions from the restructuring plan including re-setting sales pricing
particularly within UK Retail, together with overhead savings and
manufacturing operational efficiencies have been factored into FY23 and FY24
projections.
The cash flow forecasts reflect the introduction of a new finance facility of
£7.5 million, of which £1.5 million would be incremental to the Group's
current facilities, and an additional £1.0 million of shareholder loans.
Discussions are underway with asset-backed lenders to provide the new
asset-backed facility of circa £7.5 million, comprising a term loan of £2.3
million and circa £5.0 million invoice discount facility, underpinned by
asset security and the recovery plan to replace the current ABL Leumi
facility. The additional £1.0 million of shareholder loans has been pledged
and discussions are ongoing as to the pricing of this and the ranking of
shareholder loans between Loan Note Holders. No new funding agreements have
been formally signed as of the date of signing the financial statements as the
two funding arrangements are mutually conditional.
The Board has reviewed the sensitivity of the sales and the effects of these
have been modelled.
The Directors considered the potential impact of a reduction in the volume of
revenue by 5% throughout the year. Without any mitigating action, Group cash
would reduce to £nil in March 2023. However, were there to be this level of
lower sales, mitigating action would be taken quickly with an immediate
cessation of discretionary spend. The short-term plan would be a reduction in
the number of factory and overhead staff, and general overheads. Although
there could be a 3-month time lag on implementing any people changes, these
changes would create liquidity headroom with the low point of cash
availability then being June 2023 when cash would reduce to £0.2 million as
a result of the stock build for Quarter 3 (October to December).
The current banking covenants that are in place for FY23 remain the same as
FY22.
The covenants are a rolling 3-month EBITDA being within 80% of the forecast
and greater than £5 million tangible net worth. The covenants are not
breached on the stressed scenarios including mitigating action, referred to
above. However, a new finance provider may require different covenants to the
above.
The principal shareholders of the Group continue to show considerable
support.
Based on the Directors review of the above, there are three key areas which
indicate the existence of a material uncertainty which may cast significant
doubt on the Group and Parent Company's ability to continue as a going
concern, which are as follows:
· The cash flow forecasts to be achieved by the Group over the next 12
months require several significant actions to be delivered successfully in the
short-term, including the Group negotiating customer price uplifts as part of
an overall price reset (in addition to the ability to pass on increased
inflationary cost pressures to customers), making overhead cost reductions and
making improvements in working capital management (specifically inventory
reductions). The achievability of the cash flow forecasts based on the
restructuring of the business has some execution risk, as well as the impact
of wider economic headwinds, particularly in relation to duration and the
effect on consumer demand for our products. However, with support from
customers and employees, the Directors consider these actions to be
achievable.
· The cash flow forecasts are based upon the approval of new loans
totalling £2.5 million being obtained, including an additional £1.0 million
of shareholder loans. In order to secure the incremental £1.5 million
asset-backed loan, the business requires a re-financing of the facilities
currently funded by Leumi ABL to an alternative provider. Discussions have
already commenced with asset-backed lenders but are yet to be agreed.
The cash flow forecasts are based upon the extension of the maturity of the
shareholder loan notes and convertible loan notes from May 2023 to at least
May 2024, which are pledged, however the documentation is not yet formally
committed.
If these targeted actions and forecasts are not able to be delivered, or the
new bank and shareholder loans identified above are not secured, the Group may
not be able to operate within its existing cash and financing facilities and
would therefore need alternative and/or additional funding in excess of those
noted above.
In light of the above, the Directors believe that it remains appropriate to
prepare the financial statements on a going concern basis. However, the
factors described above indicate the existence of a material uncertainty which
may cast significant doubt on the Group and Parent Company's ability to
continue as a going concern and to continue realising its assets and
discharging its liabilities in the normal course of business. The financial
statements do not include any adjustments that would result from the basis of
preparation being inappropriate.
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. The defined benefit
scheme is the Napier Brown Retirement Pension Plan (the Plan). The IAS 19
pension scheme valuation reported a net surplus at 27 March 2022 of £1.5
million (2021: deficit £7.5 million). The Plan assets increased by £6.9
million to £21.4 million (2021: £14.5 million) and the Plan liabilities are
£19.9 million compared to £21.9 million at 31 March 2021. Following the sale
of Brighter Foods on the 11 May 2021, a payment of £8.5 million was made to
the Napier Brown Retirement Plan. This included a pre-payment of £1.8
million, through to 1 January 2023, in relation to the deficit recovery
schedule agreed as part of the 31 March 2018 valuation. The Trustee and
Company have agreed the 31 March 2021 valuation, which has a deficit of £1.5
million, and are finalising the deficit recovery and security provisions
within the pension funding agreement.
Dividend
The Directors, considering the Group's performance and cash resources, do not
recommend the payment of a final dividend for the year ended 31 March 2022
(2021: nil).
