Final Results

RNS Number : 4490B

Real Good Food PLC

03 October 2022

 

3 October 2022

Real Good Food plc

("RGF" or "the Group")

Final Results for the Year Ended 31 March 2022

Real Good Food plc, (AIM: RGD) today announces its final results for the year ended 31 March 2022.

Overview

Financial highlights

• Revenue from continuing businesses increased by 8.3% to £40.4 million (2021: £37.3 million).

• Adjusted underlying EBITDA* from continuing activities for the Group was £0.7 million (2021: £0.2 million), despite the impact of covid on the continuing business.

• Brighter Foods sold to The Hut Group (THG) in May 2021 generating £36.4 million cash for the Group.

• Net debt significantly reduced to £25.5 million (2021: £48.8 million).

Operational highlights

• Cake Decoration launched 69 new products in the year with in-year revenues of c. 1.8 million.

• Initiated a rebranding, range rationalisation and recipe improvement programme.

• Unprecedented increases in the cost of raw materials and energy in recent months continue unabated and pose significant challenges.

• In response, the Group has hunkered down, controlled costs and protected revenues where possible.

Current trading

• Post year end programme to reduce costs saving £1.4 million per year from the end of Q3.

• FY23 expected to be a very challenging and loss-making year but the business is being strengthened to be more resilient and ready to benefit from a more favourable trading environment.

• The Group has the support of its Loan Holders and major shareholders to navigate this difficult time.

• The Board remains open to divesting the continuing businesses for the right value at the right time.

*Underlying adjusted EBITDA (see note 3)

Mike Holt, Executive Chairman commented:

"The Group made a good start to the year and expected to build on this during the seasonally busier second half of the year. Market conditions changed during Q3 and have remained extremely challenging as noted in our trading updates in April and earlier today. To mitigate this, we are putting into effect a more radical programme of reform to reduce costs, protect revenues and preserve the inherent value of the Group. This involves the refinancing of the Group and discussions  are underway with potential lenders. "

Chairman's Statement and Business Review

Overview

With the easing of covid restrictions and post-Brexit uncertainty, the Group started the year well. For the first six months to 30 September 2021, revenue and EBITDA were well ahead of last year. Underlying adjusted EBITDA was £0.7 million compared to a (covid-impacted) loss of £0.8 million in the prior year and an EBITDA profit of £0.2 million for the first half of FY20 (our pre-covid benchmark).

Further progress was expected in our seasonally busier second half of the year, but revenue was much lower than had been anticipated (particularly during our peak Q3 period) due to severe shortages and erratic deliveries of certain key ingredients and services, compounded by high absence rates because of the Omicron variant of covid, which affected our ability to fulfil customer orders. Significant input cost increases during Q4 also impacted profitability due to the inevitable lag effect on cost-to-price pass through to customers. These are sector-wide issues but their effect on us was more pronounced due to our seasonality. Underlying adjusted EBITDA was marginally positive for the six months to 31 March 2022, compared to a £1.1 million profit in the prior year and £1.9 million loss in FY20 (our pre-covid benchmark). International sales, which had been expected to show double digit growth, were 35% lower in the second half of the year and 14% lower for the full year; due to a combination of supply chain shortfalls and the loss of some USA business to local supply.

For the year as a whole the Group improved on its FY21 performance but not FY20, with a £0.7 million underlying adjusted EBITDA on continuing activities. Whilst disappointing and frustrating, the results mask improvements that did add value in the year and will add future value once prevailing market conditions normalise. New product revenues from the launch of 69 new products, accounted for 4.5% (£1.8 million) of sales, this includes the introduction of bakers' caramel for the retail market and other luxury products, which make stylish and quality cake decorating at home easier and more accessible. Work also started on reformulating product recipes to reduce the cost and complexity of product manufacture and this rather than new product launches will be a key focus area for the new financial year.

Brighter Foods

In May 2021, we sold our majority stake in Brighter Foods Limited to The Hut Group for £35.6 million which valued the business at £43.0 million. The timing of the sale coincided with the end of the lock-in period of Brighter's Chief Executive and Founder. At £43.0 million, the sale represented 8.6 times annualised FY20 EBITDA and 11.7 times FY21 EBITDA. The sale enabled us to effectively halve the level of shareholder loans (from £45.6 million to £22.0 million) and to eliminate the pension scheme deficit on an "on-going basis" (by the injection of £8.5 million into the Scheme's assets).

Renshaw Rebranding

In 2021, Renshaw conducted research on the Cake Decorations Market¹. Qualitative insights were gathered from a consumer consulting board of 40 bakers, and these were then tested with a group of 1000 UK bakers of various skill levels from beginners to professionals¹. A study into the beliefs and behaviours of lapsed and declining consumers of RTR (ready to roll) icing² was also undertaken; last year, 1.6 million new shoppers entered the category but 1.5million exited³, so addressing their key concerns, the greatest being a lack of confidence, could make a transformational difference to the category.

The results have led to a more inclusive brand proposition. The new improved recipe will continue to provide the functionality that regular users love, whilst also making it easier to knead, roll and correct slight imperfections which anyone can make, to ensure a positive experience even for the first-time user. The vanilla flavour has been increased to enhance the eating experience whilst for consumer packs there's also a fun and approachable new look and name change. From September, consumer packs will encourage cake decorators to "just roll with it" if things take a direction they hadn't originally planned, to celebrate the perfectly imperfect creations that make a handmade product so special. In response to consumer feedback the product will be renamed Fondant Icing (after all it's not strictly "ready to roll" as a quick knead wakes up the gum system and makes the product easier to use).

There has also been a range rationalisation, as even professionals were confused at times with which product to use. Each product in the more focused portfolio has a clear description front of pack to help guide the consumer, and on the back, there are simple step by step instructions and top tips plus a QR code with content to educate and inspire.

The objective of the rebrand, supported by ongoing communications throughout the year will be to stem, (and potentially reverse over time) the decline we have seen in fondant icing, retaining more of the new and existing shoppers and encourage greater frequency of purchase.

1. Axis Consulting Quantitative Research of 1000 home bakers

2. Kantar. How do we revolutionise the icing category? 7 Sept 2021

3. Kantar, Market Data Update May 2022 .

Wavertree Property

Shortly after the year end, we sold our Wavertree property to Tutum Property Limited. The property was purchased in 2015 and housed the Renshaw Academy until August 2019. Since then, it had been used as the New Product Development Centre and by Renshaw's marketing team. These were relocated onto Renshaw's main manufacturing site at Crown Street, Liverpool bringing the Renshaw business together on one site. The sale made a small loss but generated net cash proceeds of £0.9 million of which, £0.3 million has been spent on creating an Innovation Centre adjacent to the factory at Crown Street.

Dividend

Consistent with previous years, the Board is not recommending the payment of a dividend for the year. The Board's focus is on reducing the level of debt and investing in Renshaw and Rainbow Dust Colours to deliver the best possible returns for shareholders.

Corporate Governance

The Group is governed through the Board and its Audit Committee and Remuneration Committee. The Board is very conscious of its related party connections and dealings. As appropriate, myself, Gail Lumsden (Senior Independent Non-Executive Director) and Maribeth Keeling (Chief Financial Officer) meet independently of the Board to discuss matters concerning Loan Note Holders and major Shareholders.

Strategy

Following the sale of Brighter Foods, the Group now has two trading units focused on the design and manufacture of products for decorating cakes, biscuits and desserts; JF Renshaw and Rainbow Dust Colours. The Group sells branded and private label products across multiple channels.

Within the UK, the main markets are retail products for home bakers, and ingredients for manufacturers of cakes, biscuits, and desserts, along with bakery shops and foodservice outlets serviced via a wholesaler network.

Internationally, CDD, (Cake Decoration Division) operate in retail, and the specialist home bakery market. Here customers are now spending less than they did during covid lockdowns. Although new customers to the category are still baking, they are doing so less often.

In UK retail, CDD has moved with the consumer who is becoming increasingly price conscious. CDD has therefore focused on delivery of appropriate products to not just the major multiples but also specialist retailers and bargain stores. Although the Home Baking market has declined since the growth seen during lockdowns, at £1.5 billion RSP³ (retail sales prices) it remains ahead of pre-covid levels. The prediction for the year ahead is that sales across retail will see a further decline as recessionary spending habits kick in, whilst many will continue to bake as a way of relaxing, for others it may be more economical to switch to a bought in product.

