REG - Real Good Food Co - Final Results - Part 1
RNS Number : 9646NReal Good Food Company Plc (The)01 August 2014The Real Good Food Company plc (AIM:RGD)
Final Results for the year ended 31 March 2014
The Real Good Food Company plc ("the Group") is a diversified food business, serving a number of market sectors including retail, manufacturing, wholesale, foodservice and export. The Group is a major distributor of sugar in the UK, and manufactures a wide range of baking ingredients, jams and sweet bakery products. Its portfolio of brands includes Whitworths Sugar, Renshaw and R&W Scott.
KEY POINTS
31 March
2014
'000s
As restated
31 March 2013
'000s
Revenue
272,576
265,754
EBITDA
3,296
10,466
(Loss)/Profit before taxation1
(992)
6,631
EPS:
Basic (adjusted) 1
(0.34)p
7.50p
Diluted (adjusted) 2
(0.34)p
7.0p
Working Capital (Fixed Assets/Stock/Trade Debtors & Trade Creditors)
46,941
42,555
Net Borrowings (Incl Cash)
31,133
24,952
Net Debt/EBITDA
9.5
2.4
1 before significant items
2 As the group is loss making in the year under review the diluted earnings per share is the same as the basic earnings per share
Results overshadowed by impact of sugar supply dispute with British Sugar ("BS")
Despite the BS dispute, Napier Brown has secured significant retail and wholesale contracts, driving Whitworths brand growth
Stallingborough Sugar Hub now operational, boosting Napier Brown's capability to handle imported sugar from all sources
Focus on establishing commercially led autonomous divisions gaining momentum
Renshaw Sales and EBITDA up 4.7% and 10.4% respectively
Haydens Sales up 7.6% and improved operational performance increased EBITDA by 0.6 million
Real Good Food Europe established in Brussels, offering better access to opportunities across the EU, initially to Renshaw and R&W Scott
Pieter Tott,Chairman, comments:"It would be easy to focus on the impact on our results caused by what we believe to be anti-competitive behaviour by British Sugar, but we have previously disclosed the background to this matter in our 21st February Trading Statement.
"The reduction in Group EBITDA to 3.3 million hides significant progress in a number of operating divisions. In particular, the Renshaw result was very encouraging, while at Haydens it is clear that the new business model is beginning to deliver.
"We remain in close dialogue with the Competition and Markets Authority ("CMA") and are hopeful that the regulator will take the necessary steps to ensure that competition law is enforced. However, as we indicated in our recent updates, the current sugar contract year does not end until 30th September, coinciding with our half year so despite continued strong trading at Renshaw and Haydens, our first half performance will still be materially affected. Beyond that, negotiations for the new sugar contract year are progressing and we are working on a number of strategic sourcing initiatives on the back of our investment in the Stallingborough Sugar Hub which will bring long term benefits."
ENQUIRIES
Real Good Food
Pieter Tott, Chairman
Tel: 020 3056 1516
Mike McDonough, Finance Director
Tel: 0151 706 8200
Shore Capital & Corporate
(Nomad and Joint Broker)
Tel: 020 7408 4090
Stephane Auton
Patrick Castle
Daniel Stewart and Company Plc
(Joint Broker)
Tel: 020 7776 6550
Martin Lampshire
Cubitt Consulting
Tel: 020 7367 5100
Gareth David
Cebuan Bliss
Chairman's Statement
2013/14 Review
"It would be easy to focus on the impact on our results caused by what we believe to be anti-competitive behaviour by British Sugar, but we have previously disclosed the background to this matter in our 21st February Trading Statement. We strongly believe in our case and think that British Sugar's actions contravene the requirements of the regulatory authorities. Napier Brown has a proud history of bringing competition to the market and we are simply asking to continue to operate under a regulatory regime which has been successful for the past 25 years. Once we have some guidance from the Competition and Markets Authority ("CMA") on our complaint we will respond accordingly but in the meantime I will focus on the remainder of the Group where we are pleased to report significant progress.
The reduction in Group EBITDA to 3.3 million hides significant progress in a number of the operating divisions. Renshaw's result was very encouraging as we are now beginning to see the results of the company re-branding exercise flow through into performance. Sales, margins and EBITDA all recorded significant YOY growth. The same was true at Haydens where it is clear that the new business model is beginning to deliver. R&W Scott is at an earlier stage in the process of becoming a fully stand-alone business but progress is encouraging. Garrett Ingredients' performance was clearly affected by the sugar dispute though the most significant development there was the creation of a new management structure and team. Real Good Food Europe (RGFE), which was effectively a start-up during 2013/14, gives us a platform for additional export sales growth.
Net Debt (after Cash) has increased by 6.2 million during the year largely driven by the planned increase in capital expenditure and the strategic investment in our Stallingborough Sugar Hub which is now operational. The negative impact on cash generation arising from the British Sugar dispute was largely offset by improved working capital management.
Forward Plans
Our detailed strategy in the sugar market will inevitably be affected by whatever conclusion the CMA comes to as regards our complaint. We are undertaking the necessary contingency planning but most of all are looking for clarity as soon as possible. We know that the Napier Brown business is viewed by customers within the UK as performing an important function in the market and we will build on this. We have appointed two new commercial roles to the board of Napier Brown with a Sales Director for Industrial and a Commercial Director for Retail.
