Final Results

RNS Number : 7597F

Real Good Food PLC

01 August 2016

 

Strictly embargoed until: 07.00: 1 August 2016

Real Good Food plc

("the Company" or "Real Good Food")

Final Results for the Year Ending 31 March 2016

Real Good Food plc (AIM: RGD) announces Final Results for the Year Ending 31 March 2016.

Operating Highlights

·     Following the successful disposal of Napier Brown, which generated a profit of £9.1 million the Group made a statutory profit before tax of £12.9* million in the year

·     Disposal transformed the Group balance sheet reducing net debt from £30.1 million down to £5.1 million

·     Group restructured into three pillar markets with stand-alone business strategies for each

·     Continuing investment strategy in core markets and across business assets to drive operating efficiency and future EBITDA growth

·     Acquisition strategy progressing to plan: Rainbow Dust Colours (January 2015); ISO2 Nutrition (December 2015); Chantilly Patisserie (February 2016) successfully completed

·     New Development Centre in Liverpool opened providing a base for our Group plc support functions (Technical, IT, HR, Operations) and a state-of-the-art Innovation Centre for new product development

·     Launch of 'Renshaw Academy' to further monetise the Renshaw brand and to cement our position as industry leader in the global cake decorating market

·     Strong financial and operational platform in place for future growth in all three pillar markets: Cake Decoration, Food Ingredients and Premium Bakery

Financial Highlights £ millions

	2015/16			2014/15
	Continuing	Discontinued	Total	Continuing	Discontinued	Total
Revenue	100.4	13.3	113.7	104.6	128.3	232.9
EBITDA	5.0	(0.0)	5.0	5.3	(3.4)	1.9
Finance Costs	(0.5)	(0.9)	(1.4)	(0.9)	(0.8)	(1.7)
Depreciation	(1.9)	(0.1)	(2.0)	(2.1)	(0.6)	(2.7)
Underlying Profit	2.6	(1.0)	1.6	2.3	(4.8)	(2.5)
Significant Items	2.4	9.1	11.5	(0.5)	(0.3)	(0.8)
Pension Finance	(0.2)	-	(0.2)	(0.2)	-	(0.2)
Profit Before Tax	4.8	8.1	12.9*	1.6	(5.1)	(3.5)

Pieter Totté, Executive Chairman, commented:

"The hugely successful disposal of Napier Brown transformed our balance sheet and has enabled us to begin a strategy of investing in our core markets. We have spent the time since reviewing our strategy, clarifying our focus and restructuring the business accordingly. We now operate in three pillar markets (Cake Decoration, Food Ingredients and Premium Bakery) and our objective will be to build scale and strategic positions in each of these through organic growth, targeted investment and bolt-on acquisitions as appropriate."

On the outlook for the current financial year, he added:

"The food industry faces challenging times with diversifying sales channels, increasing legislative burdens, the growth in the minimum wage and ever-demanding consumers. The response to these trends require being alert to all these factors and having the resources to invest and adapt.  I am confident that with our clear strategy and strong balance sheet we are in a good position to build three increasingly strong businesses in our three pillar markets.

"Trading in the first three months of the new financial year has been satisfactory with recent order intake positive, and with the investments we are making, I am confident that we will deliver growth across all three divisions."

*-ends-*

* The Group announced in its Trading Update on 26 April 2016 that Statutory PBT would be £13.9 million; this figure has now been revised to £12.9 million and is reconciled as follows: -

	£ millions
Original announced Statutory PBT	13.9
Adjustment in profit on sale of Napier arising due to agreement of working capital adjustments reducing the profit from £9.4 million to £9.1 million	(0.3)
Acquisition costs written off	(0.4)
Higher pension finance costs	(0.2)
Staff compensation costs resulting from sale of Napier	(0.1)
Revised Statutory PBT for the year ended 31 March 2016	12.9

About Real Good Food plc

Real Good Food plc is a diversified food business serving a number of market sectors including retail, manufacturing, wholesale, foodservice and export. The Company focuses on three main markets: Cake Decoration (Renshaw, Rainbow Dust Colours), Food Ingredients (Garrett Ingredients and R&W Scott) and Premium Bakery (Haydens and Chantilly Patisserie).

ENQUIRIES:

Real Good Food plc	Tel: [phone]
Pieter Totté, Executive Chairman
David Newman, Finance Director
Andrew Brown, Marketing Director
finnCap Limited (Nomad and Joint Broker)	Tel: [phone]
Matt Goode
Grant Bergman
Daniel Stewart and Company Plc (Joint Broker)	Tel: [phone]
David Lawman Jonathon Webb
Belvedere Communications (PR)	Tel: [phone]
John West
Kim van Beeck

Chairman's Statement

The year to 31^st March 2016 saw the Group make a pre-tax profit of £12.9 million following the hugely successful disposal of Napier Brown which generated an exceptional profit of £9.1 million. While underlying EBITDA for the continuing businesses was largely flat, the Napier Brown sale has transformed our balance sheet (net debt at the year-end improved from £30.1 million to just £5.1 million) and thereby enabled us to begin a strategy of investing in building strategic positions in our core markets. In this respect the Napier Brown case history (building and investing strategically for the long term) is a model for what we intend to do in our remaining markets.

We have spent the time since the Napier Brown disposal reviewing our strategy, clarifying our focus and restructuring the business accordingly. We now operate in three pillar markets (Cake Decoration, Food Ingredients and Premium Bakery) and our objective will be to build scale and strategic positions in each of these through organic growth, targeted investment and bolt-on acquisitions as appropriate.

Each market has different characteristics and will generate different returns and our plans will reflect this. We will also evolve our management structures and approach to make sure that the potential for each of these divisions is maximised.

We have made progress on a number of fronts. In Cake Decoration, the acquisition of Rainbow Dust Colours in January 2015 has now been fully integrated and it is a core part of this division. It will now be selling Renshaw products directly to some of its specialist customers who would prefer to have a one-stop shop. We have also recognised increased potential for tackling the cake decoration market globally and intend during the course of the next 12 months to create a global range under the Renshaw brand. While there may be the need to tailor locally either for reasons of different legislation or local tastes, the essential market positioning of the Renshaw brand and products will be the same. To provide additional focus for this initiative we have re-named our European business 'Renshaw Europe' and also set up a US company (Renshaw US Inc.) to drive this initiative. We see similar potential in Australasia and elsewhere. The transition from being just a manufacturer of products for other people to becoming a market and brand-led player (both with Renshaw and Rainbow Dust Colours) will be profound.

