Interim Results

Real Good Food Company Plc (The) 20 September 2007 Date: 20th September 2007 On behalf of: The Real Good Food Company plc ('the Company' or 'RGFC') Embargoed: 0700hrs The Real Good Food Company Plc Interim Results 2007 The Real Good Food Company (AIM: RGD), the food group servicing high end niche markets, today announces its interim results for the year ended 30 June 2007. Highlights of the six months ended 30th June 2007 > Total group sales increased by over 12% to £127.8m (2006: £113.4m), > Operating Profit before taxation and significant items of £4.4m (2006: £4.6m) was broadly in line with the previous year, > The sale of Five Star Fish was completed on the 12th June for an initial consideration of £35m, > Earnings per share of 4.8p (2006:0.7p) benefited from the profit on disposal of Five Star Fish > Hayden's Bakeries' sales grew by 8% in the period aided by new product launches into Waitrose > Underlying adjusted EPS was 0.4p (2006: 0.1p loss) > Net debt levels have reduced by £33.9m to £25.3m. Commenting on the results, Pieter Totte, Chairman of The Real Good Food, said: 'Strong progress has been made on a number of fronts for the Group. The first half of the year to June 2007 has seen a significant transformation for the Group. One of the key factors in our progress has been our decision to sell the Five Star Fish division and to focus on the Group's core high end niche markets. This is where our expertise, consistent quality and service levels can add most value to our customer base. 'As we continue to advance into a more specialised Group, our focus for the remaining financial year will be to concentrate on developing our assets to their maximum potential and to exploit all commercial opportunities. We are pleased with the beginning to the current financial year, albeit with a slow start for our Renshaw division, and we are confident that the Group is well advanced to manage the European Commission's Sugar Regime changes. We look forward to the coming year with enthusiasm.' A briefing for analysts will be held at 10:30hrs today at the City Conference Centre, 80 Coleman Street, London, EC2R 5BJ. Enquiries to: The Real Good Food Company plc Tel: 020 7335 2500 Stephen Heslop www.realgoodfoodplc.co.uk ---------------------------- Redleaf Communications Tel: 020 7822 0200 Emma Kane/Adam Leviton/Anna Dunkin al@redleafpr.com ------------------- • Publication quality photos are available from Redleaf Communications THE REAL GOOD FOOD COMPANY PLC CHAIRMAN'S STATEMENT INTERIM 6 MONTH PERIOD ENDED 30 JUNE 2007 INTRODUCTION I am pleased to report the Company's Interim results for the six months to 30 June 2007. The key headlines include: • Total group sales increased by over 12% to £127.8m (2006: £113.4m), • Operating profit before taxation and significant items of £4.4m (2006: £4.6m) was broadly in line with the previous year • The sale of Five Star Fish was completed on the 12th June for an initial consideration of £35m • Earnings per share of 4.8p (2006:0.7p) benefited from the profit on disposal of Five Star Fish • Underlying adjusted EPS was 0.4p (2006: 0.1p loss) • Net debt levels have been significantly reduced by £33.9m to £25.3m The period under review is the first published results of the Group prepared under International Financial Reporting Standards (IFRS). Reconciliations of UK GAAP to IFRS are included as an appendix to the interim report along with comparative years. During the period, the Group successfully disposed of its fish subsidiary, Five Star Fish, for £35m, with the disposal proceeds being used to reduce net debt. The limited take up of the European Commission's restructuring scheme and the consequent enforced quota cuts have exacerbated the continuing uncertainty within the Sugar sector. Despite this, the Group is well advanced in its plans to manage the opportunity generated in the longer term from the Regime changes. Despite a quieter start than anticipated to the trading year, within baking ingredients the operational capability of the business is much enhanced presenting a robust platform going into the traditionally busy Christmas period. Group now more focused upon remaining divisions with significantly reduced gearing levels. FINANCIAL INFORMATION SUMMARY The Group's profit and loss account summary for the six-month period ended 30 June 2007 is detailed below: £'000s Continuing Discontinued Total 6 months ended Total 6 months ended Operations operations 30th June 2007 30th June 2006 Turnover 112,835 14,962 127,797 113,372 