Final Results

RNS Number : 7101G

Real Good Food Company Plc (The)

03 July 2012

 



The Real Good Food Company plc (AIM: RGD)

Results for the 15 months to 31 March 2012

The Real Good Food Company plc ("RGFC" or the "Group"), owns the largest independent non-refining distributor of sugar in Europe (Napier Brown), supplies bakery ingredients (Renshaw and R&W Scott ) and manufactures patisserie and desserts (Haydens Bakery)

HIGHLIGHTS

	15 months to		12 months to
	31 March 2012		December 2011	December 2010
	£'000s		£'000s	£'000s
Revenue	305,529		249,040	200,104
EBITDA	9,185		9,112	5,635
EPS
Basic adjusted	6.2p		7.0p	2.8p
Diluted adjusted	5.7p		6.5p	2.6p
Working Capital (Fixed Assets/Stock/Trade Debtors  &Trade Creditors)	38,750		36,708	29,667
Net Borrowings (Incl Cash)	28,655		25,853	22,636
Net Debt/EBITDA *Based on 12 months to March 2012	3.3*		2.8	4.0

§  Strong performance driven by focus on brand development and by driving sales growth

§  EBITDA up 62% to £9.1m in 12 months to December 2011 (2010: £5.6m)  -  performance in 3 Months to 31 March 2012 reflects usual seasonal pattern of trading in quarter one (January to March) 

§  Key trading divisions of Napier Brown, Garrett and Renshaw all increased their EBITDA performance year on year

§  Significant improvement in EPS adjusted (fully diluted excluding significant items) at 5.7p for 15 months to 31 March 2012 up 119% on 2.6p for 12 months to  31 December 2010

§  Significant improvement in Net Debt / EBITDA ratio, down from 4.0 at 31 December 2010 to 2.8 at 31 December 2011. (March 2012 reflects normal seasonality profile)  

§  Net borrowings of £28.7m at 31 March 2012 are up against 2010 driven primarily by the increased value in the supply chain following the impact mainly of higher sugar costs, but still down on position at 31 March 2011

Pieter Totte, RGFC Executive Chairman, commented:

"In 2011 we delivered on our commitment to return to growth in sales and profitability. We are now embarking on an exciting period designed to transform the scale of the Group over the next three years. This strategy is rooted in robust plans produced by each individual business and we have restructured the Group to support these."

3 July 2012

ENQUIRIES:

Real Good Food
Pieter Totté, Chairman	Tel: [phone]
Mike McDonough, Finance Director	Tel: [phone]
Shore Capital & Corporate	Tel: [phone]
Stephane Auton / Patrick Castle
Cubitt Consulting	Tel: [phone]
Gareth David

Change of Accounting Reference Date

In April 2011 the board announced it was moving its reference date from 31 December to 31 March to better align its financial reporting with its trading seasonality. The October to December period being especially busy generating most of the year's operating profits (approx 58% of EBITDA is generated in 2011 calendar).

Prior to this change the group was faced with preparing annual budgets and market updates for the current year before the key trading period results were known. Whilst we have had a good track record in meeting expectations over the last two to three years the board believe this change will improve the quality and accuracy of reporting in the future.

To help retain transparency where relevant the 2011 calendar year results are presented in this report alongside the 15 Months to 31 March 2012 to aid comparison with the prior year. 

Impact of Change

The Jan - March period is the Group's "quietest" trading period with EBITDA typically around the break even level driven by the combination of the lowest sales levels in the year in this quarter with a relatively flat overhead base through the year.

This is evident in the trading comparatives with sales of £305.5m for the 15 Months to 31 March 2012, £56.5m higher than the 12 months ended 31 Dec 2011 (£249.0m) but profitability flat with EBITDA at £9.2m and £9.1m respectively. Given this, the key comparatives and commentary in this report will focus on comparing like with like, with performance for the full year 2011 compared with 2010 (calendar) to ensure that the underlying year on year trading is visible.

CHAIRMAN'S STATEMENT

Overview

I am very pleased with our achievements during 2011: we have delivered significant growth in both sales and EBITDA as well as setting out a clear course for how we intend to build the business over the next three years.

All divisions recorded sales growth and Group EBITDA increased to £9.1m in 2011, an increase of £3.5m on 2010. A significant proportion of this came from Napier Brown as we responded successfully to the market changes but the overall profit performance was supported also by strong results from Renshaw and Garrett Ingredients. Overall profits for the 15 month period to 31 March 2012 were in line with expectations.

Working capital levels generally have been higher during 2011 as compared to 2010 as a result of both supporting our growth plans and reflecting higher commodity prices, particularly in sugar. As at 31 March 2012 working capital of £38.8m was up 8% on 31 March 2011 (£35.9m) but well within management expectations.

Net Debt as at 31 March 2012 was £28.7m (31 March 2011: £29.4m) in line with expectations with Net Debt/EBITDA levels reducing significantly from 4.0 in 2010 to 2.8 at 31 December 2011.

The changes in the sugar market following the Sugar Regime reform period now give Napier Brown a very clear strategic focus. Customers in the EU are looking for alternative sources of sugar to provide competition to the reducing number of big EU beet producers. With our experience in sugar sourcing and our well established routes to market we are well placed to provide this.

In this respect we are delighted that Omnicane, the biggest sugar producer in Mauritius, has decided to take a significant equity stake in RGFC. We have known them for many years and following their investment in the Company we have held positive discussions which lead us to believe that there are many mutual benefits to be realised from greater cooperation.

Omnicane, with its world class model of sugar cane refining combined with electricity co-generation, is a low cost producer of cane sugar. We believe that this model of refining cane sugar in the source country is the right one, not only for Mauritius but also for other cane producers across the world and we intend to work in partnership with Omnicane to develop this. Omnicane can provide the experience and expertise in cane refining and Napier Brown can provide the routes to market, particularly in Europe where customers want and need new supply sources.

Garrett Ingredients had an extremely successful period benefiting from the management focus we have given it and following a similar strategy to Napier Brown in widening its supply sources within dairy products. Its growth prospects come from developing both its product range and its customer base.

Renshaw has benefited from the growing interest in homebaking both in the UK and internationally and this growth has prompted us to review our vision for the brand. There is an exciting opportunity to broaden its focus from its original strength in the specialist crafting sector in the UK to a much wider consumer audience both in the UK and internationally. We see the web as a major facilitator for this.

Just as we have seen benefits separating Garrett Ingredients from Napier Brown and running it as a stand alone business unit, we have started the same process with R&W Scott at Carluke. By separating it from Renshaw and investing in local management we have given its brand and product portfolios renewed focus which should begin to pay dividends during the course of this year.

At Haydens, 2011 saw the opening of the Hopton Distribution site which both created a new business stream but also critically freed up space for us to invest in the bakery. We now have three business streams, ambient, chilled and frozen, and a broadening customer base particularly in foodservice.

We have now implemented the best structure for the Group to facilitate our stated aim of doubling sales over the next three years. Whilst each division is responsible for its growth plans, we now have, in addition to the PLC board, a Group Executive Board where individual Directors have group responsibilities across key areas such as HR, IT, Compliance & Governance, Operations and Marketing  where it is clear cross divisional opportunities can be delivered.

Having the right people in the right roles is essential and we have to ensure that each business is resourced fully and effectively. The Group will help achieve this as well as ensuring consistent and high quality employment practices are observed across all our sites.

Our ambitious growth plans present some exciting challenges operationally and will require investment in new capacity. Again, at Group level we can assess the priorities and help smooth implementation of these projects to support the commercial plans.

Finally, we have discovered over the past two years some hidden gems in the brands we own and it is right that the Group provides quality support and direction in managing these assets. The recent new products have given us some indication of the potential for the Renshaw brand and we now have a significantly enhanced vision of its potential.

We believe R&W Scott can also be extended out from its core jam heritage. Meanwhile our revitalisation of the Whitworths brand in sugar has been enthusiastically greeted by the retail trade supporting as it does Napier Brown's overall strategy of providing customers with a differentiated supply option.