Elsewhere, there are two related themes which are central to us delivering our forward plans: management structures and the transformation of our operating companies into stand-alone, market-led businesses.
The Renshaw example is a model for what we are looking to achieve across all of our businesses. Two years' ago we embarked on a re-branding of the company which acted as a catalyst for a transformation of its vision and strategy into the globally ambitious, market-facing, high added value commercial business which we see today. The 'Renshaw' brand is both renowned and respected by its customers as a leader in its categories. The new management team has been in place for a year and symbolically the board now includes three commercially focused Directors: a UK Sales Director, an International Sales Director and a Marketing Director. The business's main challenge is prioritising the opportunities that exist across a number of sales channels and geographies.
The model of investing in management and in the company brand is also beginning to deliver at R&W Scott although the process is less well-advanced. We have appointed a Commercial Director and an Operations Director, a UK B2B sales manager, an export manager and a product manager. This is a transformation in the quality of resource which is required to drive sales growth.
The new Haydens team has now been in place for about six months and there are now two commercially focused Directors on the board. Haydens, while not ruling out the possibility of producing branded offerings, will remain a predominantly private label business. However, it will become a champion of its chosen product categories and will seek to lead the market in terms of innovation and product development. This new strategy is generating growth with existing customers and producing interest from new ones.
Garrett Ingredients has a long history of successfully serving its customers in its areas of market expertise. What became clear during the past year was that its management team was far too lean (effectively only two senior managers) if it were to expand in line with our ambitions. The new management team again has three commercially focused Directors as well as a Finance Director. This investment in management expertise will clearly increase the business's overheads but is a statement of the confidence we have in its growth potential.
Finally the decision to set up Real Good Food Europe is a reflection of our belief that sales growth is dependent on businesses having dedicated commercially-focused management. Renshaw was building its presence in European markets but at arms-length from its UK base in Liverpool. It was clear that if we were going to serve these customers properly and develop the business, we needed to better understand their markets and be represented locally. The new team in Brussels is totally customer-focused and excited by the opportunities.
Outlook
We remain in close dialogue with the Competition and Markets Authority ("CMA") and are hopeful that the regulator will take the necessary steps to ensure that competition law is enforced. However, as we indicated in our recent updates, the current sugar contract year does not end until 30th September, coinciding with our half year so despite continued strong trading at Renshaw and Haydens, our first half performance will still be materially affected. Beyond that, negotiations for the new sugar contract year are progressing and we are working on a number of strategic sourcing initiatives on the back of our investment in the Stallingborough Sugar Hub which will bring long term benefits."
Pieter Tott
Chairman
1 August 2014
Divisional Business Reviews
Napier Brown
2013/2014 Review
The financial performance was clearly dominated by the dispute with British Sugar. The business had a busy year with increased sales volumes across industrial, retail and wholesale. The winning of the Asda and Booker contracts significantly increased utilisation of the Normanton packing site and a number of pack formats were added to the Whitworths range to meet the requirements of these customers.
Commissioning of the Stallingborough Sugar Hub began in the final quarter and it started processing sugar from both Europe and Central America. Much focus was given to gaining customer approvals for new supply sources which we believe to be in our customers' interest in the long term. Given the high profile of traceability in the food industry following recent scares, this process is taking longer than anticipated.
31 March 2014'000s
31 March 2013'000s
Revenue
162,333
157,156
EBITDA
(1,605)
4,723
Operating (Loss)/Profit
(2,024)
4,353
Operating Profit %
n/a
2.8%
Future Plans
The business has the advantage of entering the new contract season with the Stallingborough facility operational and will be able to offer customers fully traceable sugars from various sources. Plans are in place to increase efficiencies at the Normanton packing plant following the volume increases last year. From a sourcing perspective, there seems, in the short term, to be ample availability of sugar both in Europe and around the world and advanced discussions on a number of supply arrangements, including with British Sugar, are currently taking place.
Renshaw
2013/2014 Review
Sales increased by 4.7% while improved channel mix contributed to 11% growth in delivered margin. This was to an extent offset by increased overheads as the business continued to invest in resource, both commercial and operational, to enable the growth plans. EBITDA was 515,000 ahead of last year.
While all channels experienced sales growth, sales to retail were particularly healthy with Renshaw's expertise in colours providing the main focus. A number of new product launches, such as soft icings and 'colour melts', took place towards the end of the year. Brand marketing continued to focus both online and via exhibitions with a successful presence at the Coronation Festival at Buckingham Palace being a particular highlight.
31 March 2014'000s
31 March 2013'000s
Revenue
42,952
41,033
EBITDA
5,467
4,952
Operating Profit
4,398
4,125
Operating Profit %
10.2%
10.0%
Future Plans
One of the strengths of the Renshaw business is its multi-channel nature with growth opportunities across all sectors: manufacturing, wholesale, retail (both specialist and mainstream), export and now digital. 2014 will see increased presence in export markets in Europe (via Real Good Food Europe), the US where a bespoke Renshaw branded range has been launched as well as Asia and Australasia. On the product side a re-launch of the marzipan ranges is planned which will build on Renshaw's traditional strengths in this sector while there will be further range extensions within both standard and modelling sugarpastes.