Meanwhile, the UK sales of ready-made bakery goods have grown by 1.3%/£185 million over the last year to £14.6 billion RSP. CDD has enhanced its relationship with customers through innovation and cross selling Renshaw and Rainbow Dust products into this channel.

Predictions for the year ahead are more difficult; on the plus side we have seen in previous recessionary environments a strong demand for affordable indulgences, and as mentioned above a potential trade off with home baking. But with unprecedented cost increases across fuel, energy and food, disposable income will be reduced which could lead to a drop in consumption.

In summary, the aim is to maximise value for shareholders by leveraging productive capacity by growing revenue (through product innovation and new customers) and improving operational performance. The Group is open to divesting parts of the remaining and continuing businesses for the right value at the right time. The Group has a valued heritage, and the strategy is to leverage this with new products and class leading service.

Outlook

The unprecedented increases in the cost of raw materials and energy in recent months continue unabated and pose significant challenges to the whole sector. Since 1 January 2022, the cost of sugar has doubled, and glycerine and butter have increased by 87% and 82% respectively. It is anticipated that for the current financial year (to 31 March 2023), the increased cost of raw materials and other costs of production will exceed £5 million given current cost levels. These increases are being passed through to customers but, in an environment of spiralling cost inflation, the lag effect is more prominent. Price increases have been secured but they have become incessant. They are also likely to depress demand with household incomes being under pressure from rising energy pricing and other costs. Volumes  for the first five months of the new financial year are 29% down on the same period of last year and 16% lower than our pre-covid benchmark (FY20).  Assuming the current hyper-cost inflation and its impact on demand continues, the Group will be loss-making at EBITDA level.

The Group is determined to hunker down, control costs, maximise savings opportunities and protect revenues. Wage inflation has been held at 3% and a voluntary redundancy programme was agreed in May 22 which will reduce 51 jobs during Q3 saving £1.4 million per year.  Given the pressure on the business, a more radical reform of the Group has just been signed off by the Board and Loan Note Holders to significantly reduce overhead costs, re-set pricing and achieve further manufacturing efficiencies in order to return the business to profitable growth.  Successful implementation of the recovery plan is expected to return between £2 million and £4 million in EBITDA under current market conditions. Negotiations with customers have already begun to address the widening gap caused by cost inflation and market distortions that have arisen in recent years.

The Board is confident that the right actions are being taken and has secured the support of Loan Note Holders, including the pledge of additional funding of £1.0 million, the documentation has not yet been signed. The Group is also, with the support from advisors, in discussions to secure an additional £1.5 million of new funding as part of a refinancing of the asset backed facility with a new funder, currently provided by Leumi ABL.

Mike Holt

Executive Chairman

Finance Review

Revenue

Group revenue of the continuing businesses for the 12 months ended 31 March 2022 was £40.4 million (2021: £37.3 million), an increase of 8.3% on revenue to 31 March 2021. With the relaxation of covid restrictions, sales in the Wholesale and Manufacturing sectors began to return to pre covid levels. The first half of the year saw strong sales of £20.0 million up 29.9% versus H1 in FY21, however sales in Q3 (October to December), and January were much lower than expected due to severe shortages and erratic deliveries of certain raw materials, compounded by high absence rates in the factory due to the Omicron variant, which affected our ability to fulfil customer orders. Sales in the second half were therefore flat year on year.

Profit measure on operations

Gross profit on the continuing businesses for the overall Group was £16.1 million (2021: £15.2 million). At 39.9%, the gross profit margin was below the prior year by 0.8%, owing to significant increases in key material costs and higher distribution costs for overseas deliveries. The lag effect on passing through cost increases onto customers is on average two to three months, but the impact is more pronounced during our seasonally busier second half.

The operating loss in the year of £17.1 million is reported after depreciation and amortisation charges of £1.4 million, impairment of £16.1 million and significant items of £0.3 million. The significant costs arise from further restructuring in the Cake Decoration business and the closure of the Wavertree site.

The adjusted EBITDA profit of the underlying continuing business is £0.7million.

The items adjusted for are:

Impairment charge:    £16.1m

Significant Items:  £0.3m

The impairment charge relates to purchased goodwill and aligns the £41.3 million carrying value to what the Board considers recoverable based on current trading forecasts and only the cost saving measures underway at the balance sheet date.  Had the full benefits of the recently launched radical reform programme been taken into the account the impairment would only have been £0.6 million.

After finance costs of £1.9 million (FY21: £4.7 million), a significant reduction on FY21 owing to the repayment of some investor loans in FY22, the loss before tax for the year was £19.0 million (2021: loss of £6.1 million) for continuing businesses. This equates to a loss per share of 21.46 pence on continuing operations (loss of 6.50 pence in 2021), (see note 10).

Cash flow and net debt

Conserving cash is a key objective for the Group.  Following the sale of Brighter Foods in May 2021 the Group netted cash proceeds of £35.4 million. The proceeds were utilised as follows:

The Group made a payment of £8.5 million to the Group's pension scheme (the Napier Brown Retirement Plan) (the "Plan"), broadly equivalent to the Plan's low dependency technical provisions basis.
As such, it is expected that the Group will not have to pay further deficit contributions, until a new schedule of contributions is agreed based on the valuation as at 31 March 2022 for the Plan; such agreement would take into account this cash injection, which may result in payments of up to £1.5 million (in aggregate) being paid between 1 January 2023 and 30 June 2025 to close the gap towards a buy-out basis.

The Group paid £23.1 million to the Loan Note Holders, reducing the amount repayable from £45.6 million to £22.5 million, with a further £0.5 million waiver from the loan note holders reducing the debt to £22.0 million in respect of the loan notes.

Approximately £3.0 million of net proceeds was retained to provide working capital to support the financing needs of Renshaw and Rainbow Dust Colours.

The net debt at the end of FY22 stood at £25.5 million versus £48.8 million in FY21. This predominantly comprises shareholder loans of which £16.3 million is in the form of convertible loan notes.

Net debt is a key performance indicator for the Group and is explained in note 9.

12 months to March	2022 £'000s	2021 £'000s
Revenue	40,431	37,292
Gross profit	16,130	15,164
Delivered margin	12,170	11,549
Delivered margin %	30.0%	31.0%
Underlying EBITDA (adjusted)*	659	227
Operating (loss) before impairment and significant items	(676)	(1,464)
Operating loss after impairment and significant items	(17,089)	(1,261)
Operating loss %	(42.3%)	(3.4%)
Loss before tax	(18,978)	(6,108)

All figures refer to continuing businesses.

*See note 3 for reconciliation

Going Concern

The financial statements are prepared on a going concern basis, which the Directors believe to be appropriate for the following reasons.

The forecasts are prepared on a Group basis and therefore include underlying forecasts and assumptions for the subsidiaries and the Parent Company. For this reason, the Group is referred to in the following paragraphs when discussing forecasting and events as all are interdependent on one another.

The Group incurred a loss on continuing operations before tax and impairment of £2.9m in the year to 31 March 2022 (2021: £6.1m loss) and at 31 March 2022 had net current assets of £5.1m (2021: £15.0m) and net assets of £5.1m (2021: £3.3m). The Group manages its day-to-day working capital requirement using various facilities with Leumi ABL. At the year end the available Group finance facilities, provided by Leumi ABL, totalled £6.6m, of which £5.0m was utilised. The Group shareholder loan notes and convertible loan notes, totalled £23.6m and are classified as creditors due after one year, and are repayable on 19 May 2023.

The Directors have prepared financial forecasts for the Group, comprising income statements, balance sheets and cash flows through to March 2024 which have been approved by the Board. In assessing the appropriateness of the Group's accounts being prepared on a going concern basis, the Directors have considered factors likely to affect its planned future performance and reasonably possible downside sensitivity scenarios.

As noted in the Strategic Report and Business Review, the macroeconomic headwinds are very challenging and are expected to continue for the immediate future given the wider economic outlook. A radical reform of the business has commenced, which requires the support of new funding, in order to return the Group to profitability and to position it for sustainable growth once economic conditions improve. The new funding requirement is £2.5m of which £1.0m has been pledged, but not yet formally committed, by existing Loan Note Holders.

Due to the current (and severe) inflationary cost pressures impacting consumer demand, and the ongoing difficulty in sourcing key ingredients and services, sales volumes are forecast to be 20% lower than FY22. New customers and product launches during FY22 and FY23, the unwinding of inventory on hand, actions from the restructuring plan including re-setting sales pricing particularly within UK Retail, together with overhead savings and manufacturing operational efficiencies have been factored into FY23 and FY24 projections.