Consolidated Statement of Comprehensive Income
Year ended 31 March 2022
Notes 12 months ended 12 months ended
31 March 2022 31 March 2021
£'000s £'000s
Revenue 2 40,431 37,292
Cost of sales (24,301) (22,128)
Gross profit 16,130 15,164
Income from Government Furlough Scheme - 1,205
Other operating income 56 48
Distribution expenses (3,960) (3,615)
Administrative expenses (12,902) (14,266)
Operating loss before impairment and significant items (676) (1,464)
Impairment charge on goodwill 11 (16,103) -
Significant items 4 (310) 203
Operating loss after impairment and significant items 5 (17,089) (1,261)
Finance costs 6 (1,891) (4,665)
Other finance costs 7 2 (182)
Loss before tax (18,978) (6,108)
Income tax (charge)/credit (2,384) 27
Loss from continuing operations (21,362) (6,081)
Profit from discontinued operations (assets held for sale) 14 19,986 2,617
Net loss (1,376) (3,464)
Attributable to:
Owners of the parent (1,376) (3,856)
Non-controlling interests - 392
Net loss (1,376) (3,464)
Items that will or may be reclassified to profit or loss
Foreign exchange differences on translation of subsidiaries (25) 65
Items that will not be reclassified to profit or loss
Actuarial profit/(loss) on defined benefit plan 501 (107)
Tax relating to items which will not be reclassified 527 (102)
Other comprehensive profit/(loss) 1,003 (144)
Total comprehensive loss for the year (373) (3,608)
Attributable to:
Owners of the parent (373) (4,000)
Non-controlling interests - 392
Total comprehensive loss for the year (373) (3,608)
Notes 12 months ended 12 months ended
31 March 2022 31 March 2021
£'000s £'000s
Basic and diluted loss per share - continuing operations 10 (21.46)p (6.50)p
Basic earnings per share - discontinued operations 10 20.07p 2.63p
Diluted earnings per share - discontinued operations 10 6.23p 0.82p
Consolidated Statement of Changes in Equity
Year ended 31 March 2022
Issued Share Capital Share Premium Account Other Reserves Share Option Reserve Foreign Exchange Translation Reserve Retained Earnings Total Non-Controlling Interest Total
£'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s Equity
£'000s
Balance as at 31 March 2020 1,991 3,294 (4,796) 203 (125) 3,783 4,350 2,806 7,156
Loss for the year - - - - - (3,856) (3,856) 392 (3,464)
Other comprehensive (loss)/gain for the year - - - - 65 (210) (145) - (145)
Total comprehensive (loss)/gain - - - - 65 (4,065) (4,000) 392 (3,608)
for the year
Transactions with owners of the Group, recognised directly in equity
Share options lapsed in year - - - (200) - - (200) - (200)
Total contributions by and distributions to owners of - - - (200) - - (200) - (200)
the Group
Balance as at 31 March 2021 1,991 3,294 (4,796) 3 (60) (282) 150 3,198 3,348
Total comprehensive loss
for the year
Loss for the year - - - - - (1,376) (1,376) (3,198) (4,574)
Other comprehensive (loss)/gain for the year - - - - (25) 1,028 1,003 - 1,003
Total comprehensive (loss)/gain - - - - (25) (348) (373) (3,198) (3,571)
for the year
Transactions with owners of the
Group, recognised directly in equity
Release of put option reserve - - 4,796 - - - 4,796 - 4,796
Share options lapsed in year - - - (3) - - (3) - (3)
Waiver of debt by loan holders - - 540 - - - 540 - 540
Total contributions by and distributions to owners of the Group - - 5,336 (3) - (348) 5,333 - 5,333
Balance as at 31 March 2022 1,991 3,294 540 - (85) (630) 5,110 - 5,110
Consolidated Statement of Financial Position
Year ended 31 March 2022
Notes 31 March 31 March
2022 2021
£'000s £'000s
NON-CURRENT ASSETS
Goodwill 11 16,619 32,722
Other intangible assets - 9
Tangible fixed assets 8,066 8,548
Investments - -
Deferred tax asset - 1,426
24,685 42,705
CURRENT ASSETS
Inventories 4,024 3,597
Trade and other receivables 6,572 7,248
Retirement benefit asset 13 1,497 -
Cash collateral 50 215
Cash and cash equivalents 2,734 622
14,877 11,682
Assets classed as held for sale 1,078 20,157
TOTAL ASSETS 40,640 74,544
CURRENT LIABILITIES
Trade and other payables 6,665 8,087
Current tax liability 4 -
Borrowings 12 3,718 2,659
Lease liabilities 48 93
NCI put option - 1,553
10,435 12,392
Liabilities classed as held for sale - 4,442
NON-CURRENT LIABILITIES
Borrowings 12 24,293 46,624
Lease liabilities 155 -
Derivative liability - convertible loan notes - 17
Deferred tax liabilities 647 216
Retirement benefit obligation 13 - 7,505
25,095 54,362
TOTAL LIABILITIES 35,530 71,196
NET ASSETS 5,110 3,348
EQUITY
Share capital 1,991 1,991
Share premium account 3,294 3,294
Other reserves 540 (4,796)
Share option reserve - 3
Foreign exchange translation reserve (85) (60)
Retained earnings (630) (282)
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT 5,110 150
Non-controlling Interest - 3,198
TOTAL EQUITY 5,110 3,348
Consolidated Cash Flow Statement
Year ended 31 March 2022
Notes 31 March 31 March
2022 2021
£'000s £'000s
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Profit/(loss) before taxation 1,008 (3,491)
Finance and other finance costs 6,7 1,889 4,856
Share options reserve credit (3) (200)
Foreign exchange movement (3) 308
Goodwill impairment charge 11 16,103 -
Impairment charge on assets held for sale 70 -
Waiver of shareholder loans (19,986) -
Profit on disposal of subsidiary - 31
Loss on disposal of property, plant and equipment - 7
Fair value of derivative liability - 17
Fair value of NCI put option - (1,302)
Depreciation of property, plant, and equipment 1,326 2,435
Amortisation of intangibles 9 52
Operating Cash Flow 413 2,713
(Increase)/decrease in inventories (915) 676
Decrease in receivables 2,606 23
Pension contributions 13 (8,500) (720)
Decrease in cash collateral 165 -
(Decrease)/increase in payables (2,518) 953
Cash (used by)/from operations (8,749) 3,645
Interest paid (139) (86)
Interest on leases - (26)
Net cash (outflow)/inflow from operating activities (8,888) 3,533
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment (844) (567)
Disposal of subsidiary, net of cash disposed of 14 33,153 -
Cost of disposal of subsidiary (1,138) 50
Net cash inflow/(outflow) from investing activities 31,171 (517)
CASH FLOW USED IN FINANCING ACTIVITIES
Repayment of lease liabilities (113) (402)
Outflow of term loans (865) (865)
Interest paid on investor loans (5,310) -
Inflow of other loans 12 - (35)
Repayment of investor loans 12 (17,790) -
Drawdowns on revolving credit facilities 36,045 42,816
Repayments on revolving credit facilities (34,571) (42,876)
Net cash outflow from financing activities (22,604) (1,362)
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS (321) 1,654
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period 3,080 1,363
Effects of currency translations on cash and cash equivalents (25) 63
Net movement in cash and cash equivalents (321) 1,654
Cash and cash equivalents at end of period 2,734 3,080
Continuing operations 2,734 622
Discontinued operations - 2,458
Cash and cash equivalents at end of period 2,734 3,080
Notes to the Financial Information
Year ended 31 March 2022
1. Presentation of financial 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 229 Crown
Street, Liverpool L8 7RF. The Company's shares are traded on the Alternative
Investment Market (AIM).