Real Good Food Europe
2013/2014 Review
The business has now been established as a stand-alone unit with 2013/14 being effectively the 'set-up' year. A sales office was established in Brussels and a multi-lingual sales team recruited to build sales opportunities. A gradual programme of customer transfers of existing Renshaw business took place across the year while the business also began a programme of new business development including successful participation at baking exhibitions in both Brussels and Paris. The business was pleased to win the 2013 'Best newcomer' award at the 2013 Golden Bridge Awards organised by the British and Belgium Chambers of Commerce.
31 March 2014'000s
31 March 2013'000s
Revenue
481
-
EBITDA
(391)
-
Operating (Loss)
(391)
-
Operating Profit %
n/a
-
Future Plans
Sales have begun to meet our expectations in the early months of this year. With a strongly motivated sales team fluent in 8 different languages, 2014/15 should generate significant sales growth, particularly on the Renshaw produced product ranges. A number of new opportunities are already developing across the Benelux countries and France in particular, with RGFE able to adapt to the specific requirements of different markets. A warehouse has been leased on the outskirts of Brussels which will increase RGFE's ability to offer a flexible and tailored customer service which is critical in this added value sector. The second focus will be exploring opportunities for the R&W Scott ranges.
R&W Scott
2013/2014 Review
EBITDA was 98,000 below last year, but with the division better placed to improve going forward. Sales are down as a result of withdrawing from some low margin business to business contracts and increased inter-company sales. Delivered margins improved with the more added value sales mix in line with the strategy while overheads increased as investment was made in sales, marketing and technical resources to manage the growth plan. The transition from a manufacturing site to a stand- alone business is almost complete with the recruitment of local finance resource now underway. Most of the overhead increase required to make this transition has now taken place.
31 March 2014'000s
31 March 2013'000s
Revenue
9,144
10,968
EBITDA
327
425
Operating Profit
66
166
Operating Profit %
0.7%
1.5%
Future Plans
An enormous amount of work was undertaken on new product development during last year with very little yet reflected in sales. 2014/15 will see the start of a major industrial jams and sauces contract and retail product launches in multipacks of jams, sauces and chocolate spreads. Many of these new products are being sold both in retail and business to business channels. An export drive is also underway focusing on the multipacks of jam and opportunities are being sought with Real Good Food Europe. R&W Scott is working with a local branding agency to develop a brand strategy founded on the business's quality reputation and Scottish heritage.
Garrett Ingredients
2013/2014 Review
Volumes fell in both sugar and dairy. In sugar, dramatic falls in spot prices also put pressure on margins particularly as Garrett was caught in the downstream effect of the British Sugar dispute. In the second half of the year it proved impossible to compete satisfactorily in the spot market. The Dairy market is prone to shorter term market fluctuations and while margins were well managed, volumes were down on the previous year.
It became clear that, in order to meet the growth ambitions, substantial investment in the management team was required with, in particular, the splitting of the Dairy Trading and Managing Director roles. This took place in the second half of the year and the senior structure was completed with the appointment of an experienced Commercial Director in April.
31 March 2014
'000s
31 March 2013'000s
Revenue
30,411
31,260
EBITDA
1,204
2,151
Operating Profit
1,169
2,151
Operating Profit %
3.8%
6.9%
Future Plans
The new management team is now in place and is devising a strategy and plan to get the business back into growth. The review of the distribution strategy has proved successful and Garretts will in future be managing its own logistics and customer service and separating itself from Napier Brown thereby providing a higher level of customer service. Opportunities for new distributorships are being pursued and the business now has the breadth of management capability to deliver these.
Haydens Bakery
2013/2014 Review
Profit performance was encouraging with EBITDA growing by 576,000
Sales increased by 7.6% and favourable material and labour efficiencies further enhanced margins, more than offsetting material price inflation. Overheads were ahead of last year, a combination of inflation and investment in additional resource both to fulfil customer service and technical requirements and additions to the sales team as part of the growth plan. The senior management team was also re-shaped during the year and is now fully in place to take the business to its next growth phase.
Sales growth came from both existing customers (e.g. Waitrose and Costa) and new ones with supply beginning to Morrisons in 2013.
31 March 2014
'000s
31 March 2013'000s
Revenue
27,255
25,337
EBITDA
917
341
Operating Profit / (Loss)
109
(417)
Operating Profit %
0.4%
n/a
Future Plans
The new management team has identified a narrower set of product sectors which represent the business's real areas of expertise and these will be the focus for growth both with existing and new customers. These are tarts, Danish pastries, Yum Yums, pies and crumbles and sweet buns. These will not only provide a focus for product development, but will also simplify the manufacturing operation by reducing complexity and increasing scale in core areas. The re-structure of the sales team is already proving successful in bringing new business across retail and foodservice channels.
Finance Director's Report
Overview
The current year's results are dominated by the dispute with British Sugar. The reduction in EBITDA from 10.47 million last year to 3.29 million this year is all within Napier Brown and Garrett Ingredients trading which are both directly affected.
Revenue
Group revenue from continuing operations for the 12 months to 31 March 2014 was 272.6 million, an increase of 2.6% on the 12 months to 31 March 2013 reflecting the overall volume growth across the group.
