REG - Real Good Food PLC - Real Good Food plc - Half Year Results
09/12/2021 07:00
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RNS Number : 0556V Real Good Food PLC 09 December 2021
9 December 2021
Real Good Food plc
("RGF" or "the Company")
Half year results for six months ended 30 September 2021
Strong revenue growth and improved underlying performance
Real Good Food plc, (AIM: RGD) the diversified food business, today announces
its half year results for the six months ended 30 September 2021.
Financial highlights:
· Revenue from continuing operations increased by 29.9% to £19.9
million (2020: £15.4 million).
· Underlying adjusted EBITDA* for the Group was £0.7 million
(continuing operations), compared to a loss last year and more than double
2019's pre-pandemic performance.
· Loss before tax reduced significantly to £1.2 million (2020:
loss of £4.7 million).
· Disposal of Brighter Foods for a cash consideration of £43
million on the 11 May 2021 (of which £35.7 million attributable to the
Group). This broadly equated to 8.6 times FY20 EBITDA and 11.7 times
(unaudited) FY21 EBITDA.
· Net debt significantly reduced, following the disposal, to £24.9
million at 30 September 2021 (30 September 2020: £45.1 million; 31 March
2021: £48.8 million).
· A £8.5 million payment was also made in May 2021 to eliminate
the pension deficit, at that time.
Operational highlights:
· Cake Decoration (Renshaw and Rainbow Dust) - underlying adjusted
EBITDA* of £1.1 million (2020: £0.6 million loss).
· Revenues are ahead of both 30 September 2020 and 30 September
2019, up 29.9% and 0.7%, respectively.
· Innovation continues to drive revenue growth with 39 new products
launched in the first six months of the financial year, producing revenues of
£0.4 million (£1.4 million annualised).
· Overhead costs were £0.6 million lower than the same period last
year, excluding any furlough benefit.
Current trading and outlook:
· Revenue has bounced back to pre-covid levels and are projected to
exceed last year.
· The launch of new products will continue at pace during the
second half of the year.
· Increased revenues and selective price increases are expected to
largely mitigate the impact of higher logistics, raw material, packaging, and
labour costs.
· During the second half, £0.7 million of additional capex is
planned to support and accelerate recent progress.
· The Board remains committed to reducing the Group's debt burden
and reviewing all initiatives to improve and simplify its capital structure.
* Underlying adjusted EBITDA represents earnings before depreciation,
amortisation, impairments, significant items, finance costs and tax.
Mike Holt, Executive Chairman, said:
"We have made a good start to the year and the Group is in good shape for the
seasonally busier second half of the year. Our turnaround activities are
gaining traction, enabling Renshaw to regain its reputation as a product
innovator and first choice provider of quality products, both branded and
private label. Overall, prospects for the remainder of the year are good and
we are confident of being able to report on further progress being made.
In addition, the Board has committed to spend £0.9 million this year on
capex to accelerate the progress being achieved."
Enquiries:
Real Good Food plc Tel: 0151 541 3790
Mike Holt, Executive Chairman
Maribeth Keeling, Chief Financial Officer
finnCap Limited (Nomad and Broker) Tel: 020 7220 0500
Carl Holmes / James Thompson (Corporate Finance)
MHP Communications (Financial PR) Tel: 020 3128 8100
Reg Hoare / Katie Hunt rgf@mhpc.com (mailto:rgf@mhpc.com)
About Real Good Food
Real Good Food plc is a food manufacturing business serving several market
sectors including retail (branded and private label), manufacturing and
export. The Group has two businesses that make up the Cake Decoration
division, Renshaw, and Rainbow Dust Colours, with leading brands in their
chosen markets. http://www.realgoodfoodplc.com
(http://www.realgoodfoodplc.com/)
The information communicated in this announcement contains inside information
for the purposes of Article 7 of the Market Abuse Regulation (EU) No.
596/2014.
Chairman's Statement
I am pleased to report that the Group has started the year positively; revenue
and EBITDA are well ahead of last year's first half performance, but more
importantly revenue is back to pre-covid levels (H1 FY20), and profitability
was improved. For the first six months, underlying adjusted EBITDA was £0.7
million compared to a (covid impacted) loss of £0.8m last year and an EBITDA
profit of £0.2 million for the first half of FY20.
Our plan for the year is to accelerate operational changes made within Renshaw
over the last two years and to generate revenue growth from new products and
better customer service delivery. This is happening, albeit some of the
benefit is being masked by abnormally high logistics costs and supply chain
shortages arising from short-term challenges.
To date, there have been 39 new product launches this year which are expected
to add about £1.4 million to revenue on an annualised basis, principally with
Marks and Spencer, Tesco, Asda, Aldi and Lidl. Whilst the impact of covid-19
has undoubtedly abated, it has continued to impact operational performance
through higher-than-normal employee absence rates and its impact on
productivity; looking beyond this year, margins should bounce back as these
temporary effects lift.
To support further revenue growth and profit generation, the Board has
recently approved capital expenditure of £0.6 million on three projects,
including a new Innovation Centre next to the main production facility, and
expects capex for the year to be £0.9 million (FY21: £0.5 million). This
will be funded by the sale of Wavertree which is expected to complete in the
next couple of months, a sale having been agreed.
During my tenure as Chairman, the Group's strategy has been to maximise value
for shareholders by leveraging productive capacity by growing revenue (through
product innovation and new customers) and improving operational performance.
The Group has also been open to divesting parts of the business for the right
value at the right time. This was clearly demonstrated by the sale of Brighter
Foods Limited on 11 May 2021, which produced proceeds of £35.7 million to the
Group and which valued the business at £43 million (equating to 8.6 times
annualised FY20 EBITDA and 11.7 times (unaudited) FY21 EBITDA). This enabled
the Group to repay £23.1 million to Loan Note Holders and to eliminate the
pension deficit at that time with a payment of £8.5 million.
In September 2021, the Independent Directors also agreed a further extension
with the Group's three principal investors to extend the repayment dates of
Investor Loans and Convertible Loan Notes from 19 May 2022 to 19 May 2023;
this provides additional financial flexibility for the Group to continue its
balance sheet restructuring, and to accelerate and maximise the value of the
remaining Group businesses.
At the AGM held on 20 October 2021, the special resolution to cancel admission
of the Company's shares on AIM was withdrawn once it became clear that there
was insufficient shareholder support on the current shareholder register. The
Board whilst reflecting on this result, nonetheless still believes, as stated
in my Chairman's Letter included within the Notice of the AGM, that
cancellation is in the best interests of the Company and reiterates that it
remains focussed on reviewing all initiatives to continue to improve the
capital structure of the Group.
Prospects for the remainder of the year are good and the Board is confident of
being able to report on further progress being made. It is also encouraging to
note that the business is being recognised for its innovation and quality of
new products within the industry.