Basis of preparation
The consolidated financial information is presented on the basis of
international accounting standards and has been prepared in accordance with
AIM rules and the Companies Act 2006, as applicable to companies reporting
under international accounting standards.
The financial information set out in this preliminary statement does not
constitute the Group's statutory accounts for the years ended 31 March 2022 or
2021. Statutory accounts for 2021 have been delivered to the Registrar of
Companies, and those for 2022 will be delivered in due course. The auditor has
reported on those accounts; their report for the year ended 31 March 2022 was
(i) unqualified (ii) included a Material uncertainty related to going concern
paragraph, as
· The cash flow forecasts to be achieved over the next 12 months
require several significant actions to be delivered successfully in the short
term;
· The cash flow forecasts are based upon the approval of new loans
totalling £2.5 million being obtained, which are yet to be agreed; and
· The cash flow forecasts are based upon the extension of the
maturity of the shareholder loan notes and convertible loan notes from May
2023 to at least May 2024, which is not yet formally committed.
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006. The accounts are prepared on a going concern basis.
These results were approved by the Board of Directors on 30 September 2022
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 operation
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.
During the twelve months to 31 March 2022, the Group sold Brighter Foods
Limited to THG plc on the 11 May 2021.
Any references to discontinued operations throughout this report refers to
Brighter Foods Limited.
IFRS standards and interpretations adopted
New standards and amendments which are effective from 1 January 2022, and
have been adopted within the Group's accounting policies are:
• Amendments to IFRS 3 Business combinations;
• Amendments to IAS 16 Property, Plant and Equipment;
• Amendments to IAS 37, Provisions, Contingent Liabilities and
Contingent Assets;
The adoption of the amendments to IFRS 1, IFRS 9 and IAS 41, have not had an
impact on the financial statements of the Group.
The Group does not expect any standards issued by the IASB, but not yet
effective, to have a material impact on the Group.
2. Revenue
The revenue for the Group for the current year arose from the sale of goods in
the following areas:
Cake Decoration £40.4 million Manufactures, sells, and supplies cake decorating products and ingredients
(2021 £37.3m)
for the baking sector.
Discontinued Operations (Food Ingredients) £1.3 million Manufactures and supplies a range of snack bars to the retail sector.
(2021 £19.8m)
3. Segment reporting
Business segments
The divisional structure reflects the management teams in place and ensures
all aspects of trading activity have the specific focus they need in order to
achieve our growth plans.
The Group operates in one main division: Cake Decoration. The Head Office has
a finance function that supports the subsidiary as required.
12 months ended 31 March 2022 Cake Head Office and non-trading subsidiaries Continuing Operations Discontinued Operations Total
Decoration
£'000s £'000s £'000s Group
£'000s
£'000s
Total revenue 42,545 - 42,545 1,275 43,820
Intercompany sales (2,114) - (2,114) - (2,114)
External revenue 40,431 - 40,431 1,275 41,706
Cost of sales (24,301) - (24,301) (1,063) (25,364)
Gross profit 16,130 - 16,130 212 16,342
Income from Furlough Scheme - - - 137 137
Other operating income 25 31 56 - 56
Distribution expenses (3,960) - (3,960) (47) (4,007)
Administrative expenses (12,396) (506) (12,902) (403) (13,305)
Operating (loss) / profit before impairment and significant items (201) (475) (676) (101) (777)
Impairment charge - (16,103) (16,103) - (16,103)
Significant Items (254) (56) (310) (229) (539)
Operating (loss)/profit after impairment and significant items (455) (16,634) (17,089) (330) (17,419)
Finance costs (138) (1,752) (1,891) - (1,891)
Other finance costs - 2 2 - 2
(Loss)/profit before tax (593) (18,384) (18,978) (330) (19,308)
Income tax credit/(expense) - (2,384) (2,384) - (2,384)
Profit on disposal - - 20,316 - 20,316
(Loss)/profit after tax as per comprehensive statement of income (593) (20,768) (1,046) (330) (1,376)
12 months ended 31 March 2021 Cake Head Office and non-trading subsidiaries Continuing Operations Discontinued Operations Total
Decoration
£'000s £'000s £'000s Group
£'000s
£'000s
Total revenue 40,206 - 40,206 19,788 59,994
Intercompany sales (2,914) - (2,914) - (2,914)
External revenue 37,292 - 37,292 19,788 57,080
Cost of sales (22,128) - (22,128) (12,992) (35,120)
Gross profit 15,164 - 15,164 6,796 21,960
Income from Furlough Scheme 1,205 - 1,205 461 1,666
Other operating income - 48 48 49 97
Distribution expenses (3,615) - (3,615) (411) (4,026)
Administrative expenses (13,657) (609) (14,266) (4,100) (18,366)
Operating (loss) / profit before impairment (903) (561) (1,464) 2,795 1,331
and significant items
Significant Items (763) 966 203 (169) 34
Operating (loss)/profit after impairment (1,666) 405 (1,261) 2,626 1,365
and significant items
Finance costs (95) (4,570) (4,665) (9) (4,674)
Other finance costs - (182) (182) - (182)
(Loss)/profit before tax (1,761) (4,347) (6,108) 2,617 (3,491)
Income tax credit/(expense) - 27 27 - 27
(Loss)/profit after tax as per (1,761) (4,320) (6,081) 2,617 (3,464)
comprehensive statement of income
Geographical segments
The Group earns revenue from countries outside the United Kingdom, as shown
below:
12 months ended 31 March 2022 Cake Discontinued Operations
Decoration
£'000s
£'000s
UK 26,992 1,275
Europe 5,722 -
USA 6,892 -
Rest of World 825 -
Total 40,431 1,275
The Group has two customers which constitute over 10% of revenue: one
providing 21% of revenue, and the other 13%.
12 months ended 31 March 2021 Cake Discontinued Operations
Decoration
£'000s
£'000s
UK 25,795 19,788
Europe 4,465 -
USA 6,191 -
Rest of World 841 -
Total 37,292 19,788
The Group has two customers which constitute over 10% of revenue: one
providing 17% of revenue, and the other 10%.