Gross Profit 13,673 2,619 16,292 15,554 --------- ---------- --------- --------- Normalised Profit /(loss) 2,255 2,158 4,413 4,644 ========= ========== --------- --------- Significant items (489) (753) Profit on Sale of Subsidiary 8,300 - --------- --------- Earnings before interest & Tax 12,224 3,891 --------- --------- Interest (2,045) (1,991) Tax (7,086) (1,465) --------- --------- Profit after Tax 3,093 435 ========= ========= THE REAL GOOD FOOD COMPANY PLC CHAIRMAN'S STATEMENT INTERIM 6 MONTH PERIOD ENDED 30 JUNE 2007 SUGAR DIVISION -------------------------------------------------------------------------------- £'000s 2007 2006 Six Months Six Months -------------------------------------------------------------------------------- Sales 95,022 81,083 Operating Profit* 2,865 2,814 *Normalised profit before significant items, interest and central costs The division supplies a range of sugar and dry ingredients to food manufacturers as well as packing sugar for retail grocery and food service customers, primarily from its site at Normanton near Leeds. The limited take up of the European Commission's restructuring scheme and the consequent enforced quota cuts have exacerbated the continuing uncertainty within the Sugar sector. Despite this, the Group is well advanced in its plans to manage the opportunity generated in the longer term from the Regime changes. Despite the market place remaining competitive, Napier Brown has maintained and in some areas improved its position in key sectors and with major customers. Sales were well ahead of the same period last year, reflecting additional volumes in both the bulk and retail sectors, although lower margin bulk sales have been the key growth driver. Resultant distribution costs have increased due to the higher level of activity, however profitability is ahead of the same period last year, albeit marginally. The business continues to evaluate opportunities to enhance its value added proposition going into 2008. BAKING INGREDIENTS -------------------------------------------------------------------------------- £'000s 2007 2006 Six Months Six Months -------------------------------------------------------------------------------- Sales 12,358 13,767 Operating Profit* 115 648 * Normalised profit before significant items, interest and central costs Renshaw supplies a range of high quality food ingredients, primarily to the baking sector, comprising major cake manufacturers, grocery retailers, wholesale distribution and craft bakers. It operates from two facilities, one in Liverpool and the other in Carluke, south east of Glasgow. Sales have been slower than anticipated in the first half of the year and are down slightly on last year after adjusting for the discontinued nut production activity (2006: £0.9m) and a non recurring sales income relating to a supply agreement. This has given rise to the reduction in profitability in the period. Operating efficiencies are continuing to improve and the benefits of this will be seen in the second half as volumes increase. Service levels and stock planning remain the priority to ensure that a strong platform is in place for the key Christmas trading period of the business and beyond. BAKERY DIVISION -------------------------------------------------------------------------------- £'000s 2007 2006 Six Months Six Months -------------------------------------------------------------------------------- Sales 8,889 8,234 Operating Profit* 58 33 * Normalised profit before significant items, interest and central costs THE REAL GOOD FOOD COMPANY PLC CHAIRMAN'S STATEMENT INTERIM 6 MONTH PERIOD ENDED 30 JUNE 2007 -------------------------------------------------------------------------------- Hayden's Bakeries produces chilled and ambient premium patisseries and dessert products for retail grocery customers whilst Seriously Scrumptious supplies similar products to foodservice customers from our factory in Devizes, Wiltshire. Sales grew by 8% in the period, aided by new product launches into Waitrose. The new senior management team, put in place in May 2007, is addressing the key issue of material cost control and new product development processes. Labour cost control continues to improve and reductions in overhead costs have been successfully implemented. New capacity in frying came on stream in August and this is expected to both reduce costs and provide opportunities for growth. FISH DIVISION - Discontinued -------------------------------------------------------------------------------- £'000s 2007 2006 