Outlook

In 2011 we delivered on our commitment to return to growth in sales and profitability. We are now embarking on an exciting period designed to transform the scale of the Group over the next three years. This strategy is rooted in robust plans produced by each individual business and we have restructured the Group to support these.

While the strategy is not dependent on any single business, we are fortunate to have the support of Omnicane as a major shareholder to work with us on our plans for Napier Brown, our biggest business. We also believe that Omnicane can also help us with our export ambitions.

I would like to take this opportunity to thank colleagues across all the sites in all our businesses for their enthusiasm and support without which we would not have achieved the progress I have reported.

Pieter Totté

Chairman

3 July 2012

DIVISIONAL REVIEW

Napier Brown (Sugar)

From its facility at Normanton, near Leeds, Napier Brown  sources sugar from the UK, mainland Europe and worldwide supplying customers in the UK across all market sectors; manufacturing, retail, wholesale and foodservice

	15 months ended 31 March 2012	12 months ended 31 December 2011	12 months ended 31 December 2010
	£'000s	£'000s	£'000s
Revenue¹	176,885	143,675	108,400
EBITDA	4,383	3,749	409
Operating profit²	3,703	3,220	(80)
Operating profit %	2.1	2.2	-

¹ Excluding inter-company trading

² Normalised operating profit before interest, significant items and central costs

2011/12 Review

2011 saw a dramatic change in the balance of supply and demand within the EU sugar market reflecting changes in the world market. The EU beet sugar production quotas and reduced import availability due to volatile world prices and currency fluctuations, produced shortages which in the UK were exacerbated by a significant failure of part of the beet crop. The shortage in the supply chain led to sugar prices increasing by approx. 40% at the start of 2011 allowing the market in general to return to more normal margins following the unsustainable levels triggered by regime change which affected profitability in 2008 through to 2010.

Revenue at £143.7m for 2011 was up 32.6% on 2010 with volume growth accounting for 5.2% of this with the remainder being driven by passing on increased sugar costs. EBITDA at £3.7M for 2011 reflects the recovery in margins over 2010. For the 15 month period both revenue and EBITDA reflect the usual lower activity in the January to March period in line with expectations.

The business had to move quickly to supplement its traditional supply routes in order to meet customer demands. This required us to buy sugar from a number of new sources all around the world: seven new countries in all. This exercise was logistically complex leading to an increase in costs and working capital but we were, at the same time, able to benefit from increased selling prices. More importantly the experience gained from handling these sugars and the new relationships we built up with sugar producers will stand us in good stead going forward.

Market prices remained high for the new contract season from October 2011 as supplies continued to be tight. Our contracted volumes increased as more major manufacturing customers decided to increase their number of suppliers and include Napier Brown within their supply portfolio. This combination of higher volumes and higher market prices led to significant revenue increases year on year.

Margins returned to more sustainable levels within the sector though delays in retail price increases and continued competition within the retail arena meant that margins remained depressed in this sector. The need to buy in sugars from a range of new sources increased working capital requirements.

Current Trading

Sales of retail sugars have improved over the past few months as the marketing plans we have been working on have begun to bear fruit. In retail we now have a very distinctive branded offering targeted at all retailers as opposed to relying on one or two price driven private label contracts.

A new marketing department has been set up and a brand manager, a category manager and a new account manager recruited. Brand and PR agencies have been appointed to revitalise the Whitworths brand and bring new ranges to the market. The new 'Whitworths for Baking' range of sugars in innovative, re-sealable pouches has gained good listings in major multiples and early orders are strong.

Meanwhile industrial sales have also been buoyant as we have increased our market share with strategic partners who recognise our ability to supply sugar through new routes thus providing security of supply, best-in-class service and competitive pricing.

Outlook

The business has embarked on a number of new initiatives to develop its strategy. 'Multi-sourcing' will be central to our business proposition and customers are keen for us to continue to offer alternative supply options to the major EU beet sugar producers. In this respect we continue to develop relationships with new supply sources and are planning to invest in an infrastructure which can handle a range of sugars from different sources efficiently and cost effectively.

We have already begun contracting sales for the new season from October and have gained a number of new customers. Meanwhile our new Whitworths branded ranges has enabled us to extend our customer base in retail while we continue to work on further innovations and new products for 2013.

Garrett Ingredients (Sugar & Dairy)

Based at Thornbury, near Bristol, Garrett sources dairy and other specialist food ingredients from across the UK, Eire and continental Europe for supply (along with sugar sourced from Napier Brown) to large, medium and small food manufacturing businesses across the UK.

	15 months ended 31 March 2012	12 months ended 31 December 2011	12 months ended 31 December 2010
	£'000s	£'000s	£'000s
Revenue¹	38,181	30,776	25,584
EBITDA	3,231	2,747	1,182
Operating profit²	3,231	2,747	1,182
Operating profit %	8.5	8.9	4.4

¹ Excluding inter-company trading

² Normalised operating profit before interest, significant items and central costs

2011/12 Review

Turnover increased during 2011 by 20.3% to £30.8m driven by a 5.3% volume increase in dairy ingredients and higher commodity prices. Much of the focus during the year was ensuring product availability by increasing the supplier base in dairy powders, butters and cheese from the UK, Ireland and continental Europe. In addition two new distributor partnerships in the UK were signed with Friesland Campina for sweet condensed milk and Cargill for dextrose.

A high proportion of the division's sugar sales are 'spot' and sales prices increased during the early part of the year as sugar supplies were short due to the UK crop difficulties and, as with the Napier experience, this also allowed the business to rebuild sugar margins to "normal" levels following the upheavals during regime change. Garretts had the same experience in sugar as Napier with margins being restored to more sustainable levels as seen in the EBITDA performance for 2011 of £2.7m. The 15 month period captures the usually less profitable January to March period.

Current Trading

Garrett's historic strength with small food manufacturers is now being complemented with a growing customer base amongst larger manufacturers where dairy and sugar may not be a core ingredient and where Garrett can offer excellent service and security of supply. Dairy markets have been relatively quiet recently while sugar sales have continued to be strong.

The Sunshine Ice Cream mix brand has been relaunched for summer 2012 while work is underway with a number of customers to produce bespoke added value blends utilising the mixing plant at the R&W Scott site in Carluke.

The sales operation is being restructured following the appointment of Paul Carlisle as Sales Director and the setting up of a dedicated telesales operation at the head office in Thornbury. This is being supported by investment in IT systems and associated training.

Outlook

With the UK Dairy supply base consolidating, plans are in place to increase sourcing from further afield and open up trading channels with manufacturers and supply partners from continental Europe and beyond.  An integral part of the three year plan is to increase the supply partner base, either as simply a customer for the supplier or as a dedicated distributor for the manufacturer's ingredients to the UK and Irish food manufacturing market.

Sales growth will come from both increasing the product range and the breadth of the customer base. Negotiations are underway on several potential new distributorships and supply agreements focusing on areas such as whey powder, where the number of UK manufacturers has decreased leading to reduced availability.

Renshaw (Bakery Ingredients)

Operating out of its Liverpool facility Renshaw is a leading manufacturer of high quality food ingredients, primarily to the baking sector both in the UK and for export with a strong reputation for quality, consistency and innovation.

	15 months ended 31 March 2012	12 months ended 31 December 2011	12 months ended 31 December 2010
	£'000s	£'000s	£'000s
Revenue¹	46,368	38,624	34,325
EBITDA	5,816	5,966	5,437
Operating profit²	4,908	5,222	4,767
Operating profit %	10.6	13.5	13.9

¹ Excluding inter-company trading

² Normalised operating profit before interest, significant items and central costs.

2011/12 Review

2011 has seen another successful year with revenue growing by 12.5% to £38.6m (2010 £34.3m) driven by both domestic and international sales with EBITDA at £5.9m also up on 2010 (9.7%). The reported period (15 months to March 2012) appears to buck this trend, however, Renshaw is an exceptionally seasonal business with the bulk of its trading profits generated in the last few months of the calendar year. Quarter one 2012 has generated a small loss at EBITDA level, in line with our expectations, seasonality and prior years.