Overview
Results
Revenue for the first six months of the year was ahead of the pre covid-19
levels by 0.7% to £19.9 million (2020: £19.8 million). Cake Decoration
continued to place new products in the market working closely with their
customers. In the first six months of FY22, there have been 39 products
placed generating £0.4m of sales. The restructure in the Cake Decoration
business has resulted in an overhead saving of £1.4 million versus FY20 and
£0.8 million versus FY20 (not including any furlough benefit). Overall,
a profit was reported at the Group underlying adjusted EBITDA level
(underlying adjusted EBITDA is defined as earnings before significant items,
impairment, interest, tax, depreciation, and amortisation) of £0.7 million
(2020: loss of £0.8 million; 2019: profit of £0.2 million). Measuring the
Group's performance against underlying adjusted EBITDA shows the operational
performance of the Group without the distorting effects of the costs of
finance and other significant items.
The loss before tax is £1.2 million (2020: loss of £4.7 million; 2019: loss
of £4.1 million). In addition to the increased revenues in the six months
to September 2021 of £4.6 million versus the prior year, lower overheads, and
lower interest costs on the investor loans, reduced the loss before tax. Based
on our review at the half year, there has been no impairment of the Cake
Decoration business. The Directors are confident that the business has
strong long-term growth potential and that it will be restored to greater
profitability over the coming trading periods.
6 months ended 30 Sept 2021 6 months ended 30 Sept 2020 6 months ended 30 Sept 2019
£000's
£000's
£000's
Loss before tax from continuing operations (1,214) (4,699) (4,058)
Depreciation of property, plant and equipment 667 848 782
Amortisation of intangibles 7 23 33
Impairment - - -
Significant items 75 361 547
Finance costs 1,044 2,547 2,855
Other finance costs 75 91 88
Underlying adjusted EBITDA from continuing operations 654 (829) 247
The Group has a credit facility with Leumi ABL Limited of £8.87 million,
which as part of our covid-19 cash planning, had been increased by £2.0
million secured on the debtors of Brighter Foods. Following the sale of
Brighter Foods in May 2021, the facility was reduced back to the original
amount of £8.87 million.
Investment in growth
During the height of covid-19, Capex was restricted to essential spend. The
business is now looking forward to making investments in projects highlighted
as part of the operational review.
Outlook and Current Trading
Following the easing of the covid-19 restrictions, revenues have increased
across most sectors. Retail and international sales continue to perform well
in the year to date, whilst manufacturing sector customers have been slower to
ramp up. For the year to date, the performance of the businesses is aligned
with the Board's expectations and central costs remain within budget.
The cake decoration market in the UK, particularly in the retail sector,
remains competitive, but we are confident that we are delivering what our
customers want and need. The new product developments have been successful
and there is a healthy pipeline. The Cake Decoration business is continuing to
see the benefits of the recent restructure and cost saving initiatives.
Covid-19 did delay some of the operational improvements, however these will
start to be implemented over the coming months.
Brexit has caused challenges for many companies, and RGF is no exception.
The biggest challenge faced has been the transporting of goods to Europe and
the new customs' documentation, increasing delivery times. This is starting
to ease but is likely to continue for the rest of this year.
The challenges with international logistics to the United States of America
are improving but there remains a lack of containers which is increasing
costs, with surcharges in excess of 100% of the pre covid-19 costs being
incurred. The expectation is that these excess costs will reduce during
2022.
Revenue is ahead of the Board's expectation; however, the additional logistics
charges mean the additional delivered margin is not evident in the results.
Overall, the Board remains optimistic and confident that the Cake Decoration
business has a clear growth strategy and the leadership and resources to
deliver on them. With a lower cost base in place, and new customers being
gained, the business is well placed to accelerate profitable growth.
Finance Review
Results of continuing operations: 6 months ended 30 Sept 2021 6 months ended 30 Sept 2020 6 months ended 30 Sept 2019
£000's £000's £000's
External Revenue 19,949 15,354 19,818
Gross profit 8,655 5,690 8,833
Underlying adjusted EBITDA 654 (829) 247
Operating loss (95) (2,061) (1,115)
Operating loss % (0.5)% (13.4)% (5.6)%
Loss before tax (1,214) (4,699) (4,058)
Group revenue for the six months ended 30 September 2021 is £19.9 million
(2020: £15.4 million), £4.5 million (30.2%) ahead of September 2020, and
slightly ahead of September 2019, the pre-covid period. Revenues are
returning to pre covid-19 levels with the main challenges in the first six
months being on costs and material and labour availability. Materials from
overseas have been delayed owing to labour shortages resulting from
self-isolating employees, which affected our suppliers as well as the Cake
Decoration business itself. Logistics remains a challenge when delivering
overseas. The launch of new products has continued with 39 delivered to
customers so far this year and an exciting pipeline for the coming months.
Underlying adjusted EBITDA for continuing operations at £0.7 million was
ahead of the prior year by £1.5 million as a result of the increased revenues
and margin offset by the additional logistics, material and labour costs.
The cost savings initiated last year have resulted in overheads falling £1.4m
compared to FY20. Loss before tax for the six months ended 30 September 2021
was £1.2 million, an improvement of £3.5 million on the same period in the
prior year, reflecting the increased revenues and lower overheads and
financing costs.
Covid-19
It is difficult to identify the true cost of covid-19 and the lockdowns,
however the Cake Decoration business has seen revenues return to pre covid-19
levels in the first six months of FY22. The challenge remains logistics
and this is partly covid-19 related as well as Brexit effected.
Where the business deferred PAYE payments (£0.9m) and business rates, in line
with the government assistance schemes, to conserve cash during the lockdown
period, the Group is happy to report that it has repaid these amounts.
Dividend
No dividend is proposed for the six months ended 30 September 2021 (2020:
nil).
Pension Scheme
The Group offers a defined contribution scheme for all current employees that
is funded on a monthly basis. In addition, the Company operates a defined
benefit scheme that was closed to new members in 2000.
Following the sale of Brighter Foods in May 2021, the Company agreed with the
Trustee of the Napier Brown Retirement Benefits Plan to make a payment of
£8.5million to the Plan. This eliminated the deficit, as measured on a
prudent ongoing funding basis, at the time. This was made up of £6.7million
due under the previous agreement reached with the Trustee on the sale of
Brighter Foods, with the balance to be used as a prepayment of amounts due
under the schedule of contributions.