The cash flow forecasts reflect the introduction of a new finance facility of £7.5 million, of which £1.5 million would be incremental to the Group's current facilities, and an additional £1.0 million of shareholder loans. Discussions are underway with asset-backed lenders to provide the new asset-backed facility of circa £7.5 million, comprising a term loan of £2.3 million and circa £5.0 million invoice discount facility, underpinned by asset security and the recovery plan to replace the current ABL Leumi facility. The additional £1.0 million of shareholder loans has been pledged and discussions are ongoing as to the pricing of this and the ranking of shareholder loans between Loan Note Holders. No new funding agreements have been formally signed as of the date of signing the financial statements as the two funding arrangements are mutually conditional.

The Board has reviewed the sensitivity of the sales and the effects of these have been  modelled.

The Directors considered the potential impact of a reduction in the volume of revenue by 5% throughout the year. Without any mitigating action, Group cash would reduce to £nil in March 2023. However, were there to be this level of lower sales, mitigating action would be taken quickly with an immediate cessation of discretionary spend. The short-term plan would be a reduction in the number of factory and overhead staff, and general overheads. Although there could be a 3-month time lag on implementing any people changes, these changes would create liquidity headroom with the low point of cash availability then being June 2023 when cash would reduce to £0.2 million as a result of the stock build for Quarter 3 (October to December). 

The current banking covenants that are in place for FY23 remain the same as FY22.

The covenants are a rolling 3-month EBITDA being within 80% of the forecast and greater than £5 million tangible net worth. The covenants are not breached on the stressed scenarios including mitigating action, referred to above. However, a new finance provider may require different covenants to the above.

The principal shareholders of the Group continue to show considerable support. 

Based on the Directors review of the above, there are three key areas which indicate the existence of a material uncertainty which may cast significant doubt on the Group and Parent Company's ability to continue as a going concern, which are as follows:

· The cash flow forecasts to be achieved by the Group over the next 12 months require several significant actions to be delivered successfully in the short-term, including the Group negotiating customer price uplifts as part of an overall price reset (in addition to the ability to pass on increased inflationary cost pressures to customers), making overhead cost reductions and making improvements in working capital management (specifically inventory reductions). The achievability of the cash flow forecasts based on the restructuring of the business has some execution risk, as well as the impact of wider economic headwinds, particularly in relation to duration and the effect on consumer demand for our products. However, with support from customers and employees, the Directors consider these actions to be achievable.

· The cash flow forecasts are based upon the approval of new loans totalling £2.5 million being obtained, including an additional £1.0 million of shareholder loans. In order to secure the incremental £1.5 million asset-backed loan, the business requires a re-financing of the facilities currently funded by Leumi ABL to an alternative provider.  Discussions have already commenced with asset-backed lenders but are yet to be agreed.

The cash flow forecasts are based upon the extension of the maturity of the shareholder loan notes and convertible loan notes from May 2023 to at least May 2024, which are pledged, however the documentation is not yet formally committed.

If these targeted actions and forecasts are not able to be delivered, or the new bank and shareholder loans identified above are not secured, the Group may not be able to operate within its existing cash and financing facilities and would therefore need alternative and/or additional funding in excess of those noted above.

In light of the above, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis. However, the factors described above indicate the existence of a material uncertainty which may cast significant doubt on the Group and Parent Company's ability to continue as a going concern and to continue realising its assets and discharging its liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

Pension Scheme

The Group offers a defined contribution scheme for all current employees that is funded on a monthly basis. In addition, the Company operates a defined benefit scheme that was closed to new members in 2000. The defined benefit scheme is the Napier Brown Retirement Pension Plan (the Plan). The IAS 19 pension scheme valuation reported a net surplus at 27 March 2022 of £1.5 million (2021: deficit £7.5 million). The Plan assets increased by £6.9 million to £21.4 million (2021: £14.5 million) and the Plan liabilities are £19.9 million compared to £21.9 million at 31 March 2021. Following the sale of Brighter Foods on the 11 May 2021, a payment of £8.5 million was made to the Napier Brown Retirement Plan. This included a pre-payment of £1.8 million, through to 1 January 2023, in relation to the deficit recovery schedule agreed as part of the 31 March 2018 valuation.  The Trustee and Company have agreed the 31 March 2021 valuation, which has a deficit of £1.5 million, and are finalising the deficit recovery and security provisions within the pension funding agreement.

Dividend

The Directors, considering the Group's performance and cash resources, do not recommend the payment of a final dividend for the year ended 31 March 2022 (2021: nil).

Consolidated Statement of Comprehensive Income

Year ended 31 March 2022

	Notes	12 months ended 31 March 2022 £'000s	12 months ended 31 March 2021 £'000s
Revenue	2	40,431	37,292
Cost of sales		(24,301)	(22,128)
Gross profit		16,130	15,164
Income from Government Furlough Scheme		-	1,205
Other operating income		56	48
Distribution expenses		(3,960)	(3,615)
Administrative expenses		(12,902)	(14,266)
Operating loss before impairment and significant items		(676)	(1,464)
Impairment charge on goodwill	11	(16,103)	-
Significant items	4	(310)	203
Operating loss after impairment and significant items	5	(17,089)	(1,261)
Finance costs	6	(1,891)	(4,665)
Other finance costs	7	2	(182)
Loss before tax		(18,978)	(6,108)
Income tax (charge)/credit		(2,384)	27
Loss from continuing operations		(21,362)	(6,081)
Profit from discontinued operations (assets held for sale)	14	19,986	2,617
Net loss		(1,376)	(3,464)
Attributable to:
Owners of the parent		(1,376)	(3,856)
Non-controlling interests		-	392
Net loss		(1,376)	(3,464)
Items that will or may be reclassified to profit or loss
Foreign exchange differences on translation of subsidiaries		(25)	65
Items that will not be reclassified to profit or loss
Actuarial profit/(loss) on defined benefit plan		501	(107)
Tax relating to items which will not be reclassified		527	(102)
Other comprehensive profit/(loss)		1,003	(144)
Total comprehensive loss for the year		(373)	(3,608)
Attributable to:
Owners of the parent		(373)	(4,000)
Non-controlling interests		-	392
Total comprehensive loss for the year		(373)	(3,608)

	Notes	12 months ended 31 March 2022 £'000s	12 months ended 31 March 2021 £'000s
Basic and diluted loss per share - continuing operations	10	(21.46)p	(6.50)p
Basic earnings per share - discontinued operations	10	20.07p	2.63p
Diluted earnings per share - discontinued operations	10	6.23p	0.82p

Consolidated Statement of Changes in Equity

Year ended 31 March 2022

	Issued Share Capital £'000s	Share Premium Account £'000s	Other Reserves £'000s	Share Option Reserve £'000s	Foreign Exchange Translation Reserve £'000s	Retained Earnings £'000s	Total £'000s	Non-Controlling Interest £'000s	Total Equity £'000s
Balance as at 31 March 2020	1,991	3,294	(4,796)	203	(125)	3,783	4,350	2,806	7,156
Loss for the year	-	-	-	-	-	(3,856)	(3,856)	392	(3,464)
Other comprehensive (loss)/gain for the year	-	-	-	-	65	(210)	(145)	-	(145)
Total comprehensive (loss)/gain for the year	-	-	-	-	65	(4,065)	(4,000)	392	(3,608)
Transactions with owners of the Group, recognised directly in equity
Share options lapsed in year	-	-	-	(200)	-	-	(200)	-	(200)
Total contributions by and distributions to owners of the Group	-	-	-	(200)	-	-	(200)	-	(200)
Balance as at 31 March 2021	1,991	3,294	(4,796)	3	(60)	(282)	150	3,198	3,348
Total comprehensive loss for the year
Loss for the year	-	-	-	-	-	(1,376)	(1,376)	(3,198)	(4,574)
Other comprehensive (loss)/gain for the year	-	-	-	-	(25)	1,028	1,003	-	1,003
Total comprehensive (loss)/gain for the year	-	-	-	-	(25)	(348)	(373)	(3,198)	(3,571)
Transactions with owners of the Group, recognised directly in equity
Release of put option reserve	-	-	4,796	-	-	-	4,796	-	4,796
Share options lapsed in year	-	-	-	(3)	-	-	(3)	-	(3)
Waiver of debt by loan  holders	-	-	540	-	-	-	540	-	540
Total contributions by and distributions to owners of the Group	-	-	5,336	(3)	-	(348)	5,333	-	5,333
Balance as at 31 March 2022	1,991	3,294	540	-	(85)	(630)	5,110	-	5,110