Reconciliation of operating (loss)/profit to underlying adjusted EBITDA to 31 Cake Head Office Continuing Operations Discontinued Operations Total
March 2022
Decoration and non-trading subsidiaries £'000s £'000s Group
£'000s £'000s £'000s
Operating loss (455) (16,634) (17,089) (330) (17,419)
Significant items 254 56 310 229 539
Impairment charge - 16,103 16,103 - 16,103
Depreciation 1,209 117 1,326 - 1,326
Amortisation 9 - 9 - 9
Underlying adjusted EBITDA 1,017 (358) 659 (101) 558
Reconciliation of operating (loss)/profit to underlying adjusted EBITDA to 31 Cake Head Office Continuing Operations Discontinued Operations Total
March 2021
Decoration and non-trading subsidiaries £'000s £'000s Group
£'000s £'000s £'000s
Operating (loss)/profit (1,666) 405 (1,261) 2,626 1,365
Significant items 763 (966) (203) 169 (34)
Depreciation 1,614 25 1,639 796 2,435
Amortisation 87 (35) 52 - 52
Underlying adjusted EBITDA 798 (571) 227 3,591 3,818
31 March 2022 Cake Head Office Continuing Operations Discontinued Operations Total
Decoration and non-trading subsidiaries £'000s £'000s Group
£'000s £'000s £'000s
Segment assets 36,017 4,623 40,640 - 40,640
Segment liabilities 10,606 24,924 35,530 - 35,530
Net operating assets / (liabilities) 25,411 (20,301) 5,110 - 5,110
Non-current asset additions 844 - 844 - 844
Depreciation (1,209) (117) (1,326) - (1,326)
Amortisation (9) - (9) - (9)
31 March 2021 Cake Head Office Continuing Operations Discontinued Operations Total
Decoration and non-trading subsidiaries £'000s £'000s Group
£'000s £'000s £'000s
Segment assets 52,180 3,355 55,535 19,009 74,544
Segment liabilities 11,305 55,449 66,754 4,442 71,196
Net operating assets / (liabilities) 40,875 (52,094) (11,219) 14,567 3,348
Non-current asset additions 444 - 444 185 629
Depreciation (1,614) (25) (1,639) (796) (2,435)
Amortisation (87) 35 (52) - (52)
In line with the Group strategy of allowing each business to understand its
true cost base as a stand-alone business, during the 12 months ended 31 March
2022, Head Office costs of £1.2 million (2021: £0.8m) have been re-allocated
to the Cake Decoration division.
4. Significant items
12 months ended 12 months ended
31 March 31 March
2022 2021
£'000s £'000s
Costs relating to disposal of Brighter Foods - (269)
Professional fees in relation to refinancing costs (62) (38)
Movement in provisions relating to the non-controlling interest put option - 1,302
Professional fees in relation to Liverpool factory/Wavertree closure (90) (113)
Closure of Renshaw US warehouse (15) (171)
Management restructuring (143) (508)
Significant items - Continuing business (310) 203
Continuing business (310) 203
Discontinued business (229) (169)
Total significant items (539) 34
The Group's underlying profit figure excludes a number of items which are
material and non-recurring and are detailed separately to ensure the
underlying operating performance of the businesses is clearly visible, without
the distortions of these non-recurring costs.
The year to 31 March 2022 had the following significant costs:
1. Professional fees in relation to the refinancing of the Investor Loan
Notes and CLNs.
2. Professional fees in relation to the closure of the Wavertree property
and relocation to Crown Street Liverpool.
3. Professional fees in relation to the closure of the Renshaw US
warehouse.
4. Redundancy costs associated with the restructuring of the Cake
Decoration business.
The year to 31 March 2021 had the following significant costs:
1. The legal and due diligence costs involved in preparing the Brighter
Food business for disposal.
2. The legal costs associated with including Brighter Foods in the CID
facility with ABL Leumi.
3. Project management costs for projects running in the Crown Street
factory.
4. Costs associated with closing the Renshaw US warehouse, the lease
terminating in July 2021, with stockholding relocated to Crown Street
Liverpool.
5. Redundancy costs of the restructuring plan started in FY20.
6. Brighter Foods incurred costs in relation to a proposed sale, as the
disposal has occurred, Brighter Foods is now shown as a discontinued
operation.
5. Operating loss
Operating loss for continuing operations
Notes 12 months ended 12 months ended
31 March 31 March
2022 2021
£'000s £'000s
External Sales 40,431 37,292
Staff Costs (11,696) (12,276)
Inventories:
- cost of inventories as an expense (included in cost of sales) (18,577) (16,294)
Depreciation of property, plant, and equipment (1,326) (1,639)
Amortisation of intangible assets (9) (52)
Significant items 4 (310) 203
Impairment charges 11 (16,103) -
Research and development expenditure (646) (626)
Impairment of trade receivables (53) (230)
Foreign exchange gains/(losses) 3 (308)
Other net operating expenses (8,803) (7,523)
Total (57,520) (38,553)
Operating loss (17,089) (1,261)
6. Finance costs
12 months ended 12 months ended
31 March 31 March
2022 2021
£'000s £'000s
Interest on bank loans, overdrafts, and investor loans (1,896) (4,600)
Interest on lease liabilities (12) (26)
Interest on non-controlling interest put option - 43
Finance cost on substantial modification of convertible loan notes 17 (91)
(1,891) (4,674)
Continuing business (1,891) (4,665)
Discontinued business - (9)
7. Other finance (income)/costs
12 months ended 12 months ended
31 March 31 March
2022 2021
£'000s £'000s
Interest on pension scheme liabilities (note 13) (429) (465)
Interest on pension scheme assets (note 13) 431 312
Interest on effect of asset ceiling/IFRIC 14 - (29)
2 (182)
8. Directors' remuneration
12 months ended 12 months ended
31 March 31 March
2022 2021
£'000s £'000s
Directors' salaries, benefits, and fees (650) (482)
(650) (482)
The emoluments of the Directors for the period were as follows:
Fees/Salaries Taxable Bonus Pension 12 months ended 12 months
inc. Er's NIC Benefits £'000s Contributions 31 March ended
£'000s £'000s £'000s 2022 31 March
£'000s 2021
£'000s
M J Holt 175 - 106 - 281 160
J M d'Unienville 25 - - - 25 25
M Keeling 178 10 62 - 250 203
J A Mackenzie 25 - - - 25 25
A Ridgwell 27 - - - 27 27
G Lumsden 42 - - - 42 42
472 10 168 - 650 482
This includes salaries and fees (including Employer's NI) received as an
officer of the Company. Taxable benefits include car allowance, health and
other taxable payments for expenses paid by the Company.