Movements in base commodity costs in the year were managed effectively across the divisions with the exception of Sugar where the market reductions were not fully reflected in our purchase price triggering the dispute with British Sugar.
Key Comparatives (continuing operations excluding significant items)
31 March 2014
'000s
31 March 2013
'000s
Revenue
272,576
265,754
Gross profit
33,389
37,285
Delivered Margin
(Gross profit after distribution costs)
19,561
25,620
EBITDA *
3,296
10,466
Operating profit *
669
8,241
(EBITDA less depreciation)
Operating profit %
0.2%
3.1%
(Loss)/ Profit before taxation
(After financing & pension costs)
(992)
6,631
* before significant items
Margins
Delivered margin for the year at 19.6 million was 6.1 million down over the prior year with Napier and Garretts, who were both significantly affected by the BS dispute down 6.9 million and 0.5 million respectively. The rest of the Group at 15.1 million was up 1.3 million on the prior year.
Loss before Tax and Interest
Overall we generated a loss before tax and significant items for the year of 1.0 million (PBT continuing operations including pension "running costs") a reduction of7.6 million over the previous year 12 months driven by a 7.2 million EBITDA reduction mainly in Napier Brown and Garretts as commented previously with the balance of 0.4 million primarily increased depreciation reflecting the planned increase in capital expenditure in the year. Investment in the Stallingborough Sugar Hub accounts for the increase of this year's spend of 6.9 million over the 2.7 million invested in the prior year.
Financing Costs
Financing costs for the year at 1.6 million were largely in line with the prior year.
Significant Items
During the year the Group incurred one-off costs of 0.5 million which included 0.35 million for the complete reshaping of the executive team at Garrett Ingredients, including the appointment of a new managing director, commercial director, business development director and finance director. 0.15 million was also incurred in Renshaw with major changes to the direction and management in the senior commercial team.
Working Capital & Net Debt
31 March 2014
000's
31 March 2013
000's
Working Capital
46,941
42,555
(Fixed assets/stock/trade debtors & trade creditors)
Net Borrowings (Incl Cash)
31,133
24,952
Net Debt/EBITDA
9.5
2.4
Cash Flow and Debt
Working Capital levels increased by 4.4 million during the year. Within this Fixed Assets were up a net 4.3 million (6.9 million Capital expenditure less 2.6 million depreciation) reflecting our investment programme with the balance, an increase of 0.1 million, being the movements across the more fluid stock, debtor and creditor positions.
Net Debt (after Cash) as at 31 March 2014 was 31.1 million, up 6.2 million on the prior year (31 March 2013 24.9 million) largely driven by the increased capital expenditure. The negative impact on cash generation arising on the British Sugar dispute was largely offset by improved working capital management.
Our ability to service this debt remains despite the headline change in the Debt ratio (Net Debt to EBITDA) from last year.
Pensions
The Group operates one defined benefits scheme which was closed to new members in 2000. As reported last year an extension to the existing recovery plan has been was agreed with "base" contribution levels for the year ended 31 March 2013 of 265k with annual increments of 3% for the following two years. In addition to this the Group has agreed to make an additional, one off, contribution of 166k which is payable at the rate of 11k per month starting from November 2013. The Group is confident this will continue to meet the trustees' needs and the pension regulator's guidance.
The latest IAS19 valuation as at March 2014 indicates 3.67 million deficit, an increase of 0.13 million since March 2013.
Key Performance Indicators
The Board of Directors monitors a range of financial and non-financial key performance indicators, reported on a periodic basis, to measure the Group's performance over time. The key performance indicators are set out below:
31 March 2014
m
31 March 2013
m
Revenue growth1
2.6%
2.8%
Operating margin2
0.2%
3.1%
Debt cover (Net debt / EBITDA)3
9.5
2.4
Interest cover4
2.0
7.1
Health & Safety score5
92%
88%
1. Revenue growth is calculated for continuing operations.
2. Operating margin is stated for continuing operations only and is calculated by dividing operating profit before tax, interest and significant items by revenue from continuing operations.
3. Debt cover is calculated by dividing total net debt by continuing EBITDA. EBITDA is defined as earnings before significant items, interest, tax, depreciation and intangible asset amortisation.
4. Interest cover is calculated by dividing EBITDA by net interest payments (gross interest payable less interest receivables).
5. Health & Safety score represents the weighted average score across all sites as determined by our health and safety score index which was introduced in 2006 and is measured by an external consultant. Figures quoted refer to the calendar year.