Consolidated Statement of Financial Position

Year ended 31 March 2022

	Notes	31 March 2022 £'000s	31 March 2021 £'000s
NON-CURRENT ASSETS
Goodwill	11	16,619	32,722
Other intangible assets		-	9
Tangible fixed assets		8,066	8,548
Investments		-	-
Deferred tax asset		-	1,426
		24,685	42,705
CURRENT ASSETS
Inventories		4,024	3,597
Trade and other receivables		6,572	7,248
Retirement benefit asset	13	1,497	-
Cash collateral		50	215
Cash and cash equivalents		2,734	622
		14,877	11,682
Assets classed as held for sale		1,078	20,157
TOTAL ASSETS		40,640	74,544
CURRENT LIABILITIES
Trade and other payables		6,665	8,087
Current tax liability		4	-
Borrowings	12	3,718	2,659
Lease liabilities		48	93
NCI put option		-	1,553
		10,435	12,392
Liabilities classed as held for sale		-	4,442
NON-CURRENT LIABILITIES
Borrowings	12	24,293	46,624
Lease liabilities		155	-
Derivative liability - convertible loan notes		-	17
Deferred tax liabilities		647	216
Retirement benefit obligation	13	-	7,505
		25,095	54,362
TOTAL LIABILITIES		35,530	71,196
NET ASSETS		5,110	3,348
EQUITY
Share capital		1,991	1,991
Share premium account		3,294	3,294
Other reserves		540	(4,796)
Share option reserve		-	3
Foreign exchange translation reserve		(85)	(60)
Retained earnings		(630)	(282)
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT		5,110	150
Non-controlling Interest		-	3,198
TOTAL EQUITY		5,110	3,348

Consolidated Cash Flow Statement

Year ended 31 March 2022

	Notes	31 March 2022 £'000s	31 March 2021 £'000s
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Profit/(loss) before taxation		1,008	(3,491)
Finance and other finance costs	6,7	1,889	4,856
Share options reserve credit		(3)	(200)
Foreign exchange movement		(3)	308
Goodwill impairment charge	11	16,103	-
Impairment charge on assets held for sale		70	-
Waiver of shareholder loans		(19,986)	-
Profit on disposal of subsidiary		-	31
Loss on disposal of property, plant and equipment		-	7
Fair value of derivative liability		-	17
Fair value of NCI put option		-	(1,302)
Depreciation of property, plant, and equipment		1,326	2,435
Amortisation of intangibles		9	52
Operating Cash Flow		413	2,713
(Increase)/decrease in inventories		(915)	676
Decrease in receivables		2,606	23
Pension contributions	13	(8,500)	(720)
Decrease in cash collateral		165	-
(Decrease)/increase in payables		(2,518)	953
Cash (used by)/from operations		(8,749)	3,645
Interest paid		(139)	(86)
Interest on leases		-	(26)
Net cash (outflow)/inflow from operating activities		(8,888)	3,533
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment		(844)	(567)
Disposal of subsidiary, net of cash disposed of	14	33,153	-
Cost of disposal of subsidiary		(1,138)	50
Net cash inflow/(outflow) from investing activities		31,171	(517)
CASH FLOW USED IN FINANCING ACTIVITIES
Repayment of lease liabilities		(113)	(402)
Outflow of term loans		(865)	(865)
Interest paid on investor loans		(5,310)	-
Inflow of other loans	12	-	(35)
Repayment of investor loans	12	(17,790)	-
Drawdowns on revolving credit facilities		36,045	42,816
Repayments on revolving credit facilities		(34,571)	(42,876)
Net cash outflow from financing activities		(22,604)	(1,362)
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS		(321)	1,654
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period		3,080	1,363
Effects of currency translations on cash and cash equivalents		(25)	63
Net movement in cash and cash equivalents		(321)	1,654
Cash and cash equivalents at end of period		2,734	3,080
Continuing operations		2,734	622
Discontinued operations		-	2,458
Cash and cash equivalents at end of period		2,734	3,080

Notes to the Financial Information

Year ended 31 March 2022

1. Presentation of financial statements

General information

Real Good Food plc is a public limited company incorporated in England and Wales under the Companies Act (registered number 04666282). The Company is domiciled in England and Wales and its registered address is 229 Crown Street, Liverpool L8 7RF. The Company's shares are traded on the Alternative Investment Market (AIM).

Basis of preparation

The consolidated financial information is presented on the basis of international accounting standards and has been prepared in accordance with AIM rules and the Companies Act 2006, as applicable to companies reporting under international accounting standards.

The financial information set out in this preliminary statement does not constitute the Group's statutory accounts for the years ended 31 March 2022 or 2021. Statutory accounts for 2021 have been delivered to the Registrar of Companies, and those for 2022 will be delivered in due course. The auditor has reported on those accounts; their report for the year ended 31 March 2022 was (i) unqualified (ii) included a Material uncertainty related to going concern paragraph, as

· The cash flow forecasts to be achieved over the next 12 months require several significant actions to be delivered successfully in the short term;

· The cash flow forecasts are based upon the approval of new loans totalling £2.5 million being obtained, which are yet to be agreed; and

· The cash flow forecasts are based upon the extension of the maturity of the shareholder loan notes and convertible loan notes from May 2023 to at least May 2024, which is not yet formally committed.

(iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The accounts are prepared on a going concern basis.

These results were approved by the Board of Directors on 30 September 2022

Discontinued operations

A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operation that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification of a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is presented as if the operation had discontinued from the start of the comparative period.

During the twelve months to 31 March 2022, the Group sold Brighter Foods Limited to THG plc on the 11 May 2021.

Any references to discontinued operations throughout this report refers to Brighter Foods Limited.

IFRS standards and interpretations adopted

New standards and amendments which are effective from 1 January 2022, and have been adopted within the Group's accounting policies are:

• Amendments to IFRS 3 Business combinations;

• Amendments to IAS 16 Property, Plant and Equipment;

• Amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets;

The adoption of the amendments to IFRS 1, IFRS 9 and  IAS 41, have not had an impact on the financial statements of the Group.

The Group does not expect any standards issued by the IASB, but not yet effective, to have a material impact on the Group.

2. Revenue

The revenue for the Group for the current year arose from the sale of goods in the following areas:

Cake Decoration	£40.4 million (2021 £37.3m)	Manufactures, sells, and supplies cake decorating products and ingredients for the baking sector.
Discontinued Operations (Food Ingredients)	£1.3 million (2021 £19.8m)	Manufactures and supplies a range of snack bars to the retail sector.

3. Segment reporting

Business segments

The divisional structure reflects the management teams in place and ensures all aspects of trading activity have the specific focus they need in order to achieve our growth plans.

The Group operates in one main division: Cake Decoration. The Head Office has a finance function that supports the subsidiary as required.

12 months ended 31 March 2022	Cake Decoration £'000s	Head Office and non-trading subsidiaries £'000s	Continuing Operations £'000s	Discontinued Operations £'000s	Total Group £'000s
Total revenue	42,545	-	42,545	1,275	43,820
Intercompany sales	(2,114)	-	(2,114)	-	(2,114)
External revenue	40,431	-	40,431	1,275	41,706
Cost of sales	(24,301)	-	(24,301)	(1,063)	(25,364)
Gross profit	16,130	-	16,130	212	16,342
Income from Furlough Scheme	-	-	-	137	137
Other operating income	25	31	56	-	56
Distribution expenses	(3,960)	-	(3,960)	(47)	(4,007)
Administrative expenses	(12,396)	(506)	(12,902)	(403)	(13,305)
Operating (loss) / profit before impairment and significant items	(201)	(475)	(676)	(101)	(777)
Impairment charge	-	(16,103)	(16,103)	-	(16,103)
Significant Items	(254)	(56)	(310)	(229)	(539)
Operating (loss)/profit after impairment and significant items	(455)	(16,634)	(17,089)	(330)	(17,419)
Finance costs	(138)	(1,752)	(1,891)	-	(1,891)
Other finance costs	-	2	2	-	2
(Loss)/profit before tax	(593)	(18,384)	(18,978)	(330)	(19,308)
Income tax credit/(expense)	-	(2,384)	(2,384)	-	(2,384)
Profit on disposal	-	-	20,316	-	20,316
(Loss)/profit after tax as per comprehensive statement of income	(593)	(20,768)	(1,046)	(330)	(1,376)