In the UK the Renshaw brand extended its presence in both the retail and craft sectors while export sales continued to show growth both in the core business in the USA as well as other markets such as Scandinavia. This was recognised when The Liverpool Daily Post awarded Renshaw the title 'Regional Exporter of the Year' for 2011.

Retailers and the media are maintaining a strong focus on both homebaking and cake decorating. Renshaw has sought to capitalise on this with a range of new innovative products that have begun to gain new distribution in both mainstream and specialist craft retailers.

Sales growth led to the Liverpool manufacturing site producing record tonnage during the year, including 76 new retail products. This was achieved through a combination of 24 hour working and a rationalisation of shift patterns to improve continuity and capacity. Investment in new extruding and packing equipment was also required to meet the demand.

Current Trading

Sales have remained strong both domestically and internationally and the business has invested in people to manage this growth across all the sales channels.

The Commercial team has been restructured to focus on the three main channels of Industrial, Consumer and Export while plans are in place to develop a new e-commerce channel. The Development team has been upgraded with new appointments including a focus on packaging. In addition a new dedicated Operations Director for the Liverpool site has recently joined the business.

Outlook

It is clear that the homebaking trends which are being experienced in the UK are being replicated in many other countries and research has begun into identifying the areas of greatest potential. Our vision is to develop the Renshaw brand globally as an expert in cake decorating and we see the creation of a branded e-commerce sales channel as central to this.

R&W Scott (Bakery Ingredients)

R&W Scott at its Carluke facility south-east of Glasgow produces chocolate coatings and sauces, jams and dry powder blends for the industrial, retail, wholesale and foodservice markets.

	15 months ended 31 March 2012	12 months ended 31 December 2011	12 months ended 31 December 2010
	£'000s	£'000s	£'000s
Revenue¹	14,437	11,791	8,468
EBITDA	(1,044)	(829)	18
Operating profit²	(1,338)	(1057)	(192)
Operating profit %	(9.3)	(9.0)	(2.3)

¹ Excluding inter-company trading

² Normalised operating profit before interest, significant items and central costs

2011/12 Review

2011 proved to be a tough year for the business which incurred significant material cost increases which were not being recovered in sales price increases until late in the year. As a consequence of the delay in passing on costs and due to  production inefficiences on a changing sales mix EBITDA for 2011 fell to a loss of (£0.8M) over the previous year with the 15 month period presenting a similar picture whilst underlying volumes were static against the prior year.

In order to address this the Carluke site was established as a separate trading division from Renshaw during the latter half  of 2011, under its old trading name R&W Scott, in order to bring more commercial focus to its key product areas of chocolate coatings, sauces, jams and dry powder blends.

2011 saw overall volumes at the site increase to 7,400 tonnes helped by the re-siting of the dry powder mix from Napier Brown in Normanton. To support this volume growth, further capital investment was made in the site in the areas of malted filling capacity, refining capability and retail packing as well as upgrades from an environmental and health and safety perspective.

Current trading

I am pleased to report that the current year has started strongly and has returned to profitability. Delivered margin (gross profit after distribution before overheads) aspirations for 2012/13 are to move from the 12% achieved in 2011/12 to above 20%.  Run rate in the first quarter is in line with plan due to improved pricing, increased output of higher value added lines and focus on improvement initiatives.  Business development plans are in place to continue to drive margin improvement and return EBITDA back to positive.

Outlook

The vision for R&W Scott is to transform the Carluke site from being a manufacturer of largely commodity products to an added value, innovative and commercial business utilising the site's considerable brand heritage, skills and capabilities. 

A new site based management team has been established to bring focus to the business across all sales channels; industrial, foodservice and retail. Using our experience to create new recipes, made in innovative ways and that have lifestyle appeal, is the key to brand development, improved product offerings and to delivering growth.  The first example of this is the revitalisation of the R&W Scott brand with an exciting new range of naturally sweet retail jams due to appear in supermarkets later this year.

The business plans to increase turnover to £25m within 3 years and the site has both the capacity and capability to deliver this.  Product development in tune with the needs of the consumer today will drive the business to be a brand led enterprise supported by investment in facilities, plant and new product support.

Haydens Bakeries (Bakery Division)

From its site in Devizes, Wiltshire Haydens Bakeries produces an extensive range of high added value, hand finished, ambient, chilled and frozen patisserie and dessert products to retail and foodservice customers. Through its Hopton Distribution subsidiary, it also consolidates distribution of bakery products from other manufacturers to Waitrose.

	15 months ended 31 March 2012	12 months ended 31 December 2011	12 months ended 31 December 2010
	£'000s	£'000s	£'000s
Revenue¹	29,658	24,184	23,327
EBITDA	(604)	(398)	415
Operating profit²	(1,333)	(961)	(238)
Operating profit %	(4.5)	(4.0)	(1.0)

¹ Including inter-company trading

² Normalised operating profit before interest, significant items and central costs

2011/12 Review

As reported previously Haydens had a difficult year in 2011 on two fronts. Significant material cost increases which were not reflected in sales price increases until quarter four and the factory development started later than planned preventing management from delivering the cost reduction opportunities from production efficiencies and improved material usage.

Revenue growth of 3.7% in 2011 was not sufficient to offset the combined impact of these pressure points resulting in EBITDA dropping to a loss (£0.4m) in 2011 with the trend largely the same for the 15 month period.

Commercially the business continued to thrive with over thirty new products launched focusing on the bakery's core processes. These new products included premium dessert products for the 'Heston' brand in Waitrose through to individually packaged Danish products and were developed under the supervision of Executive Chef, Ross Sneddon who has recently been awarded the honour of Master Chef-Patisserie.  New formats of Haydens' high quality products are part of the division's strategy to broaden its exposure to new customer channels such as impulse, convenience and foodservice.

The new Distribution Centre for Waitrose opened in April 2011 and this has enabled the 3 year bakery modernisation programme to begin with blast chilling and freezing capability planned to be in place by mid-2012. These changes are critical to delivering production cost and material usage efficiencies as well as reaching new sales channels. Meanwhile there has also been investment in tart and pie capacity required to meet growing demand.

Current Trading

There continues to be strong demand for the Company's added value products, with over 15 new patisserie and dessert launches in the late spring of this year. Additionally, new food service products were launched in line with Hayden's strategy to develop the full potential in this sector.

In the immediate future, the focus is on increasing efficiencies and reducing costs through the implementation of the factory development programme, delayed from last year. This is now live and stage 1 benefits should start to materialise from the 3^rd quarter of this year.

Outlook

The division has a clear strategic plan to focus its new product development in its areas of expertise and broaden its customer base by exploiting its quality credentials across a range of trade channels. The capability to utilise ambient, chilled and frozen supply chains is central to this.

The factory development programme is being delivered by a new highly motivated Operations team, led by newly appointed John Larsen. The team is committed to delivering significant return on this investment within the current financial year. This plan, coupled with aspirations for strong sales growth in the second half of the year, is providing the management with reason for optimism.

FINANCE DIRECTOR'S REPORT

Accounting reference date

As commented on at the start of this report, the change in the accounting reference date will improve the Group's budgeting and forecasting routines, and consequently in providing stakeholders with commentary and trading updates.  At this time, however, we "tag on" our lowest trading quarter to our normal twelve month period creating some "noise" around understanding the underlying performance and trend. In order to overcome this, emphasis in the commentary is placed on comparatives with like for like "calendar" performance for 2011 versus 2010. Additional commentary on the 31 March 2012 position is included where appropriate.

Revenue

Group revenue from continuing operations for the 15 months to 31 March 2012 was £305.5m 2011 (Jan to Dec) at £249.0m, on a like for like basis was approx 25% up (£48.9M) on 2010 at £200.1m. Of this £48.9m year on year increase, approximately 80% (£39.4m) is from the Napier & Garretts businesses with £30.2m of this increase "value driven", reflecting the increased commodity costs, primarily sugar, and passed on in sales prices to customers.