Food Ingredients is a very different market where inevitably margins are lower but we also see increasing opportunities for providing added value. The acquisition of ISO2 Nutrition is an example of finding a niche in an area of our competence (whey protein is the main ingredient) and thereby providing diversification for Garrett Ingredients from its commodity base in dairy powders and sugar. Both these commodity sectors have been extremely difficult over the past two years with prices hitting record lows. There are already signs, particularly in sugar, that prices will rise, but our strategy is to reduce our reliance on this and seek more lucrative and sustainable sectors. We also believe that customer service and an efficient supply chain are important factors in this market and we continue to investigate how we can build competitive advantage in this way.

In Premium Bakery, the acquisition of Chantilly Patisserie is a perfect example of the type of business we are keen to acquire and build on. It operates in a small but fast growing market niche - high quality out-of-home desserts. The business brings to us great skills in product and specific customer knowledge while we can help it grow and extend its technical capabilities and customer reach. Meanwhile we have determined on a very clear vision for our core business in this sector, Haydens, by increasingly focusing on fewer product lines and product sectors -producing many more of fewer products and thereby doing it better and generating better returns. Part of this initiative is to produce a branded range from Haydens in the coming year. We also see a significant opportunity to use our stronger cash resources to automate non-added value processes which will both reduce costs and improve quality and consistency.

We have also been evolving our management model. While we believe in local accountability for stand-alone businesses we increasingly see divisional opportunities and the value which expert Group functions can deliver. To this end the opening of our new Development Centre in Liverpool is central to our strategy. The centre provides three things; first, a base for our Group support functions (Technical, IT, HR, Operations) which previously had been squeezed into the Renshaw Crown Street site; secondly, a state of the art Innovation Centre for our Group new product development and applications teams who previously had to use only site based equipment. The food industry is fast moving with consumers becoming ever more demanding in terms of health, quality, shelf life, convenience and personalisation. The challenge is to find technical and process solutions to deliver these benefits to consumers and our Innovation Centre team are fully focused on this with a number of exciting projects in the pipeline.

Finally the Development Centre houses our new 'Renshaw Academy'. This initiative is part and parcel of the Renshaw global range launch and will be the main marketing support vehicle for it. Consumer aspiration to improve cake decorating skills is a global phenomenon and the Renshaw brand has the reputation as the expert and thus is well placed to lead the market both in terms of product range and customer and consumer inspiration. More detail on our plans is given later in this report.

Outlook

The food industry faces challenging times with diversifying sales channels, increasing legislative burdens, the growth in the minimum wage and ever-demanding consumers. The response to these trends requires being alert to all these factors and having the resources to invest and adapt. In this respect I am confident that with our clear strategy and strong balance sheet we are in a good position to build three increasingly strong businesses in our three pillar markets.

Trading in the first three months of the new financial year has been satisfactory with recent order intake positive, and with the investments we are making, I am confident that we will deliver growth across all three divisions.

Pieter Totté

Executive Chairman

Divisional Business Review

Cake Decoration

2015/16 Performance

Sales revenue was slightly down on the previous year as Renshaw removed a manufacturing contract and Renshaw Europe lost a private label contract. Sales of Renshaw brand, however, grew as the company focused on developing its branded proposition. Export sales outside Europe showed strong growth. At Rainbow Dust Colours sales of Progel© food colouring and metallic food paints in particular showed good growth; both areas where we have clear product superiority. As the market matures opportunities are appearing in more mainstream retailers such as Hobbycraft and John Lewis.

Forward Plans

The new focus on developing a global branded range will take shape during the course of 2016. A relaunch of the core sugarpaste range in upgraded packaging is already having a strong impact in the market as is the introduction of 'Renshaw Extra', a firmer and more elastic product designed for European tastes and also more effective in hotter climates. Further significant product initiatives will be launched in early 2017. At Rainbow Dust Colours a number of major product initiatives are also in place; a relaunch of the 'food art' pens, an upgraded recipe on matt food paints and new multi-lingual packs on Progel©.

12 months to March	2015/2016 £ms	2014/2015 £ms
Revenue	48.3	49.2
EBITDA	7.3	6.5
Operating profit	6.5	5.5
Operating profit %	13.5	11.2

Food Ingredients

2015/16 Performance

Revenues were significantly down year on year due to unprecedented commodity price deflation particularly in sugar and dairy. Both these markets experienced record low levels of prices; sugar was impacted not only by weak world prices but also in Europe ahead of the ending of quotas in 2017, while dairy, where quotas have already ended, was affected by the Russian export ban. In this context Garrett Ingredients did well to increase its traded dairy volumes though sugar sales fell slightly. The acquisition of ISO2 Nutrition generated a modest amount of sales but set up costs led to a small overall loss in the year. Sales volume was slightly ahead of the previous year at R&W Scott though again price deflation led to a marginal revenue decline. Investment in management teams at both businesses led to higher costs and a decline in EBITDA. Both businesses are now fully equipped to run on a stand-alone basis and develop their growth plans.

Forward Plans

Garrett Ingredients is well placed to benefit from any upturn in sugar and dairy pricing and will build sales in sports nutrition. At R&W Scott a number of product initiatives (soft fillings, fruit fillings, sauces, curds, mallows and premium jams) have been developed and are being sold across all channels. The investment in jam capacity at R&W Scott, which caused some disruption last year, should begin to yield benefits. R&W Scott will also significantly increase its supply into other Real Good Food companies (especially Haydens) facilitated by the central Innovations team.

12 months to March	2015/2016 £ms	2014/2015 £ms
Revenue	22.7	27.0
EBITDA	(0.1)	0.5
Operating (loss)/profit	(0.4)	0.3
Operating (loss)/profit %	(2.0)	1.1

Premium Bakery

2015/16 performance

Despite narrowing its product range Haydens grew its sales by 4% year on year with the growth rate quickening to 12% in the second half of the year. Customer service was excellent over the critical Christmas and Easter periods but at a cost of significantly increased labour which impacted margins leading to a decline in EBITDA over last year. The extension of the customer base had a positive effect on sales but product complexity remains the challenge and is being addressed with an even greater focus on fewer product lines. The impact of this was already being seen in the final quarter.

