Interim Results

RNS Number : 2476E
Real Good Food Company Plc (The)
25 September 2008
 



The Real Good Food Company plc


Interim results for the six months ended 30 June 2008





The Real Good Food Company plc ('the Group'), the sugars, ingredients and bakery company, today announces its Interim Results for the six months ended 30 June 2008



Highlights 


  > Market conditions in core Sugar Division remain challenging


  > 13% growth in sales achieved by Baking Ingredients Division


  > Total Group sales from continuing operations down 8% to £104.0m (2007: £112.8m)


  > Operating profit before taxation and significant items of £921,000 (2007: £2.2m


  > Loss before taxation of £1.59m (2007: £184,000


  > Diluted loss per share of 1.7p (2007profit of 4.7p)


  > Successful refinancing of debt facilities



Pieter Totte, Chairman of The Real Good Food Company plc, comments:


'Sales of the group continue to be skewed towards the last quarter and the critical Christmas trading period. It is still too early to anticipate the outcome of trading in this period. However, given the circumstances and trading conditions outlined above and in the absence of any significant improvement in market conditions, the Board anticipates that the results for the year ended 31 December 2008 are likely to be circa £1m lower than current market expectations.'  


25 September 2008





 Enquiries:

 

The Real Good Food Company plc  

Tel: 020 7335 2500

Stephen Heslop Chief Executive


Lee Camfield Finance Director  




Shore Capital    

Tel: 020 7408 4090

Guy Peters




College Hill

Tel: 020 7457 2020

Gareth David



               

   


                        


                       

Chairman's Statement



Introduction


As highlighted in our most recent trading update, these results for the six months to 30th June 2008 reflect a period of difficult trading conditions, when margins have been under competitive pressure and when fuel and energy prices have continued to rise, and look likely to have a consequential effect during the second half, particularly on packaging items. 


Total Group sales for the period fell by 8% to £104m, principally due to a 10% reduction in sales by our Sugar Division and despite sales growth of 13% in our Baking Ingredients Division and a modest decline in sales of just 4% in the Bakery Division. Operating profit before significant items from continuing operations fell from £2.25m to £921,000, reflecting a 36% fall within our Sugar Division to £1.84m, a 32% fall within Baking Ingredients to £78,000 and an operating loss of £275,000 (2007: profit of £58,000) in our Bakery Division.    


EU market conditions relating to sugar have continued to be challenging due largely to the uncertainty surrounding the reference price change on the 1st October 2008 and 2009This continues to have an effect on our business.


EU Beet producers have so far relinquished some 5.2 million tonnes of sugar quota and the Commission expects further reductions to be announced by the end of January 2009. This should ensure that no further compulsory quota cut across all member states will be necessary. 


I am very pleased to announce the appointment of Andrew Brown to the position of Managing Director, Napier Brown Foods effective 19th August. Andrew has held a number of senior posts within RHM and served as MD of the Milling Division. Equally I am pleased to confirm that the group has successfully re-financed its debt structure with KBC, a leading Belgian bank. 


Sugar Division


£'000s

2008

Six Months

2007

Six Months




Sales

85,713

95,022

Operating Profit*

1,838

2,865

*Normalised profit before significant items, interest and central costs


Sales in our Sugar Division were down 10% on the prior year, almost entirely due to two principal reasons. One, the loss of a large account as previously reported and, two, price deflation as a consequence of the EU reform programme. This revenue decline was partially offset by currency movements, which increased both sales and costs of sales equally and retail volumes which were up 4% on the prior year. 


In our Blends operation new business has been secured with further activities planned in 2009 to improve overall operating margins. Dairy trading has been more difficult than anticipated due to the poor and inclement weather. However, plans are being finalised to further develop the business. Whilst overall profitability was down versus the prior year it remained in line with our expectations. 