The Board and the Trustee are in the process of putting in place a new
contribution schedule for the actuarial valuation as at 31 March 2021. As
the new contribution schedule is not yet formally in place, IFRIC14
accounting rules require that a liability of £6.0million, being the value
of contributions due under the old contribution schedule, is recognised on the
company's balance sheet. This is a technical requirement, and the liability
will be rebased once the 31 March 2021 valuation, and a new contribution
schedule have been agreed. Even with more prudent assumptions than
previously, the new valuation is expected to show a much smaller deficit than
the £6.0 million liability currently shown.
The plan assets increased by £8.9 million to £23.4 million during the
period. The plan liabilities are £29.4 million including the additional
IFRIC14 liability compared to £22.0 million on 31 March 2021 (see note 6).
Cash Flow
The net decrease in cash and cash equivalents for the period since 30
September 2020 was £0.1 million. Net debt on 30 September 2021 amounted to
£24.9 million (2020: £45.1 million). The decrease in net debt arose from
the repayment of shareholder loans following the sale of Brighter Foods in May
2021. Net debt is principally represented by the loans and accrued interest
from shareholders of £7.0 million, convertible loan notes ("CLNs") at fair
value of £15.8 million, asset financing of £1.6 million, leased asset
commitments of £0.04 million and revolving credit facilities of £3.1
million. Cash in the bank stood at £2.7 million. Net debt is calculated as
total borrowings less cash and cash equivalents (see note 8).
Divisional Business Review
Cake Decoration
Cake Decoration manufactures sugarpaste, marzipan, soft icings, mallows, and
caramels, under the Renshaw Professional brand and for private label. The
division also produces a range of edible glitters, dusts, powders, food paints
and pens for the sugar craft sector, through the Rainbow Dust Colours brand.
Renshaw Europe and Renshaw Americas sell these products in their respective
territories.
6 months ended 30 Sept 2021 6 months ended 30 Sept 2020 6 months ended 30 Sept 2019
£000's £000's £000's
External Revenue 19,949 15,319 19,922
Underlying adjusted EBITDA 1,087 (637) 637
Profit / (Loss) before tax 315 (1,729) (571)
External revenue was £19.9 million (2020: £15.3 million), an increase of
£4.6 million (29.9%). Following the easing of the lockdown period in
the UK and Europe the sectors that had been most affected, wholesale,
manufacturing and Europe started to open up, albeit they were reliant on their
own customers reopening. The retail sector had already been performing to
pre-covid levels during the pandemic and with the upturn in wholesale and
manufacturing, the business has returned to pre covid revenue levels in the
first six months. There have been covid and Brexit challenges, particularly
in logistics both in receiving materials from overseas and delivering goods to
customers. This has had an impact on margins. We consider the container
cost surcharges to be 'abnormal' and expect these to return to normal once
container availability and port challenges are resolved. UK sales were up by
£2.7 million (26 %) in the first six months, with Europe up by £1.9 million
(12%) and the rest of world sales up by £1.6 million (54%).
The sector is also facing challenges, with pressure on revenues in icing and
marzipan driven by underlying market decline; however, during the six months
the Cake Decoration business bucked this trend. The sale of soft icings is a
growing market and one that Renshaw is benefitting from, with sales year on
year up by 1% (while the market declined by 1%); with the growing new product
development (NPD) pipeline there is no reason why this should not continue.
The underlying adjusted EBITDA profit of £1.1 million is an increase of
£1.7 million on the prior year, driven by the increased revenues of £4.6
million and the savings made in overheads. Further savings are expected once
the rollout of the delayed operational improvements start.
Impairment Review
The Cake Decoration division has over the past two years undergone an
operational improvement programme to increase its margins and profitability on
a sustainable basis. The impact of covid-19 affected the business as it did
with many others, however revenues continue to grow and margins improved owing
to the changes made, including strengthening the commercial functions
including new product development. With covid restrictions lifted and the
increased revenues and profits, there is no impairment required for the
interim period to the 30 September 2021.
Head Office
The Group functions comprise only Finance, in addition to the plc Board.
6 months ended 30 Sept 2021 6 months ended 30 Sept 2020 6 months ended 30 Sept 2019
£000's £000's £000's
External Revenue - 35 11
Underlying adjusted EBITDA (433) (192) (390)
(22867 (22867
Loss before tax (1,529) (2,970) (3,487)
The underlying adjusted EBITDA loss was higher by £0.2 million than the prior
year; this was a result of a release in FY21 of £0.2m. The loss before
tax of £1.5 million reflects the reduction in interest costs on the investor
loans that were reduced from 1 January 2021.
This report was approved by the Board on 8 December 2021 and is signed on its
behalf by:
Mike Holt
Executive Chairman
Independent review report to Real Good Food plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2021 which comprises the Consolidated Statement of Comprehensive
Income, Consolidated Statement of Financial Position, Consolidated Statement
of Changes in Equity, Consolidated Cash Flow Statement and related notes.
We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the rules
of the London Stock Exchange for companies trading securities on AIM which
require that the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Company's annual accounts
having regard to the accounting standards applicable to such annual accounts.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information
Performed by the Independent Auditor of the Entity'', issued by the Financial
Reporting Council for use in the United Kingdom. A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on Auditing (UK)
and consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2021 is not prepared,
in all material respects, in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the rules of the London
Stock Exchange for companies trading securities on AIM and for no other
purpose. No person is entitled to rely on this report unless such a person
is a person entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do so by our
prior written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
Manchester
United Kingdom
8 December 2021
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Consolidated Statement of Comprehensive Income - Continuing operations
unaudited unaudited audited
Notes 6 months ended 6 months 12 months ended
ended
30 Sept 2021 30 Sept 2020 31 Mar 2021
(restated*)
£000's £000's £000's
Revenue 19,949 15,354 37,292
Cost of sales (11,294) (9,664) (22,128)
)
Gross profit 8,655 5,690 15,164
Furlough Income 24 - 1,205
Other operating income 12 - 48
Distribution expenses (2,069) (1,287) (3,615)
Administrative expenses (6,642) (6,103) (14,266)
Significant items 7 (75) (361) 203
Operating loss (95) (2,061) (1,261)
Finance costs (1,044) (2,547) (4,665)
Other finance costs (75) (91) (182)
Loss before tax (1,214) (4,699) (6,108)
Income tax credit - 17 27
Loss from continuing operations (1,214) (4,682) (6,081)
Profit from discontinued operations 20,056 724 2,617
Net profit / (loss) 18,842 (3,958) (3,464)
Attributable to:
Owners of the parent 18,842 (4,071) (3,856)
Non-controlling interests - 113 392
Net profit / (loss) 18,842 (3,958) (3,464)
Items that will not be reclassified to profit or loss
Foreign exchange differences on translation of subsidiaries (10) (25) 65
Actuarial gain / (loss) on defined benefit plan 77 (708) (910)
Pension provision IFRIC 14 (7,001) - 803
Tax relating to items which will not be reclassified 75 133 (102)
Other comprehensive loss (6,859) (600) (144)
Total comprehensive profit / (loss) for the period 11,983 (4,558) (3,608)
Attributable to:
Owners of the parent 11,983 (4,671) (4,000)
Non-controlling interests - 113 392
Total comprehensive profit / (loss) for the period 11,983 (4,558) (3,608)
30 Sept 2021 30 Sept 2020 31 Mar 2021
Basic and diluted loss per share - continuing operations 3 (8.11)p (24.84)p (6.50)p
Basic earnings per share - discontinued operations 20.14p 0.73p 2.63p
Diluted earnings per share - discontinued operations 6.00p 0.23p 0.82p
*The result for the 6 months ended 30 September 2021 has been restated to
reflect the change in continuing and discontinued operations.