The Chantilly acquisition took place late in the year with sales and margins in line with expectations.

Forward plans

The process of further focusing on core lines and processes where Haydens has recognised product superiority will continue. Part of this will be the launch of a small range of branded premium indulgent sweet treats which will be sold to a range of customers and generate significant scale. The Chantilly acquisition has already highlighted a number of cross selling opportunities (both opportunities for Haydens within foodservice and also Chantilly within retail) which will be pursued. There are a number of opportunities for automating non-added value, manual processes and these will be prioritised against the scale achieved in each product sector.

12 months to March	2015/2016 £ms	2014/2015 £ms
Revenue	29.4	28.4
EBITDA	0.7	1.3
Operating (loss)/profit	(0.1)	0.4
Operating (loss)/profit %	(0.5)	1.5

 

Key Performance Indicators and Risks

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, all based on continuing operations, are set out below:

	2016	2015	2014
Revenue Growth1
Revenue	£100.4m	£104.6m	£110.2m
Growth	(4.0)%	(5.1)%	2.6%
EBITDA 2	£5.0ms	£5.3ms	£4.9ms
% of Sales	5.0%	5.1%	4.4%
Net Debt 3	£5.1ms	£30.1ms	£31.1ms
Debt Cover 4	1.0	5.6	9.5
Health & Safety Score 5	90%	82%	92%

¹ Revenue is calculated for continuing business and excludes sugar for 2014 and is from external sources only. Comment - Revenue has fallen due to falling commodity prices and removal of manufacturing contracts

² EBITDA is defined as earnings before significant items, interest, tax depreciation and amortisation. Comment - EBITDA has held steady in what have been difficult food market conditions

³ Net Debt is the total Group borrowings less cash at bank. Comment - With the sale of Napier Brown Net Debt has reduced significantly

⁴ Debt Cover is calculated by dividing total Net Debt by continuing EBITDA. Comment - With the level of reduced debt and the maintenance of the EBITDA level debt cover is a comfortable level

⁵ Health & Safety score represents a weighted average score across all sites and is measured by an external consultant. Figures are quoted for calendar years. Comment - In 2014 measurers were reset effectively toughening the measure by approximately ten percent

Principal Risks

The Group operates in a continually changing environment and consequently our risks change over time. The assessment of risks and the development of strategies for dealing with them are dealt with on an ongoing basis through Group management and control processes. A formal review is carried out on an annual basis. This review includes the identification of risks and the likelihood of them impacting the business and the potential severity of that impact and the determination of what needs to be done to manage them effectively.

The Directors have identified the following as principal risks:

·     Key Customers

·     Customer Requirements

·     Product Quality

·     Labour Costs, Prices and Supply

·     Health and Safety

·     Raw Materials

Risks
Key Customers The Group has a number of key customers from which it derives its revenue. Its key customers tend to work without long term contracts	The Group works with its key customers to ensure product development and customer service matches expectations and is flexible to meet demands Sales and Marketing strategies are set to attract new customers and limit any reliance on one particular customer
Customer Requirements Changes in overall economy and consumer fashions may affect the marketability of the Group's offering	The Group Innovation Centre recently opened and the new product development  teams at the individual operating businesses work together to ensure the Group is always looking at new product areas to be ahead of any changes in the markets
Product Quality Maintenance of product quality standards is vital to sustained sales performance	As a reputable food manufacturer our operating divisions rigorously enforce our technical policies and procedures in relation to production and storage of our products. Our larger divisions are all BRC accredited and our smaller divisions are SALSA accredited
Labour costs, Prices and Supply The Group employs an average of 1,058 employees of which 743 are direct labour employees and its success depends on attracting and retaining quality staff at the correct skill level	The Group has established a strong HR team across  all of its operating sectors, with strict recruitment criteria and processes Personal development reviews are carried at every six months to map out training and development needs
Health and Safety Any breach of Health and Safety legislation may lead to reputation damage and penalties	The Group has a compliance programme in place and this is audited by an external party to ensure that all legal and internal standards are met and adhered to
Raw Materials Raw materials used by the Group are subject to price fluctuations and market conditions	The Group purchasing managers liaise regularly to ensure best buying practices are maintained and volume advantages are earned On commodities forward purchase contracts are entered into to ensure best prices are obtained and continuation of supply is maintained

Finance Review

David Newman

Group Finance Director

Overview

During this financial year the Group completed its segregation programme to achieve its model of each business unit being a stand-alone legal entity. It has also now fully focused the business on its three pillar markets and in this annual report will be reporting on the Group results based on those markets which are Cake Decorating, Premium Bakery and Food Ingredients. Comparative figures have been restated to reflect these markets.

Revenue

Group revenue for the 12 months ending March 2016 for continuing businesses was £100.4 million which is a drop of 4% on the revenue to March 2015. This is the result of a move away from low margin contract business in Cake Decoration and also the low prices in the Food Ingredients market.

Profit Measure on continuing operations

Delivered Margin on the continuing businesses for the overall Group has encouragingly increased to £21.1 million from £19.9 million. Cake Decoration has increased margins by 4% as it has concentrated on higher margin business and the benefit of the Rainbow Dust acquisition is felt for the full year.

Premium Bakery has maintained a 13% margin on increased turnover whilst the Food Ingredients pillar has maintained a 10% margin even though turnover has declined in what has been a difficult trading year.

EBITDA for the 12 months to March 2016 was £5.0 million down by £0.3 million from March 2015 as the Group continued to invest in overheads to continue its drive towards a fully market led operation.

Statutory profit before tax has been boosted by the profit on sale of Napier Brown Sugar of £9.1 million and an exceptional write back of a Rainbow Dust liability no longer required of £3.2 million, as the contingent conditions were not met. This has resulted in a statutory profit before tax of £12.9 million (2015 loss £3.5 million) giving a basic EPS of 18.36p per share (2015 loss per share 4.9p).