Overall on a like-for-like basis the Group grew in volume terms by 5.3% in 2011.

Key Comparatives (Continuing Operations excluding Significant items)	15 months ended 31 March 2012	12 months ended 31 December 2011	12 months ended 31 December 2010
	£'000s	£'000s	£'000s
Revenue	305,529	249,040	200,104
Gross Profit	39,626	33,472	23,879
Delivered Margin (Gross Profit after Distribution costs)	26,617	22,887	15,826
EBITDA	9,185	9,112	5,637
Operating profit (EBITDA less Depn)	6,564	7,041	3,609
Operating profit %	2.1%	2.8%	1.8%
PBT (After Financing & Pension costs)	4,910	5,737	2,343

Margins

Delivered Margin for the 15 month period was £26.6m resulting in EBITDA of £9.2m with 2011 calendar year at £22.9m up 44.6% on 2010 (£15.8m). This increase is a result, primarily, of trading margins in sugar returning to more normal sustainable levels following the upheavals in the Sugar Regime that adversely affected profitability from 2008 through 2010.

Profit before Tax and Interest

Overall profits for the 15 month period and 2011 calendar year were in line with expectations driven by the recovery in Sugar in Napier and Garretts.

Financing Costs

Financing costs for the 15 months at £1.9M were in line with the 2011 "run rate" of £1.5m (2010 £1.4m). 

Significant Items

During the 15 months the Group incurred one-off costs of £0.55m due mostly to the reorganisation of the Haydens operation, £0.43m, a continuation of the modernisation programme started in 2010.  £0.12m was incurred in the liquidation and winding up of dormant subsidiaries and the hive down of Haydens trading from the Plc entity into its own limited company. The tidying up of this structure will reduce administration and increase transparency for stakeholders.

Working Capital & Net Debt	31 March 2012	31 December 2011	31 December 2010
	£'000s	£'000s	£'000s
Working Capital (Fixed Assets/Stock/Trade Debtors & Trade Creditors)	38,750	36,708	29,667
Net Borrowings (Incl Cash)	28,655	25,883	22,636
Net Debt/EBITDA *Based on 12 months to March 2012	3.3*	2.8	4.0

Cash Flow and Debt

Working Capital levels have increased (24% as at 31 December 2011) over 2010 levels reflecting primarily increased material costs which are not expected to ease in the short term. The group has also maintained higher stock levels especially in sugar following the problems experienced in the supply chain last year.

These factors have pushed debt levels up, with Net Debt up 14% at 31 December 2011 compared to 31 December 2010, although this is in line with expectations and well within our funding facilities.   

Net Debt (after Cash) as at 31 March 2012 was £28.7m (31 March 2011 £29.4m) reflecting the normal seasonality through the year.

However, underlying Debt levels as compared to EBITDA (Net Debt to EBITDA) have reduced significantly from 4.0 in 2010 to 2.8 at Dec 2011. March 2012 has moved up since Dec 2011 but this is in line with expectations and follows our normal seasonality pattern.

Pensions

Two subsidiaries, Napier Brown Foods Limited and Renshawnapier Limited, operate a defined benefit pension scheme which is closed to new members. The IAS 19 valuation of the scheme at 31 March 2012 identified a £1.1m deficit, a deterioration of £1.1m since December 2010. The scheme's assets have largely retained their value since 2010 with the deficit mainly driven by the fall in discount rates at the present time increasing the present value of future benefits. The Group is proactive with the trustees in managing the scheme, not losing sight of the fact key market drivers are weak and presenting a negative view at this time.  During the period the Group contributed £177k (2010: £117k) to the scheme.

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:

The 2011 Calendar as compared with 2010 breaks out the underlying trends with improvement across all areas, with the 15 month period to 31 March 2012 capturing the seasonality of the January to March quarter which dilutes the picture.

		31 March 2012	31 December 2011	31 December 2010
Revenue growth1		n/a	24.5%	(7.2%)
Operating margin2		2.1%	2.8%	1.8%
Debt cover (net debt:EBITDA)3		3.3*	2.8	4.0
Interest cover4		4.8	7.0	4.5
Health & Safety score5		n/a	83%	80%

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. * Based on 12 months to March 2012
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 2008 and is measured by an external consultant.

Mike McDonough

Group Finance Director

3 July 2012

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

15 months ended 31 March 2012

	15 months ended 31  March 2012			12 months ended 31 December 2010
	Before Significant Items	Significant Items (Note 3)	Total	Before Significant Items	Significant Items (Note 3)	Total
CONTINUING OPERATIONS	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
REVENUE	305,529	-	305,529	200,104	-	200,104
Cost of sales	(265,903)	-	(265,903)	(176,225)	-	(176,225)
GROSS PROFIT	39,626	-	39,626	23,879	-	23,879
Distribution costs	(13,009)	-	(13,009)	(8,053)	-	(8,053)
Administration expenses	(20,053)	(550)	(20,603)	(12,217)	(395)	(12,612)
OPERATING PROFIT	6,564	(550)	6,014	3,609	(395)	3,214
Finance income	-	-	-	5	-	5
Finance costs	(1,896)	-	(1,896)	(1,365)	-	(1,365)
Other finance income	242	-	242	94	-	94
PROFIT BEFORE TAXATION	4,910	(550)	4,360	2,343	(395)	1,948
Income tax expense	(859)	113	(746)	(536)	111	(425)
PROFIT FROM CONTINUING OPERATIONS	4,051	(437)	3,614	1,807	(284)	1,523
OTHER COMPREHENSIVE INCOME
Actuarial (losses) / gains on   defined benefit plans	(1,499)	-	(1,499)	488	-	488
Income tax relating to components of other comprehensive income	360	-	360	(137)	-	(137)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	2,912	(437)	2,475	2,158	(284)	1,874
Earnings per share from continuing and discontinued operations:
- basic			5.6p			2.3p
- diluted			5.1p			2.2p
Earnings per share from continuing operations:
- basic			5.6p			2.3p
- diluted			5.1p			2.2p

Consolidated STATEMENT OF Changes in equity

15 months ended 31 March 2012

	Issued Share Capital	Share Premium Account	Share Option Reserve	Retained Earnings	Total
	£'000s	£'000s	£'000s	£'000s	£'000s
Balance as at 1 January 2010	1,300	68,870	73	7,787	78,030
Shares options to be issued	-	-	34	-	34
Deferred tax on share options			46		46
Total comprehensive income for the year	-	-	-	1,874	1,874
Balance as at 31 December 2010	1,300	68,870	153	9,661	79,984
Balance as at 1 January 2011	1,300	68,870	153	9,661	79,984
Shares options to be issued	-	-	38	-	38
Deferred tax on share options	-	-	335	-	335
Shares issued in period	-	4	-	-	4
Total comprehensive income for the year	-	-	-	2,475	2,475
Balance as at 31 March 2012	1,300	68,874	526	12,136	82,836

consolidated STATEMENT OF FINANCIAL POSITION

15 months ended 31 March 2012

	31 March 2012	31 December 2010
	£'000s	£'000s
NON CURRENT ASSETS
Goodwill	75,796	75,796
Other intangible assets	521	625
Property, plant and equipment	17,057	15,603
Deferred tax asset	912	351
	94,286	92,375
CURRENT ASSETS Inventories	17,380	9,546
Trade and other receivables	24,444	24,373
Cash and cash equivalents	2,506	3,187
	44,330	37,106
TOTAL ASSETS	138,616	129,481
CURRENT LIABILITIES
Trade and other payables	20,082	19,891
Borrowings	24,366	17,258
Derived financial instruments	-	30
Current tax liabilities	570	589
	45,018	37,768
NON CURRENT LIABILITIES
Borrowings	6,796	8,565
Deferred tax liabilities	2,886	3,164
Retirement benefit obligations	1,080	-
	10,762	11,729
TOTAL LIABILITIES	55,780	49,497
NET ASSETS	82,836	79,984
EQUITY
Share capital	1,300	1,300
Share premium account	68,874	68,870
Share option reserve	526	153
Retained earnings	12,136	9,661
TOTAL EQUITY	82,836	79,984