Consolidated Statement of Financial Position
unaudited unaudited audited
Notes 30 Sept 2021 30 Sept 2020 31 Mar 2021 2021
£000's £000's £000's
NON-CURRENT ASSETS
Goodwill 9 32,722 37,753 32,722
Other intangible assets 3 35 9
Tangible fixed assets 8,084 15,252 8,548
Investments - 81 -
Deferred tax asset 1,501 1,658 1,426
42,310 54,779 42,705
CURRENT ASSETS
Inventories 4,319 6,568 3,597
Trade and other receivables 7,311 9,576 7,248
Current tax assets - 182 -
Cash collateral 50 215 215
Cash and cash equivalents 2,650 2,341 622
14,330 18,882 11,682
Assets in disposal groups classified as held for sale 10 1,148 1,148 20,157
TOTAL ASSETS 57,788 74,809 74,544
CURRENT LIABILITIES
Trade and other payables 6,548 11,366 8,087
Current tax liability 4 - -
Borrowings 8 3,907 1,433 2,659
Lease liabilities 8 43 267 93
NCI put option 1 - 4,420 1,553
10,502 17,486 12,392
Liabilities held for sale - - 4,442
10,502 17,486 16,834
NON-CURRENT LIABILITIES
Borrowings 8 23,596 45,247 46,624
Lease liabilities 8 - 495 -
Derivative liability - Convertible Loan Notes - 6 17
Deferred tax liabilities 216 257 216
Retirement benefit obligation 6 6,005 8,735 7,505
29,817 54,740 54,362
Liabilities directly associated with assets in disposal groups classified as - - 4,442
held for sale
TOTAL LIABILITIES 40,319 72,226 71,196
NET ASSETS 17,469 2,583 3,348
EQUITY
Share capital 1,991 1,991 1,991
Share premium account 3,294 3,294 3,294
Share option reserve 3 188 3
38
Other reserve - (4,796) (4,796)
Foreign exchange translation reserve (70) (150) (60)
Retained earnings 12,251 (863) (282)
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT 17,469 (336) 150
Non-controlling interest - 2,919 3,198
TOTAL EQUITY 17,469 2,583 3,348
Consolidated Statement of Changes in
Equity
For the six months ended 30 September 2021 (unaudited) Issued Share Capital Share Premium Account Share Option Reserve Other Reserve Foreign Retained Earnings Total Non-Controlling Interest Total Equity
Exchange Translation Reserve
£'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balances on 1 April 2021 1,991 3,294 3 (4,796) (60) (282) 150 3,198 3,348
Total comprehensive profit/(loss) for the period
Profit for the period - - - - - 18,842 18,842 - 18,842
Other comprehensive loss for the period - - - - (10) (6,849) (6,859) - - (6,859)
Total comprehensive profit/(loss) for the period - - - - (10) 11,993 11,983 - 11,983
Transactions with owners of the Group, recognised directly in equity
Loan waiver - - - - - 540 540 - 540
Reserves on sale of Brighter Foods - - - 4,796 - - 4,796 - 4,796
Minority Investors on sale of Brighter Foods - - - - - - - (3,198) (3,198)
- - - - - - - -
Total contributions by and distributions to owners of the Group - - - 4,796 - 540 5,336 (3,198) 2,138
Balances at 30 September 2021 1,991 3,294 3 - (70) 12,251 17,469 - 17,469
-
-
-
-
-
-
-
-
-
-
(3,198)
-
(3,198)
-
Total contributions by and distributions to owners of the Group
-
-
-
4,796
-
540
5,336
(3,198)
2,138
Balances at 30 September 2021
1,991
3,294
3
-
(70)
12,251
17,469
-
17,469
For the six months ended 30 September 2020 (unaudited) Issued Share Capital Share Premium Account Share Option Reserve Other Reserve Foreign Retained Earnings Total Non-Controlling Interest Total Equity
Exchange
Translation Reserve
£'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balances at 1 April 2020 1,991 3,294 203 (4,796) (125) 3,783 4,350 2,806 7,156
Total comprehensive (loss)/profit for the period
(Loss)/profit for the period - - - - - (4,071) (4,071) 113 (3,958)
Other comprehensive loss for the period - - - - (25) (575) (600) - (600)
Total comprehensive (loss)/profit for the period - - - - (25) (4,646) (4,671) 113 (4,558)
Transactions with owners of the Group, recognised directly in equity
Share based payments - - (15) - - - (15) - (15)
Total contributions by and distributions to owners of the Group - - (15) - - - (15) - (15)
Balances at 30 September 2020 1,991 3,294 188 (4,796) (150) (863) (336) 2,919 2,583
For the twelve months ended 31 March 2021 (audited) Issued Share Capital Share Premium Account Share Option Reserve Other Reserve Foreign Retained Earnings Total Non-Controlling Interest Total Equity
Exchange Translation Reserve
£'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balances at 1 April 2020 1,991 3,294 203 (4,796) (125) 3,783 4,350 2,806 7,156
Total comprehensive loss for the period
Loss for the year - - - - - (3,856) (3,856) 392 (3,464)
Other comprehensive loss for the period - - - - 65 (209) (144) - (144)
Total comprehensive loss for the period - - - 65 (4,065) (4,000) 392 (3,608)
Transactions with owners of the Group, recognised directly in equity
Share based payments - - (200) - - - (200) - (200)
Total contributions by and distributions to owners of the Group - - (200) - - - (200) - (200)
Balances at 31 March 2021 1,991 3,294 3 (4,796) (60) (282) 150 3,198 3,348
Consolidated Cashflow Statement
unaudited unaudited audited
6 months ended 6 months ended 12 months ended
Notes 30 Sept 2021 30 Sept 2020 31 Mar 2021
£000's £000's £000's
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Profit / (Loss) before taxation 18,842 (3,975) (3,491)
Finance and other finance costs 1,119 2,637 4,856
FX movement 17 - 308
Profit on sale of discontinued business (20,386) - -
Loss on disposal of investment - - 31
Loss on disposal of property, plant and equipment - - 7
Share option reserve credit - - (200)
Share based payment credit - (15) -
Fair value of derivative liability (17) 6 17
Fair value of NCI put option - - (1,302)
Depreciation of property, plant and equipment 746 1,223 2,435
Amortisation of intangibles 7 25 52
Operating Cash Flow 328 (99) 2,713
(Increase)/decrease in inventories (1,222) 255 676
Decrease in receivables 2,047 870 23
Pension contributions (8,500) (250) (720)
(Decrease)/increase in payables (2,800) 2,278 953
Reduction in cash collateral (increase in cash) 165 - -
Cash (used in) /from operations (9,982) 3,054 3,645
Income taxes paid - - -
Interest paid (53) - (86)
Interest on lease liabilities (7) - (26)
Net cash (outflow)/inflow from operating activities (10,042) 3,054 3,533
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment (223) 73 (567)
Disposal of discontinued business, net of cash disposed of 11 32,085 - 50
Net cash inflow/(outflow) from investing activities 31,862 73 (517)
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of lease liabilities 8 (57) - (402)
Repayment of Investor Loans 8 (23,100) (9) -
Repayment of term loans (433) - (865)
Drawdowns on revolving credit facilities 8 19,390 11,994 42,816
Repayments of revolving credit facilities 8 (18,084) (13,279) (42,876)
Inflow / (repayment) of other loans 44 (841) (35)