	31 March 2016		31 March 2015
	Continuing £'000s	Total £'000s	Continuing £'000s	Total £'000s
Revenue	100,439	113,676	104,580	232,868
Gross profit	26,670	28,023	25,561	35,925
Delivered Margin (Gross profit after distribution costs)	21,303	21,507	19,989	20,415
EBITDA	5,043	5,027	5,319	1,960
Operating profit (EBITDA less depreciation)	3,082	2,998	3,202	(741)
Operating profit %	3.1%	2.6%	3.1%	(0.3)%
Profit/(loss) before taxation	2,413	1,423	2,101	(2,677)

 

Cash Flow and Net Debt

Following the sale of Napier Brown Sugar Ltd to Tereos in May 2015 and the receipt of the £44.4 million disposal proceeds the Group was able to repay all of its borrowings and to close its position with PNC Business Capital.

The Group was also at this time able to repay the Loan Note that had been outstanding with NB Ingredients since the acquisition of Napier Brown by Real Good Food.

The Group already had a relationship with Lloyds Bank Plc for its daily banking arrangements and in September 2015 in order to cover working capital requirements and to fund the Group's acquisition policy this relationship was extended with the addition of a £10 million invoice finance facility.

As noted above with the sale of Napier Brown Sugar Ltd the Group was able to clear its borrowings with PNC and accordingly net debt has reduced significantly during the year finishing on 31 March 2016 at £5.1 million compared to £30.1 million at March 2015.

Cash generated from operations for the year was £(1.9) million compared to £4.8 million in 2015 reflecting a higher working capital investment in the business due to higher commodity prices and more competitive trading leading to longer credit terms to customers.

The Group invested £6.4 million in tangible fixed assets, an increase of £4.2 million over 2015, reflecting the modernisation of the Group's factories and its facilities. This sum included £2.4 million on the new Group Innovation Centre.

	31 March 2016 £'000's	31 March 2015 £'000's
Working Capital	16,154	7,557
(Inventories, trade and other receivables, trade and other payables)
Net Borrowings (incl. Cash)	5,067	30,140
Net Debt/EBITDA	1.0	15.4

 

Acquisitions

The Group has been successful in acquiring two business throughout the year in accordance with its stated policy of looking for bolt on acquisitions.

In December 2015 it acquired the ISO2 Nutrition sports supplement brand from the administrators of Cre8tive Health Ltd. This business has been integrated into Garrett Ingredients part of the Food Ingredients sector and is seen as an enabler to the entry into a new and interesting product and portfolio diversification. The total consideration was £15,995.

In February 2016 it acquired Chantilly Patisserie, based in Paignton, Devon, employs some 40 staff, and produces high quality, hand-made frozen desserts, supplying the foodservice sector, with customers such as Marston's Brewery, Warner Leisure, Brakes, and Country Range. The business complements the offering of Haydens extremely well and it is envisaged that significant commercial opportunities for both businesses will be identified as a result. The total consideration was £1.75 million.

Capital Restructuring

During the year the Group held an extraordinary general meeting in order to get approval from shareholders to cancel its share premium reserve and transfer the amount into distributable reserves. This proposal was approved and an application was then made to the courts to complete this process. This was approved by the courts on the 4th May 2016. This will be reflected in the financial statements for the year ended 31 March 2017.

Pension

The Group operates defined contribution pension schemes with contributions made to schemes administered by major insurance companies. Contributions to these schemes are set as a percentage of employee's earnings.

The Group also operates a defined benefit pension scheme which has been closed to further benefit accrual since 2000. In preparation for the disposal of the sugar business it was decided to transfer the liability for this scheme out of JF Renshaw Ltd into Real Good Food plc.

The scheme deficit at 31 March 2016 was £6.1 million (2015 £5.7 million). Cash contributions to the scheme in the year ended 31 March 2016 amounted to £282,000 in line with the agreed recovery plan.

 

Consolidated Statement of Comprehensive Income

Year ended 31 March 2016

	Notes	Year ended 31 March 2016			Year ended 31 March 2015
		Continuing Operations £'000s	Discontinued Operations £'000s	Total £'000s	Continuing Operations £'000s	Discontinued Operations £'000s	Total £'000s
REVENUE		100,439	13,237	113,676	104,580	128,288	232,868
Cost of sales		(73,769)	(11,884)	(85,653)	(79,019)	(117,924)	(196,943)
GROSS PROFIT		26,670	1,353	28,023	25,561	10,364	35,925
Distribution costs		(5,367)	(1,149)	(6,516)	(5,572)	(9,938)	(15,510)
Administration expenses		(18,221)	(288)	(18,509)	(16,787)	(4,369)	(21,156)
Significant items	2	(945)	-	(945)	(522)	(328)	(850)
OPERATING PROFIT/(LOSS)		2,137	(84)	2,053	2,680	(4,271)	(1,591)
Fair value on contingent consideration		3,267	-	3,267	-	-	-
Finance income		-	-	-	-	-	-
Finance costs		(478)	(906)	(1,384)	(866)	(845)	(1,711)
Other finance costs		(191)	-	(191)	(235)	-	(235)
Profit on disposal of discontinued operation		-	9,145	9,145	-	-	-
(LOSS)/PROFIT BEFORE TAXATION		4,735	8,155	12,890	1,579	(5,116)	(3,537)
Income tax (expense)/credit	3	(439)	-	(439)	(1,055)	1,005	(50)
Tax on discontinued business		-	256	256	-	-	-
Income tax on significant items	3	113	-	113	110	68	178
(LOSS)/PROFIT ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT		4,409	8,411	12,820	634	(4,043)	(3,409)
OTHER COMPREHENSIVE LOSS
Items that will not be reclassified to profit or loss
Actuarial (losses)/gains on defined benefit plans		(484)	-	(484)	(2,237)	-	(2,237)
Income tax relating to components of other comprehensive income		35	-	35	447	-	447
OTHER COMPREHENSIVE (LOSS)		(449)	-	(449)	(1,790)	-	(1,790)
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT		3,960	8,411	12,371	(1,156)	(4,043)	(5,199)
Earnings per share from operations:
- basic	4	6.31p	12.05p	18.36p	0.91p	(5.81)p	(4.90)p
- diluted		5.83p	11.13p	16.96p	0.85p	(5.81)p	(4.90)p