  

Baking ingredients


£'000s

2008

Six Months

2007

Six Months




Sales

14,271

12,358

Operating Profit*

78

115

* Normalised profit before significant items, interest and central costs


Sales in the first half have been very positive and are up 13% on the prior year, reflecting healthy sales in the retail sector. This is partially offset with lower chocolate compound sales, which have been adversely affected by higher oil prices used in the manufacturing process. Gross margins were only slightly ahead, which reflects the delay in recovering all the material inflation. Material, fuel and energy prices have continued to rise, hence further discussions are being finalised in relation to price increases


The business continues to explore new opportunities with new sales to M&S for chocolate drops and a range of syrups currently being sold into food service. Contracts for the remainder of the year have all been finalised with the major retailers for the busy Christmas trading periodOperational efficiencies are improved at both factories and will support customer service during the busy seasonal period


Bakery division


£'000s

2008

Six Months

2007

Six Months




Sales

8,535

8,889

Operating Profit*

(275)

58

* Normalised profit before significant items, interest and central costs


Overall sales are down 4% on the prior year reflecting poor sales on a few key lines. The business is now focused on matching the consumer and customer needs to address this shortfall. As a consequence, the business has established a relationship with a leading patisserie Chef from London which should enhance our overall capability.


Material control remains a major challenge to the business and as a consequence further rationalisation will be required as well as further price increaseto offset the effect of fuel and energy prices encountered this year. The business has now implemented the shift re-configuration as planned, reducing expensive night shift premiums. 


Significant items


During the period under review, the Group incurred a number of one-off significant costs. These were largely related to the refinance of the Group (£0.8m) reflecting break costs with our previous lender and the release of the associated prepaid loan arrangement fees. Restructuring costs of £0.4m were also incurred as operational restructuring was undertaken at a number of divisions, whilst the provision for an onerous lease was increased by £0.2m as the Group has been unable to re-lease the property. 


Cashflow


Cashflow from operating activities before working capital and significant items was £1.7m, reflecting a lower level of operating profit compared to the prior year. Investment in working capital was reduced by £0.4m during the period. Higher stock levels within both Sugar and Bakery Ingredients were driven by raw material inflationseasonal stock builds for the higher second half sales and higher dairy and imported sugar stocks. These were offset by higher creditor levels, largely reflecting the timing of the stock builds and higher raw material costs.

  

Net interest costs amounted to £1.1m while continuing operations tax payments were £0.7m Additional tax payments of £2.9m were made in the period in relation to the deferred payments of tax due on the profit on disposal of Five Star Fish last year. Loan repayments, under our existing facility, of £0.8m left net debt at £31.4m up £5.5m since the year end, reflecting the deferred tax payments and higher stock levels.


Refinancing


As reported in our pre-close statement, the Group completed a re-finance of our debt facilities on the 19th July. This saw the repayment of facilities with our existing lender and new asset backed facilities undertaken with KBC, a leading Belgian bank. The new loans are for a period of five years, with two revolving facilities, secured against debtors and stock and term loan facilities of £13.3m which attract loan repayments of £2.20m per annum.


Outlook


In the Sugar Division the last few months have been a difficult trading period with both volumes and margins lower than anticipated as we enter the first reference price change. Whilst the sugar industry appears to be moving towards equilibrium on supplysome volatility is still expected until the regime change is fully implemented in October 2009.  Further, customer call off on volumes is expected to continue below our original expectations.


Within Bakery Ingredients, sales improvements achieved in the first half have abated with lower volumes and margins in quarter three. There is much nervousness within the trade in attempting to understand potential consumer attitudes during the key Christmas trading period and this leads us to be cautious on our expectations for the full year.


In the Bakery Division sales have continued below that of the prior year. However new business has been secured within the Foodservice sector following re-assessment of the overall business strategy. Margins remain difficult as the business continues to wrestle with material variances and higher input costs


Sales of the group continue to be skewed towards the last quarter and the critical Christmas trading period. It is still too early to anticipate the outcome of trading in this period. However, given the circumstances and trading conditions outlined above and in the absence of any significant improvement in market conditions, the Board anticipates that the results for the year ended 31 December 2008 are likely to be circa £1m lower than current market expectations.  


Pieter Totte

Chairman


25 September 2008













  Consolidated Income statement for the six months ended 30 June 2008 (Unaudited)





 

 

 

Period ended 30 June 2008






Period Ended 30 June 2007



 

 

 

 









Notes

Before Significant Items

 

Significant Items


Total




Before 

Significant 

Items


Significant Items


Total



£'000s

 

£'000s


£'000s


£'000s


£'000s


£'000s

CONTINUING OPERATIONS


 

 












 

 










REVENUE


103,972

 

-


103,972


112,835


-


112,835

Cost of sales


92,821

 

-


92,821


99,162


-


99,162



 

 










GROSS PROFIT


11,151

 