12 months ended 31 March 2021	Cake Decoration £'000s	Head Office and non-trading subsidiaries £'000s	Continuing Operations £'000s	Discontinued Operations £'000s	Total Group £'000s
Total revenue	40,206	-	40,206	19,788	59,994
Intercompany sales	(2,914)	-	(2,914)	-	(2,914)
External revenue	37,292	-	37,292	19,788	57,080
Cost of sales	(22,128)	-	(22,128)	(12,992)	(35,120)
Gross profit	15,164	-	15,164	6,796	21,960
Income from Furlough Scheme	1,205	-	1,205	461	1,666
Other operating income	-	48	48	49	97
Distribution expenses	(3,615)	-	(3,615)	(411)	(4,026)
Administrative expenses	(13,657)	(609)	(14,266)	(4,100)	(18,366)
Operating (loss) / profit before impairment and significant items	(903)	(561)	(1,464)	2,795	1,331
Significant Items	(763)	966	203	(169)	34
Operating (loss)/profit after impairment and significant items	(1,666)	405	(1,261)	2,626	1,365
Finance costs	(95)	(4,570)	(4,665)	(9)	(4,674)
Other finance costs	-	(182)	(182)	-	(182)
(Loss)/profit before tax	(1,761)	(4,347)	(6,108)	2,617	(3,491)
Income tax credit/(expense)	-	27	27	-	27
(Loss)/profit after tax as per comprehensive statement of income	(1,761)	(4,320)	(6,081)	2,617	(3,464)

Geographical segments

The Group earns revenue from countries outside the United Kingdom, as shown below:

12 months ended 31 March 2022	Cake Decoration £'000s	Discontinued Operations £'000s
UK	26,992	1,275
Europe	5,722	-
USA	6,892	-
Rest of World	825	-
Total	40,431	1,275

The Group has two customers which constitute over 10% of revenue: one providing 21% of revenue, and the other 13%.

12 months ended 31 March 2021	Cake Decoration £'000s	Discontinued Operations £'000s
UK	25,795	19,788
Europe	4,465	-
USA	6,191	-
Rest of World	841	-
Total	37,292	19,788

The Group has two customers which constitute over 10% of revenue: one providing 17% of revenue, and the other 10%.

Reconciliation of operating (loss)/profit to underlying adjusted EBITDA to 31 March 2022	Cake Decoration £'000s	Head Office and non-trading subsidiaries £'000s	Continuing Operations £'000s	Discontinued Operations £'000s	Total Group £'000s
Operating loss	(455)	(16,634)	(17,089)	(330)	(17,419)
Significant items	254	56	310	229	539
Impairment charge	-	16,103	16,103	-	16,103
Depreciation	1,209	117	1,326	-	1,326
Amortisation	9	-	9	-	9
Underlying adjusted EBITDA	1,017	(358)	659	(101)	558

Reconciliation of operating (loss)/profit to underlying adjusted EBITDA to 31 March 2021	Cake Decoration £'000s	Head Office and non-trading subsidiaries £'000s	Continuing Operations £'000s	Discontinued Operations £'000s	Total Group £'000s
Operating (loss)/profit	(1,666)	405	(1,261)	2,626	1,365
Significant items	763	(966)	(203)	169	(34)
Depreciation	1,614	25	1,639	796	2,435
Amortisation	87	(35)	52	-	52
Underlying adjusted EBITDA	798	(571)	227	3,591	3,818

31 March 2022	Cake Decoration £'000s	Head Office and non-trading subsidiaries £'000s	Continuing Operations £'000s	Discontinued Operations £'000s	Total Group £'000s
Segment assets	36,017	4,623	40,640	-	40,640
Segment liabilities	10,606	24,924	35,530	-	35,530
Net operating assets / (liabilities)	25,411	(20,301)	5,110	-	5,110
Non-current asset additions	844	-	844	-	844
Depreciation	(1,209)	(117)	(1,326)	-	(1,326)
Amortisation	(9)	-	(9)	-	(9)

31 March 2021	Cake Decoration £'000s	Head Office and non-trading subsidiaries £'000s	Continuing Operations £'000s	Discontinued Operations £'000s	Total Group £'000s
Segment assets	52,180	3,355	55,535	19,009	74,544
Segment liabilities	11,305	55,449	66,754	4,442	71,196
Net operating assets / (liabilities)	40,875	(52,094)	(11,219)	14,567	3,348
Non-current asset additions	444	-	444	185	629
Depreciation	(1,614)	(25)	(1,639)	(796)	(2,435)
Amortisation	(87)	35	(52)	-	(52)

In line with the Group strategy of allowing each business to understand its true cost base as a stand-alone business, during the 12 months ended 31 March 2022, Head Office costs of £1.2 million (2021: £0.8m) have been re-allocated to the Cake Decoration division.

4. Significant items

	12 months ended 31 March 2022 £'000s	12 months ended 31 March 2021 £'000s
Costs relating to disposal of Brighter Foods	-	(269)
Professional fees in relation to refinancing costs	(62)	(38)
Movement in provisions relating to the non-controlling interest put option	-	1,302
Professional fees in relation to Liverpool factory/Wavertree closure	(90)	(113)
Closure of Renshaw US warehouse	(15)	(171)
Management restructuring	(143)	(508)
Significant items - Continuing business	(310)	203
Continuing business	(310)	203
Discontinued business	(229)	(169)
Total significant items	(539)	34

The Group's underlying profit figure excludes a number of items which are material and non-recurring and are detailed separately to ensure the underlying operating performance of the businesses is clearly visible, without the distortions of these non-recurring costs.

The year to 31 March 2022 had the following significant costs:

1.  Professional fees in relation to the refinancing of the Investor Loan Notes and CLNs.

2.  Professional fees in relation to the closure of the Wavertree property and relocation to Crown Street Liverpool.

3.  Professional fees in relation to the closure of the Renshaw US warehouse.

4.  Redundancy costs associated with the restructuring of the Cake Decoration business.

The year to 31 March 2021 had the following significant costs:

1.  The legal and due diligence costs involved in preparing the Brighter Food business for disposal.

2.  The legal costs associated with including Brighter Foods in the CID facility with ABL Leumi.

3.  Project management costs for projects running in the Crown Street factory.

4.  Costs associated with closing the Renshaw US warehouse, the lease terminating in July 2021, with stockholding relocated to Crown Street Liverpool.

5.  Redundancy costs of the restructuring plan started in FY20.

6.  Brighter Foods incurred costs in relation to a proposed sale, as the disposal has occurred, Brighter Foods is now shown as a discontinued operation.

5. Operating loss

Operating loss for continuing operations

	Notes	12 months ended 31 March 2022 £'000s	12 months ended 31 March 2021 £'000s
External Sales		40,431	37,292
Staff Costs		(11,696)	(12,276)
Inventories:
- cost of inventories as an expense (included in cost of sales)		(18,577)	(16,294)
Depreciation of property, plant, and equipment		(1,326)	(1,639)
Amortisation of intangible assets		(9)	(52)
Significant items	4	(310)	203
Impairment charges	11	(16,103)	-
Research and development expenditure		(646)	(626)
Impairment of trade receivables		(53)	(230)
Foreign exchange gains/(losses)		3	(308)
Other net operating expenses		(8,803)	(7,523)
Total		(57,520)	(38,553)
Operating loss		(17,089)	(1,261)

6. Finance costs

	12 months ended 31 March 2022 £'000s	12 months ended 31 March 2021 £'000s
Interest on bank loans, overdrafts, and investor loans	(1,896)	(4,600)
Interest on lease liabilities	(12)	(26)
Interest on non-controlling interest put option	-	43
Finance cost on substantial modification of convertible loan notes	17	(91)
	(1,891)	(4,674)
Continuing business	(1,891)	(4,665)
Discontinued business	-	(9)

7. Other finance (income)/costs

	12 months ended 31 March 2022 £'000s	12 months ended 31 March 2021 £'000s
Interest on pension scheme liabilities (note 13)	(429)	(465)
Interest on pension scheme assets (note 13)	431	312
Interest on effect of asset ceiling/IFRIC 14	-	(29)
	2	(182)

8. Directors' remuneration

	12 months ended 31 March 2022 £'000s	12 months ended 31 March 2021 £'000s
Directors' salaries, benefits, and fees	(650)	(482)
	(650)	(482)

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

	Fees/Salaries inc. Er's NIC £'000s	Taxable Benefits £'000s	Bonus £'000s	Pension Contributions £'000s	12 months ended 31 March 2022 £'000s	12 months ended 31 March 2021 £'000s
M J Holt	175	-	106	-	281	160
J M d'Unienville	25	-	-	-	25	25
M Keeling	178	10	62	-	250	203
J A Mackenzie	25	-	-	-	25	25
A Ridgwell	27	-	-	-	27	27
G Lumsden	42	-	-	-	42	42
	472	10	168	-	650	482

This includes salaries and fees (including Employer's NI) received as an officer of the Company. Taxable benefits include car allowance, health and other taxable payments for expenses paid by the Company.