Net cash (outflow)/ inflow from financing activities (22,240) 2,135 (1,362)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (420) 992 (1,654)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period 3,080 1,363 1,363
Effects of currency translation on cash and cash equivalents (10) (14) 63
Net movement in cash and cash equivalents (420) 992 1654
Cash and cash equivalents at end of period 2,650 2,341 3,080
Continuing operations 2,650 1,032 622
Discontinued operations - 1,309 2,458
2,650 2,341 3,080
Notes to the Interim Statements
1. Preparation of the interim statements
General information
Real Good Food plc is a public limited company incorporated in England and
Wales under the Companies Act (registered number 04666282). The Company is
domiciled in England and Wales and its registered address is 61 Stephenson
Way, Wavertree, Liverpool L13 1HN. The Company's shares are traded on the
Alternative Investment Market (AIM).
The principal activities of the Group are the sourcing, manufacture,
marketing and distribution of food and industrial ingredients.
The interim report will be posted on the Company's website and will be
released via the Stock Exchange. Further copies of the interim report and
Annual Report and Accounts may be obtained from the address above.
Basis of preparation
These condensed consolidated interim statements are compliant with the
recognition and measurement principles of United Kingdom adopted International
Financial Reporting Standards (IFRS) and interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC) but does
not include all disclosures required by IAS 34. The unaudited financial
information for the six months ended 30 September 2021 and 30 September 2020
are not statutory accounts and as such, have not been audited, but have been
reviewed by our auditors. The comparative financial information for the year
ended 31 March 2021 included within this report does not constitute the full
statutory accounts for that period. The statutory Annual Report and Accounts
for 2021 have been filed with the Registrar of Companies. The Independent
Auditor's Report on that Annual Report and Accounts for 2021 was (i) qualified
- due to covid-19 restrictions, the auditor was not able to observe the
counting of physical inventories at 31 March 2020 for inventories held by
Brighter Foods Limited, a subsidiary and significant component of Real Good
Food plc, due to restrictions in the attendance of external visitors at the
company and third-party premises, specifically as a result of covid-19. They
were unable to determine whether any adjustment to this amount was necessary,
or what the impact of any such adjustment would be on the consolidated
statement of comprehensive income, consolidated statement of changes in
equity, consolidated statement of financial position or consolidated cash flow
statement for the year ended 31 March 2021 (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis without
qualifying their report (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.
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.
On 11 May 2021, the Group sold Brighter Foods Limited, and this has been
classified as a discontinued operation in the accounts.
Going Concern
The Directors have considered the Group's business activities together with
the factors that may affect its planned future performance with respect to
covid-19 and Brexit and are taking appropriate action.
The forecasts, agreed with the businesses, consider reasonable possible
changes in trading performance and these assumptions have been projected and
shared with the Company's advisors. Having already traded through two
lockdowns, both businesses are more aware of the impact with their own
customer base and sectors in which they trade.
The Directors considered the following sensitised scenarios:
Scenario 1: Reduction in revenue of c.5% and gross margin reduced by 10% for 3
months
Scenario 2: Reduction in sales by 10% all year and payroll and overhead costs
increase by 2% all year
In both stressed scenarios the group has sufficient liquidity headroom for at
least the next 12 months, with lowest headroom in August 2022, when cash
becomes tighter coinciding with the stock build for Christmas.
RGF has repaid all deferred PAYE payments and rate payments that were deferred
as part of the covid-19 cash planning.
The Group will take action as appropriate, should sales not be in line with
expectations. The Group has various levers that it can use to mitigate any
shortfall including:
· Cessation of non-essential spend
· Review of overhead costs
The banking covenants in place being a test of EBITDA and positive tangible
net worth are not breached on the stressed scenarios referred to above.
The principal shareholders of the Group have shown considerable support for
the working capital requirements. The three major shareholders finalised an
amendment deed (amended on 17 September 2021) relating to the funding
agreements. The agreements have been amended such that the final repayment
dates of each of the agreements have been extended to 19 May 2023, with no
change to the interest rate payable by the company.
Having carefully considered the liquidity of the Group in line with the
current strategy and future performance, the Directors have a reasonable
expectation that the Group have adequate resources to continue in operational
existence for the next 12 months. Looking beyond that horizon, the Board is
fully conscious of the significant potential cash demands from the repayment
of shareholder loans, for example, and such matters will receive appropriate
consideration, of course, well in advance of the due dates.
Assets held for sale
Following the sale of the trade and assets of Real Good Food Ingredients
Limited, the Group was left with an office building near Bristol, which was no
longer required. The property has been advertised for sale with local estate
agents since July 2018, and we hope to find a suitable buyer.
As such, the asset is classified as held for sale within the consolidated
statement of financial position on 30 September 2021.
Following the restructure of the RGF Group Head Office, the property at
Wavertree, Liverpool is no longer required, with remaining staff relocating to
the Crown Street property. The property is currently advertised for sale.
The asset is classified as held for sale within the consolidated statement of
financial position on 30 September 2021.
Government Grants
Grants which have been received in respect of the Coronavirus job retention
scheme have been accounted for and presented separately on the face of the
Statement of Comprehensive Income, rather than by reducing the related
expenses. The Group has used the Government deferred PAYE payment scheme. The
costs were accounted for as incurred. All deferred PAYE has been fully repaid.