Mike McDonough
Finance Director
1 August 2014
Consolidated Statement of Comprehensive Income
Year ended 31 March 2014
Year ended 31 March 2014
Year ended 31 March 2013
as restated
Continuing Operations
Before
significant
items
'000s
Significant
items
(Note 6)
'000s
Total
'000s
Before
significant
items
'000s
Significant
items
(Note 6)
'000s
Total
'000s
REVENUE
272,576
-
272,576
265,754
-
265,754
Cost of sales
(239,187)
-
(239,187)
(228,469)
-
(228,469)
GROSS PROFIT
33,389
-
33,389
37,285
-
37,285
Distribution costs
(13,828)
-
(13,828)
(11,665)
-
(11,665)
Administration expenses
(18,892)
(544)
(19,436)
(17,379)
(505)
(17,884)
OPERATING PROFIT
669
(544)
125
8,241
(505)
7,736
Finance income
-
-
-
-
-
-
Finance costs
(1,602)
-
(1,602)
(1,560)
-
(1,560)
Other finance income
(59)
-
(59)
(50)
-
(50)
(LOSS) / PROFIT BEFORE TAXATION
(992)
(544)
(1,536)
6,631
(505)
6,126
Income tax expense
758
120
878
(1,467)
121
(1,346)
(LOSS)/PROFIT FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITYHOLDERS OF THE PARENT
(234)
(424)
(658)
5,164
(384)
4,780
OTHER COMPREHENSIVE INCOME
Actuarial (losses)/gains on defined benefit plans
(394)
-
(394)
(2,597)
-
(2,597)
Income tax relating to components of other comprehensive income
(3)
-
(3)
613
-
613
OTHER COMPREHENSIVE (LOSS)/INCOME
(397)
-
(397)
(1,984)
-
(1,984)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT
(631)
(424)
(1,055)
3,180
(384)
2,796
Earnings per share from continuing operations:
- basic
(0.95)p
7.0p
- diluted
(0.95)p
6.4p
As the group is loss making in the year under review the diluted earnings per share is the same as the basic earnings per share
Consolidated Statement of Changes in Equity
Year ended 31 March 2014
Issued
Share
Capital
'000s
Share
Premium
Account
'000s
Share
Option
Reserve
'000s
Retained
Earnings
'000s
Total
'000s
Balance as at 31 March 2012
1,300
68,874
526
12,136
82,836
Share options to be issued
-
-
45
-
45
Deferred tax on share options
-
-
(31)
-
(31)
Shares issued in period
89
2,370
-
-
2,459
Total comprehensive income for the period
-
-
-
2,796
2,796
Balance as at 31 March 2013
1,389
71,244
540
14,932
88,105
Share options to be issued
-
-
46
-
46
Deferred tax on share options
-
-
(82)
-
(82)
Total comprehensive loss for the period
-
-
-
(1,055)
(1,055)
Balance as at 31 March 2014
1,389
71,244
504
13,877
87,014
.
Consolidated Statement of Financial Position
Year ended 31 March 2014
31 March
2014
'000s
31 March
2013
'000s
NON-CURRENT ASSETS
Goodwill
75,796
75,796
Other intangible assets
1,102
1,412
Property, plant and equipment
22,291
17,685
Deferred tax asset
1,319
1,385
100,508
96,278
CURRENT ASSETS
Inventories
19,108
15,037
Trade and other receivables
34,260
30,213
Current tax assets
641
-
Other financial assets
499
-
Cash and cash equivalents
8,568
7,134
63,076
52,384
TOTAL ASSETS
163,584
148,662
CURRENT LIABILITIES
Trade and other payables
29,820
21,282
Borrowings
31,221
23,032
Other financial liabilities
499
-
Current tax liabilities
-
750
61,540
45,064
NON-CURRENT LIABILITIES
Borrowings
8,480
9,054
Accruals and deferred income
191
-
Deferred tax liabilities
2,686
2,899
Retirement benefit obligations
3,673
3,540
15,030
15,493
TOTAL LIABILITIES
76,570
60,557
NET ASSETS
87,014
88,105
EQUITY
Share capital
1,389
1,389
Share premium account
71,244
71,244
Share option reserve
504
540
Retained earnings
13,877
14,932
TOTAL EQUITY
87,014
88,105
Consolidated Cash Flow Statement
Year ended 31 March 2014
31 March
2014
'000s
31 March
2013
'000s
As restated
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss)/ profit before taxation
Finance costs
Finance income
Other finance income
Depreciation of property, plant and equipment
Amortisation of intangibles
(1,536)
1,602
-
59
2,275
352
6,260
1,560
-
(84)
1,992
233
Operating Cash Flow
(Increase)/Decrease in inventories
(Increase) in receivables
Pension contributions
Increase in payables
2,752
(4,071)
(4,047)
(320)
8,741
9,961
2,343
(5,533)
(187)
1,220
Cash generated from operations
Income taxes paid
Interest paid
3,055
(745)
(1,602)
7,804
(1,019)
(1,560)
Net cash from operating activities
708
5,225
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment
Purchase of intangible assets
Purchase of property, plant and equipment
22
(42)
(6,903)
32
(1,124)
(2,652)
Net cash used in investing activities
(6,923)
(3,744)
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in period
Additional loans
Additional finance leases
Repayment of loans
Additional / (Repayment of) Borrowings
Repayment of obligations under finance leases
-
1,120
517
(1,989)
8,053
(52)
2,459
4,866
-
(2,779)
(1,367)
(32)
Net cash used in financing activities
7,649
3,147
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
1,434
4,628
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
Net movement in cash and cash equivalents
7,134
1,434
2,506
4,628
Cash and cash equivalents at end of period
8,568
7,134
Cash and cash equivalents comprise:
Cash
Overdrafts
8,568
-
7,134
-
8,568
7,134
Notes to the Financial Statements
Year ended 31 March 2014
1. Segment reporting
Business segments
The divisional structure reflects the management teams in place and also ensures all aspects of trading activity have the specific focus they need in order to achieve our growth plans. Real Good Food Europe (RGFE) has been added for clarity.