23 weeks 26 weeks -------------------------------------------------------------------------------- Sales 14,962 14,024 Operating Profit* 2,158 1,821 * Normalised profit before significant items, interest and central costs The sale of Five Star Fish was completed on 12 June 2007 for a gross consideration of £35m. Tax charges on the disposal are estimated at £6.6m. At the time of the disposal, sales were ahead of last year, due to the combination of raw material price inflation being passed on in price increases to customers and improvements in sales volumes. SIGNIFICANT ITEMS During the period under review, as already mentioned the Group disposed of our fish division, Five Star Fish. The disposal process was completed on the 12th June. Changes £'m Disposal Proceeds 35.0 Net assets w/o (10.5) Goodwill assets w/o (15.5) Costs (0.7) ------ Pre Tax Profit on disposal 8.3 ====== Tax* (6.6) ------- Net profit on disposal 1.7 *Tax charge on disposal is shown within the tax line in the profit and loss account. The charge reflects the profit incurred on disposal before Goodwill amortisation write-off, which is not allowable as a tax deduction item. Other significant items in the period relate to costs associated with the restructuring of the plc board at and consequential restructuring of a number of the operating division Executive teams CASHFLOW AND DEBT Cashflow from operating activities before working capital and significant items was £5.4m. Working capital investment in the period was driven by increases in stock levels since the year end. Within Bakery Ingredients, stocks have increased by £1.1m due to the start of the seasonal stock build for the busy Christmas trading period, whilst higher levels of imported sugar and higher diary prices have combined to leave the Sugar Division's stocks £1.7m higher. Stock values within Five Star Fish increased by £1.6m due to the combined effects of raw material price inflation and higher stock levels associated with increased trading activity. Net interest costs amounted to £2.1m, whilst tax paid in the period was £0.6m. The sale of Five Star Fish realised £34.3m in the period, with a further £0.7m held in ESCROW until quarter 1 2008. The profit on disposal has generated a £6.6m tax charge which will be paid over the next 10 months. The Group's bank loans were reduced by £23.5m funded by the disposal proceeds. Net debt levels reduced by £33.9m to £25.3m CURRENT TRADING As expected our sales growth momentum within the Sugar Division is currently slower, reflecting comparatives, than in the first half. Margin performance as reported in the first half continues into the second half. At Bakery Ingredients the underlying sales trend has marginally improved against the second half and the comparative period last year. However, as planned, investment in the overhead base of the business has left operating profit slightly down in this period versus last year. In the Bakery Division sales growth continues, up 5%. Raw material price inflation, particularly within the wheat and dairy categories, has held back the improvement in margins, although these are ahead of the comparative period last year. The sales profile of the Group is skewed towards the last quarter of the year and the critical Christmas trading period. As the Group enters this period it does so with a more robust operational platform across all of its Divisions and a stronger balance sheet. THE REAL GOOD FOOD COMPANY PLC CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDING 30th JUNE 2007 (UNAUDITED) Notes Period ended 30th June 2007 Period Ended 30th June 2006 (As re-stated) Before Significant Total Before Significant Total Significant Items Significant Items Items Items £'000s £'000s £'000s £'000s £'000s £'000s CONTINUING OPERATIONS TURNOVER 112,835 - 112,835 99,348 - 99,348 Cost of sales 99,162 - 99,162 86,688 144 86,832 -------- -------- -------- -------- -------- -------- GROSS PROFIT 13,673 13,673 12,660 (144) 12,516 Distribution costs 5,165 5,165 3,564 3,564 Administration expenses 6,253 489 6,742 6,251 609 6,860 -------- -------- -------- -------- -------- -------- OPERATING PROFIT 2,255 (489) 1,766 2,845 (753) 2,092 Finance Income 180 - 180 128 - 128 Finance Costs 2,220 - 2,220 2,227 - 2,227 Net Pension Finance Income 90 - 90 199 - 199 -------- -------- -------- -------- -------- -------- PROFIT/(LOSS) Before Taxation 305 (489) (184) 945 (753) 192 Taxation 66 - 66 1,014 - 1,014 -------- -------- -------- -------- -------- -------- PROFIT/(LOSS) FROM CONTINUING OPERATIONS 