2. Segment analysis
Geographical Segments
The Group earns revenue from countries outside the United Kingdom, these
represent 34.4% of the total revenue of the Group to 30 September 2021 (6
months to 30 September 2020: 25.6% and 6 months to September 2019: 33.4%).
The change in the percentage is a result of the increased sales post
covid-19 in Europe and America.
Business segments
The divisional structure reflects the management teams in place and also
ensures all aspects of trading activity have the specific focus that they need
in order to achieve our growth plans.
The Group operates in two businesses in the Cake Decoration division. The
Head Office finance function provide support to the division as required.
Unaudited segment analysis for these divisions for the six months ended 30
September 2021 is provided below, along with reconciliations to the underlying
adjusted EBITDA:
The Group operates in the Cake Decoration division. The Head Office consists
of Finance and the plc Board. The segment analysis for the six months ended 30
September 2021 is:
Cake Decoration Head Office and non-trading subsidiaries Continuing Operations Discontinued Operations Total Group
£000's £000's £000's £000's £000's
Total Revenue 21,157 - 21,157 1,275 22,432
Intercompany Sales (1,208) - (1,208) - (1,208)
External Revenue 19,949 - 19,949 1,275 21,224
Cost of sales (11,294) - (11,294) (1,063) (12,357)
Gross Profit 8,655 - 8,655 212 8,867
Furlough Income 24 - 24 137 161
Other operating income - 12 12 - 12
Distribution expenses (2,069) - (2,069) (47) (2,116)
Administrative expenses (6,185) (457) (6,642) (403) (7,045)
Significant items and impairments (41) (34) (75) (229) (304)
Operating profit/(loss) after impairment and significant items 384 (479) (95) (330) (425)
Finance costs (69) (975) (1,044) - (1,044)
Other finance costs - (75) (75) - (75)
Profit/(Loss) before tax 315 (1,529) (1,214) (330) (1,544)
Income tax credit / (expense) - - - - -
Profit/(Loss) after tax 315 (1,529) (1,214) (330) (1,544)
Profit from discontinued operations - - - 20,386 20,386
Net profit /(loss) 315 (1,529) (1,214) 20,056 18,842
Reconciliation of operating (loss)/profit to underlying adjusted EBITDA Cake Decoration Head Office and non-trading subsidiaries Continuing Operations Discontinued Operations Total Group
£000's £000's £000's £000's £000's
Operating profit/(loss) 384 (479) (95) (330) (425)
Significant items and impairments 41 34 75 229 304
Depreciation 655 12 667 79 746
Amortisation 7 - 7 - 7
Underlying adjusted EBITDA 1,087 (433) 654 (22) 632
Comparative unaudited segment analysis for the six months ended 30 September
2020 is:
Cake Decoration Head Office and non-trading subsidiaries Continuing Operations Discontinued Total Group
(restated*) Operations
(restated*)
£000's £000's £000's £000's £000's
Total Revenue 17,039 35 17,074 8,523 25,597
Intercompany Sales (1,720) - (1,720) - (1,720)
External Revenue 15,319 35 15,354 8,523 23,877
Cost of sales (9,641) (23) (9,664) (5,699) (15,363)
Gross Profit 5,678 12 5,690 2,824 8,514
Furlough Income - - - - -
Other operating income - - - - -
Distribution expenses (1,265) (22) (1,287) (177) (1,464)
Administrative expenses (5,828) (275) (6,103) (1,886) (7,989)
Significant items and impairments (295) (66) (361) (38) (399)
Operating (loss)/profit after impairment and significant items (1,710) (351) (2,061) (1,338)
723
1
Finance costs (19) (2,528) (2,547) 1 (2,546)
Other finance costs - (91) (91) - (91)
(Loss)/profit before tax (1,729) (2,970) (4,699) 724 (3,975)
Income tax credit / (expense) - 17 17 - 17
(Loss)/profit after tax (1,729) (2,953) (4,682) 724 (3,958)
Profit from discontinued operations - - - - -
Net (loss)/profit (1,729) (2,953) (4,682) 724 (3,958)
Reconciliation of operating (loss)/profit to underlying adjusted EBITDA Cake Decoration Head Office and non-trading subsidiaries Continuing Operations Discontinued Operations Total Group
(restated*) (restated*)
£000's £000's £000's £000's £000's
Operating (loss)/profit (1,710) (351) (2,061) 723 (1,338)
Significant items and impairments 295 66 361 38 399
Depreciation 760 88 848 375 1,223
Amortisation 18 5 23 2 25
Underlying adjusted EBITDA (637) (192) (829) 1,138 309
*The analysis has been restated to reflect the change in continuing and
discontinued operations.
Comparative audited segment analysis for the twelve months ended 31 March 2021
is:
Cake Decoration Head Office and non-trading subsidiaries Continuing Operations Discontinued Operations Total Group
£000's £000's £000's £000's £000's
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
Furlough Income 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)
Significant items and impairments (763) 966 203 (169) 34
Operating (loss)/profit after impairment and significant items (1,666) 405 (1,261) 2,626 1,365
Finance costs (95) (4,570) (4,665) (9) (4,674)
Other finance costs - (182) (182) - (182)
(Loss)/profit before tax (1,761) (4,537) (6,108) 2,617 (3,491)
Income tax credit / (expense) - 27 27 - 27
(Loss)/profit after tax (1,761) (4,320) (6,081) 2,617 (3,464)
Profit from discontinued operations - - - - -
Net (loss)/profit (1,761) (4,320) (6,081) 2,617 (3,464)
Reconciliation of operating (loss)/profit to underlying adjusted EBITDA Cake Decoration Head Office and non-trading subsidiaries Continuing Operations Discontinued Operations Total Group
£000's £000's £000's £000's £000's
Operating (loss)/profit (1,666) 405 (1,261) 2,626 1,365
Significant items and impairments 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
3. Earnings per ordinary share
Basic earnings per share
Basic earnings per share is calculated on the basis of dividing the loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares in issue at the end of the period.
unaudited unaudited unaudited unaudited audited audited
6 months ended 6 months ended 6 months ended 6 months ended 12 months ended 12 months ended
30 Sept 2021 30 Sept 2021
30 Sept 2020 30 Sept 2020 31 March 2021 31 March 2021
(restated*) (restated*)
Continuing Discontinued Operations Continuing Operations Discontinued Operations Continuing Operations Discontinued Operations
Operations
Loss/profit after tax attributable to ordinary shareholders (£'000s) (8,073) 20,056 (6,473) (24,727) 724 2,617
Weighted average number of shares in issue for basic EPS ('000s) 99,564 99,564 99,564 99,564 99,564 99,564
Employee share options & Convertible loan notes (CLNs) ('000s) 234,434 234,434 215,710 215,710 221,320 221,320
Weighted average number of shares in issue for diluted EPS ('000s) 333,998 333,998 315,274 315,274 320,884 320,884
Basic (loss)/profit per share - pence (8.11)p 20.14p (24.84)p 0.73p (6.50)p 2.63p
Diluted (loss)/profit per share - pence (8.11)p 6.00p (24.84)p 0.23p (6.50)p 0.82p
*The loss after tax attributable to ordinary shareholders for the 6 months
ended 30 September 2020 has been restated to reflect the change in continuing
and discontinued operations.