All salaries and fees disclosed are included in current year trading results.
M Keeling's salary above represents 100%, however 50% of the salary costs are
recharged from J F Renshaw to Group.
Directors' fees paid to J A MacKenzie are charged and paid to Downing LLP.
Consultancy fees and expenses paid to entities in which Directors hold a
beneficial interest, for services provided to the Group by the Directors.
The bonus paid to M J Holt relates to the sale of Brighter Foods Limited and
was fully funded by the Loan Note Holders via a debt waiver.
The current Company Directors disclosed are considered as key management
personnel.
9. Notes supporting the cash flow statement
The cash collateral figure for the Group is £0.05 million (FY21: £0.2m).
This has been provided to Lloyds Bank plc as security for insurance claims of
the Group. This amount is not included in the cash flow.
Group
Real Good Food plc (Group) Non-current Loans and Borrowings Current Loans Total
£'000s and Borrowings £'000s
(Note 12) £'000s
(Note 12)
At 31 March 2020 43,059 2,717 45,776
Cash Flows (37) (923) (960)
Non-cash flows
- Interest accruing on loans 4,376 - 4,376
- Finance loss on change of terms for convertible loan notes 91 _ 91
Loans and borrowings classified as non-current at March 2020 becoming current (865) 865 -
before March 2021
At 31 March 2021 46,624 2,659 49,283
Cash Flows (23,100) 608 (22,492)
Non-cash flows
- Interest accruing on loans 1,760 - 1,760
- Waiver of shareholder loans (540) - (540)
Loans and borrowings classified as non-current at March 2021 becoming current (451) 451 -
before March 2022
At 31 March 2022 24,293 3,718 28,011
Net Debt
Net debt is a key performance indicator for the Group. It is defined as short
term and long-term borrowings less cash. See table below:
Note 31 March 31 March
2022 2021
Group Group
£'000s £'000s
Short term borrowings 12 (3,718) (2,659)
Short term lease liabilities 12 (48) (93)
Long term borrowings 12 (24,293) (46,624)
Long term lease liabilities 12 (155) -
Cash 2,734 622
Total Net Debt (25,480) (48,754)
Group
Net cash Non-current Net debt
and current borrowings £'000s
borrowings £'000s
£'000s
At 1 April 2020 1,744 43,626 45,370
Cash flow 386 (1,748) (1,362)
Other non-cash movements - 4,746 4,746
At 31 March 2021 2,130 46,624 48,754
Cash flow (1,617) (23,100) (24,717)
Other non-cash movements 519 924 1,443
At 31 March 2022 1,032 24,448 25,480
10. Earnings per 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 during the year.
12 months ended 12 months ended 12 months ended 12 months ended
31 March 31 March 31 March 31 March
2022 2022 2021 2021
Continuing Operations Discontinued Operations Continuing Operations Discontinued Operations
(Loss)/profit after tax attributable to ordinary shareholders (£'000s) (21,362) 19,986 (6,473) 2,617
Weighted average number of shares in issue for basic EPS ('000s) 99,564 99,564 99,564 99,564
Employee share options ('000s) - - 340 340
Convertible loan notes ('000s) 220,980 220,980 220,980 220,980
Weighted average number of shares in issue for diluted EPS ('000s) 320,544 320,544 320,884 320,884
Basic (loss)/earnings per share (21.46)p 20.07p (6.50)p 2.63p
The total loss per share for 2022 is (1.39)p for continuing and discontinued
operations (2021 continuing and discontinued loss per share: (3.87)p).
Diluted earnings per share
The discontinued operations in the period can be diluted. The impact of this
is a diluted earnings per share of 6.23p (2021 0.82p) for discontinued
operations. If all of the share options had been exercised before the period
end, the earnings per share would then have been a loss per share of (21.46)p
on the continuing operations and earnings of 6.23p on the discontinued
operations. The weighted average number of shares in issue for the period was
99,564,430 and there are no options outstanding. There were also 8,806,571
convertible loan notes outstanding, of which the weighted average number of
shares was 220,979,796. Therefore, the weighted average number of dilutive
potential ordinary shares is 320,544,226.
11. Goodwill
Goodwill acquired on business combinations is allocated at acquisition to the
cash generating units that are expected to benefit from that business
combination. The carrying amount of goodwill has been allocated as follows:
Group
£'000s
Cost
At 1 April 2021 32,722
Impairment (16,103)
At 31 March 2022 16,619
31 March 31 March
2022 2021
£'000s £'000s
Cake Decoration 16,619 32,722
Assumptions:
The Group tests goodwill annually for impairment, or more frequently if there
are indications that goodwill may be impaired. The recoverable amount of any
cash generating unit is determined based on the higher of fair value less
costs of disposal and value-in-use calculations. The cash flows used in the
value-in-use calculation are EBITDA (adjusted) performance less capital
expenditure based on the latest Board-approved forecasts in respect of the
following three years.
Long-term growth rate assumptions:
For the purposes of impairment testing, the cash flows are extrapolated over 5
years with a terminal value applied to the fifth year. The terminal value is
calculated using the fifth year forecasted EBITDA (adjusted) performance and
applying a 2% growth rate.
Discount rate assumptions:
The discount rate applied to the cash flows is 10% (2021: 10%). This rate is
in line with the Company's actual weighted average cost of capital of 9.67%
which takes account of the increased risk of being listed on AIM rather than
the main market. It is representative of businesses operating within the food
sector.
Impairment charge:
The impairment review resulted in an impairment of the goodwill held for Cake
Decoration of £16.1 million (2021: nil). Cake Decoration is a core division
for the Group and is currently in turnaround. The investments made in
manufacturing capability in recent years have not yet started to deliver the
returns that could be expected, for example, and the Board believes that the
current valuation, reflected here, necessarily, and materially underplays the
potential value of this division. Plans to improve the strategic positioning,
service delivery and commercial performance of this business are also in
progress.
Sensitivity analysis:
An illustration of the sensitivity to reasonable possible changes in the
discount rate assumption or the long-term growth rate are shown below:
• An increase of 0.5% in the Group's weighted average cost of
capital of 10% to 10.5% would cause a further impairment of £1.6 million on
the carrying value of goodwill on Cake Decoration.
