Interim Results

RNS Number : 7922Z

Real Good Food Company Plc (The)

29 September 2009

 



The Real Good Food Company plc (AIM: RGD) 

Interim Results for the six months ended 30 June 2009

The Real Good Food Company plc ('the Group'), the sugars, ingredients and bakery company, today announces Interim Results for six months ended 30 June 2009

Highlights

• Trading conditions stabilizing in core sugar business 

• Improved Operating Profitability in Bakery Ingredients and Bakery Division 

• Total Group sales from continuing operations down 2.2% to £101.7m (2008: £104.0m) reflecting the price and volume pressures in the Sugar Division as a result of regime change

• Loss from Continuing Operations of £0.889m (2008: loss of £1.159m) 

• Loss per share (basic and diluted) of 1.3p (2008: loss per share of 1.8p)

• Net Cash from Operating activities £0.504m versus (£1.467m) deficit in 2008  

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

'The group continues to trade in line with its plan and with its commitments associated with its banking arrangements. We are currently benefiting from the consolidation of Renshaw Napier business with underlying overheads reducing with a full year impact flowing through 2010. The business is focussed on cash generation by further reducing Working Capital levels and focusing on EBITDA performance.   

'With further stability expected in the sugar market, improved profitability in both ingredients and bakery, we remain quietly confident regarding the remainder of the year as we move into our busiest seasonal period.'

29 September 2009 

ENQUIRIES:

The Real Good Food Company plc	Tel: [phone]
Stephen Heslop, Chief Executive Officer
Mike McDonough, Chief Financial Officer
Shore Capital	Tel: [phone]
Guy Peters
College Hill	Tel: [phone]
Gareth David

CHAIRMAN'S STATEMENT 

Overview

As I indicated in my comments at the time of our Annual General Meeting in July, the first six months of the current year have seen welcome signs of stability returning to our markets, after lengthy period in which we have had to cope with the combination of changes to the EU sugar regime, high raw materials and fuel prices and a fiercely competitive market-place.

Total Group turnover for this period was down slightly at £101.7m (2008: £104.0m), with sales improvements at our Bakery Ingredients and Bakery Divisions, which both improved their operating performance year-on-year, driven by increased margins and lower overheads. This was offset by a 4.3% reduction in sales at our Sugar Division to £78.1m (2008: £81.7m). 

The loss from continuing operations of £0.889m represents an improvement from the comparable figure of £1.159m.

For the purposes of clarity, we will continue to report our results under the three previous segmental headings: Sugar, Bakery Ingredients and Bakery.

Within Renshawnapier, where our core sugar trading business has experienced three years of difficult trading, I can report that overall we feel that our group is starting to turn the corner and we look with more confidence towards the future. EU Sugar regime changes are in their last phase, with the final adjustment of the reference price on 1 October 2009. 

Having seen some restoration of stability this year in the sugar market, with the European sugar market more or less in balance as far as offer and demand is concerned, we now expect it to strengthen as we go forward. We do expect still further rationalisation in the EU marketplace, but the biggest adjustments have been made. 

Our Bakery Ingredients Division has had a good start to the year with sales up 1.4% driving increased profitability in what is its 'off season'.

Our Bakery Division has also had a good first half of the year, with sales up 12% year on year and the business trading ahead of budget. We have enjoyed considerable success in new product development, achieving more product launches with all our customers for Quarter Four and early next year than ever during our ownership. We are looking forward to second half 2009 and believe that the business is well placed to grow both sales and profitability in 2010.

SUGAR DIVISION

Napier Brown Foods supplies a range of sugar and dry ingredients to food manufacturers and packs sugar for retail grocery and foodservice customers from its facilities at Normanton, near Leeds.

£'000s	2009 Six Months	2008 Six Months
Sales EBITDA	78,145 520	81,653 2,126
Operating Profit*	218	1,838

  The Board is pleased to be able to confirm we have since seen some stability during 2009 with our trading in line with budget and latest estimates both in terms of Operating Profits and Cash generation following the margin pressures encountered in the second half of last year. Operating Profits however are down for the period as the six months to June 2008 was unaffected.

BAKERY INGREDIENTS DIVISION

Renshaw supplies a range of high quality food ingredients primarily to the bakery sector, comprising craft bakers and major cake manufacturers and also to grocery retailers. It operates two facilities, one in Liverpool and the other in Carluke, south-east of Glasgow.

