Interim Results
Real Good Food Company Plc (The)
31 August 2004
31 August 2004
The Real Good Food Company Plc
('Real Good Food' or 'the Company')
Results for the seven months ended 30th June 2004
Chairman's Statement
I am pleased to report the Company's second interim results for the seven month
period ended 30th June, 2004, the Group has made substantial progress in
strategic and financial terms during the period under review.
• Haydens moved into profitability in March and mechanisation of processes
continues to bring benefits.
• The acquisition of Five Star Fish Limited in May 2004 for an
aggregate consideration of £16.6 million consolidated the Group's
position in the food service sector and will provide further potential
for the development of synergies across the operating companies.
• Seriously Scrumptious is now manufacturing out of one new,
purpose-built, BRC (and Waitrose) accredited unit.
• Management has been strengthened in the operating companies
with appointment of a new managing director at Coolfresh and a
new operations director at Haydens. At Main Board level, we have
appointed a group finance director and two additional
non-executive directors .
Progress in certain areas has been slower than anticipated (due in the main to
external factors) but nevertheless the Group's sales revenues have increased
to an annualised total of approximately £50 million and continuing
reorganisation and efficiency programmes within the operating companies have
started to produce improvement in margin and profits. Your board is confident
that it is building a sound base from which to drive future top and bottom line
growth.
Results
Following the acquisition of Five Star Fish on 13th May the Group has
changed its reporting year and in 2005 will announce audited accounts for
the sixteen months to 31st December 2004. The first interim results were for
the six months to 30th November 2003 in accordance with the AIM rules.
Accordingly, the current results cover a seven month period to 30th June,
2004.
Notwithstanding the disparity in the two periods and the effect of Five Star
Fish for six weeks, it is pleasing to note turnover in these results for the
period of £14.71 million compared to £10.3 million in the previous six month
period. The loss before and after tax for the period was £1.40 million, but
before goodwill amortisation of £128,000 and exceptional reorganisation costs of
£128,000, this equates to £1.15 million, which is in line with expectations. The
basic loss per share has improved from 12.11p in the previous period to 11.88p
for the period.
Given that operating losses were greater than expected in the first three months
of 2004 and reorganisation has been slower than anticipated, these results
indicate that the Group's strategic plan is back on track.
Strategy
In the thirteen months since inception, the Group has grown organically and
through the acquisition of a mature and profitable niche business. It has
started the programme of investment to improve the quality of the manufacturing
units and has brought in experienced new personnel to enhance both operational
and financial management. This process will continue.
Acquisition opportunities will still be considered where these are seen to add
value in line with the strategic aims and can offer the synergies that will be a
key part of driving the Group forward. The identification and implementation of
purchasing, distribution and sales synergies has commenced beneficially and will
gather momentum over the next eighteen months or so as suppliers and customers
are made aware of the quality and range of products on offer.
Continuing focus on rationalisation of the product range and customer base to
improve margin and, therefore, profitability and cash generation, may have a
cost in the short-term. However, through pro-active and controlled management,
and the investment and production efficiency programmes, a stable platform to
underpin revenue and profit growth going forward will be delivered. The
directors expect the Group to move into profitability in the second half of
2004.
Operating Companies
Haydens
In the year immediately preceding its acquisition, Haydens Bakeries made a loss
of £0.7 million on a turnover of £10.5 million. Since acquisition in July 2003
weekly sales are running 27 per cent. higher and the division moved into
profitability during March 2004.
Following exceptionally high levels of sales in the weeks leading up to
Christmas, volumes took some time to recover in the New Year. The introduction
of a bespoke production planning system has now brought down labour costs
significantly and ahead of target, as sales improved during the second quarter
of the year. Improvements are also being made in material cost control following
the appointment of an experienced operations director and further benefits are
expected in the second half of the year. Considerable effort is also being put
into planning and implementation of more mechanised production equipment. The
first of these, a new laminating plant, is on stream and improving quality. This
capital investment programme will generate further efficiency benefits over the
next 18 months.
Sales to both key customers are planned to increase further from the combined
effects of new stores acquired from Morrisons and new innovative product
introductions. The full effect of these developments will be seen in the autumn
and are expected to break through the key level of £300,000 per week before the
year-end.
The Company has now paid Haydens' previous owners £450,000 of the deferred
consideration, with a further £136,000 becoming payable in the second half of
the year.
Seriously Scrumptious
Seriously Scrumptious was purchased in July 2003 and was essentially a start up
business located over a number of operating units in the Glastonbury area with
turnover of £0.4 million generating losses of £142,000.
During the last seven months the three old manufacturing units have been
combined into one new purpose designed and built leasehold unit at Glastonbury.
The factory consolidation programme was slightly delayed due to lease
arrangements with the new landlord, but is now fully complete. The unit has
successfully gained BRC accreditation in May 2004.