• A reduction of 0.5% to the growth rate from 2.0% to 1.5% would
cause a further impairment of £1.0 million on the carrying value of goodwill
on Cake Decoration.
The Board has considered these sensitivities and believe that, owing to
trading expectations and a strong brand, the recoverable amount would support
the value.
Book value of Estimated recoverable
cash generating amount/value
unit in use
£'000s £'000s
Cake Decoration 25,249 36,547
12. Borrowings and capital management
31 March 2022 31 March 2022 31 March 2021 31 March 2021
Group Company Group Company
£'000s £'000s £'000s £'000s
Secured borrowings at amortised cost
Bank term loans 1,185 - 2,050 -
Revolving credit facilities 3,267 - 1,794 -
Leases 203 - 93 -
Investor loans* 7,256 7,256 30,240 30,240
Convertible loan notes** 16,303 16,303 15,199 15,199
28,214 23,559 49,376 45,439
Borrowings due for settlement within 12 months 3,718 - 2,659 -
Lease liabilities due for settlement within 12 months 48 - 93 -
Borrowings due for settlement after 12 months 24,293 23,559 46,624 45,439
Lease liabilities due for settlement after 12 months 155 - -- -
Total 28,214 23,559 49,376 45,439
* The investor loans shown consists of £4.7 million principal amount,
£1.8 million accrued interest up to 31 March 2022 and redemption premiums of
£0.7 million.
** Convertible loan notes shown at 31 March 2022 consist of £8.8 million
investment (2021: £8.8 million), £7.5 million accrued interest (2021: £6.3
million), and £0.02k of transaction costs (2021: nil) being spread over the
remaining life of the liability and a finance cost of £0.7m and a fair value
adjustment of (£0.7m), resulting from a substantial modification to the
Convertible Loan Note terms requiring de-recognition of the existing loans and
recognition of new loans.
All existing shareholder loans are due to be paid in May 2023, however the
Loan note holders have pledged to extend them to May 2024, however the
documentation is not yet in place.
Convertible loan notes
In May 2018, the Company secured further funding from each of its major
shareholders totalling £8.8 million. NB Holdings Ltd and Omnicane Investors
Ltd each providing £3.4 million, and funds managed by Downing LLP provided
£1.9 million. This instrument has since, with shareholder approval, been
replaced with convertible loan notes ("CLN's") of £8.8 million with a
conversion price of 5 pence. The loan is repayable in 3 years from the date of
issue or can be converted at any time into shares at the holder's option. The
loan note holders have pledged to amend the repayment date of the loans to
May 2024, however the documentation has not yet been signed.
The instrument accrues interest at a rate of 12 percent per annum accruing
daily and will mature and be due for repayment in full on 19 May 2023, unless
they are redeemed before that date. The loan note holders have pledged to
amend the repayment date to the 19 May 2024; however, the documentation is not
yet signed. On that date, unless the convertible loan notes are converted into
ordinary shares on the conversion date, a redemption premium fee will be
payable. The redemption fee, which stopped accruing from 1 January 2021, 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 12 per cent 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 31 March 2022, the derivative liability was valued at
£0.1k (2021: £17k).
The convertible loan notes shown consist of a host loan at amortised cost of
£8.8 million, £7.5 million of finance costs and £0.7 million of costs and a
fair value adjustment of (£0.7m) resulting from substantial modification to
the convertible loan notes up to 31 March 2022.
Features of the Group's borrowings are as follows:
The Group's financial instruments comprised cash, leases, a revolving credit
facility, investor loans and various items arising directly from its
operations, such as trade payables and receivables. The main purpose of these
financial instruments is to finance the Group's operations.
The main risks from the Group's financial instruments are interest rate risk
and liquidity risk. Liquidity risk arises from the Group's management of
working capital and the finance charges and principal repayments on its debt
instruments. The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they become due.
The Group also has some currency exposure in relation to its Euro and US
Dollar commodity purchases. However, this is mitigated by matching in part
against foreign currency sales. The Board reviews and agrees policies, which
have remained substantially unchanged for the year under review, for managing
these risks.
The Group's policies on the management of interest rate, liquidity and
currency exposure risks are set out in the Report of the Directors.
During the year ended 31 March 2022, the Group continued with the borrowing
facilities in place and secured loans from investors. As at 31 March 2022, the
borrowings comprised:
• Revolving credit facility of £5.45 million with Leumi ABL Limited on
a revolving basis with a term of 60 months. This facility is secured against
the debtors of JF Renshaw Limited and Rainbow Dust Colours Limited with an
interest rate of 2.25% above Sterling Overnight Index Average for Sterling
Advances. Because the group retains the risks and rewards of ownership of the
underlying debts, these continue to be recognised in these financial
statements.
• The Group secured facilities against specific plant and machinery
with Leumi ABL Limited £2.1 million for 36 months ending August 2022. The
facilities interest payable is 2.75% above Sterling Overnight Index Average
for Sterling Advances.
• The Group secured a £1.3m term loan facility with the term being 60
months.
The three major shareholders, NB Holdings Ltd, Omnicane Investors Ltd, and
certain funds managed by Downing LLP, supported the business, and provided
significant funding to the Group by way of loans.
The loans at 31 March 2022 were as follows:
Date Amount Method of Funding Major Shareholder(s)
May 2018 £8.8m Secured convertible loan notes NB Holdings Ltd (£3.4m), Omnicane Investors Ltd (£3.4m),
Funds managed by Downing LLP (2.0m)
March 2018 £2.3m Secured loan notes NB Holdings Ltd (£0.9m)), Omnicane Investors Ltd (£0.9m),
Funds managed by Downing LLP (£0.6m)
January 2018 £0.3m Secured loan notes Funds managed by Downing LLP (£0.3m)
September 2017 £0.8m Secured loan notes Funds managed by Downing LLP (£0.8m)
June 2017 £1.3m Secured loan notes Funds managed by Downing LLP (£1.3m)
Total £13.5m
At 31 March 2022, Leumi ABL Limited had a debenture incorporating a floating
charge over the undertaking and all property and assets present and future
including goodwill, book debts, uncalled capital, buildings, fixtures,
intangible assets, fixed plant, and machinery. In addition, the banking
arrangements with Lloyds Bank plc had a guarantee over the Wavertree property.