239 (489) (250) (69) (753) (822) ======== ======== ======== ======== ======== ======== DISCONTINUED OPERATIONS TURNOVER 14,962 - 14,962 14,024 - 14,024 Operating Expenses 12,804 - 12,804 12,225 - 12,225 -------- -------- -------- -------- -------- -------- OPERATING PROFIT 2,158 2,158 1,799 1,799 Finance Costs 95 - 95 91 - 91 Profit on Sale of Subsidiary - 8,300 8,300 - - - Taxation 439 6,581 7,020 451 - 451 PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS 1,624 1,719 3,343 1,257 - 1,257 ======== ======== ======== ======== ======== ======== PROFIT/(LOSS) FOR THE PERIOD 1,863 1,230 3,093 1,188 (753) 435 ======== ======== ======== ======== ======== ======== Basic Profit per share 5 2.9 4.8 1.8 0.7 Diluted Profit per share 5 2.9 4.7 1.8 0.7 THE REAL GOOD FOOD COMPANY PLC CONSOLIDATED BALANCE SHEET 30TH JUNE 2007 (UNAUDITED) GROUP BALANCE SHEET As at 30th June 2007 30th June 2007 30th June 2006 31st Dec 2006 (re-stated) (re-stated) £'000s £'000s £'000s ASSETS Non Current Assets Goodwill 75,794 88,854 90,612 Intangibles 548 370 532 Property, Plant & Equipment 15,841 17,843 18,186 92,183 107,067 109,330 -------- -------- -------- Current Assets Inventory 11,396 15,226 14,685 Trade & Other Receivables 27,144 28,184 29,224 Financial Instruments at fair value 123 30 63 Cash and cash equivalents 23,333 8,987 12,412 -------- -------- -------- 61,996 52,427 56,384 -------- -------- -------- Non Current Assets held for sale 487 -------- -------- -------- Total Assets 154,179 159,981 165,714 -------- -------- -------- LIABILITIES Current Liabilities Borrowings 17,161 9,013 10,234 Trade and Other Payables 20,254 22,658 20,605 Financial Instruments at fair value 12 7 19 Corporation Tax 7,410 (402) 629 -------- -------- -------- 44,837 31,276 31,487 -------- -------- -------- Non current Liabilities Borrowings 31,482 59,529 58,992 Deferred Tax 844 795 1,124 Provisions 470 671 596 Pension Scheme Deficit - 36 856 -------- -------- -------- 32,796 61,031 61,568 ======== ======== ======== Total Assets Less Liabilities 76,546 67,674 72,659 ======== ======== ======== SHAREHOLDERS' EQUITY Called up share capital 1,300 1,297 1,297 Share premium account 68,870 68,773 68,773 Other Reserves 68 44 53 Profit and loss account 6,308 (2,440) 2,536 -------- -------- -------- EQUITY SHAREHOLDERS' FUNDS 76,546 67,674 72,659 ======== ======== ======== THE REAL GOOD FOOD COMPANY PLC STATEMENT OF CHANGES IN EQUITY FOR THE SIXTH MONTHS ENDING 30th JUNE 2007 (UNAUDITED) IFRS 2 Issued Share Share Share Premium Option Retained Capital Account reserve Earnings Total £'000s £'000s £'000s £'000s £'000s Balance at 1st January 2006 1,297 68,773 34 (3,359) 66,745 Shares to be issued - Options - - 10 - 10 Profit for the period - - - 435 435 Pension scheme surplus for period - - - 484 484 -------- -------- -------- -------- -------- Balances as at 30th June 2006 1,297 68,773 44 (2,440) 67,674 -------- -------- -------- -------- -------- Balance at 1st January 2007 1,297 68,773 53 2,536 72,659 Shares to Be issued - Options - - 15 - 15 Options exercise in period 3 97 - - 100 Profit for Period - - - 3,093 3,093 Pension Scheme surplus for period - - - 679 679 -------- -------- -------- -------- -------- Balances as at 30th June 2007 1,300 68,870 68 6,308 76,546 ======== ======== ======== ======== ======== THE REAL GOOD FOOD COMPANY PLC CASH FLOW STATEMENT FOR THE SIXTH MONTHS ENDING 30th JUNE 2007 (UNAUDITIED) 6 months to 6 months to 30th June 2007 30th June 2006 £'000s £'000s Cash Flows from Operating Activities Operating Profit before significant items 4,413 4,644 Depreciation 997 916 Significant Items (95) (255) (Profit)/loss on Disposal of non current assets - 27 IAS Adjustable 23 10 Changes in Working Capital (Increase)/Decrease in Inventory (4,214) (836) (Increase)/Decrease in trade & other receivables (2,386) 711 Increase/(Decrease) in trade payable 2,927 580 -------- -------- Cash Generated from Operating Activities 1,665 5,797 Interest Paid (2,250) (1452) Interest Received 180 128 Interest on finance lease repayments (42) (22) Income taxes paid (584) (359) -------- -------- Net Cash from Operating Activities (1031) 4,092 Cash Flows from Investing Activities Purchase of property, plant & equipment (1,435) (1,148) Purchase of Intangibles (70) - Net Proceeds from sale of subsidiary 33,974 (1,912) Receipts from sales of non current assets - 137 Contributions to Pension Fund (87) (88) Hire Purchase Payments (346) (151) -------- -------- Net Cash outflow from Investing Activities 32,036 (3,162) -------- -------- Cash