£'000s	2009 Six Months	2008 Six Months
Sales EBITDA	13,977 552	13,784 428
Operating Profit*	188	78

Sales in the period were in line with last year overall, with operating profit benefiting from reduced overheads and reduced material costs in some commodities. Industrial volumes are lower but there has been growth in the Retail and Export sectors. Being a seasonal business, with the majority of the profitability in the second half of the year, the Board is pleased to be able to report the business is robust and well placed in delivering expectations for the remainder of the year

BAKERY DIVISION

Hayden's Bakeries produces chilled and ambient premium patisserie and dessert products to retail grocery customers. It operates from a site in Devizes, Wiltshire.

£'000s	2009 Six Months	2008 Six Months
Sales EBITDA	9,575 144	8,535 22
Operating Loss*	(198)	(275)

The 12% increase in sales was driven by continued development of our Foodservice offering into the coffee shop sector, new product launches, range extensions and promotional activity with leading customers. Overall, profitability has improved on the prior period and is now making a positive contribution. Operationally, the team continues to refine production methodologies, which has seen an improvement in material variances, which has offset the labour necessary to affect the improvements. 

SIGNIFICANT ITEMS

During the period under review, the Group incurred a number of significant items. The principal cost relating to the restructuring of the Groups operations to form Renshawnapier.

CASH FLOW AND DEBT

Net cashflow from operating activities was £0.5m, up £1.971m on prior year reflecting the focus on working capital. Overall borrowings at £31.163m are at a similar level to last year and in line with expectations.

  PENSIONS

The £1.771m deterioration in the IAS 19 pension valuation is the result of two factors, reduction in plan asset values as a result of changes in the financial markets during the interim period, together with an increased long term outlook for inflation which has increased the scheme liabilities. The scheme has been closed to new entrants since April 2004

CURRENT TRADING

The Group continues to trade in line with its plan and with its commitments associated with its banking arrangements.

We are currently benefiting from the consolidation of the Renshaw and Napier businesses with underlying overheads reduced and expect these to continue to flow through into 2010. With further stability expected in the sugar market, improved profitability in both ingredients and bakery, we remain quietly confident regarding the remainder of the year as we move into our busiest seasonal period.

PIETER TOTTÉ

Chairman

29 September 2009

  REPORT OF THE AUDITORS

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009, which comprises the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cashflows and the related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the company, as a body, in accordance with our instructions. Our review has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union. 

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.

Horwath Clark Whitehill LLP

Chartered Accountants
10 Palace Avenue
Maidstone

Kent

ME15 6NF

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDING 30 JUNE 2009 (UNAUDITED)

	Notes	Period ended 30 June 2009			Period Ended 30 June 2008
		Before Significant Items	Significant Items	Total	Before Significant Items	Significant Items	Total
		£’000s	£’000s	£’000s	£’000s	£’000s	£’000s
CONTINUING OPERATIONS
REVENUE		101,697	-	101,697	103,972	-	103,972
Cost of sales		(92,043)	-	(92,043)	(92,821)	-	(92,821)
GROSS PROFIT		9,654	-	9,654	11,151	-	11,151
Distribution costs		(4,113)	-	(4,113)	(4,371)	-	(4,371)
Administration expenses		(5,962)	(84)	(6,046)	(5,859)	(1,365)	(7,224)
OPERATING (LOSS)/PROFIT		(421)	(84)	(505)	921	(1,365)	(444)
Finance income		264	-	264	106	-	106
Finance costs		(944)	-	(944)	(1,407)	-	(1,407)
Net Pension finance (cost)/income		(9)	-	(9)	157	-	157
LOSS BEFORE TAXATION		(1,110)	(84)	(1,194)	(223)	(1,365)	(1,588)
Taxation		281	24	305	19	410	429
LOSS FROM CONTINUING OPERATIONS		(829)	(60)	(889)	(204)	(955)	(1,159)
LOSS FROM DISCONTINUED OPERATIONS		-	-	-	-	-	-
LOSS FOR THE PERIOD		(829)	(60)	(889)	(204)	(955)	(1,159)
Other comprehensive income
Actuarial losses on defined benefit plans		(1,771)	-	(1,771)	(201)	-	(201)
Income tax relating to components of other comprehensive income		482	-	482	56	-	56
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		(2,118)	(60)	(2,178)	(349)	(955)	(1,304)
Basic Loss per share	5	(1.3)		(1.4)	(0.3)		(1.8)
Diluted Loss per share	5	(1.3)		(1.4)	(0.3)		(1.8)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2009 (UNAUDITED)