 

Consolidated Statement of Changes in Equity

Year ended 31 March 2016

	Issued Share Capital £'000s	Share Premium Account £'000s	Share Option Reserve £'000s	Retained Earnings £'000s	Total £'000s
Balance as at 31 March 2014	1,389	71,244	504	13,877	87,014
Total Comprehensive Income for the year
Loss for the year	-	-	-	(3,409)	(3,409)
Other Comprehensive Income for the year	-	-	-	(1,790)	(1,790)
Total Comprehensive Income for the year	-	-	-	(5,199)	(5,199)
Transactions with owners of the Group, recognised directly in equity
Contributions by and distribution to owners of the Group
Shares issued in the year	3	28	-	-	31
Share based payment expense	-	-	47	-	47
Deferred tax on share options	-	-	26	-	26
Total contributions by and distributions to owners of the Group	3	28	73	-	104
Balance as at 31 March 2015	1,392	71,272	577	8,678	81,919
Total Comprehensive Income for the year
Profit for the year	-	-	-	12,820	12,820
Other Comprehensive Income for the year	-	-	-	(449)	(449)
Total Comprehensive Income for the year	-	-	-	12,371	12,371
Transactions with owners of the Group, recognised directly in equity
Contributions by and distribution to owners of the Group
Shares issued in the year	10	103	-	-	113
Share based payment expense	-	-	15	-	15
Deferred tax on share options	-	-	-	-	-
Total contributions by and distributions to owners of the Group	10	103	15	-	128
Balance as at 31 March 2016	1,402	71,375	592	21,049	94,418

 

Consolidated Statement of Financial Position

Year ended 31 March 2016

	Notes	31 March 2016 £'000s	31 March 2015 £'000s
NON-CURRENT ASSETS
Goodwill		71,005	70,019
Other intangible assets		834	841
Property, plant and equipment		18,066	13,599
Deferred tax asset		1,556	1,866
		91,461	86,325
CURRENT ASSETS
Inventories		12,360	10,328
Trade and other receivables		17,039	15,229
Assets relating to discontinued business		-	41,406
Cash and cash equivalents		2,946	6,687
		32,345	73,650
TOTAL ASSETS		123,806	159,975
CURRENT LIABILITIES
Bank Overdrafts		949	51
Trade and other payables		13,243	18,000
Borrowings	5	7,008	17,190
Liabilities relating to discontinued business		-	27,300
Current tax liabilities		127	613
		21,327	63,154
NON-CURRENT LIABILITIES
Borrowings	5	55	6,677
Deferred tax liabilities		1,925	2,537
Retirement benefit obligations	6	6,081	5,688
		8,061	14,902
TOTAL LIABILITIES		29,388	78,056
NET ASSETS		94,418	81,919
EQUITY
Share capital		1,402	1,392
Share premium account		71,375	71,272
Share option reserve		592	577
Retained earnings		21,049	8,678
TOTAL EQUITY		94,418	81,919

These financial statements were approved by the Board of Directors and authorised for issue on 1 August 2016.

They were signed on its behalf by:

P W Totté

Executive Chairman

D Newman

Finance Director

 

Consolidated Cash Flow Statement

Year ended 31 March 2016

	12 months ended 31 March 2016 £'000s	12 months ended 31 March 2015 £'000s
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss)/profit before taxation	12,890	(3,537)
Finance costs	1,384	1,711
Other finance costs	191	235
Share based payment expense	15	47
Depreciation of property, plant and equipment	1,917	2,341
Profit on disposal of Napier Brown	(9,061)	-
Fair value gain on contingent consideration	(3,267)	-
Profit on disposal of property, plant and equipment	-	(11)
Amortisation of intangibles	113	360
Operating Cash Flow	4,182	1,146
(Increase)/decrease in inventories	(1,900)	3,393
(Increase)/decrease in receivables	(2,034)	4,678
Pension contributions	(282)	(457)
(Decrease)/increase in payables	(1,866)	(3,955)
Cash generated from operations	(1,900)	4,805
Income taxes received/(paid)	(614)	576
Interest paid	(1,661)	(1,711)
Net cash from operating activities	(4,175)	3,670
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment	160	11
Purchase of intangible assets	-	(99)
Purchase of property, plant and equipment	(6,408)	(1,428)
Disposal of discontinued business	37,201	-
Acquisition of business, net of cash acquired	(1,666)	(1,243)
Net cash used in investing activities	29,287	(2,759)
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in year	113	32
Additional loans	-	4,000
Repayment of borrowings	(33,447)	-
Repayment of loans	-	(1,954)
Net movements on revolving credit facilities	3,705	(4,832)
Repayment of obligations under finance leases	(122)	(89)
Net cash used in financing activities	(29,751)	(2,843)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS	(4,639)	(1,932)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period	6,636	8,568
Net movement in cash and cash equivalents	(4,639)	(1,932)
Cash and cash equivalents at end of period	1,997	6,636
Cash and cash equivalents comprise:
Cash	2,946	6,687
Overdrafts	(949)	(51)
	1,997	6,636

 

Notes to the Financial Statements

Year ended 31 March 2016

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 2016	Cake Decoration £'000s	Food Ingredients  £'000s	Premium  Bakery £'000s		Continuing Operations Total £'000s	Discontinued  Operations Total £'000s	Total Group £'000s
Total Revenue	49,231	25,799	29,446		104,476	13,237	117,713
Revenue - Internal	(933)	(3,104)	-		(4,037)	-	(4,037)
External Revenue	48,298	22,695	29,446		100,439	13,237	113,676
Underlying adjusted EBITDA (see table below)	7,350	(147)	758		7,961	(15)	7,946
Operating Profit before Head Office	6,579	(413)	(162)		6,005	(84)	5,921
Head Office and consolidation adjustments					(2,923)	-	(2,923)
Significant Items	(81)	(38)			(119)		(119)
Significant Items relating to head office					(826)	-	(826)
Operating Profit/(loss)	6,498	(451)	(162)		2,137	(84)	2,053
Fair value gain on contingent consideration	3,267	-	-		3,267	-	3,267
Net finance costs	(270)	-	(47)		(478)	(906)	(1,384)
Pension finance costs					(191)	-	(191)
Profit on disposal of discontinued operation	-	-	-		-	9,145	9,145
Profit/(loss) before tax	9,495	(451)	(209)		4,735	8,155	12,890
Tax	(1,377)	49	101		(1227)	256	(971)
Unallocated Tax	-	-	-		901	-	901
Profit/(loss) after tax as per comprehensive statement of income	8,118	(402)	(108)		4,309	8,411	12,820

Sales between segments are charged at prevailing market rates.