The total basic earnings per share at 30 September 2021 is 12.04p for
continuing and discontinued operations (at 30 September 2020 continuing and
discontinued basic loss per share: (24.11)p).
For the six months to 30 September 2021, the weighted average number of shares
in issue was 99,564,430 and the number of options outstanding was 33,333. If
these were all exercised the cash raised would be equivalent to that which
would be raised by issuing 505,897 shares at the average share price during
the year. There were also 8,806,571 convertible loan notes outstanding, of
which the weighted average was 233,927,216. Therefore, the weighted average
number of dilutive potential ordinary shares is 333,997,543.
Diluted earnings per share
The number of shares calculated as above is compared with the number of shares
that would have been issued assuming the exercise of all outstanding share
options. For continuing operations, the potential ordinary shares are
considered anti-dilutive as they decrease the loss per share. Therefore,
diluted EPS is the same as basic EPS for continuing operations. For
discontinued operations, however, the earnings per share can be diluted. If
all the shares had been exercised before the end of the period, the loss per
share would then have been (8.11)p on the continuing operations and there
would have been an earnings per share of 6.00p on discontinued operations
(2020: earnings of 0.73p on continuing and 0.23p on discontinued operations).
4. Dividends
The Directors are not recommending an interim dividend (2020: nil).
5. Taxation
The charge for taxation is based on the results for the period and takes into
account taxation deferred because of timing differences between the treatment
of certain items for taxation and accounting purposes.
Provision is made in full for taxation deferred in respect of timing
differences that have originated but not reversed by the balance sheet date,
except for gains on disposal of fixed assets which will be rolled over into
replacement assets. No provision is made for taxation on permanent
differences. Deferred tax is not discounted.
6. Pension arrangements
The Group operates a defined contribution scheme for all employees, including
provision to comply with auto-enrolment requirements laid down by law.
In addition, the Group operates a defined benefit scheme, the Napier Brown
Retirement Benefits Scheme, which closed to new members in 2000. The assets
of the scheme are held separately from those of the Group in an independently
administered fund. Following the sale of Brighter Foods, the Group injected
£8.5 million into the scheme to eliminate the pension scheme deficit on an
ongoing funded basis at that time. Contributions in the first six months of
last year were £249,999.
The Board and the Trustee are in the process of putting in place a new
contribution schedule for the actuarial valuation as at 31 March 2021. As
the new contribution schedule is not yet formally in place, IFRIC14 accounting
rules require that a liability equal to the value of contributions which were
due under the old contribution schedule be recognised on the company's balance
sheet. A liability of £6.0 million has therefore been recognised, albeit
this will be replaced by a much smaller liability (mainly reflecting more
cautious assumptions since May 2021) once the valuation is complete and an
updated contribution schedule is signed.
Assumptions
The assets of the scheme have been included at market value and the
liabilities have been calculated using the following principal actuarial
assumptions:
unaudited unaudited audited
30 Sept 2021 30 Sept 2020 31 Mar 2021
% per annum % per annum % per annum
Rate of increase in pension payment 3.40 3.00 3.30
Discount rate 2.00 1.50 2.00
Inflation assumption 3.60 3.00 3.40
Revaluation rate for deferred pensions 2.90 2.50 2.70
Scheme deficit
The fair value of the assets in the scheme and the present value of the
liabilities in the scheme are:
unaudited unaudited audited
30 Sept 2021 30 Sept 2020 31 Mar 2021
£'000s £'000s £'000s
Total fair value of assets 23,388 14,831 14,527
Present value of scheme liabilities (22,186) (23,566) (21,885)
Effect of IFRIC14 (7,207) - (147)
(Deficit) in the scheme (6,005) (8,735) (7,505)
The scheme is a closed scheme and therefore under the projected unit method
the current service cost would be expected to increase as the members of the
scheme approach retirement.
The present value of contributions payable exceeds the net liability and in
accordance with IFRIC14, we have recognised this additional liability.
7. Significant Items and Impairments
The Group's underlying profit figure excludes a number of items which are
material or non-recurring and are detailed separately to ensure the underlying
operating performance of the business is clearly visible, without the
distortion of these costs. The significant costs incurred by the Group, are
summarised below:
unaudited unaudited audited
30 Sept 2021 30 Sept 2020 31 Mar 2021
(restated*)
£000's £000's £000's
Professional fees in relation to Liverpool factory - - (113)
Professional fees in relation to refinancing costs - - (38)
Movement in provisions relating to the non-controlling interest put option - - 1,302
RGF legal Costs (75) - (269)
Closure of Renshaw US warehouse - - (171)
Management restructuring - (361) (508)
Total significant items and impairments (75) (361) 203
Continuing business (75) (361) 203
Discontinued business (229) (38) (169)
Total Significant Items (304) (399) 34
*The significant items for the six months ended 30 September 2020 have been
restated to reflect the change in continuing and discontinued operations.
8. Borrowings
The table below shows the movement on the Borrowings over the past 12 months.
unaudited unaudited audited
30 Sept 2021 30 Sept 2020 31 Mar 2021
£000's £000's £000's
Revolving credit facility 3,100 568 1,794
Investor loans 7,022 29,210 30,240
Other loans - 179 -
Convertible loan notes 15,763 14,036 15,199
Asset finance 1,618 2,483 2,050
Lease liabilities (IFRS 16) 43 762 93
Government grants - 204 -
Total Borrowings 27,546 47,442 49,376
Amount due for settlement within 12 months 3,950 1,700 2,752
Amount due for settlement after 12 months 23,596 45,742 46,624
Convertible Loan Notes
The Company had issued loan notes with a conversion price of 5 pence to its
major shareholders, NB. Ingredients Limited ("Napier Brown"), Omnicane
International Investors Limited ("Omnicane") and funds managed by Downing LLP
("Downing") totalling £8.8 million during 2018. The loans are due to be
repaid on 17 May 2023.
A host loan at amortised cost and an embedded derivative liability, being
measured at fair value with changes in value being recorded in profit or loss,
have been recognised. At 30 September 2021 the derivative liability amounted
to nil (2020: £6,000).
Investor Loans
The repayment date of the investor loans was amended on the 17 September 2021.