These financial statements were approved by the Board of Directors and authorised for issue on 3 July 2012. They were signed on its behalf by:

P W Totté                                                       M J McDonough

Chairman                                              Director

CONSOLIDATED cash flow statement

15 months ended 31 March 2012

	15 months ended 31 March 2012	12 months ended 31 December 2010
	£'000s	£'000s
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Profit before taxation	4,360	1,948
Finance costs	1,896	1,365
Finance income	-	(5)
IAS 19 income	(242)	(94)
Depreciation of property, plant & equipment	2,449	1,785
Amortisation of intangibles	172	241
Operating Cash Flow	8,635	5,240
(Increase)/Decrease in inventories	(7,834)	24
Increase in receivables	(70)	(922)
Increase in payables	221	904
Cash generated from operations	952	5,363
Income taxes paid	(932)	(23)
Interest paid	(1,896)	(1,341)
Net cash from operating activities	(1,876)	3,999
CASH FLOW FROM INVESTING ACTIVITIES
Interest received	-	5
Shares issued in period	4	-
Purchase of intangible assets	(68)	(215)
Purchase of property, plant & equipment	(3,903)	(2,162)
Net cash used in investing activities	(3,967)	(2,372)
CASH FLOW USED IN FINANCING ACTIVITIES
Additional/(Repayment) of borrowings	5,540	(3,708)
Repayment of obligations under finance leases	(201)	(272)
Pension contributions	(177)	(117)
Net cash used in financing activities	5,162	(4,097)
NET DECREASE IN CASH AND CASH  EQUIVALENTS	(681)	(2,470)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period	3,187	5,657
Net movement in cash and cash equivalents	(681)	(2,470)
Cash and cash equivalents at end of period	2,506	3,187
Cash and cash equivalents comprise:
Cash	2,506	3,187
Overdrafts	-	-
	2,506	3,187

NOTES TO THE FINANCIAL STATEMENTS

15 months ended 31 March 2012

1.  presentation of financial statements

General information

The Real Good Food Company plc is a public limited company incorporated in England and Wales under the Companies Act (registered number 4666282). The Company is domiciled in England and Wales and its registered address is 229 Crown Street, Liverpool, Merseyside, L8 7RF. The Company's shares are traded on the Alternative Investment Market (AIM).

The principal activities of the Group are the sourcing, manufacture and distribution of food to the retail and industrial sectors.

Basis of preparation

These consolidated financial statements are presented on the basis of International Financial Reporting Standards (IFRS) as adopted by the European Union and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and have been prepared in accordance with AIM rules and the Companies Act 2006, as applicable to companies reporting under IFRS.

These consolidated financial statements have been prepared in accordance with Group accounting policies and under the historical cost convention, except where modified by the revaluation of certain financial instruments and commodities.

New IFRS standards and interpretations adopted

The following IFRS standards, amendments and interpretations are not yet effective and have not been adopted early by the group.

The adoption of these standards, amendments and interpretations is not expected to have a material impact on the Group's profit for the period or equity. The adoptions may affect disclosures in the Group's financial statements.

2.  SEGMENT REPORTING

Business segments

The group has historically traded with its operating segments being Sugar, Bakery Ingredients and Bakery and the Group's management and reporting structure was traditionally set out along those lines. However in 2011 with the separating of the R&W Scott business from Renshaw we have now migrated to a structure that reflects the management teams in place and also ensures all aspects of trading activity has the specific focus it needs in order to achieve our growth plans 

15 months ended 31 March 2012
	Napier	Garrett	Renshaw	R&W Scott	Haydens	Continuing Operations Total	Significant items	Total Group
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Total Revenue	189,406	38,967	46,572	14,437	29,658	319,040	-	319,040
Revenue - Internal	(12,521)	(786)	(204)	-	-	(13,511)	-	(13,511)
External Revenue	176,885	38,181	46,368	14,437	29,658	305,529	-	305,529
Operating Profit	3,703	3,231	4,908	(1,338)	(1,333)	9,171	(550)	8,621
Head Office and consolidation adjustments						(2,607)	-	(2,607)
Net Finance Costs	(943)	(195)	(495)	(142)	(121)	(1,896)	- -	(1,896)
Pension finance income	-	-	-	-	-	242	-	242
Profit/(loss) before tax	3,168	2,628	4,413	(1,480)	(1,454)	4,910	(550)	4,360
Tax Unallocated Tax	(546) -	(453) -	(761) -	255 -	251 -	(1,254) 395	- 113	(1,254) 508
Profit/(loss) after tax as per comprehensive statement of income	2,622	2,175	3,652	(1,225)	(1,203)	4,051	(437)	3,614

  Sales between segments are charged at prevailing market rates.

2.  SEGMENT REPORTING (continued)

15 months ended 31 March 2012	Napier	Garrett	Renshaw	R&W Scott	Haydens	Unallocated (1)	Total Group
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Segment assets	27,122	4,646	15,694	6,752	7,288		61,502
Unallocated assets
Goodwill							75,796
Other intangible assets							0
Property, plant and equipment							28
Deferred tax assets							912
Trade and other receivables							275
Cash and cash equivalents							103
Total assets							138,616
Segment liabilities	(26,699)	(4,739)	(8,710)	(1,503)	(3,247)		(44,898)
Unallocated liabilities
Trade and other payables
Borrowings							(8,808)
Current tax liabilities							318
Deferred tax liabilities							(2,392)
Total liabilities							(55,780)
Net operating assets	423	(93)	6,984	5,249	4,041		82,836
Non current asset additions	369	-	907	318	2,363	14	3,971
Depreciation	598	-	826	294	722	9	2,449
Amortisation	82	-	82	-	7	1	172

(1) Unallocated

Relates primarily to the Head Office and non current asset additions, depreciation and amortisation which cannot be meaningfully allocated to individual operating divisions.

Geographical segments

The Group earns revenue from countries outside the United Kingdom, but as these only represent 3.0% of the total revenue of the Group, segmental reporting of a geographical nature is not considered relevant

2.  SEGMENT REPORTING (continued)

12 months  Ended 31 December 2010
	Napier	Garrett	Renshaw	R&W Scott	Bakery	Continuing Operations Total	Significant items	Total Group
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Total Revenue	109,883	26,230	34,503	8,468	23,327	202,411	-	202,411
Revenue - Internal	(1,483)	(646)	(178)	-	-	(2,307)	-	(2,307)
External Revenue	108,400	25,584	34,325	8,468	23,237	200,104	-	200,104
Operating Profit	(80)	1,182	4,767	(192)	(238)	5,439	(395)	5,044
Head Office and consolidation adjustments						(1,830)	-	(1,830)
Net Finance Costs	(638)	(151)	(369)	(91)	(86)	(1,335)	-	(1,335)
Unallocated Net Finance Costs	-	-	-	-	-	94 (25)	-	94 (25)
Pension finance income	-	-	-	-	-
Profit/(loss) before tax	(718)	1,031	4,398	(283)	(324)	2,343	(395)	1,948
Tax Unallocated Tax	97 -	(289) -	(933) -	79 -	31 -	(1,015) 479	- 111	(1,015) 590
Profit/(loss) after tax as per comprehensive statement of income	(621)	742	3,465	(204)	293	1,807	(284)	1,523

 Sales beween segments are charged at prevailing market rates.