Included in the Premium Bakery segment, one single customer accounts for 17.1% of the continuing Group's external sales for the year ended 31 March 2016.

Reconciliation of underlying EBITDA to Operating Profit	Cake Decoration £'000s	Food Ingredients  £'000s	Premium  Bakery £'000s		Head Office & Consol Total £'000s	Discontinued  Operations Total £'000s	Total Group £'000s
Operating Profit/(loss)	6,498	(451)	(162)		(3,748)	(84)	2,053
Significant Items (Note 2)	81	38			826	-	945
Depreciation	771	255	818		4	69	1,917
Amortisation		11	102			-	113
Underlying adjusted EBITDA	7,350	(147)	758		(2,918)	(15)	5,028
Head Office					2,918		2,918
Underlying adjusted EBITDA as above	7,350	(147)	758		-	(15)	7,946

31 March 2016	Cake Decoration £'000s	Food Ingredients  £'000s	Premium Bakery £'000s	Discontinued  £'000s	Unallocated £'000s	Total Group £'000s
Segment assets	85,133	19,763	13,818	-	-	118,714
Unallocated assets
Property, plant and equipment						3,204
Deferred tax assets						1,479
Trade and other receivables						409
Current tax asset						-
Total assets	85,133	19,763	13,813	-	-	123,806
Segment liabilities	7,601	3,905	5,890	-	-	17,496
Unallocated liabilities
Trade and other payables						765
Borrowings						4,146
Current tax liabilities						(913)
Deferred tax liabilities						1,813
Pension liability						6,081
Total liabilities	7,601	3,905	5,890	-		29,388
Net operating assets	77,532	15,858	7,923	-	-	94,418
Non-current asset additions	1,626	991	1,077	-	2,783	6,855
Depreciation	771	255	818	69	4	1,917
Amortisation	-	11	102	-	-	113

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, this amounts to 11.3% of the total revenue of the continuing Group but as no individual country is considered to be material, segmental reporting of a geographical nature is not considered relevant.

12 months ended 31 March 2015	Cake Decoration £'000s	Food Ingredients  £'000s	Premium Bakery £'000s		Continuing Operations Total £'000s	Discontinued  Operations Total £'000s	Total Group £'000s
Total Revenue	50,705	30,104	28,367		109,176	137,456	246,632
Revenue - Internal	(1,492)	(3,104)	-		(4,596)	(9,168)	(13,764)
External Revenue	49,213	27,000	28,367		104,580	128,288	232,868
EBITDA	6,523	516	1,252		8,291	(3,359)	4,932
Operating profit before Head Office	5,519	260	444		6,223	(3,943)	2,280
Head Office and consolidation adjustments	-	-	-		(3,021)	-	(3,021)
Significant Items relating to Head Office	-	-	-		(522)	(328)	(850)
Operating profit/(loss)	5,519	260	444		2,680	(4,271)	(1,591)
Net Finance Costs	(457)	(206)	(203)		(866)	(845)	(1,711)
Pension Finance Income	-	-	-		(235)	-	(235)
Profit/(loss) before tax	5,062	54	241		1,579	(5,116)	(3,537)
Tax	532	-	(48)		506	1,073	574
Unallocated Tax		-	-		(1,451)	-	(446)
Profit/(loss) after tax as per comprehensive statement of income	5,594	54	193		634	(4,043)	(3,409)

Inter segment sales are charged at prevailing market rates.

31 March 2015	Cake Decoration £'000s	Food Ingredients  £'000s	Premium Bakery £'000s	Discontinued  £'000s	Unallocated £'000s	Total Group £'000s
Segment assets	89,199	15,521	11,333	41,406	-	157,459
Unallocated assets
Property, plant and equipment						77
Deferred tax assets						-
Trade and other receivables						573
Current tax asset						1,866
Total assets	89,199	15,521	11,333	41,406		159,975
Segment liabilities	22,053	5,020	6,936	27,005	-	61,014
Unallocated liabilities
Trade and other payables						924
Borrowings						7,994
Current tax liabilities						-
Deferred tax liabilities						2,436
Pension liability						5,688
Total liabilities	22,053	5,020	6,936	27,005		78,056
Net operating assets	67,146	10,501	4,397	14,401	-	81,919
Non-current asset additions	641	218	643	1,750	3	3,255
Depreciation	661	239	808	584	49	2,341
Amortisation	343	17	-	-	-	360

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 11.1% of the total revenue of the Group, segmental reporting of a geographical nature is not considered relevant. The Renshaw division accounts for the majority of this turnover.

2. Significant items

	12 months ended 31 March 2016 £'000s	12 months ended 31 March 2015 £'000s
Management restructuring costs	(119)	(568)
Head office relocation following Napier disposal	(446)
Acquisition costs	(380)	(282)
Taxation credit on significant items	113	178
	(832)	(672)

During the year the Group incurred a number of significant items as detailed above. The management restructuring costs reflect a number of fundamental reorganisations within Cake Decorating and Head Office. The current year acquisition costs relates to the purchase of Chantilly Patisserie, £306k, plus additional costs for the acquisition of Rainbow Dust Colours Ltd of £74k.

3. Taxation

	31 March 2016 £'000s	31 March 2015 £'000s
Current tax
UK Current tax on profit of the period	134	201
UK Current tax on significant items	-	(178)
Adjustments in respect of prior years	(7)	85
Total current tax	127	108
Deferred tax relating to sale of Napier	(256)	-
Deferred tax charge re pension scheme	17	44
Origination and reversal of timing differences	198	(260)
Adjustments in respect of prior years	73	(20)
Adjustment in respect of change in deferred tax rate	(89)	-
Total deferred tax	(57)	(236)
Total tax - continuing operations	326	945
Tax on discontinued operations	(256)	(1,073)
Total tax	70	(128)
Tax on profit	70	(128)

Factors affecting tax charge for the period:

The tax assessed for the period is lower (2015 - higher) than the standard rate of corporation tax in the UK 20% (2015 - 21%).