All loans, including the Convertible Loan Notes, are now repayable in full on
19 May 2023.
Also, in May 2021 the Loan Note Holders waived £0.5m of certain of the
outstanding loan notes held by each of the Major Shareholders (the "Loan Note
Waivers") reducing the amount of loan notes outstanding to £22.0 million.
This waiver has been agreed in respect of certain costs related to the
disposal. The £540,000 attributable to waiver is split between c.£350,000 of
capital, £100,000 relating to certain management compensation with the
remainder being in respect of interest and redemption premium.
As Napier Brown and Omnicane are substantial shareholders of the Company
and Judith MacKenzie, a director of the Company, is also a Partner of
Downing, each of the Loan Note Waivers are deemed to be related party
transactions pursuant to the AIM Rules for Companies. Maribeth Keeling, Mike
Holt, and Gail Lumsden, the Independent Directors of the Company for this
purpose, having consulted with the Company's Nominated Adviser, finnCap Ltd,
consider the terms of the Loan Note Waivers to be fair and reasonable insofar
as the Company's shareholders are concerned.
Financing
The credit facility provided by Leumi prior to the sale of Brighter Foods was
£10.87 million, this included £2 million secured on the Brighter Foods
receivables, following the sale of Brighter Foods on the 11 May 2021, this
reduced to the original facility of £8.87 million.
9. Goodwill
Goodwill is reviewed for impairment on a regular basis. Each cash
generating unit was assessed for its recoverable amount based upon the higher
of fair value less costs of disposal, and value-in-use calculations. The
cashflows used in the value-in-use calculation are EBITDA (adjusted) less
capital expenditure based upon the latest Board approved forecasts in respect
of the following three years. The discount rate applied is 10.0% (Mar 21:
10.0%) based on the market calculated weighted average cost of capital for
similar companies. The long-term growth assumptions reflect a 5-year period
with a terminal value applied to the fifth year. The impairment review shows
that no impairment is required for the goodwill in the Cake Decoration segment
(2020: nil).
Sensitivity Analysis
An illustration of the sensitivity to reasonable possible changes in the
discount rate assumption or the 3-year planned EBITDA in Cake Decorations only
are shown below:
· An increase of 1.0% in the weighted cost of capital of 10.0% to
11.0% would cause no impairment on the carrying value of goodwill in Cake
Decorations.
· Applying a 10% reduction to the planned EBITDA in FY22 and
subsequent years would cause no impairment on the carrying value of goodwill
in Cake Decorations.
unaudited Unaudited audited
30 Sept 2021 30 Sept 2020 31 Mar 2021
£000's £000's £000's
Total Goodwill 32,722 37,753 32,722
* Goodwill has been restated to reflect the change in continuing and
discontinued operations.
10. Assets classed as held for sale
The group owns an office building near Bristol, previously used by a business
sold in the year to 31 March 2019. The building has been put up for sale and
is classed as held for sale within the consolidated statement of financial
position as of 30 September 2021.
Following the restructure of the RGF Group Head Office, the property in
Wavertree, Liverpool is no longer required. The sale of this property is
expected to complete in the next couple of months. The asset is within the
Head office operating segment. The asset is classified as held for sale
within the consolidated statement of financial position as of 30 September
2021.
unaudited unaudited audited
30 Sept 2021 30 Sept 2020 31 Mar 2021
£000's £000's £000's
Property near Bristol 148 148 148
Property in Wavertree, Liverpool 1,000 1,000 1,000
Assets held for sale 1,148 -
1,148 1,148
AT 31 March 2021, as the Directors had begun the process for the sale of
Brighter Foods Limited as a going concern, and had entered into an exclusivity
contract with THG Plc. The additional assets and liabilities held for sale
were:
unaudited unaudited audited
30 Sept 2021 30 Sept 2020 31 Mar 2021
£000's £000's £000's
Assets held for sale - - 20,157
Liabilities held for sale - - 4,442
11. Discontinued operations
On 11 May 2021, Brighter Foods Limited was sold to THG Plc for a consideration
of £43 million. This was consistent with the Group's strategy and allows it
to focus on its remaining businesses. The results of the sale are shown below.
Profit on Sale 30 Sept 2021
£000's
Gross consideration received 43,000
Debt free / cash free adjustment (664)
Non-controlling interest's share of consideration (6,604)
Cash consideration received 35,732
Cash disposed of (2,579)
Disposal costs (1,068)
Net cash received on disposal of discontinued operations 32,085
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 borrowings 338
(6,556)
Goodwill (5,031)
Put Option (3,243)
Minority Interest 3,131
Profit on disposal of subsidiary 20,386
Result for period on discontinued operations (330)
Total on discontinued operations 20,056
The result of the discontinued business contained within these accounts is:
Unaudited Unaudited audited
6 months 6 months 12 months
30 Sept 2021
30 Sept 2021 30 Sept 2020 31 March 2021
£000's £'000s £'000s
Total Revenue 1,275 8,523 19,788
Intercompany Sales - - -
External Revenue 1,275 8,523 19,788
Cost of sales (1,063) (5,699) (12,992)
Gross Profit 212 2,824 6,796
Furlough Income 137 - 461
Other operating income - - 49
Distribution expenses (47) (177) (411)
Administrative expenses (403) (1,886) (4,100)
Significant items and impairments (229) (38) (169)
Operating profit after impairment and significant items (330) 723 2,626
Finance costs - 1 (9)
Profit before tax (330) 724 2,617
Income tax credit / (expense) - - -
Profit after tax (330) 724 2,617
The statement of cash flows includes the following amounts in relation to
discontinued operations:
Unaudited Unaudited audited
6 months 6 months 12 months
30 Sept 2021
30 Sept 2021 30 Sept 2020 31 March 2021
£000's £'000s £'000s
Operating activities 167 169 1,224
Investing activities (20) (66) 234
Financing activities 41 50 (156)
188 153 1,302
The earnings per share from discontinued operations are shown below, are fully
disclosed in note 3.
Unaudited Unaudited audited
6 months 6 months 12 months
30 Sept 2021
30 Sept 2021 30 Sept 2020 31 March 2021
£000's £'000s £'000s
Basic earnings per share 20.14 0.73 2.63
Diluted earnings per share 6.00 0.23 0.82
12. Contingent Liability
The Group carries a wide range of insurance cover, and no separate disclosure
is made of the detail of claims, or the costs covered by insurance. There
have been no further claims raised since the publication of the FY21 Annual
Accounts.
There is one claim to disclose:
The Group received communication from the liquidators of Five Star Fish
Limited (FSF), claiming repayment of £610k in relation to a debt allegedly
owed by RGF to FSF. Having taken legal advice, the Directors are of the view
that this is not a valid claim against the Company and accordingly no
provision has been made within the accounts.
13. Post period end
There are no post balance sheet events
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