GROUP FINANCIAL POSITION As at 30 June 2009
	30 June 2009	30 June 2008	31 Dec 2008
	£'000s	£'000s	£'000s
ASSETS Non Current Assets
Goodwill	75,796	75,796	75,796
Intangibles	485	587	513
Property, plant and equipment	15,644	16,770	16,408
Deferred tax asset	1,600	-	853
	93,525	93,153	93,570
Current Assets
Inventory	10,291	11,970	10,963
Trade and other receivables	23,913	24,749	24,763
Financial instruments at fair value	25	1	117
Corporation tax	574	556	839
Cash and cash equivalents	2,208	7,769	1,464
	37,011	45,045	38,146
Total Assets	130,536	138,198	131,716
LIABILITIES  Current Liabilities
Borrowings	20,642	22,223	19,258
Trade and other payables	16,189	19,580	16,787
Financial instruments at fair value	160	37	524
	36,991	41,840	36,569
Non Current Liabilities
Borrowings	12,729	16,921	13,652
Deferred tax	2,963	982	2,973
Provisions	452	545	684
Retirement benefit obligations	1,995	-	264
	18,139	18,448	17,573
Net Assets	75,406	77,910	77,574
SHAREHOLDERS' EQUITY
Called up share capital	1,300	1,300	1,300
Share premium account	68,870	68,870	68,870
Other reserves	83	79	73
Profit and loss account	5,153	7,661	7,331
Total Equity	75,406	77,910	77,574

STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDING 30 JUNE 2009 (UNAUDITED)

	Issued  Share  Capital	Share Premium Account	IFRS 2 Share Option reserve	Retained Earnings	Total
	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 1 January 2008	1,300	68,870	66	8,965	79,201
Shares to be issued - Options	-	-	13	-	13
Total comprehensive income for the period	-	-	-	(1,304)	(1,304)
Balances as at 30 June 2008	1,300	68,870	79	7,661	77,910
Balance at 1 January 2009	1,300	68,870	73	7,331	77,574
Shares to be issued - Options	-	-	10	-	10
Total comprehensive income for the period	-	-	-	(2,178)	(2,178)
Balances as at 30 June 2009	1,300	68,870	83	5,153	75,406

  STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDING 30 JUNE 2009 (UNAUDITIED)

				6 months to 30 June 2009		6 months to 30 June 2008
				£'000s		£'000s
CASH FLOW FROM OPERATING ACTIVITIES
Loss for the period before taxation				(1,194)		(1,588)
Adjusted for:
Finance costs				944		1,407
Finance income				(264)		(106)
IAS 19 cost/(income)				9		(157)
Depreciation of property, plant & equipment				963		895
Amortisation of intangibles				49		47
Share based payment expense				10		13
Release of provision				(188)		-
Operating Cash Flow				329		511
Decrease/(Increase) in inventories				667		(2,617)
Decrease in receivables				850		35
(Decrease)/Increase in payables				(592)		2,430
Cash generated from operations				1,254		359
Income taxes received/(paid)				295		(696)
Interest paid				(1,045)		(1,130)
Net cash from operating activities				504		(1,467)
CASH FLOW FROM INVESTING ACTIVITIES
Interest received				-		100
Income tax paid on disposal of division				-		(2,919)
Purchase of intangible assets				-		(87)
Purchase of property, plant & equipment				(222)		(944)
Net cash used in investing activities				(222)		(3,850)
CASH FLOW USED IN FINANCING ACTIVITIES
Drawdown/(Repayment) of borrowings				604		(812)
Repayment of obligations under finance leases				(142)		(129)
Net cash used in financing activities				462		(941)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS				744		(6,258)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year				1,464		10,785
Net movement in cash and cash equivalents				744		(6,258)
Cash and cash equivalents at balance sheet date				2,208		4,527
Cash and cash equivalents comprise:
Cash				2,208		7,769
Overdrafts				-		(3,242)
				2,208		4,527

  NOTES TO THE INTERIM RESULTS 

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 229 Crown Street Liverpool Merseyside L8 7RF. The Company's shares are traded on the Alternative Investment Market ('AIM').

The principal activities of the Group are the sourcing, manufacture, 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

These consolidated financial statements are presented on the basis of International Financial Reporting Standards (IFRS) as adopted by the European Union and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and have been prepared in accordance with AIM rules and the Companies Act 1985, as applicable to companies reporting under IFRS.

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.

New IFRS standards and interpretations not adopted

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

• Revised IAS 27 Consolidated and Separate Financial Statements (effective 1 July 2009) 

• IFRS 3 (revised) Business Combinations (effective 1 July 2009) 

• IAS 32 Financial Instruments - Presentation (Amendments)

• IAS 23 Borrowing Costs

• IAS 27 Consolidated and Separate Financial Statements (effective 1 July 2009)

• IAS 39 Financial Instruments: Recognition and Measurement (Amendment): Eligible Hedged Items

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

3. SIGNIFICANT ITEMS

It is the company's policy to show items that it considers being of a significant nature seperately on the face of the Consolidated Statement of Comprehensive Income 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 a major restructuring of the activities of the Group. Summary details of significant items are shown in the Chairman's statement which forms part of this half yearly financial report.