The differences are explained below:

	12 months ended 31 March 2016 £'000s	12 months ended 31 March 2015 £'000s
Tax reconciliation
(Loss)/profit per accounts before taxation	12,890	(3,521)
Tax on (loss)/profit on ordinary activities at standard CT rate of 20% (2015 - 21%)	2,559	(732)
Expenses not deductible for tax purposes	226	77
Additional deduction for R&D expenditure	-	(47)
Share option relief	(26)	(3)
Current year losses not recognised - deferred tax	77	502
Income not taxable	(2,482)	-
Adjustment in respect of change in deferred tax rate	(94)	11
Adjustments to tax in respect of prior years	66	64
Deferred tax relating to sale of Napier Brown Sugar Ltd	(256)	-
Total tax	70	(128)
Tax on continuing operations	326	945
Tax on discontinued operations	(256)	(1,073)
Tax charge for the period	70	(128)

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.

	12 months ended 31 March 2016 £'000s Continuing operations	12 months ended 31 March 2015 £'000s  Continuing operations
Earnings after tax attributable to ordinary shareholders (£'000s)	12,820	(3,409)
- Continuing operations	4,409	634
- Discontinued operations	8,411	(4,043)
Weighted average number of shares in issue ('000s)	69,818	69,568
- Continuing operations	6.31p	0.91p
- Discontinued operations	12.05p	(5.81)p
Basic earnings per share	18.36p	(4.90)p

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. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of all the outstanding share options. This difference represents the dilutive potential ordinary shares.

	31 March 2016 £'000s	31 March 2015 £'000s
Earnings after tax attributable to ordinary shareholders (£'000s)	12,820	(3,409)
- Continuing operations	4,409	634
- Discontinued operations	8,411	(4,043)
Weighted average number of shares in issue ('000s)	75,564	74,203
- Continuing operations	5.83p	0.85p
- Discontinued operations	11.13p	(5.8)p
Diluted earnings per share	16.96p	(4.9)p

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 2016 £'000s	31 March 2015 £'000s
Earnings after tax attributable to ordinary shareholders (£'000s)	12,820	(3,409)
- Continuing operations	4,409	634
- Discontinued operations	8,411	(4,043)
Add back significant items (note 2)	945	850
Add Back Fair value gain	(3,267)	-
Add Back Profit on Napier disposal	(9,145)	-
Add back tax on significant items	113	(178)
Adjusted earnings after tax attributable to ordinary shareholders (£'000s)	1,466	(2,737)
Weighted average number of shares in issue ('000s)	69,818	69,568
Basic earnings per share	2.10p	(3.93)p
Total potential weighted average number of shares in issue ('000s)	75,564	74,203
Basic diluted earnings per share*	1.94p	(3.93)p

5. Borrowings and capital management

	31 March 2016 Group £'000s		31 March 2015 Group £'000s
Unsecured borrowings at amortised cost
Loan notes	-		2,774
Secured borrowings at amortised cost
Bank term loans	3,200		9,170
Revolving credit facilities	3,705		24,430
Hire purchase	158		376
	7,063		36,750
Amounts due for settlement within 12 months	7,008		30,073
Amounts due for settlement after 12 months	55		6,677
	7,063		36,750
Continuing business	7,063		23,867
Discontinued business	-		12,883

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. Following the sale of Napier Brown Sugar in May 2015 the facilities with PNC Business Credit have been fully repaid along with the loan note that was due to Napier Brown Ingredients Ltd. During the year a new revolving credit invoice discount facility has been entered into with Lloyds Bank Plc

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.

At the end of March 2016 the group has one term loan and a revolving credit facility with Lloyds Bank Plc. The term loan was taken out in January 2015 to assist with the acquisition of Rainbow Dust Colours Ltd, the original term was for 365 days and due for repayment in January 2016, this has been extended and is repayable in July 2016. The balance outstanding was £3.2 million (2015 £3.95 million).

During the year the group negotiated a £10 million revolving credit facility comprising Sterling Euro and US Dollar invoice discounting facilities which bears interest at 1.5% above base rate and at the year-end £3.7 million was outstanding under this facility. This facility is secured primarily on the debtors of JF Renshaw Ltd and Haydens Bakery Ltd.

Since the year end the Group has successfully negotiated extended borrowing facilities with Lloyds Bank plc to enable it to continue its acquisition and investment strategy. The Group has entered into an invoice finance facility of £20 million on a revolving basis with a minimum term of 12 months and a 3 months' notice period. This facility is secured against the debtors across the whole of the Groups UK businesses, and comprise a Sterling, Euro and US Dollar facility with an interest rate of 1.5% above base rate.

In addition a new term loan of £3 million has been agreed with Lloyds Bank plc to replace the loan taken out to finance the acquisition of Rainbow Dust Colours Ltd. The new loan has a term of 3 years expiring in July 2019 and is repayable in quarterly instalments of £250k. Interest on this loan is charged at 2.75% above base rate.

To aid the capital expenditure growth planned for the Group it has also entered into a £4 million facility secured against specific items of plant and machinery with Lloyds Bank plc. This loan is for a term of 5 years ending July 2021 and is repayable in monthly instalments of £73k plus VAT. Interest on this loan is charged at 3.5% above base rate.

The fixed interest rate liabilities relate to amounts payable on hire purchase agreements £0.2 million. The weighted average interest rate of these liabilities was 2% (2015 - 2%) and the weighted average period for which the interest rates are fixed was 28 months (2015 - 40 months).

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.

Lloyds Bank Plc has a debenture incorporating a floating charge over the undertaking and all property and assets present and future including goodwill, book debts, uncalled capital, buildings, fixtures, intangible assets, fixed plant and machinery. In addition, our banking arrangements with Lloyds Bank plc contain certain cross guarantees.

Hire purchase and finance lease liabilities are secured upon the underlying assets.