Following accreditation sales levels have improved significantly, particularly
with customers introduced by other operating divisions. A more stable level of
trade is being developed with a home-shopping television channel and new
customers are being gained on a regular basis. Sales of celebration cakes have
been disappointing in the period as new leads could not be progressed until BRC
accreditation had been achieved.
A major contract has been won with Waitrose to supply product for Christmas 2004
and this is expected to lead to further opportunities. Weekly sales levels have
now increased to £16,000 per week and the operating unit is expected to move
into profitability in the last quarter of the year.
Five Star Fish
Five Star Fish was acquired by the Group on the 13 May 2004 for an aggregate
consideration of £16.6 million and a potential earn-out based on agreed annual
profitability. During the six weeks of ownership included in the reporting
period Five Star Fish, has performed in line with management's expectations and
it is anticipated this will continue.
Since the start of the calendar year, Five Star Fish has generated operating
profits of £1.3 million, representing 39 per cent. of the maximum earn-out
figure for the year. With the important summer trading period due to benefit the
second half of the year it is expected the company will achieve its targets.
Sales levels are currently running at levels 6 per cent. higher than the
corresponding period last year.
Coolfresh / Eurofoods
Following the appointment of an experienced managing director, the division has
now been re-branded 'Coolfresh' and the strategy re-affirmed. Concentration on
Greater London and 'single drop' business, has seen sales re-established at
prior year levels, having been at low volumes during the December to March 2004
period. The new managing director has also re-organised the operating unit to
improve commercial and production margins.
The influx of new business wins in the late Spring caused a certain amount of
disruption at the unit, as production had to be geared to a doubling in volumes.
Consequently, the benefits of new volume have not yet led to a significant
improvement in results. This was exacerbated, and margins eroded, by
disregarding the division's core strategy and extending supply to out of London
coffee shop customers, where distribution costs and smaller drop sizes made the
business uneconomic.
For this reason, during the period, detailed negotiations to improve terms and
hence margin were instigated with Caffe Nero, the division's largest customer,
with the result that Coolfresh will cease delivery to Nero outlets this autumn.
A phased exit will allow the company to manage the run down cost effectively and
ensure no disruption to Caffe Nero which continues to take product from other
parts of the Group.
The saving of approximately £1 million in distribution costs arising from this
decision, together with new sales opportunities coming on stream in line with
our strategy and improved production margins, should set a sound base for
improved profitability in the last quarter of this year.
Pieter Totte
Chairman
31 August 2004
Profit and loss account
For the seven months ended 30th June, 2004
7 month period 6 months ended
ended 30th June 30th November
2004 2003
(Unaudited) (Unaudited)
£'000 £'000
Turnover 14,710 10,228
Cost of sales (11,833) (8,112)
---------- ---------
Gross profit 2,877 2,116
Selling &
Distribution
Expenses (1,494) (931)
Administrative
Expenses (2,614) (1,693)
Exceptional
items (128) -
---------- ---------
Operating loss (1,359) (508)
Interest
receivable 57 3
Interest
payable (99) (36)
---------- ---------
Loss before
taxation (1,401) (541)
Taxation - -
---------- ---------
Loss for the
period (1,401) (541)
========== =========
Basic loss per
share (pence) (11.88) (12.11)
========== =========
Consolidated Balance Sheet
As at 30th June 2004
30th June, 30th November,
2004 2003
(Unaudited) (Unaudited)
£'000 £'000
Fixed assets
Intangible assets 16,566 617
Tangible assets 6,033 3,193
---------- ---------
22,599 3,810
Current assets
Stock 3,552 648
Debtors 6,651 3,350
Cash at bank and in hand 157 783
---------- ---------
10,360 4,781
Creditors: amounts falling due within
one year (15,090) (6,063)
---------- ---------
Net current liabilities (4,730) (1,282)
---------- ---------
Total assets less current liabilities 17,869 2,528
Creditors - amounts falling due after
more than one year (6,884) (461)
---------- ---------
Net assets 10,985 2,067
========== =========
Capital and reserves
Called up share capital 267 105
Share premium account 12,662 2,505
Profit and loss account (1,944) (543)
---------- ---------
Shareholders funds 10,985 2,067
========== =========
Consolidated cash flow statement
For the six months ended 30th June, 2004
7 month period 6 months ended
ended 30th 30th November,
June 2004 2003
(Unaudited) (Unaudited)
£'000 £'000
Net cash
outflow from
operating
activities (4,014) (419)
----------- ---------
Returns on investments and servicing of finance
Interest paid (51) (36)
Interest received 57 3
----------- ---------
Cash outflow from returns on investments
and servicing of finance 6 (33)
Capital expenditure and financial investment