11,151


13,673




13,673

Distribution costs


4,371

 



4,371


5,165




5,165

Administration expenses


5,859

 

1,365


7,224


6,253


489


6,742



 

 










OPERATING PROFIT


921

 

(1,365)


(444)


2,255


(489)


1,766



 

 










Finance Income


106

 

-


106


180


-


180

Finance Costs


(1,407)

 

-


(1,407)


(2,220)


-


(2,220)

Net Pension Finance Income


157

 

-


157


90


-


90



 

 










PROFIT/(LOSS) Before Taxation


(223)

 

(1,365)


(1,588)


305


(489)


(184)



 

 










Taxation


75

 

410


485


(66)


-


-66



 

 










PROFIT/(LOSS) FROM CONTINUING OPERATIONS


 

 












(148)

 

(955)


(1,103)


239


(489)


(250)

DISCONTINUED OPERATIONS


 

 










REVENUE


-

 

-


-


14,962


-


14,962

Operating Expenses


-

 

-


-


12,804


-


12,804

OPERATING PROFIT


-

 

-


-


2,158




2,158



 

 










Finance Costs


-

 

-


-


(95)


-


(95)

Profit on Sale of Subsidiary


-

 

-


-


-


8,300


8,300

Taxation


-

 

-


-


(439)


-6,581


(7,020)

PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS


 

 

























-

 

-


-


1,624


1,719


3,343

PROFIT/(LOSS) FOR THE PERIOD


(148)

 

(955)


(1,103)


1,862


1,230


3,093

Basic Profit/(loss) per share 

5

0

 



(1.7)


2.9




4.8

Diluted Profit/(loss) per share 

5

0

 



(1.7)


2.9




4.7





CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2008 (UNAUDITED)



GROUP BALANCE SHEET


30 Jun08 


30 Jun07 


31 Dec 07

As at 30 June 2008


 







£'000s


£'000s


£'000s

ASSETS


 





Non Current Assets


 





Goodwill 


75,796


75,794


75,796

Intangibles


587


548


547

Property, Plant and Equipment


16,770


15,841


16,721



93,153


92,183


93,064



 





Current Assets


 





Inventory


11,970


11,396


9,353

Trade and Other Receivables


24,749


27,144


24,784

Financial Instruments at fair value


1


123


113

Corporation Tax


556


-


-

Cash and cash equivalents


7,769


23,333


13,780



45,045


61,996


48,030



 





Total Assets


138,198


154,179


141,094



 





LIABILITIES 


 





Current Liabilities


 





Borrowings


22,223


17,161


22,479

Trade and Other Payables


19,580


20,254


17,289

Financial Instruments at fair value


37


12


81

Corporation Tax


-


7,410


3,615



41,840


44,837


43,464



 





Non current Liabilities


 





Borrowings


16,921


31,482


17,161

Deferred Tax


982


844


912

Provisions


545


470


356



18,448


32,796


18,429



77,910


76,546


79,201

Total Assets Less Liabilities


 







 







 





SHAREHOLDERS' EQUITY


 





Called up share capital


1,300


1,300


1,300

Share premium account


68,870


68,870


68,870

Other Reserves


79


68


66

Profit and loss account


7,661


6,308


8,965



 





EQUITY SHAREHOLDERS FUNDS


77,910


76,546


79,201


STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2008 (UNAUDITED)





Issued Share 

Capital



Share Premium 

Account





IFRS 2 

Share 

Option 

reserve


Retained Earnings


Total



£'000s


£'000s


£'000s


£'000s


£'000s












Balance at 1 January 2007


1,297


68,773


53


2,536


72,659












Shares to be issued - Options


-


-


15


-


15












Options exercised in period


3


97


-


-


100












Profit for the period


-


-


-


3,093


3,093












Pension scheme surplus for period


-


-


-


679


679












Balances as at 30 June 2007


1,300


68,870


68


6,308


76,546


































Balance at 1 January 2008


1,300


68,870


66


8,965


79,201












Shares to be issued - Options


-


-


13


-


13












Profit/(Loss) for the period


-


-


-


(1,103)


(1,103)












Pension Scheme surplus for period


-


-


-


(201)


(201)












Balances as at 30 June 2008


1,300


68,870


79


7,661


77,910



CASH FLOW STATEMENT FOR THE SIX MONTHS ENDING 30 JUNE 2008 (UNAUDITIED)