12 months ended
31 March 2014
Napier
'000s
Garrett
'000s
Renshaw '000s
R&W
Scott'000s
Haydens
'000s
RGFE '000s
Continuing
Operations
Total
'000s
Sig-
nificantitems
'000s
Total
Group
'000s
Total Revenue
172,089
31,803
43,495
10,440
27,255
481
285,563
-
285,563
Revenue - Internal
(9,756)
(1,392)
(543)
(1,296)
-
-
(12,987)
-
(12,987)
External Revenue
162,333
30,411
42,952
9,144
27,255
481
272,576
-
272,576
Operating (Loss)/Profit before Head Office
(2,024)
1,169
4,398
66
109
(391)
3,327
(544)
2,783
Head Office and consolidation adjustments
-
-
-
-
-
-
(2,658)
-
(2,658)
Operating (Loss)/Profit
(2,024)
1,169
4,398
66
109
(391)
669
(544)
125
Net Finance Costs
(1,046)
(113)
(280)
(59)
(104)
-
(1,602)
-
(1,602)
Pension Finance Income
-
-
-
-
-
-
(59)
-
(59)
Profit/(loss) before tax
(3,070)
1,056
4,118
7
5
(391)
(992)
(544)
(1,536)
Tax
706
(243)
(947)
(1)
(1)
90
(396)
-
(396)
Unallocated Tax
-
-
-
-
-
-
1,154
120
1,274
Profit/(loss) after tax as per comprehensive statement of income
(2,364)
813
3,171
6
4
(301)
(234)
(424)
(658)
Sales between segments are charged at prevailing market rates.
There are no customers that contributed more than 10% of the Group's external sales from continuing operations for the year ended 31 March 2014
2. Significant items
31 March
2014
'000s
31 March
2013
'000s
Management restructuring costs
(544)
(395)
Group refinancing costs
-
(110)
(544)
(505)
Taxation credit on significant items
120
121
(424)
(384)
During the year the Group incurred a number of significant costs as detailed above. The management restructuring costs reflect a number of fundamental reorganisations within Garrett Ingredients and Renshaw during the period. Refinancing costs, last year relate to "break costs" associated with the refinancing exercise we completed with PNC, our existing provider in December 2012.
3. Taxation
31 March
2014
'000s
31 March
2013
'000s
Current tax
UK Current tax on profit of the period
(356)
1,404
UK Current tax on significant items
(120)
(121)
Adjustments in respect of prior years
(170)
(59)
Total current tax
(646)
1,224
Deferred tax
Deferred tax charge re pension scheme
52
58
Origination and reversal of timing differences
53
114
Adjustments in respect of prior years
(6)
49
Adjustment in respect of change in deferred tax rate
(331)
(99)
Total deferred tax
(232)
(122)
Tax on (loss) / profit on ordinary activities
(878)
1,346
31 March
2014
'000s
31 March
2013
'000s
Tax reconciliation
(Loss)/profit per accounts before taxation
(1,536)
6,126
Tax on (Loss)/profit on ordinary activities at standard CT rate of 23% (2013 - 24%)
(354)
1,470
Expenses not deductible for tax purposes
21
48
Additional deduction for R&D expenditure
(17)
(18)
Share option relief
-
(39)
Losses carried back at higher marginal rate
(20)
-
Adjustment in respect of change in deferred tax rate
(331)
(102)
Adjustments to tax in respect of prior years
(177)
(13)
Tax charge for the period
(878)
1,346
4. Earnings per share
Basic earnings per share
Basic earnings per share is calculated on the basis of dividing the profit/(loss) attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the year.
31 March
2014
'000s Continuing operations
31 March
2013
'000s Continuing operations
(Loss)/Earnings after tax attributable to ordinary shareholders (000's)
(658)
4,780
Weighted average number of shares in issue (000's)
69,466
68,405
Basic earnings per share
(0.95)p
7.0p
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares. Potential dilutive ordinary shares arise from share options and warrants. For these, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the exercise price attached to outstanding share options. Thus the total potential dilutive weighted average number of shares considers the number of shares that would have been issued assuming the exercise of the share options.
31 March
2014
'000s Continuing operations
31 March
2013
'000s Continuing operations
Earnings after tax attributable to ordinary shareholders ('000s)
(658)
4,7804
Total potential weighted average number of shares in issue (000's)
75,575
74,111
Diluted earnings per share*
(0.95)p
6.4p
Adjusted earnings per share
An adjusted earnings per share and a diluted adjusted earnings per share, which exclude significant items, have also been calculated as in the opinion of the Board this allows shareholders to gain a clearer understanding of the trading performance of the Group.
31 March
2014
'000s Continuing operations
31 March
2013
'000s Continuing operations
Earnings after tax attributable to ordinary shareholders ('000s)
(658)
4,780
Add back significant items (note 2)
544
505
Add back tax on significant items
(120)
(121)
Adjusted earnings after tax attributable to ordinary shareholders ('000s)
(234)
5,164
Weighted average number of shares in issue (000's)
69,466
68,405
Basic earnings per share
(0.34)p
7.50p
Total potential weighted average number of shares in issue (000's)
75,579
74,111
Basic diluted earnings per share*
(0.34)p
7.0p
* As the Group is loss making in the year under review the diluted earnings per share is the same as basic earnings per share.