All salaries and fees disclosed are included in current year trading results.

M Keeling's salary above represents 100%, however 50% of the salary costs are recharged from J F Renshaw to Group.

Directors' fees paid to J A MacKenzie are charged and paid to Downing LLP.

Consultancy fees and expenses paid to entities in which Directors hold a beneficial interest, for services provided to the Group by the Directors.

The bonus paid to M J Holt relates to the sale of Brighter Foods Limited and was fully funded by the Loan Note Holders via a debt waiver.

The current Company Directors disclosed are considered as key management personnel.

9. Notes supporting the cash flow statement

The cash collateral figure for the Group is £0.05 million (FY21: £0.2m). This has been provided to Lloyds Bank plc as security for insurance claims of the Group. This amount is not included in the cash flow.

Group

Real Good Food plc (Group)	Non-current Loans and Borrowings £'000s (Note 12)	Current Loans and Borrowings £'000s (Note 12)	Total £'000s
At 31 March 2020	43,059	2,717	45,776
Cash Flows	(37)	(923)	(960)
Non-cash flows
- Interest accruing on loans	4,376	-	4,376
- Finance loss on change of terms for convertible loan notes	91	_	91
Loans and borrowings classified as non-current at March 2020 becoming current before March 2021	(865)	865	-
At 31 March 2021	46,624	2,659	49,283
Cash Flows	(23,100)	608	(22,492)
Non-cash flows
- Interest accruing on loans	1,760	-	1,760
- Waiver of shareholder loans	(540)	-	(540)
Loans and borrowings classified as non-current at March 2021 becoming current before March 2022	(451)	451	-
At 31 March 2022	24,293	3,718	28,011

Net Debt

Net debt is a key performance indicator for the Group. It is defined as short term and long-term borrowings less cash. See table below:

	Note	31 March 2022 Group £'000s	31 March 2021 Group £'000s
Short term borrowings	12	(3,718)	(2,659)
Short term lease liabilities	12	(48)	(93)
Long term borrowings	12	(24,293)	(46,624)
Long term lease liabilities	12	(155)	-
Cash		2,734	622
Total Net Debt		(25,480)	(48,754)

  Group

	Net cash and current borrowings £'000s	Non-current borrowings £'000s	Net debt £'000s
At 1 April 2020	1,744	43,626	45,370
Cash flow	386	(1,748)	(1,362)
Other non-cash movements	-	4,746	4,746
At 31 March 2021	2,130	46,624	48,754
Cash flow	(1,617)	(23,100)	(24,717)
Other non-cash movements	519	924	1,443
At 31 March 2022	1,032	24,448	25,480

10. Earnings per share

Basic earnings per share

Basic earnings per share is calculated on the basis of dividing the loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the year.

	12 months ended 31 March 2022 Continuing Operations	12 months ended 31 March 2022 Discontinued Operations	12 months ended 31 March 2021 Continuing Operations	12 months ended 31 March 2021 Discontinued Operations
(Loss)/profit after tax attributable to ordinary shareholders (£'000s)	(21,362)	19,986	(6,473)	2,617
Weighted average number of shares in issue for basic EPS ('000s)	99,564	99,564	99,564	99,564
Employee share options ('000s)	-	-	340	340
Convertible loan notes ('000s)	220,980	220,980	220,980	220,980
Weighted average number of shares in issue for diluted EPS ('000s)	320,544	320,544	320,884	320,884
Basic (loss)/earnings per share	(21.46)p	20.07p	(6.50)p	2.63p

The total loss per share for 2022 is (1.39)p for continuing and discontinued operations (2021 continuing and discontinued loss per share: (3.87)p).

Diluted earnings per share

The discontinued operations in the period can be diluted. The impact of this is a diluted earnings per share of 6.23p (2021 0.82p) for discontinued operations. If all of the share options had been exercised before the period end, the earnings per share would then have been a loss per share of (21.46)p on the continuing operations and earnings of 6.23p on the discontinued operations. The weighted average number of shares in issue for the period was 99,564,430 and there are no options outstanding. There were also 8,806,571 convertible loan notes outstanding, of which the weighted average number of shares was 220,979,796. Therefore, the weighted average number of dilutive potential ordinary shares is 320,544,226.

11. Goodwill

Goodwill acquired on business combinations is allocated at acquisition to the cash generating units that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:

	Group £'000s
Cost
At 1 April 2021	32,722
Impairment	(16,103)
At 31 March 2022	16,619

	31 March 2022 £'000s	31 March 2021 £'000s
Cake Decoration	16,619	32,722

Assumptions:

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill may be impaired. The recoverable amount of any cash generating unit is determined based on the higher of fair value less costs of disposal and value-in-use calculations. The cash flows used in the value-in-use calculation are EBITDA (adjusted) performance less capital expenditure based on the latest Board-approved forecasts in respect of the following three years.

Long-term growth rate assumptions:

For the purposes of impairment testing, the cash flows are extrapolated over 5 years with a terminal value applied to the fifth year. The terminal value is calculated using the fifth year forecasted EBITDA (adjusted) performance and applying a 2% growth rate.

Discount rate assumptions:

The discount rate applied to the cash flows is 10% (2021: 10%). This rate is in line with the Company's actual weighted average cost of capital of 9.67% which takes account of the increased risk of being listed on AIM rather than the main market. It is representative of businesses operating within the food sector.

Impairment charge:

The impairment review resulted in an impairment of the goodwill held for Cake Decoration of £16.1 million (2021: nil). Cake Decoration is a core division for the Group and is currently in turnaround. The investments made in manufacturing capability in recent years have not yet started to deliver the returns that could be expected, for example, and the Board believes that the current valuation, reflected here, necessarily, and materially underplays the potential value of this division. Plans to improve the strategic positioning, service delivery and commercial performance of this business are also in progress.

Sensitivity analysis:

An illustration of the sensitivity to reasonable possible changes in the discount rate assumption or the long-term growth rate are shown below:

• An increase of 0.5% in the Group's weighted average cost of capital of 10% to 10.5% would cause a further impairment of £1.6 million on the carrying value of goodwill on Cake Decoration.

• A reduction of 0.5% to the growth rate from 2.0% to 1.5% would cause a further impairment of £1.0 million on the carrying value of goodwill on Cake Decoration.

The Board has considered these sensitivities and believe that, owing to trading expectations and a strong brand, the recoverable amount would support the value.

	Book value of cash generating unit £'000s	Estimated recoverable amount/value in use £'000s
Cake Decoration	25,249	36,547

12. Borrowings and capital management

	31 March 2022 Group £'000s	31 March 2022 Company £'000s	31 March 2021 Group £'000s	31 March 2021 Company £'000s
Secured borrowings at amortised cost
Bank term loans	1,185	-	2,050	-
Revolving credit facilities	3,267	-	1,794	-
Leases	203	-	93	-
Investor loans*	7,256	7,256	30,240	30,240
Convertible loan notes**	16,303	16,303	15,199	15,199
	28,214	23,559	49,376	45,439
Borrowings due for settlement within 12 months	3,718	-	2,659	-
Lease liabilities due for settlement within 12 months	48	-	93	-
Borrowings due for settlement after 12 months	24,293	23,559	46,624	45,439
Lease liabilities due for settlement after 12 months	155	-	--	-
Total	28,214	23,559	49,376	45,439

*  The investor loans shown consists of £4.7 million principal amount, £1.8 million accrued interest up to 31 March 2022 and redemption premiums of £0.7 million.