Liquidity risk management
Liquidity risk arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments. It is the
risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
The Board reviews the Group's liquidity position on a monthly basis and
monitors its forecast and actual cash flows against maturing profiles of its
financial assets and liabilities.
The following table details the Group's maturity profile of its financial
liabilities:
Less than 1-3 months 3 months to 1-5 years 5+ years Total
1 month £'000s 1 year £'000s £'000s £'000s
£'000s £'000s
2022
Trade and other payables 4,904 1,044 427 195 - 6,570
Investor loans - - - 4,704 - 4,704
Convertible loan notes - - - 8,800 - 8,800
Bank term loans 72 216 163 734 - 1,185
Revolving credit facilities - - 3,267 - - 3,267
Leases 4 8 36 155 - 203
4,980 1,268 3,893 14,588 - 24,729
Interest - - - 9,349 - 9,349
Redemption premiums - - - 706 - 706
Total 4,980 1,268 3,893 24,643 - 34,784
Less than 1-3 months 3 months to 1-5 years 5+ years Total
1 month £'000s 1 year £'000s £'000s £'000s
£'000s £'000s
2021
Trade and other payables 7,138 893 56 - - 8,087
Investor loans - - - 20,562 - 20,562
Convertible loan notes - - - 8,807 - 8,807
Bank term loans 72 144 649 1,185 - 2,050
Revolving credit facilities - - 1,794 - - 1,794
Leases 8 15 70 - - 93
NCI put option liability 1,553 - - - - 1,553
8,771 1,052 2,569 30,554 - 42,946
Interest - - - 13,029 - 13,029
Redemption premiums - - - 3,084 - 3,084
Total 8,771 1,052 2,569 46,667 - 59,059
The profile of the trade payables has been taken as being consistent with the
Group's payment terms to suppliers.
Analysis of market risk sensitivity
Currency risks:
The Group is exposed to currency risks on purchases of commodities from USA
and Europe. The risk associated with these purchases is mitigated by sales
also made to customers in these countries, however, to the extent that these
do not cover each other there is a risk of exposure to the Group.
The effect of the exposure is calculated as being:
• With an excess of $ assets to $ liabilities, a 10% strengthening of
the US dollar would result in an increase in pre-tax profits of £616k. A 10%
weakening of the US dollar would result in a decrease of pre-tax profits of
£504k.
• With an excess of € liabilities to € assets a 10% strengthening
of the Euro would result in a decrease in pre-tax profits of £686k. A 10%
weakening of the Euro would result in an increase of pre-tax profits of
£561k.
Interest rate risks:
The Group has an exposure to interest rate risk arising from borrowings based
upon the Bank of England base rate. However, at the balance sheet date, the
Group did not have any outstanding balance on these borrowing facilities, and
so the impact of an increase in the applicable interest rates would, all other
factors remaining unchanged, not have impacted profits.
13. Pension arrangements
Defined Contribution Scheme. 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 Company operates one defined benefits scheme which was closed
to new members in 2000 and closed to future accrual with effect from 5 April
2004. The Defined Benefit scheme is a funded arrangement with assets held in a
separate trustee-administered fund. Members of the Plan are entitled to
retirement benefits based on their final salary at the date of leaving the
Plan (or 5 April 2004 if earlier), and length of service.
An arrangement was previously agreed with the Trustees under which employer
contributions to the scheme are £1 million per year from 1 August 2019. For
the purposes of IAS 19 the data provided for the 31 March 2018 actuarial
valuation, has been approximately updated to reflect defined benefit
obligations on the accounting basis at 31 March 2022. This has resulted in a
surplus in the Plan of £1,497k. The present value of the fair plan assets is
in excess of the contribution's payable exceeds the net liability.
Present values of defined benefit obligations, fair value of assets and
deficit
31 March 31 March 31 March 31 March 31 March
2022 2021 2020 2019 2018
£'000s £'000s £'000s £'000s £'000s
Present value of defined benefit obligation 19,929 21,885 20,750 21,177 21,448
Fair value of Plan assets (21,426) (14,527) (13,735) (13,774) (13,529)
(Surplus)/deficit in Plan (1,497) 7,358 7,015 7,403 7,919
Effect of asset ceiling/IFRIC14 - 147 921 - -
Gross amount recognised (1,497) 7,505 7,936 7,403 7,919
Deferred tax* - (1,426) (1,508) (1,258) (1,094)
Net (asset)/liability (1,497) 6,079 6,428 6,145 6,825
* Deferred tax rate 2022 at 25%; 2021 and 2020: 19%, and 2017, 2018 &
2019: 17%
Reconciliation of opening and closing balances of the present value of the
defined benefit obligations
31 March 31 March
2022 2021
£'000s £'000s
Defined benefit obligation at start of period 21,885 20,750
Interest cost 429 465
Actuarial losses / (gains) (1,536) 1,698
Past service cost - -
Benefits paid (849) (1,028)
Defined benefit obligation at end of period 19,929 21,885
Reconciliation of opening and closing balances of the fair value of Plan
assets
31 March 31 March
2022 2021
£'000s £'000s
Fair value of Plan assets at start of period 14,527 13,735
Interest income on Plan assets 431 312
Return on assets less interest income (1,182) 788
Contributions paid by the Group 8,500 720
Benefits paid, death-in-service insurance premiums and expenses (850) (1,028)
Fair value of Plan assets at end of period 21,426 14,527
UK equities - 2,408
Other investments 21,426 12,119
Total plan assets at end of period 21,426 14,527
The actual return on the Plan assets over the period ended 31 March 2022 was
(£1,687k) (2021: £1,100k).