2.  SEGMENT REPORTING (continued)

12 months ended 31 December 2010	Napier	Garrett	Renshaw	R&W Scott	Haydens	Unallocated (1)	Total Group
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Segment assets	20,794	3,501	16,232	6087	6,303		52,917
Unallocated assets
Goodwill							75,796
Other intangible assets							1
Property, plant and equipment							5
Deferred tax assets							351
Inventory							-
Trade and other receivables							287
Derived financial assets
Current tax assets							-
Cash and cash equivalents							124
Total assets							129,481
Segment liabilities	(20,184)	(3,326)	(7,034)	(1,370)	(3,947)		(35,861)
Unallocated liabilities
Trade and other payables							(406)
Borrowings							(10,511)
Derived financial instruments							-
Current tax liabilities							(308)
Deferred tax liabilities							(2,411)
Provisions
Total liabilities							(49,497)
Net operating assets	609	1,756	9,197	4,717	2,356		79,984
Non current asset additions	404	-	776	126	1072		2,378
Depreciation	420	-	526	210	624	5	1,785
Amortisation	67	-	144	-	28	2	241

Unallocated

 Relates primarily to the Head Office and non current asset additions, depreciation and amortisation which cannot be meaningfully allocated to individual operating divisions.

Geographical segments

The Group earns revenue from countries outside the United Kingdom, but as these only represent 3.1% of the total revenue of the Group, segmental reporting of a geographical nature is not considered relevant.

3.  SIGNIFICANT ITEMS

		15 months ended 31 March 2012	12 months ended 31 December 2010
		£'000s	£'000s
Management restructuring costs		(429)	(395)
Group restructuring costs		(121)	-
		(550)	(395)
Taxation credit on significant items		113	111
		(437)	(284)

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 our operating divisions during the year. The Group restructuring cost relate to liquidation of dormant subsidiaries necessary to simplify the Group structure.

4.  dIRECTORS' REMUNERATION

	15 months ended  31 March	12 months ended 31 December
	2012	2010
	£'000s	£'000s
Fees	268	208
Executive salaries and benefits	698	403
Share-based payments	22	24
	988	635

The emoluments of the Directors for the period were as follows:

	Short term Employee Benefits*		Share Based payments		Benefits	Post Employment Benefits		15 months ended 31 March 2012	12 months ended 31 December 2010
	£'000s		£'000s		£'000s	£'000s		£'000s	£'000s
M J McDonough	239		-		20	-		259	193
P W Totté	439		22		-	-		461	223
P Ridgwell	96		-		-	-		96	79
P C Salter	133		-		-	-		133	108
C O Thomas	39		-		-	-		39	32
	946		22		20	-		988	635

*      Short term Employee Benefits (Salaries and fees) include both fees received as an officer of the Company and separate consultancy fees.

Key management personnel are considered to be the Company Directors

4.  dIRECTORS' REMUNERATION (continued)

Directors' interests in share options

	Option Type	Date of Grant	Number of options at 31 March 2012	Number of options at 31 December 2010	Exercise Price	Earliest Exercise Date	Exercise Expiry Date
P W Totté
	Un-approved options 2009	July 2009	1,000,000	1,000,000	5.25p	July 2012	July 2019
	Un-approved options 2010 Un-approved options 2011	May 2010 March 2011	142,857 3,817,725	142,857 -	24.50p 25.0p	May 2013 April 2011	May 2020 Mar 2021
P Ridgwell
	Un-approved options 2009	July 2009	476,190	476,190	5.25p	July 2012	July 2019
	Un-approved options 2010	May 2010	61,224	61,224	24.50p	May 2013	May 2020
P C Salter
	Un-approved options 2009	July 2009	285,714	285,714	5.25p	July 2012	July 2019
	Un-approved options 2010	May 2010	102,040	102,040	24.50p	May 2013	May 2020
C O Thomas
	Un-approved options 2009	July 2009	304,762	304,762	5.25p	July 2012	July 2019
	Un-approved options 2010	May 2010	40,816	40,816	24.50p	May 2013	May 2020
	Warrants	Dec 2003	369,000	369,000	67.75p	Dec 2007	Dec 2013
M J McDonough
	Approved options 2009	June 2009	476,190	476,190	5.25	July 2012	July 2019
	Approved options 2010	May 2010	20,408	20,408	24.50p	May 2013	May 2020
	Un-approved options 2010	May 2010	40,816	40,816	24.50p	May 2013	May 2020

3,817,725 new options were granted to Directors during the period (2010 - 408,161). Options have been granted to directors whose performances and potential contribution were judged to be important to the operations of the Group, as incentives to maximise their performance and contribution.

The mid-market price of the ordinary shares on 31 March 2012 was 58.5p and the range during the period was 24.1p to 73.5p.

During the period retirement benefits were accruing to 1 (2010 - 1) Directors in respect of money purchase pension schemes.

No Director exercised share options during the year.

5.  Taxation

	15 months	12 Months
	ended 31 March 2012	ended31 December 2010
	£'000s	£'000s
CURRENT TAX
UK Current tax on profit of the period	1,102	576
UK Current tax on significant items	(113)	(111)
Adjustments in respect of prior years	(98)	(7)
Total current tax	891	458
Deferred Tax
Deferred tax charge re pension scheme	101	26
Origination and reversal of timing differences	36	104
Adjustments in respect of prior years	45	(56)
Deferred tax asset re losses brought forward	-	-
Adjustment in respect of change in
deferred tax rate	(327)	(107)
Total deferred tax	(145)	(33)
Tax on profit on ordinary activities	746	425

Factors affecting tax charge for the period:

The tax assessed for the period is lower (2010 - lower) than the standard rate of corporation tax in the UK 26.39% (2010 - 28%).  The differences are explained below:

	15 months	12 months
	ended 31 March 2012	ended 31 December 2010
	£'000s	£'000s
TAX RECONCILIATION
Profit per accounts before taxation	4,360	1,948
Tax on profit on ordinary activities at standard CT rate of 26.39% (2010 28%)	1,150	545
Expenses not deductible for tax purposes	48	51
Impact of change in tax base for leasehold	-	-
Additional deduction for R&D expenditure	(64)	-
Deferred tax asset re losses brought forward	-	-
Temporary difference movements at lower tax rate	(9)	-
Adjustment in respect of change in deferred tax rate	(327)	(107)
Adjustments to tax in respect of prior years	(52)	(64)
Tax charge for the period	746	425

6.  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.

	15 months  ended 31 March 2012	12 months  ended 31 December 2010
	Continuing Operations	Continuing Operations
Earnings after tax attributable to ordinary shareholders (£000's)	3,614	1,523
Weighted Average No. of shares in issue (000's)	65,017	65,014
Basic earnings per share	5.6p	2.3p

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.

	15 months ended 31 March 2012	12 months ended 31 December 2010
	Continuing Operations	Continuing Operations
Earnings after tax attributable to ordinary shareholders (£000's)	3,614	1,523
Total Potential Weighted Average No. of shares in issue (000's)	71,385	68,311
Diluted earnings per share	5.1p	2.2p

Adjusted earnings per share

An adjusted earnings per share and a diluted adjusted earnings per share, which exclude significant items, has 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.

	15 months ended 31 March 2012	12 months  ended 31 December 2010
	Continuing Operations	Continuing Operations
Earnings after tax attributable to ordinary shareholders (£000's)	3,614	1,523
Add back significant items (note 6)	550	395
Add back tax on significant items	(113)	(111)
Adjusted earnings after tax attributable  to ordinary shareholders (£000's)	4,051	1,807
Weighted Average No. of shares in issue (000's)	65,017	65,014
Basic earnings per share	6.2p	2.8p
Total Potential Weighted Average No. of shares in issue (000's)	71,385	68,311
Basic diluted earnings per share	5.7p	2.6p

7.  goodwill

				Group
				£'000s
Cost
Brought forward 1 January 2011				75,796
Carried forward 31 March 2012				75,796
Goodwill acquired on business combinations is allocated at acquisition to the Cash Generating Units that are expected to benefit from that business combination. Before any recognition of impairment losses, the carrying amount of goodwill has been allocated as follows:
	31 March 2012		31 December 2010
	£'000s		£'000s
Sugar and Bakery Ingredients division*	75,796		75,796
Carried forward 31 March 2012	75,796		75,796

*        The goodwill relating to the Sugar and Bakery Ingredients Divisions arose out of the single acquisition of Napier Brown Foods by The Real Good Food Company plc in 2005. It has not been possible to allocate this goodwill between individual Cash Generating Units.