**  Convertible loan notes shown at 31 March 2022 consist of £8.8 million investment (2021: £8.8 million), £7.5 million accrued interest (2021: £6.3 million), and £0.02k of transaction costs (2021: nil) being spread over the remaining life of the liability and a finance cost of £0.7m and a fair value adjustment of (£0.7m), resulting from a substantial modification to the Convertible Loan Note terms requiring de-recognition of the existing loans and recognition of new loans.

All existing shareholder loans are due to be paid in May 2023, however the Loan note holders have pledged to extend them to May 2024, however the documentation is not yet in place.

Convertible loan notes

In May 2018, the Company secured further funding from each of its major shareholders totalling £8.8 million. NB Holdings Ltd and Omnicane Investors Ltd each providing £3.4 million, and funds managed by Downing LLP provided £1.9 million. This instrument has since, with shareholder approval, been replaced with convertible loan notes ("CLN's") of £8.8 million with a conversion price of 5 pence. The loan is repayable in 3 years from the date of issue or can be converted at any time into shares at the holder's option. The loan note holders have pledged  to amend the repayment date of the loans to May 2024, however the documentation has not yet been signed.

The instrument accrues interest at a rate of 12 percent per annum accruing daily and will mature and be due for repayment in full on 19 May 2023, unless they are redeemed before that date. The loan note holders have pledged to amend the repayment date to the 19 May 2024; however, the documentation is not yet signed. On that date, unless the convertible loan notes are converted into ordinary shares on the conversion date, a redemption premium fee will be payable. The redemption fee, which stopped accruing from 1 January 2021, will be an amount which, when added to the interest accrued on the relevant notes, provides a total return equal to the amount which would have accrued in respect of such notes from the date of the convertible loan note instrument until and including the date the notes are redeemed in full had the interest rate been 12 per cent per annum.

A host loan at amortised cost and an embedded derivative liability, being measured at fair value with changes in value being recorded in profit or loss, have been recognised. At 31 March 2022, the derivative liability was valued at £0.1k (2021: £17k).

The convertible loan notes shown consist of a host loan at amortised cost of £8.8 million, £7.5 million of finance costs and £0.7 million of costs and a fair value adjustment of (£0.7m) resulting from substantial modification to the convertible loan notes up to 31 March 2022.

Features of the Group's borrowings are as follows:

The Group's financial instruments comprised cash, leases, a revolving credit facility, investor loans and various items arising directly from its operations, such as trade payables and receivables. The main purpose of these financial instruments is to finance the Group's operations.

The main risks from the Group's financial instruments are interest rate risk and liquidity risk. Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.

The Group also has some currency exposure in relation to its Euro and US Dollar commodity purchases. However, this is mitigated by matching in part against foreign currency sales. The Board reviews and agrees policies, which have remained substantially unchanged for the year under review, for managing these risks.

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

During the year ended 31 March 2022, the Group continued with the borrowing facilities in place and secured loans from investors. As at 31 March 2022, the borrowings comprised:

•   Revolving credit facility of £5.45 million with Leumi ABL Limited on a revolving basis with a term of 60 months. This facility is secured against the debtors of JF Renshaw Limited and Rainbow Dust Colours Limited with an interest rate of 2.25% above Sterling Overnight Index Average for Sterling Advances. Because the group retains the risks and rewards of ownership of the underlying debts, these continue to be recognised in these financial statements.

•    The Group secured facilities against specific plant and machinery with Leumi ABL Limited £2.1 million for 36 months ending August 2022. The facilities interest payable is 2.75% above Sterling Overnight Index Average for Sterling Advances.

•    The Group secured a £1.3m term loan facility with the term being 60 months.

The three major shareholders, NB Holdings Ltd, Omnicane Investors Ltd, and certain funds managed by Downing LLP, supported the business, and provided significant funding to the Group by way of loans.

The loans at 31 March 2022 were as follows:

Date	Amount	Method of Funding	Major Shareholder(s)
May 2018	£8.8m	Secured convertible loan notes	NB Holdings Ltd (£3.4m), Omnicane Investors Ltd (£3.4m), Funds managed by Downing LLP (2.0m)
March 2018	£2.3m	Secured loan notes	NB Holdings Ltd (£0.9m)), Omnicane Investors Ltd (£0.9m), Funds managed by Downing LLP (£0.6m)
January 2018	£0.3m	Secured loan notes	Funds managed by Downing LLP (£0.3m)
September 2017	£0.8m	Secured loan notes	Funds managed by Downing LLP (£0.8m)
June 2017	£1.3m	Secured loan notes	Funds managed by Downing LLP (£1.3m)
Total	£13.5m

At 31 March 2022, Leumi ABL Limited had a debenture incorporating a floating charge over the undertaking and all property and assets present and future including goodwill, book debts, uncalled capital, buildings, fixtures, intangible assets, fixed plant, and machinery. In addition, the banking arrangements with Lloyds Bank plc had a guarantee over the Wavertree property.

Liquidity risk management

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

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

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

	Less than 1 month £'000s	1-3 months £'000s	3 months to 1 year £'000s	1-5 years £'000s	5+ years £'000s	Total £'000s
2022
Trade and other payables	4,904	1,044	427	195	-	6,570
Investor loans	-	-	-	4,704	-	4,704
Convertible loan notes	-	-	-	8,800	-	8,800
Bank term loans	72	216	163	734	-	1,185
Revolving credit facilities	-	-	3,267	-	-	3,267
Leases	4	8	36	155	-	203
	4,980	1,268	3,893	14,588	-	24,729
Interest	-	-	-	9,349	-	9,349
Redemption premiums	-	-	-	706	-	706
Total	4,980	1,268	3,893	24,643	-	34,784

	Less than 1 month £'000s	1-3 months £'000s	3 months to 1 year £'000s	1-5 years £'000s	5+ years £'000s	Total £'000s
2021
Trade and other payables	7,138	893	56	-	-	8,087
Investor loans	-	-	-	20,562	-	20,562
Convertible loan notes	-	-	-	8,807	-	8,807
Bank term loans	72	144	649	1,185	-	2,050
Revolving credit facilities	-	-	1,794	-	-	1,794
Leases	8	15	70	-	-	93
NCI put option liability	1,553	-	-	-	-	1,553
	8,771	1,052	2,569	30,554	-	42,946
Interest	-	-	-	13,029	-	13,029
Redemption premiums	-	-	-	3,084	-	3,084
Total	8,771	1,052	2,569	46,667	-	59,059

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

Analysis of market risk sensitivity

Currency risks:

The Group is exposed to currency risks on purchases of commodities from USA and Europe. The risk associated with these purchases is mitigated by sales also made to customers in these countries, however, to the extent that these do not cover each other there is a risk of exposure to the Group.

The effect of the exposure is calculated as being:

•    With an excess of $ assets to $ liabilities, a 10% strengthening of the US dollar would result in an increase in pre-tax profits of £616k. A 10% weakening of the US dollar would result in a decrease of pre-tax profits of £504k.

•    With an excess of € liabilities to € assets a 10% strengthening of the Euro would result in a decrease in pre-tax profits of £686k. A 10% weakening of the Euro would result in an increase of pre-tax profits of £561k.

Interest rate risks:

The Group has an exposure to interest rate risk arising from borrowings based upon the Bank of England base rate. However, at the balance sheet date, the Group did not have any outstanding balance on these borrowing facilities, and so the impact of an increase in the applicable interest rates would, all other factors remaining unchanged, not have impacted profits.

13. Pension arrangements

Defined Contribution Scheme. The Group operates a defined contribution scheme for all employees, including provision to comply with auto-enrolment requirements laid down by law.

In addition, the Company operates one defined benefits scheme which was closed to new members in 2000 and closed to future accrual with effect from 5 April 2004. The Defined Benefit scheme is a funded arrangement with assets held in a separate trustee-administered fund. Members of the Plan are entitled to retirement benefits based on their final salary at the date of leaving the Plan (or 5 April 2004 if earlier), and length of service.

An arrangement was previously agreed with the Trustees under which employer contributions to the scheme are £1 million per year from 1 August 2019. For the purposes of IAS 19 the data provided for the 31 March 2018 actuarial valuation, has been approximately updated to reflect defined benefit obligations on the accounting basis at 31 March 2022. This has resulted in a surplus in the Plan of £1,497k. The present value of the fair plan assets is in excess of the contribution's payable exceeds the net liability.