Capital management

The Group is subject to the risk that its capital structure will not be sufficient to support the growth of the business. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The sale of Napier Brown Sugar enabled the Group to repay all of its borrowings at the time, however there has been no change to the Group's approach to capital management, which is to fund its working capital requirements by trading generated cash flows supplemented by asset based lending, which is the most favourable source of finance available to the business at this time, to assist in managing its seasonal requirements.

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:

2016	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	3,640	4,167	517	-	-	8,324
Bank term loans	-	-	3,200	-	-	3,200
Revolving credit facilities	-	3,705	-	-	-	3,705
Finance leases	10	20	73	55	-	158
	3,650	7,892	3,790	55	-	15,387
Interest	19	57	153	15	-	244
Total	3,669	7,945	3,943	70	-	15,631

2015	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	24,657	3,675	3,687	-	-	32,019
Loan notes	-	-	-	2,774	-	2,774
Bank term loans	403	556	4,532	3,679	-	9,170
Revolving credit facilities	-	24,430	-	-	-	24,430
Finance leases	10	20	122	224	-	376
	25,070	28,681	8,341	6,677	-	68,769
Interest	148	338	451	1,845	-	2,782
Total	25,218	29,019	8,792	8,522	-	71,551

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 10¢ 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 £32k. The impact of a 10¢ 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 £41k.

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 Lloyds Bank plc, 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 £22k.

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 £70k.

Obligation under finance leases

	31 March 2016  £'000s	31 March 2015 £'000s
Finance lease liabilities - minimum lease payments
Due within one year	103	152
Due within one to five years	55	224
	158	376
Future finance charges on finance leases	(11)	(27)
Present value of finance lease liabilities	147	349
The present value of finance lease liabilities is as follows:
Due within one year	98	143
Due within one to five years	49	206
	147	349

It is the Group's policy to lease certain property, plant and equipment under finance leases. For the period ended 31 March 2016 the average effective borrowing rate was 2.6% (2015 - 4.01%). 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.

6. Pensions arrangements

The Group operates one defined benefits scheme which was closed to new members in 2000. From 1 April 2016 the Group annual contributions were agreed at £320k for 4 years 7 months. 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 31 March 2012 actuarial valuation has been approximately updated to reflect liabilities on the accounting basis at 31 March 2016. This has resulted in a deficit in the scheme of £6,081k.

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 2016  £'000s	31 March 2015  £'000s	31 March 2014 £'000s	31 March 2013 £'000s	31 December 2012 £'000s
Present value of defined benefit obligation	21,094	21,799	19,033	19,153	17,085
Fair value of plan assets	(15,013)	(16,111)	(15,360)	(15,613)	(16,005)
Deficit/(surplus) in plan	6,081	5,688	3,673	3,540	1,080
Amount not recognised in accordance with IAS 19	-	-	-	-	-
Gross amount recognised	6,081	5,688	3,673	3,540	1,080
Deferred tax at 19% (2014 - 20%)	(1,155)	(1,138)	(735)	(814)	(259)
Net liability	4,926	4,550	2,938	2,726	821

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

	31 March 2016 £'000s	31 March 2015 £'000s
Defined benefit obligation at start of period	21,799	19,033
Interest cost	738	857
Actuarial losses	(638)	3,122
Benefits paid, death in service insurance premiums, expenses and past service costs	(805)	(1,213)
Defined benefit obligation at end of period	21,094	21,799

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

	12 months ended 31 March 2016 £'000s	12 months ended 31 March 2015 £'000s
Fair value of scheme assets at start of the period	16,111	15,360
Expected return on scheme assets	547	695
Actuarial (losses)/gains	(1,122)	885
Contributions paid by the Group	282	457
Benefits paid, death in service insurance premiums and expenses	(805)	(1,286)
Fair value of scheme assets at end of the period	15,013	16,111

The actual return on the scheme assets over the period ended 31 March 2016 was £(575)k (2015 - £1,580k).

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

	31 March 2016 £'000s	31 March 2015 £'000s
Interest on liabilities	738	857
Interest on assets	(547)	(695)
Past service cost	-	73
Total income	191	235

Statement of recognised income and expenses

	31 March 2016 £'000s	31 March 2015 £'000s
Actuarial (losses)/gains	(1,122)	885
Experience gains and losses arising on the scheme liabilities: loss	-	-
Actuarial gains/(losses) arising from changes in demographic assumptions	(42)	(11)
Actuarial gains/(losses) arising from changes in financial assumptions	680	(3,111)
Total amount recognised in Statement of Other Comprehensive Income	(484)	(2,237)

Assets

	31 March 2016  £'000s	31 March 2015  £'000s	31 March 2014 £'000s
UK equity	1,608	1,759	1,977
Overseas equity	4,462	4,634	5,141
Absolute return fund	3,826	4,126	3,929
Bonds	1,020	933	1,798
Gilts	2,104	1,382	645
Property	72	354	301
Cash	473	1,444	748
Alternative assets	1,448	1,479	821
Total assets	15,013	16,111	15,360

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 2016 % per annum	31 March 2015 % per annum	31 March 2014 % per annum	31 March 2013 % per annum
Inflation	2.80	2.90	3.30	3.20
Salary increases	-	-	-	-
Rate of discount	3.65	3.45	4.65	4.70
Allowance for pension in payment increases	2.70	2.80	3.20	3.10
Allowance for revaluation of deferred pensions	1.80	1.90	2.20	1.90
Allowance for commutation of pension for cash at retirement	90% of max allowance	90% 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 2016 imply the following life expectancies:

Male retiring at age 65 in 2016	21.9 years
Female retiring at age 65 in 2016	23.9 years
Male retiring at age 65 in 2036	23.2 years
Female retiring at age 65 in 2036	25.4 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.

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 2016  £'000s	31 March 2015  £'000s	31 March 2014 £'000s	31 March 2013 £'000s	31 March 2012 £'000s
Fair value of assets	15,013	16,111	15,360	15,613	16,005
Defined benefit obligation	(21,094)	(21,799)	(19,033)	(19,153)	(17,085)
Surplus/(deficit) in scheme	(6,081)	(5,688)	(3,673)	(3,540)	(1,080)
Experience adjustment on scheme assets	(1,122)	885	(382)	208	(984)
Experience adjustment on scheme liabilities	-	-	-	(1,923)	(46)

 

END

 

 

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