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 7.19% (2010 - 4.61%). The Group prepares cash flow forecasts derived from the most recent financial plans approved by the board for the next three years and extrapolates this over a further 16 years at a zero growth rate.A period of 19 years has been applied 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 time scale the recoverable amounts exceed the carrying value by £84.7 million. Actual results were 12% above the forecast cash flows used for the impairment review in the previous year.

An increase in the Group's weighted average cost of capital to above 17.11% (2010 - 10.4%) would cause the Board to impair the carrying value of goodwill.

8.  Borrowings AND CAPITAL MANAGEMENT

	31 March 2012	31 March 2012	31 December 2010	31 December 2010
	Group	Company	Group	Company
	£'000s	£'000s	£'000s	£'000s
Unsecured borrowings at amortised cost
Loan notes	2,774	-	2,774	-
Secured borrowings at amortised cost
Bank term loans	6,016	6,016	7,784	7,784
Revolving credit       facilities	22,340	1,135	15,032	1,098
Hire purchase	32	32	233	106
	31,162	7,183	25,823	8,978
Amounts due for settlement within 12 months	24,366	3,161	17,258	3,187
Amounts due for settlement after 12 months	6,796	4,022	8,565	5,791
	31,162	7,183	25,823	8,978

Features of the Group's borrowings are as follows:

The Group's financial instruments comprise cash, a term loan, hire purchase and finance leases, revolving credit facility, overdraft and various items arising directly from its operations such as trade payables and receivables. The main purpose of these financial instruments is to finance the Group's operations.

The main risks from the Group's financial instruments are interest rate risk and liquidity risk. The Group also has some currency exposure in relation to its sugar trade and also some currency exposure in relation to the purchase of almonds from the United States, however, this is mitigated by matching against foreign currency sales. The Board reviews and agrees policies, which have remained substantially unchanged for the year under review, for managing these risks.

The Group's policies on the management of interest rate, liquidity and currency exposure risks are set out in the Report of the Directors.

The Group operates a number of term loans and revolving credit facilities with PNC Business Credit. The property term loan currently bears interest at 3% above base rate and is repayable via monthly instalments of £71,000 and then a bullet repayment of £3,529,000 in July 2013. At the year end £4.6m was outstanding under this facility. Our fixed asset term loan also currently bears interest at 3% above base rate and is repayable by monthly instalments of £85,000 until July 2013. At the year end £1.3m was outstanding under this loan. Our final term loan currently bears interest at 4% above base rate and is repayable via monthly instalments of £62,000 up to June 2012. At the year end £0.1m was outstanding under this facility.

The Group's revolving credit facilities, which are available until July 2013, comprise of Sterling and Euro denominated invoice discounting facilities and an inventory asset facility. The invoice discounting facilities currently bear interest at 2.65% above Sterling and Euro base rates respectively and are secured against the underlying trade receivables. The total amount outstanding under these facilities at the end of the period was £15.6m, whilst the maximum permitted borrowings are £24.4m. The inventory finance facility currently bears interest at 2.95% above base rate and at the period end £6.7m was outstanding under this facility which has a maximum borrowing limit of £8.5m and is secured upon the finished goods and certain raw material inventories of the Group.

The fixed interest rate liabilities relate to amounts payable on hire purchase agreements. The weighted average interest rate of these liabilities was 6.0% (2010 - 6.93%) and the weighted average period for which the interest rates are fixed was 6 months (2010 - 15 months).

The Group had outstanding loan notes amounting to £2,773,908 (2010 - £2,773,908) due to Napier Brown Ingredients Limited as disclosed in note 9. The loan note holders have previously agreed to waive the accrued interest in relation to these notes, which were also interest free during 2011. No agreement is in place for 2012 onwards.

The financial assets of the Group are surplus funds, which are offset against borrowings under the facility, and there is no separate interest rate exposure.

PNC Business Credit has a debenture incorporating a fixed and floating charge over the undertaking and all property and assets present and future including goodwill, book debts, uncalled capital, buildings, fixtures, intangible assets, fixed plant and machinery. In addition our banking arrangements with KBC contain certain cross guarantees. Hire purchase and finance lease liabilities are secured upon the underlying assets.

Forward foreign exchange contracts

The Group has no forward foreign exchange contracts in place as at end of March 2012.

Liquidity risk management

The Board reviews the Group's liquidity position on a monthly basis and monitors its forecast and actual cash flows against maturing profiles of its financial assets and liabilities.

The following table details the Group's maturity profile of its financial liabilities.

2012	Less than 1 month £'000s	1 - 3 months £'000s	3 months to 1 year £'000s	1 - 5 years £'000s	5 + years £'000s	Total £'000s
Trade and other payables	9,308	10,774	-	-	-	20,082
Loan notes	-	-	-	2,774	-	2,774
Bank term loans	218	372	1,404	4,022	-	6,016
Revolving credit facilities	-	-	22,340	-	-	22,340
Finance leases	21	11	-	-	-	32
	9,547	11,157	23,744	6,796	-	51,244
2010	Less than 1 month £'000s	1 - 3 months £'000s	3 months to 1 year £'000s	1 - 5 years £'000s	5 + years £'000s	Total £'000s
Trade and other payables	7,246	12,645	-	-	-	19,891
Loan notes	-	-	-	2,774	-	2,774
Bank term loans	170	510	1,360	5,744	-	7,784
Revolving credit facilities	-	-	15,032	-	-	15,032
Finance leases	21	59	106	47	-	233
	7,437	13,214	16,498	8,565	-	45,714

The profile of the trade payables has been taken as being consistent with the Group's payment terms to suppliers.

Analysis of market risk sensitivity

Currency risks:

The Group is exposed to currency risk on purchases made of almonds from the United States. The risk associated with these purchases is mitigated by matching with sales in foreign currencies. The effect of a 10c strengthening of the US dollar against Sterling exchange rate at the balance sheet date on the trade payables carried at that date would, with all other variables being held constant, have resulted in a decrease in pre tax profits of £7k. The impact of a 10c strengthening of the US Dollar against Sterling at the balance sheet date on our trade receivables carried at that date would, all other variables being held constant, have resulted in an increase in pre-tax profits of £78k.

The Group is also exposed to currency risk on purchases of sugar from Europe. The risk associated with these purchases is mitigated by matching with sales in foreign currencies. These sales form part of our Invoice Discounting facilities with PNC, which generate a Euro loan obligation. The effect of a €0.05 strengthening of the Euro versus Sterling exchange rate at the balance sheet date on our overall Euro net position carried at that date would, all other variables being held constant, have resulted in a decrease in pre-tax profits of  £168k.

Interest rate risks:

The Group has an exposure to interest rate risk arising from fluctuations in Sterling and Euro base rates. The impact of a 1% increase in the applicable interest rates at the balance sheet date on the variable rate debt carried at that date would, all other factors remaining unchanged, have resulted in a decrease in pre tax profits of £284k.

Obligation under finance leases

	2012 £'000s	2010 £'000s
Finance lease liabilities - minimum lease payments
Due within one year	32	195
Due within one to five years	-	49
	32	244
Future finance charges on finance leases	(-)	(11)
Present value of finance lease liabilities	32	233
The present value of finance lease liabilities is as follows:
Due within 1 year	32	186
Due within 1 to 5 years	-	47
	32	233

It is the Group's policy to lease certain property, plant and equipment under finance leases. For the period ended 31 March 2012 the average effective borrowing rate was 6.0% (2010 - 6.93%). Interest rates are fixed at the contract dates. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in Sterling.

The fair value of the Group's lease obligations approximates to their carrying amount.

9.  related party transactions

Napier Brown Foods Limited was a former subsidiary of Napier Brown Ingredients Limited.  At the year end a loan note of £2,773,908 was owed to Napier Brown Ingredients Limited in which P G Ridgwell, who is a Director of The Real Good Food Company plc, has a beneficial interest. The loan note holders agreed to waive their rights to the accrued interest on this loan note to December 2011. The accounts assume that this waiver will continue to March 2012, thus accrued interest on the loan amounted to £nil (2010 - £nil) at 31 March 2012.