Present values of defined benefit obligations, fair value of assets and deficit

	31 March 2022 £'000s	31 March 2021 £'000s	31 March 2020 £'000s	31 March 2019 £'000s	31 March 2018 £'000s
Present value of defined benefit obligation	19,929	21,885	20,750	21,177	21,448
Fair value of Plan assets	(21,426)	(14,527)	(13,735)	(13,774)	(13,529)
(Surplus)/deficit in Plan	(1,497)	7,358	7,015	7,403	7,919
Effect of asset ceiling/IFRIC14	-	147	921	-	-
Gross amount recognised	(1,497)	7,505	7,936	7,403	7,919
Deferred tax*	-	(1,426)	(1,508)	(1,258)	(1,094)
Net (asset)/liability	(1,497)	6,079	6,428	6,145	6,825

* Deferred tax rate 2022 at 25%; 2021 and 2020: 19%, and 2017, 2018 & 2019: 17%

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

	31 March  2022 £'000s	31 March 2021 £'000s
Defined benefit obligation at start of period	21,885	20,750
Interest cost	429	465
Actuarial losses / (gains)	(1,536)	1,698
Past service cost	-	-
Benefits paid	(849)	(1,028)
Defined benefit obligation at end of period	19,929	21,885

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

	31 March  2022 £'000s	31 March 2021 £'000s
Fair value of Plan assets at start of period	14,527	13,735
Interest income on Plan assets	431	312
Return on assets less interest income	(1,182)	788
Contributions paid by the Group	8,500	720
Benefits paid, death-in-service insurance premiums and expenses	(850)	(1,028)
Fair value of Plan assets at end of period	21,426	14,527
UK equities	-	2,408
Other investments	21,426	12,119
Total plan assets at end of period	21,426	14,527

The actual return on the Plan assets over the period ended 31 March 2022 was (£1,687k) (2021: £1,100k).

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

	31 March 2022 £'000s	31 March 2021 £'000s
Interest on liabilities	429	465
Interest on assets	(431)	(312)
Interest on effect of asset ceiling / IFRIC 14	-	29
Net interest cost/(gain)	(2)	182
Past service cost	-	-
Total cost	(2)	182

Statement of recognised income and expenses

	31 March 2022 £'000s	31 March 2021 £'000s
Actuarial gain/(loss) on the Plan assets	(1,182)	788
Actuarial gain/(loss) on the Plan liabilities arising from changes in demographic assumptions	199	17
Actuarial (loss)/gain on the Plan liabilities arising from changes in financial assumptions	1,620	(1,715)
Actuarial (loss)/gain experience	(283)
Change in the effect of the asset ceiling / IFRIC14	147	803
Total amount recognised in Statement of Other Comprehensive Income	501	(107)

Assets

	31 March 2022 £'000s	31 March 2021 £'000s	31 March 2020 £'000s
UK equity	-	2,408	2,210
Absolute return fund	4,113	1,412	1,522
Corporate Bonds	-	2,936	2,746
Gilts	3,427	2,769	3,112
Credit Funds	7,220	175	218
Sterling Liquidity Funds	1,822	-	-
Cash/Net current assets	223	-	-
Multi-Asset Funds	4,621	4,827	3,927
Total assets	21,426	14,527	13,735

The investment strategy for the Plan is controlled by the Trustees, in consultation with the Company. None of the fair values of the assets shown above includes any of the Group's own financial instruments or any property occupied by, or other assets used by, the Group. Absolute return funds are invested in a diverse range of assets in order to achieve equity-like returns with reduced volatility. Alternative assets include infrastructure and derivatives.

Assumptions

	31 March 2022 £'000s	31 March 2021 £'000s	31 March 2020 £'000s	31 March 2019 £'000s
Inflation	3.80	3.40	2.70	3.30
Salary increases	-	-	-	-
Rate of discount	2.80	2.00	2.30	2.40
Allowance for pension in payment increases
RPI max 5%	3.70	3.30	2.70	3.10
RPI min 3% max 5%	3.90	3.60	3.20	3.50
Allowance for revaluation of deferred pensions	3.30	2.70	2.20	2.30
Allowance for commutation of pension for cash at retirement	90% of max allowance	90% of max allowance	90% of max allowance	90% of max allowance

The obligations of the Plan have been calculated by projecting forwards the figures from the initial results of the latest valuation as at
31 March 2018 and then making appropriate adjustments for known experience and for differences in assumptions.

The mortality assumptions adopted at 31 March 2022 and 31 March 2021 imply the following life expectancies from age 65:

	31 March 2022	31 March 2021
Male retiring at age 65 in current year	21 years	21 years
Female retiring at age 65 in current year	23 years	23 years
Male retiring at age 65 in 20 years' time	22 years	22 years
Female retiring at age 65 in 20 years' time	25 years	25 years

The weighted-average duration of the defined benefit obligation at 31 March 2022 was 15 years (2021: 15 years).

Historic funding positions

The funding positions applicable at the start of each period are as follows:

	12 months ended 31 March 2022 £'000s	12 months ended 31 March 2021 £'000s	12 months ended 31 March 2020 £'000s	12 months ended 31 March 2019 £'000s	12 months ended 31 March 2018 £'000s
Fair value of assets	21,426	14,527	13,735	13,774	13,529
Defined benefit obligation	(19,929)	(21,885)	(20,750)	(21,177)	(21,448)
Effect of asset ceiling / IFRIC14	-	(147)	(921)	-	-
Asset/(Liability) in scheme	1,497	(7,505)	(7,936)	(7,403)	(7,919)
Experience adjustment on scheme assets	-	-	(168)	518	(232)
Experience adjustment on scheme liabilities	-	-	-	427	-

Risks

The scheme is exposed to a number of risks, including:

Asset volatility: The Plan's defined benefit obligation is calculated using a discount rate set with reference to corporate bond yields; however, the Plan invests significantly in equities. These assets are expected to outperform corporate bonds in the long-term but provide volatility and risk in the short term.

Changes in bond yields: a decrease in corporate bond yields would increase the Plan's defined benefit obligation; however, this would be partially offset by an increase in the value of the Plan's bond holdings.

Inflation risk: a proportion of the Plan's defined benefit obligation is linked to inflation; therefore, higher inflation will result in a higher defined benefit obligation (subject to the appropriate caps in place). The majority of the Plan's assets are either unaffected by inflation, or only loosely correlated with inflation, therefore an increase in inflation would also increase the deficit.

Life expectancy: if Plan members live longer than expected, the Plan's benefits will need to be paid for longer, increasing the Plan's defined benefit obligation.

The Trustees and Company manage risks in the Plan through the following strategies:

Diversification: In order to counter asset volatility and changes in bond yields, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.

Investment Strategy: The Trustees are required to review their investment strategy on a regular basis and consult with the Company on any changes. The Trustees' investment strategy is set out in the Statement of Investment Principles.

Funding positions: The Trustees are required to assess the funding position annually by means of a formal actuarial report which must be shared with the Company.

Sensitivity analysis

The impact to the value of the defined benefit obligation of a reasonably possible change to one actuarial assumption, holding all other assumptions constant, is presented in the table below:

	Reasonably Possible Change	Obligation Increase	Obligation Decrease
Discount Rate	(+/- 0.5%)	8%	7%
RPI Inflation	(+/- 0.5%)	3%	3%
Assumed Life expectancy	(+/-) 1 Year	5%	5%

Small changes to other assumptions, such as the allowance for commutation of pension for cash at retirement, and the proportion of members assumed to be married at retirement, do not have such a significant effect on the obligations of the Plan.

14. Disposal of Brighter Foods Limited

On 11 May 2021, Brighter Foods Limited was sold to The Hut Group plc (THG) for a cash consideration of £43.0 million. RGF through its subsidiary NBF, had an interest of 84.334 percent of the issued share capital of Brighter Foods Limited with the balance owned by Brighter's managers. The Group received cash proceeds of £35.64 million. The table below shows the profit on sale.

Profit on Sale

	31 March  2022 £'000s
Cash consideration received	35,732
Cash disposed of	(2,579)
Net cash inflow on disposal of discontinued operations	33,153
Net assets disposed of (other than cash):
Property, plant and equipment	(5,766)
Inventories	(2,784)
Trade and other receivables	(1,520)
Trade and other payables	3,176
Other long-term borrowing	338
	(6,556)
Goodwill	(5,031)
Disposal costs	(1,138)
Put option	(3,243)
Minority interest	3,131
Result for period until disposal	(330)
Profit on disposal of Brighter Foods Limited	19,986

 

END

 

 

FR UAVBRURURRAA