Purchase of intangible fixed assets - (12)
Purchase of tangible fixed assets (1,069) (685)
----------- ---------
Net cash outflow from capital expenditure
and financial investments (1,069) (697)
----------- ---------
Acquisitions and disposals
Purchase of subsidiary undertaking (14,198) (928)
Cash received with acquisition (788) (539)
----------- ---------
Net cash inflow from acquisitions
and disposals (14,986) (1,467)
----------- ---------
Cash outflow before financing (20,063) (2,616)
----------- ---------
Financing
Issue of ordinary share capital 10,000 2,811
Expenses paid in connection with share issues (681) (198)
Debt due within a year:
Increase in short term borrowings 2,752 -
Debt due beyond a year
New secured loan 6,148 -
Capital element of finance lease rental payments 1,770 -
----------- ---------
Cash inflow
from financing 19,989 2,613
----------- ---------
Decrease in cash (74) (3)
=========== =========
Notes to the Cash flow statement
A. RECONCILLIATION OF NET CASHFLOW TO MOVEMENT IN NET DEBT
7 month period
ended 30th
June 2004,
(Unaudited)
Increase/(Decrease) in cash in the period (74)
Cash inflow from increase in debt and lease financing (10,670)
----------
Change in net debt resulting from cashflows (10,744)
Loans and finance leases acquired with subsidiary (32)
New finance leases 394
----------
Movement in net debt in the period (10,382)
Net debt at 30 November 2003 (6)
----------
Net debt at 30 June 2004 (10,388)
==========
B. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
7 month period 6 months ended
ended 30th June 30th November
2004 2003
(Unadudited) (Unaudited)
£'000 £'000
Operating loss (1,359) (508)
Goodwill amortisation and depreciation 421 32
Increase in stock (614) (166)
Increase in debtors 263 (505)
Increase in creditors (2,725) 730
------------ ----------
Net cash outflow from operating
activities (4,014) (419)
============ ==========
c. ANALYSIS OF changes in NET DEBT
As at 30th Increase in Cash Flow At 30th June
November debt 2004
2003
£'000 £'000 £'000 £'000
Cash at bank 783 (626) 157
Overdraft (773) 552 (221)
--- ---
----------- ------------- ----------- ----------
Debt due
within one
year 10 (74) (64)
--- ---
Bank loan (923) (923)
---
Hire Purchase (195) (195)
---
Invoice
discounting (2,752) (2,752)
---
Bank Loan (5,225) (5,225)
Hire purchase (16) (1,213) (1,229)
----------- ------------- ----------- ----------
6 (10,308) (74) (10,388)
=========== ============= =========== ==========
NOTES TO THE INTERIM RESULTS
1. BASIS OF PREPARATION
The results for the seven months ended 30th June 2004 which are unaudited, have
been prepared in accordance with applicable accounting standards and under the
historical cost convention.
The financial information set out in this document does not comprise the
statutory accounts of the Company within the meaning of section 240(5) of the
Companies Act 1985.
2. LOSS PER ORDINARY SHARE
The calculation of the loss per share is based on the loss on ordinary
activities for the seven month period ended 30th June 2004 of 11.88 pence and
the weighted average number of ordinary shares in issue during the period, being
11,792,857.
3. DIVIDENDS
No dividend is proposed for the seven months ended 30th June 2004.
4. TAXATION
No deferred tax asset has been recognised in respect of trading losses at this
point in time.
5. PURCHASE OF SUBSIDIARY UNDERTAKING
On 13 May 2004 the group acquired the whole of the issued share capital of Five
Star Fish Ltd and Tom Darwood Limited, a fish wholesaler and processor. The
consideration is set out below. This purchase has been accounted for by the
acquisition method of accounting.
The fair values of the assets and liabilities of Five Star Fish Limited and Tom
Darwood Limited at the date of acquisition were as follows:-
Book Value Fair Value Fair Value
Adjustments
£'000 £'000 £'000
Fixed assets
Tangible 1,703 755 2,458
Investments 1,367 (1,367) -
Current assets
Stock and work in progress 2,655 - 2,655
Debtors 3,566 (365) 3,201
Cash at bank and in hand 14 - 14
-------------- --------------- ------------
Total assets 9,305 (977) 8,328
============== =============== ============
Creditors due within one
year (3,664) 365 (3,299)
Provisions for liabilities and
charges:-
Deferred taxation (131) - (131)
Government grants (243) - (243)
-------------- --------------- ------------
Total liabilities (4,083) 365 (3,673)
============== =============== ============
Net Assets 5,267 (612) 4,655
Goodwill capitalized 15,907
------------
Total fair value of
acquisition 20,562
============
Settled by:
Payment of cash 13,719
Assumed debt 1,904
Shares allotted 977
Acquisition cost paid and
accrued 761
Deferred consideration 3,201
------------
20,562
============
6. MAJOR NON CASH TRANSACTIONS
a. During the period the group entered into finance lease arrangements in
respect of assets with a total capital value at the inception of the leases of
£394,000.
b. Part of the consideration for the purchase of the subsidiary
undertakings that occurred during the period comprised of both shares and
deferred consideration. Further details of the acquisitions are set out below.
Enquiries
The Real Good Food Company Tel: 01428 644099
Pieter Totte/John Gibson/Lee Camfield
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