  4. SEGMENT ANALYSIS

Business segments

The Group's operating segments are Sugar, Bakery Ingredients and Bakery as the Group's management and reporting structure is set out along these lines.

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. 

Six months to 30 June 2009		Bakery Ingredients	Bakery	Total Before Significant Items	Significant Items	Total After Significant Items
	Sugar
	£’000s	£’000s	£’000s	£’000s		£’000s
Total revenue	82,113	14,837	9,575	106,525	-	106,525
Revenue - internal	(3,968)	(860)	-	(4,828)	-	(4,828)
External Revenue	78,145	13,977	9,575	101,697	-	101,697
Operating Profit/(Loss)	218	188	(198)	208	(84)	124
Finance costs (net of interest received)				(680)	-	(680)
Pension finance costs				(9)	-	(9)
Head office and consolidated adjustments				(629)	-	(629)
Loss before tax				(1,110)	(84)	(1,194)
Tax				281	24	305
Loss after tax as per income statement				(829)	(60)	(889)

Inter-segment sales are charged at prevailing market rates. 

The Group operates a central function; therefore finance costs cannot be meaningfully allocated to individual operating segment.

5.  SEGMENT REPORTING (continued)

As At 30 June 2009	Sugar	Bakery Ingredients	Bakery	Unallocated	Total Group
	£'000s	£'000s	£'000s	£'000s	£'000s
Segment assets	27,916	18,841	5,114		51,871
Unallocated assets
Goodwill					75,796
Other intangible assets					3
Property, plant and equipment					13
Deferred tax assets					1,600
Inventory					(26)
Trade and other receivables					515
Derived financial assets					25
Current tax assets					574
Cash and cash equivalents					165
Total assets					130,536
Segment liabilities	(26,919)	(7,539)	(3,156)		(37,614)
Unallocated liabilities
Trade and other payables					(489)
Borrowings					(14,294)
Derived financial instruments					(160)
Current tax liabilities					(188)
Deferred tax liabilities					(2,209)
Provisions					(176)
Total liabilities					(55,130)
Net operating assets	997	11,302	1,958		75,406
Non current asset additions	31	158	33	-	222
Depreciation	308	327	325	3	963
Amortisation	(6)	37	17	1	49

Geographical segments

The Group earns revenue from countries outside the United Kingdom, but as these only represent 2.6% of the total revenue of the Group, segmental reporting of a geographical nature is not considered relevant.

6. EARNINGS PER ORDINARY SHARE

Earnings per share is calculated on the basis of the loss for the period after tax, divided by the weighted average number of shares in issue for 2009 of 65,014,348 (2008: 65,014,348).

Diluted loss 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 loss per share and a diluted adjusted loss 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.

			Six months to 30 June 2009				Six months to 30 June 2008
			Earnings  £'000s	Weighted Average No.  of shares	Per share amount pence		Earnings £'000s	Weighted Average No. of shares	Per share amount pence
Loss attributable to ordinary shareholders			(889)	65,014,348	(1.4)		(1,159)	65,014,348	(1.8)
Significant items			60	-	-		955	-	-
Adjusted Loss per share			(829)	65,014,348	(1.3)		(204)	65,014,348	(0.3)
Dilutive effect of options			-	-	-		-	-	-
Dilutive effect of warrants			-	-	-		-	-	-
Diluted loss per share			(889)	65,014,348	(1.4)		(1,159)	65,014,348	(1.8)
Diluted adjusted loss per share			(829)	65,014,348	(1.3)		(204)	65,014,348	(0.3)

7. DIVIDENDS

No dividend is proposed for the six months ended 30 June 2009 (2008 Nil).

8. 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.

9.    PENSION ARRANGEMENTS

A subsidiary of the Group, Napier Brown & Company 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 £48,870. 

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 2009 % per annum	31 December 2008 % per annum
Rate of increase in pensions in payment	3.60	3.10
Discount rate	6.10	6.30
Inflation assumption	3.60	3.10
Revaluation rate for deferred pensions	3.60	3.10

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 2008 %
Equities	6.90	6.90
Bonds	5.64	5.64
Property	5.90	5.90
Cash	3.50	3.50

	30 June 2009 £'000s	31 December 2008 £'000s
Total fair value of assets	14,068	14,830
Present value of scheme liabilities	(16,063)	(15,094)
Deficit in the scheme	(1,995)	(264)

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.

 

END

 

 

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