Transactions between the Company and its subsidiaries are as follows: -

Trading transactions - purchase of goods

		15 months ended 31 March 2012 £'000s	12 months ended 31 December 2010 £'000s
Renshawnapier Limited		827	808

Amounts due to		31 March 2012 £'000s	31 December 2010 £'000s
Renshawnapier Limited		31,734	24,040
Napier Brown Foods Limited		Nil	Nil

Renshawnapier Limited is a related party because it is a 100% owned subsidiary of Napier Brown Foods Limited which is a 100% subsidiary of The Real Good Food Company plc.

Purchases from related parties have been made at market prices; settlement of the debt is made under normal trading terms.

Amounts due from related parties

	31 March 2012 £'000s	31 December 2010 £'000s
Renshawnapier Limited	Nil	Nil
Napier Brown Foods Limited	40,333	39,258

The Group has provided loans to its subsidiary companies at rates which reflect the rates charged by its own bankers. Loans and interest are repayable by monthly instalments.

10.  Pensions ARRANGEMENTS

The Group operates a defined benefit pension plan in the UK. A full actuarial valuation was carried out as at 1 April 2009 in accordance with the scheme funding requirements of the Pensions Act 2004 and the funding of the scheme is agreed between the Group and the trustees in line with those requirements. These in particular require the surplus/deficit to be calculated using prudent as opposed to best actuarial assumptions. The actuarial valuation showed a deficit of £5.3 million. However a further actuarial review was undertaken as at 31 March 2010 which revealed that the deficit had reduced to £2.7 million. This was a result of the recovery of the stock markets from the low in 2009 and improvements in gilt yields and discount rates. On the basis of this valuation the Group agreed with the trustees that it will eliminate the £2.7 million deficit over a period of 11 years and 9 months from 1 April 2009 by the continuation of contributions of £8,145 per month up to 31 July 2010, increasing to £12,000 per month between 1 August and 31 December 2010, £130,000 per annum in 2011, £155,000 per annum in 2012 and £265,000 per annum thereafter. In addition and in accordance with the actuarial valuation the Group has agreed with the trustees that it will meet the expenses of the scheme and levies to the Pension Protection Fund, along with further deficit contributions contingent on the Group's year end cash position relative to its banking covenants.

For the purposes of IAS19 the data provided for the 1 April 2009 Actuarial valuation has been approximately updated to reflect liabilities on the accounting basis at 31 March 2012. This has resulted in a deficit in the scheme of £1,080,000.

It is the policy of the company 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 2012 £'000s	31 December 2010 £'000s	31 December 2009 £'000s	31 December 2008 £'000's	31 December 2007  £'000's
Present value of defined benefit obligation	17,085	16,212	15,945	15,094	16,268
Fair value of plan assets	(16,005)	(16,308)	(15,363)	(14,830)	(18,052)
Deficit/(surplus) in plan	1,080	(96)	582	264	(1,784)
Amount not recognised in accordance with IAS I9 paragraph 58b	-	96	-	-	1,249
Gross amount recognised	1,080	-	582	264	(535)
Deferred tax at 24% (2012)	(259)	-	(163)	(74)	535
Net liability	(821)	-	419	190	-

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

	31 March 2012	31 December 2010
	£'000s	£'000s
Defined benefit obligation at start of period	16,212	15,945
Interest cost	1,132	937
Actuarial losses/(gains)	611	(6)
Benefits paid, death in service insurance premiums and expenses	(870)	(664)
Defined benefit obligation at end of period	17,085	16,212

10.  Pensions ARRANGEMENTS (continued)

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

	31 March	31 December
	2012	2010
	£'000s	£'000s
Fair value of scheme assets at start of the year	16,308	15,363
Expected return on scheme assets	1,374	1,031
Actuarial (losses)/gains	(984)	578
Contributions by the Group paid	177	117
Adjustment for contribtions by the Group not agreed	-	(117)
Benefits paid, death in service insurance premiums and expenses	(870)	(664)
Fair value of scheme assets at end of the year	16,005	16,308

The actual return on the scheme assets over the period ending 31 March 2012 was £390,000 (2010 - £1,609,000).

Total expense recognised in the statement of comprehensive income within other finance income

	31 March	31 December
	2012	2010
	£'000s	£'000s
Interest on liabilities	1,132	937
Expected return on scheme assets	(1,374)	(1,031)
Total (income)	(242)	(94)

Statement of recognised income and expenses

	15 months ended	12 months ended
	31 March	31 December
	2012	2010
	£'000s	£'000s
Difference between expected and actual return on scheme assets: gain	(984)	578
Experience gains and losses arising on the scheme liabilities: gain	(46)	387
Effects of changes in the demographic and financial assumptions underlying the present value of the scheme liabilities: (loss)	(565)	(381)
Reversal of the limit under IAS19 paragraph 58b	96	(96)
Total amount recognised in statement of changes in equity	(1,499)	(488)

10.  Pensions ARRANGEMENTS (continued)

Assets

	31 March 2012 £'000s	31 December 2010 £'000s	31 December 2009 £'000s
Equities	9,615	10,779	10,274
Bonds & Gilts	4,915	3,990	3,919
Property	434	408	449
Cash	1,041	1,131	721
Total assets	16,005	16,308	15,363

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

	As at 31 March 2012 % per annum	As at 31 December 2010 % per annum	As at 31 December 2009 % per annum
Inflation	2.90	3.10	3.10
Salary increases	-	-	-
Rate of discount	5.00	5.70	6.00
Allowance for pension in payment increases of RPI or 5% p.a. if less	2.80	3.10	3.10
Allowance for revaluation of deferred pensions of RPI or 5% if less	1.90	3.10	3.10
Allowance for commutation of pension for cash at retirement	75% of max allowance	75% of max allowance	50% of max allowance

Assumption	Change in assumption	Change in liability
Discount rate Rate of inflation Rate of Salary Growth Rate of mortality	Increase / decrease of 0.5% p.a. Increase / decrease of 0.5% p.a. Increase / decrease of 0.5% p.a. 1 year increase in life expectancy	Decrease / increase by 7.7% Increase / decrease by 2.3% Increase / decrease by 0.0% Increase by 3.3%

The mortality assumptions adopted at 31 March 2012 imply the following life expectancies:

Male retiring at age 65 in 2010                      21.7 years

Female retiring at age 65 in 2010                   23.8 years

Male retiring at age 65 in 2030                      22.7 years

Female retiring at age 65 in 2030                   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 out-performance.

Expected long term rates of return

The expected long term rates of return applicable at the start of each period are as follows:

	31 March 2012 % per annum	31 December 2010 % per annum	31 December 2009 % per annum
Equities	7.55	7.50	6.90
Bonds	4.60	5.60	5.64
Property	7.55	6.50	5.90
Cash	0.50	4.20	3.50
Overall for scheme	5.87	6.83	6.29

	31 March 2012 £'000s	31 December 2010 £'000s	31 December 2009 £'000s	31 December 2008 £'000s	31 December 2007 £000's
Fair value of assets	16,005	16,308	15,363	14,830	18,052
Defined benefit obligation	(17,085)	(16,212)	(15,945)	(15,094)	(16,268)
Surplus /(deficit) in scheme	(1,080)	96	(582)	(264)	1,784
Experience adjustment on
scheme assets	(984)	578	113	(3,937)	893
Experience adjustment on
scheme liabilities	(46)	387	18	(114)	464

11.  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 December 2010 and the accounting policies adopted in the audited financial statements of the Group for the period ended 31 March 2012.

Comparative figures for the year ended 31 December 2010 have been extracted from the statutory financial statements for that period which carried an unqualified audit report, did not include a reference to any matters to which the auditor drew attention by way of emphasis and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

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 2012, 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 498(3) of the Companies Act 2006.

 

END

 

 

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