6 months to 30 June 2008


6 months to 30 June 2007



£'000s


£'000s

CASH FLOW FROM OPERATING ACTIVITIES






(Loss)/Profit for the period before taxation


(1,588)


10,179

Adjusted for:






Finance costs


1,407


2,315


Finance income


(106)


(180)


IAS 19 income


(157)


(90)


Depreciation of property, plant & equipment


895


930


Amortisation of intangibles


47


67


Share based payment expense


13


15


Gain on disposal of discontinued operation


-


(8,300)

Operating Cash Flow 


511


4,936








(Increase) in inventories


(2,617)


(4,214)


Decrease/(Increase) in receivables


35


(2,386)


Increase in payables


2,430


3,242

Cash generated from operations


359


1,578








Income taxes paid


(696)


(584)


Interest paid


(1,130)


(2,292)

Net cash from operating activities


(1,467)


(1,298)






CASH FLOW FROM INVESTING ACTIVITIES






Interest received


100


180


Disposal of division


-


33,974


Income tax paid on disposal of division


(2,919)


-


Purchase of intangible assets


(87)


(153)


Purchase of property, plant & equipment


(944)


(1,352)

Net cash (used in)/from investing activities


(3,850)


32,649






CASH FLOW USED IN FINANCING ACTIVITIES






Repayment of borrowings


(812)


(23,476)


Repayment of obligations under finance leases


(129)


(346)


Proceeds on issue of shares


-


100

Net cash used in financing activities


(941)


(23,722)



(6,258)


7,629

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS










CASH AND CASH EQUIVALENTS






Cash and cash equivalents at beginning of year


10,785


6,925


Net movement in cash and cash equivalents


(6,258)


7,629







Cash and cash equivalents at balance sheet date


4,527


14,554






Cash and cash equivalents comprise:






Cash


7,769


23,333


Overdrafts


(3,242)


(8,779)




4,527


14,554


Notes


1. General information


The Real Good Food Company plc is a public limited company ('company') incorporated in the United Kingdom under the Companies Act 1985 (registration number 4666282). The Company is domiciled in the United Kingdom and its registered address is International House, 1 St Katherine's WayLondonE1W 1XB. The Company's shares are traded on the Alternative Investment Market ('AIM').

 

The principal activities of the Group are the sourcing, manufacture, marketing and distribution of food and industrial ingredients. 

 

Copies of the interim report are being sent to shareholders. Further copies of the interim report and Annual Report and Accounts may be obtained from the address above.



2. Basis of preparation


The Real Good Food plc adopted International Financial Reporting Standards (IFRS) with effect from 1 January 2006 and these interim statements are prepared under this basis.

 

The financial information set out in this document does not comprise of the statutory accounts of the Company within the meaning of section 240(5) of the Companies Act 1985.


It is the company's policy to show items that it considers being of a significant nature separately on the face of the Income Statement in order to assist the reader to understand the accounts. The company defines the term significant as items that are material in respect to their size and nature; for example, major restructuring of the activities of the group. Summary details of significant items are shown in the Chairman's statement which forms part of these accounts.

 

 

3. Segment analysis


The group has adopted IFRS 8 'Operating Segments' in advance of its effective date, with effect from 1 January 2007. IFRS 8 requires that operating segments be identified on the basis of internal reporting and decision making. This is in line with the previous divisional reporting which the group previously published and therefore the information is consistent with that of previous financial statements.


The following table shows the group's revenue and results for the period under review analysed by operating segment. Segment profit represents the trading profit after depreciation but before any interest and significant items. 



Sugar

Bakery Ingredients

Bakery

Head Office and Consolidation Adjustments

Total

Discontinued Operations

Total Group









Revenue - External

81,653

13,784

8,535

-

103,972

-

103,972

Revenue - Internal

4,060

487

-

(4,547)

-

-

-









Total Revenue

85,713

14,271

8,535

(4,547)

103,972

-

103,972

















Operating Profit

1,838

78

(275)

(720)

921

-

921









Significant Items







(1,365)









Earnings before interest and Tax







(444)









Net Interest







(1,301)

Pension Finance Income







157

Tax







244









Loss after Tax







(1,344)



Sugar

Bakery Ingredients

Bakery

Head Office and Consolidation Adjustments

Total

Discontinued Operations

Total Group









Segment assets

74,445

27,719

5,318

30,698

138,180

18

138,198









Segment liabilities

(15,591)

(2,447)

(3,595)

(37,029)

(58,662)

(1,626)

(60,288)

















Net Assets

58,854

25,272

1,723

(6,331)

79,518

(1,608)

77,910


The group operates a central treasury function, finance costs cannot be meaningfully allocated to individual operating divisions.