5. Goodwill
Group
'000s
Cost
Carried forward 31 March 2013
75,796
Carried forward 31 March 2014
75,796
The Goodwill originally arose on the acquisition of Napier Brown Foods Ltd and its subsidiary RenshawNapier Ltd (formerly Napier Brown & Company Ltd) in 2005 in which, then as now, the trading activity of Renshaw, R&W Scott, Napier Brown and Garrett Ingredients resides. They all are part of one legal entity and were acquired as such at the time without any separate evaluation or consideration.
The strategy in recent years has been to establish each of these as separate trading businesses, "divisions", with their own management teams and increasing autonomy leading in the near future to the likely re-establishment of them as separate Limited companies.
The board believe the time is now right to consider them as separate entities and allocate the Goodwill across the divisions based on an assessment of their individual ongoing cash generating performance.
An assessment of the underlying cash generation, based on current EBITDA performance less ongoing maintenance capex, has been used to determine the future cash generation profile for each of the divisions with the exception of Napier Brown where the ongoing performance has been assessed setting aside the effect of the dispute with BS which affects the "sugar year" October 2013 to September 2014. In line with the established impairment tests logic this profile has been used to establish the Net Present Value of the individual future income streams.
The board is keen to point out the outcome reflects the specific dynamics and nature of each division and that the respective values should not be viewed as a "judgement" on each. All the divisions have exciting growth plans that are being implemented and all will contribute to the future success of the Group.
31 March
2014
'000s
31 March
2013
'000s
Sugar and Bakery Ingredients divisions
-
75,796
Napier Brown
12,000
-
Garrett Ingredients
5,000
-
Renshaw
57,796
-
R&W Scott
1,000
-
Carried forward 31 March 2014
75,796
75,796
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be impaired.
The recoverable amounts of the Cash Generating Units are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates and expected changes to selling prices and direct costs.
The rate used to discount the forecast cash flows is the Group's pre-tax weighted average cost of capital of 6.67% (2013 - 4.88%). A period of 19 years has been applied to the projected cashflows, based on the logic above assuming no annual growth, as the Directors used this period to assess the viability of the acquisition when the business was acquired in 2005. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. Using these parameters and allowing for disposal income at the end of this timescale the recoverable amounts exceed the carrying value by 29.8 million. Actual EBITDA results this year were in line, with the exception of Napier Brown, with the projections used in the new divisional assessment. This year's results overall were not in line with the assumptions used for last year's impairment as a result of the BS dispute which has been commented on in the Chairman's statement and the Napier Brown and Garrett Ingredients business reviews.
An increase in the Group's weighted average cost of capital to above 10.5% (2013 17.11%) would cause the Board to impair the carrying value of goodwill.
6. Borrowings and capital management
31 March 2014
Group
'000s
31 March 2014
Company
'000s
31 March 2013
Group
'000s
31 March 2013
Company
'000s
Unsecured borrowings at amortised cost
Loan notes
2,774
-
2,774
-
Secured borrowings at amortised cost
Bank term loans
7,200
7,200
8,103
8,103
Revolving credit facilities
29,262
-
21,209
-
Hire purchase
465
-
-
-
39,701
7,200
32,086
8,103
Amounts due for settlement within 12 months
31,221
1,836
23,032
1,823
Amounts due for settlement after 12 months
8,480
5,364
9,054
6,280
39,701
7,200
32,086
8,103
7. Pensions arrangements
The group operates one defined benefits scheme which was closed to new members in 2000. As reported last year an extension to the existing recovery plan has been was agreed with "base" contribution levels for the year ended 31 March 2014 of 264k with annual increments of 3% for the following two years. In addition to this the group has agreed to make an additional, one off, contribution of 166k which is payable at the rate of 11k per month starting from November 2013. The group is confident this will continue to meet the trustees' needs and the pension regulator's guidance.
For the purposes of IAS 19 the data provided for the 1 April 2009 actuarial valuation has been approximately updated to reflect liabilities on the accounting basis at 31 March 2014. This has resulted in a deficit in the scheme of 3,673,000.
It is the policy of the Group to recognise all actuarial gains and losses in the year in which they occur in the statement of comprehensive income.