Total expense recognised in the Statement of Comprehensive Income within other
finance income
31 March 31 March
2022 2021
£'000s £'000s
Interest on liabilities 429 465
Interest on assets (431) (312)
Interest on effect of asset ceiling / IFRIC 14 - 29
Net interest cost/(gain) (2) 182
Past service cost - -
Total cost (2) 182
Statement of recognised income and expenses
31 March 31 March
2022 2021
£'000s £'000s
Actuarial gain/(loss) on the Plan assets (1,182) 788
Actuarial gain/(loss) on the Plan liabilities arising from changes in 199 17
demographic assumptions
Actuarial (loss)/gain on the Plan liabilities arising from changes in 1,620 (1,715)
financial assumptions
Actuarial (loss)/gain experience (283)
Change in the effect of the asset ceiling / IFRIC14 147 803
Total amount recognised in Statement of Other Comprehensive Income 501 (107)
Assets
31 March 31 March 31 March
2022 2021 2020
£'000s £'000s £'000s
UK equity - 2,408 2,210
Absolute return fund 4,113 1,412 1,522
Corporate Bonds - 2,936 2,746
Gilts 3,427 2,769 3,112
Credit Funds 7,220 175 218
Sterling Liquidity Funds 1,822 - -
Cash/Net current assets 223 - -
Multi-Asset Funds 4,621 4,827 3,927
Total assets 21,426 14,527 13,735
The investment strategy for the Plan is controlled by the Trustees, in
consultation with the Company. None of the fair values of the assets shown
above includes any of the Group's own financial instruments or any property
occupied by, or other assets used by, the Group. Absolute return funds are
invested in a diverse range of assets in order to achieve equity-like returns
with reduced volatility. Alternative assets include infrastructure and
derivatives.
Assumptions
31 March 31 March 31 March 31 March
2022 2021 2020 2019
£'000s £'000s £'000s £'000s
Inflation 3.80 3.40 2.70 3.30
Salary increases - - - -
Rate of discount 2.80 2.00 2.30 2.40
Allowance for pension in payment increases
RPI max 5% 3.70 3.30 2.70 3.10
RPI min 3% max 5% 3.90 3.60 3.20 3.50
Allowance for revaluation of deferred pensions 3.30 2.70 2.20 2.30
Allowance for commutation of pension for cash at retirement 90% of max 90% of max 90% of max 90% of max
allowance allowance allowance allowance
The obligations of the Plan have been calculated by projecting forwards the
figures from the initial results of the latest valuation as at
31 March 2018 and then making appropriate adjustments for known experience and
for differences in assumptions.
The mortality assumptions adopted at 31 March 2022 and 31 March 2021 imply the
following life expectancies from age 65:
31 March 31 March
2022 2021
Male retiring at age 65 in current year 21 years 21 years
Female retiring at age 65 in current year 23 years 23 years
Male retiring at age 65 in 20 years' time 22 years 22 years
Female retiring at age 65 in 20 years' time 25 years 25 years
The weighted-average duration of the defined benefit obligation at 31 March
2022 was 15 years (2021: 15 years).
Historic funding positions
The funding positions applicable at the start of each period are as follows:
12 months ended 12 months ended 12 months ended 12 months ended 12 months ended
31 March 31 March 31 March 31 March 31 March
2022 2021 2020 2019 2018
£'000s £'000s £'000s £'000s £'000s
Fair value of assets 21,426 14,527 13,735 13,774 13,529
Defined benefit obligation (19,929) (21,885) (20,750) (21,177) (21,448)
Effect of asset ceiling / IFRIC14 - (147) (921) - -
Asset/(Liability) in scheme 1,497 (7,505) (7,936) (7,403) (7,919)
Experience adjustment on scheme assets - - (168) 518 (232)
Experience adjustment on scheme liabilities - - - 427 -
Risks
The scheme is exposed to a number of risks, including:
Asset volatility: The Plan's defined benefit obligation is calculated using a
discount rate set with reference to corporate bond yields; however, the Plan
invests significantly in equities. These assets are expected to outperform
corporate bonds in the long-term but provide volatility and risk in the short
term.
Changes in bond yields: a decrease in corporate bond yields would increase the
Plan's defined benefit obligation; however, this would be partially offset by
an increase in the value of the Plan's bond holdings.
Inflation risk: a proportion of the Plan's defined benefit obligation is
linked to inflation; therefore, higher inflation will result in a higher
defined benefit obligation (subject to the appropriate caps in place). The
majority of the Plan's assets are either unaffected by inflation, or only
loosely correlated with inflation, therefore an increase in inflation would
also increase the deficit.
Life expectancy: if Plan members live longer than expected, the Plan's
benefits will need to be paid for longer, increasing the Plan's defined
benefit obligation.
The Trustees and Company manage risks in the Plan through the following
strategies:
Diversification: In order to counter asset volatility and changes in bond
yields, investments are well diversified, such that the failure of any single
investment would not have a material impact on the overall level of assets.
Investment Strategy: The Trustees are required to review their investment
strategy on a regular basis and consult with the Company on any changes. The
Trustees' investment strategy is set out in the Statement of Investment
Principles.
Funding positions: The Trustees are required to assess the funding position
annually by means of a formal actuarial report which must be shared with the
Company.
Sensitivity analysis
The impact to the value of the defined benefit obligation of a reasonably
possible change to one actuarial assumption, holding all other assumptions
constant, is presented in the table below:
Reasonably Obligation Obligation
Possible Increase Decrease
Change
Discount Rate (+/- 0.5%) 8% 7%
RPI Inflation (+/- 0.5%) 3% 3%
Assumed Life expectancy (+/-) 1 Year 5% 5%
Small changes to other assumptions, such as the allowance for commutation of
pension for cash at retirement, and the proportion of members assumed to be
married at retirement, do not have such a significant effect on the
obligations of the Plan.
14. Disposal of Brighter Foods Limited
On 11 May 2021, Brighter Foods Limited was sold to The Hut Group plc (THG) for
a cash consideration of £43.0 million. RGF through its subsidiary NBF, had an
interest of 84.334 percent of the issued share capital of Brighter Foods
Limited with the balance owned by Brighter's managers. The Group received cash
proceeds of £35.64 million. The table below shows the profit on sale.
Profit on Sale
31 March
2022
£'000s
Cash consideration received 35,732
Cash disposed of (2,579)
Net cash inflow on disposal of discontinued operations 33,153
Net assets disposed of (other than cash):
Property, plant and equipment (5,766)
Inventories (2,784)
Trade and other receivables (1,520)
Trade and other payables 3,176
Other long-term borrowing 338
(6,556)
Goodwill (5,031)
Disposal costs (1,138)
Put option (3,243)
Minority interest 3,131
Result for period until disposal (330)
Profit on disposal of Brighter Foods Limited 19,986
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