 

 4Earnings per ordinary share


Earnings per share is calculated on the basis of profit for the year after tax, divided by the weighted average number of shares in issue for 2008 of 65,014,348 (2007: 65,014,348).


Diluted (loss)/earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares. Potential dilutive ordinary shares arise from share options and warrants. For these, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the exercise price attached to outstanding share options. Thus the dilutive weighted average number of shares considers the number of shares that would have been issued assuming the exercise of the share options.


An adjusted earnings per share and a diluted adjusted earnings per share, which exclude significant items, has also been calculated as in the opinion of the Board this will allow shareholders to gain a clearer understanding of the trading performance of the Group.






2008




2007



Earnings £'000s

Weighted Average No. of shares

Per share amount pence


Earnings £'000s

Weighted Average No. of shares

Per share amount pence










Earnings attributable to ordinary shareholders


(1,103)

65,014,348

(1.7)


3,093

65,014,348

4.8



















Significant items


955

-

-


(1,230)

-

-










Adjusted Earnings per share


(148)

65,014,348

0


1,863

65,014,348

2.9










Dilutive effect of options


-

-

-


-

243,782

-

Dilutive effect of warrants


-

-

-


-

105,776

-










Diluted earnings per share


(1,103)

65,014,348

(1.7)


3,093

65,363,906

4.7


















Diluted adjusted earnings per share


(148)

65,014,348

0


1,863

65,363,906

2.9

 

5. Dividends


 

      No dividend is proposed for the six months ended 30 June 2008.


6. Taxation


The charge for taxation is based on the results for the period and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes.


Provision is made in full for taxation deferred in respect of timing differences that have originated but not reversed by the balance sheet date, except for gains on disposal of fixed assets which will be rolled over into replacement assets. No provision is made for taxation on permanent differences. Deferred tax is not discounted.


Deferred tax assets are recognised to the extent that it is more likely than not that they will be recovered.


7. Pension arrangements


A subsidiary of the Group, Napier Brown Foods Limited, operates a defined benefit pension scheme, the Napier Brown Retirement Benefits Scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The contributions made by the employer over the six-month period have been £45,836. 


Assumptions


The assets of the scheme have been taken at market value and the liabilities have been calculated using the following principal actuarial assumptions:



30 June 2008

% per annum

31 December 2007

% per annum

Rate of increase in pensions in payment

3.90

3.45

Discount rate

6.00

5.80

Inflation assumption

4.00

3.45

Revaluation rate for deferred pensions

4.00

3.45


The fair value of the assets in the scheme, the present value of the liabilities in the scheme and the expected rate of return at each balance sheet date were:



30 June 2008

%

31 December 2007

%

Equities

8.10

7.50

Bonds

5.60

5.00

Property

6.60

6.00

Cash

4.50

4.50




30 June 2008

£'000s

31 December 2007

£'000s

Total fair value of assets

17,398

18,052

Present value of scheme liabilities

(15,379)

(16,268)

Surplus/(Deficit) in the scheme

2,019

1,784

Amount not recognised in accordance with IAS 19 paragraph 58b

(2,019)

(1,784)

Amount to be recognised

-

-


The scheme is a closed scheme and therefore under the projected unit method the current service cost would be expected to increase as the members of the scheme approach retirement.


As the scheme is closed and benefits are no longer accruing to members, the surplus is unrecoverable by the company, and as such the surplus of £2,019k is not reflected in the Group balance sheet.


8. Post Balance Sheet Events


On the 17th July the Group completed a re-finance of the Groups debt facilities. The re-financing involved the repayment of our existing revolving and term loans with our existing lenders and the entering into loan agreements with KBC, a leading Belgium bank. The new loans facilities are:

  • A revolving stock loan facility;

  • A revolving invoice discounting;

  • A 5 year fixed asset backed loan facility;

  • A 5 year term loan;

 A 15 year property loan with a bullet payment after 5 years.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR FKQKKABKDQCB
UK 100