Present values of defined benefit obligations, fair value of assets and deficit
31 March
2014
'000s
31 March
2013
'000s
31 March
2012
'000s
31 December
2010
'000s
31 December
2009
'000s
Present value of defined benefit obligation
19,033
19,153
17,085
16,212
15,945
Fair value of plan assets
(15,360)
(15,613)
(16,005)
(16,308)
(15,363)
Deficit/(surplus) in plan
3,673
3,540
1,080
(96)
582
Amount not recognised in accordance with
IAS 19 paragraph 58b
-
-
-
96
-
Gross amount recognised
3,673
3,540
1,080
-
582
Deferred tax at 20% (2013 - 23%)
(735)
(814)
(259)
-
(163)
Net liability
2,938
2,726
821
-
419
Reconciliation of opening and closing balances of the present value of the defined benefit obligations
31 March
2014
'000s
31 March
2013
'000s
Defined benefit obligation at start of period
19,153
17,085
Interest cost
879
816
Actuarial losses
12
2,805
Benefits paid, death in service insurance premiums, expenses and past service costs
(1,011)
(1,553)
Defined benefit obligation at end of period
19,033
19,153
Reconciliation of opening and closing balances of the fair value of plan assets
31 March
2014
'000s
31 March
2013
'000s
Fair value of scheme assets at start of the period
15,613
16,005
Expected return on scheme assets
720
766
Actuarial (losses)/gains
(382)
208
Contributions paid by the Group
320
187
Benefits paid, death in service insurance premiums and expenses
(911)
(1,553)
Fair value of scheme assets at end of the period
15,360
15,613
The actual return on the scheme assets over the period ended 31 March 2014 was 338,000 (2013 - 974,000).
Total expense recognised in the Statement of Comprehensive Income within other finance income
31 March
2014
'000s
31 March
2013
'000s
Interest on liabilities
879
816
Expected return on scheme assets
(720)
(766)
Past service cost
(100)
-
Total income
59
50
Statement of recognised income and expenses
31 March
2014
'000s
31 March
2013
'000s
Actual return on assets less interest
(382)
208
Experience gains and losses arising on the scheme liabilities: loss
-
(1,923)
Actuarial gains /(losses) arising from changes in demographic assumptions
352
(26)
Actuarial gains / (losses) arising from changes in financial assumptions
(364)
(856)
Total amount recognised in Statement of Other Comprehensive Income
(394)
(2,597)
Assets
31 March
2014
'000s
31 March
2013
'000s
31 March
2012
'000s
UK equity
1,977
869
483
Overseas equity
5,141
4,058
5,107
Absolute return fund
3,929
3,444
-
Bonds
1,798
2,588
2,260
Gilts
645
406
2,655
Property
301
390
434
Cash
748
1,889
1,041
Alternative assets
821
1,969
4,025
Total assets
15,360
15,613
16,005
None of the fair values of the assets shown above include any of the Group's own financial instruments or any property occupied by, or other assets used by, the Group.
Assumptions
31 March
2014
% per annum
31 March
2013
% per annum
31 March
2012
% per annum
31 December
2010
% per annum
Inflation
3.30
3.20
2.90
3.10
Salary increases
-
-
-
-
Rate of discount
4.65
4.70
5.00
5.70
Allowance for pension in payment increases of RPI or 5% p.a. if less
3.20
3.10
2.80
3.10
Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less
2.20
1.90
1.90
3.10
Allowance for commutation of pension for cash at retirement
75% of max allowance
75% of max allowance
75% of max allowance
75% of max allowance
Assumption
Change in assumption
Change in liability
Discount rate
Increase/decrease of 0.5% p.a.
Decrease/increase by 7.0%
Rate of inflation
Increase/decrease of 0.5% p.a.
Increase/decrease by 2.0%
Rate of mortality
1 year increase in life expectancy
Increase by 4.0%
The mortality assumptions adopted at 31 March 2014 imply the following life expectancies:
Male retiring at age 65 in 2014
21.6 years
Female retiring at age 65 in 2014
23.8 years
Male retiring at age 65 in 2033
22.6 years
Female retiring at age 65 in 2033
25.0 years
The long term expected rate of return on cash is determined by reference to UK long dated government bond yields at the balance sheet date. The long term expected return on bonds is determined by reference to UK long dated government and corporate bond yields at the balance sheet date. The long term expected rate of return on equities is based on the rate of return on bonds with an allowance for outperformance.
31 March
2014
'000s
31 March
2013
'000s
31 March
2012
'000s
31 December
2010
'000s
31 December
2009
'000s
Fair value of assets
15,360
15,613
16,005
16,308
15,363
Defined benefit obligation
(19,033)
(19,153)
(17,085)
(16,212)
(15,945)
Surplus/(deficit) in scheme
(3,673)
(3,540)
(1,080)
96
(582)
Experience adjustment on scheme assets
(382)
208
(984)
578
113
Experience adjustment on scheme liabilities
-
(1,923)
(46)
387
18
Audit Status
The preliminary announcement has been prepared under the historical cost convention, on a going concern basis and in accordance with the recognition and measurement principles of International Financial Reporting Standards and IFRIC interpretations as adapted by the EU ("IFRS"), but this announcement does not in itself contain sufficient information to comply fully with IFRS.
The directors have considered the working capital requirements of the group for a period of one year from the date of this announcement and believe that the going concern basis is appropriate due to the current cash balance and future prospects.
The preliminary announcement has been prepared on the basis of the same accounting policies as published in the audited financial statements of the group for the year ended 31 March 2014 and the accounting policies adopted in the audited financial statements of the group for the period ended 31 March 2014.
The financial information in this announcement does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The audited statutory financial statements for the period ended 31 March 2014, which have not yet been delivered to The Registrar of Companies, contain an unqualified audit report, do not include a reference to any matters to which the auditor might draw attention by way of emphasis and do not contain a statement under section 498(2) or 493 (3) of the Companies Act 2006.
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR RBMPTMBAJBJI
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