Inflow/(Outflow) before Financing Activities 31,005 930 Cash Flows From Financing Activities Share Options Exercised 100 - Borrowing Repayments (23,476) (1,600) -------- -------- Net Cash Used by Financing Activities (23,376) (1,600) -------- -------- Net Increase/(Decrease) in Cash and Cash Equivalents 7,629 (670) Opening Cash and Cash Equivalents 6,925 7,347 -------- -------- Cash and Cash Equivalents at end of period 14,554 6,677 ======== ======== THE REAL GOOD FOOD COMPANY PLC 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 it's registered address is International House, 1 St Katherine's Way, London, E1W 1XB. The Company's shares are traded on the Alternative Investment Market ('AIM'). The principal activities of 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 PREPERATION Real Good Food Plc has adopted International Financial Reporting Standards (IFRS) with effect from 1st January 2006. The group will apply IFRS in its consolidated financial statements for the year ending December 2007. Therefore these interim statements are the group's first financial statements prepared in accordance with 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. A detailed explanation of the impact of the transition from UK GAAP to IFRS is contained in appendix to this interim report. THE REAL GOOD FOOD COMPANY PLC NOTES TO THE INTERIM RESULTS 3. SEGMENT ANALYSIS The group has adopted IFRS 8 - Operating Segments in advance of its effective date, with effect from 1st 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 periods under review analysed by operating segment. Segment profit represents the trading profit after depreciation but before any interest and significant items. Sugar Bakery Bakery Head Office Total Fish Total Group Ingredients and Consolidation Adjustments Turnover -External 91,687 12,259 8,889 - 112,835 14,962 127,797 Turnover -Internal 3,335 99 - (3,434) - - - -------- -------- -------- -------- -------- -------- -------- Total Revenue 95,022 12,358 8,889 (3,434) 112,835 14,962 127,797 ======== ======== ======== ======== ======== ======== ======== -------- -------- -------- -------- -------- -------- -------- Operating Profit 2,865 115 58 (783) 2,255 2,158 4,413 ======== ======== ======== ======== ======== ======== ======== Significant Items (489) Profit on Sale of Subsidiary 8,300 -------- Earnings before interest and Tax 12,224 Interest (2,135) Net Finance Income 90 Tax (7,086) Profit -------- after Tax 3,093 ======== Sugar Bakery Bakery Head Office Total Fish Total Group Ingredients and Consolidation Adjustments Net Assets 54,513 22,551 2,944 23,566 103,574 (1,724) 101,850 ======== ======== ======== ======== ======== ======== Net Debt (25,304) -------- Group Net Assets 76,546 ======== The Group operates a central treasury function, finance costs cannot be meaningfully allocated to individual operating divisions. Therefore segment profit represents trading profit after depreciation, but before any interest costs and significant items. The Group does not recharge any central costs to the Operating divisions THE REAL GOOD FOOD COMPANY PLC NOTES TO THE INTERIM RESULTS 4. CASH AND CASH EQUIVALENTS Cash and cash equivalents, for the purposes of the cash flow statement, comprises cash in hand and at the bank, any deposits repayable on demand, less any bank overdrafts. An analysis of the figures is as follows: 30th June 2007 30th June 2006 £'000s £'000s Cash in Hand and at Bank 23,333 8,987 Bank Overdrafts (8,779) (2,310) -------- -------- Net Cash and Cash Equivalents 14,554 6,677 ======== ======== 5. EARNINGS 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 2007 of 65,014,348 (2006: 64,866,749). 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 exceptional items and goodwill amortisation, has also been calculated as in the opinion of the Board this allow shareholders to gain a clearer understanding of the trading performance of the Group. 2007 2006 Earnings Weighted Per Earnings Weighted Per share £'000s Average No. share £'000s Average No. amount of shares amount of shares pence pence Earnings attributable to ordinary shareholders 3,093 65,014,348 4.8 435 64,866,749 0.7 Amortisation of Goodwill - - - - - - Significant items (1,230) - - 753 - - ------- -------- ------- ------- --------- -------- Adjusted Earnings per share 1,863 65,014,348 2.9 1,188 64,866,749 1.8 Dilutive effect of options - 243,782 - - 113,816 - Dilutive effect of warrants - 105,776 - - 33,972 - ------- -------- ------- ------- --------- -------- Diluted earnings per share 3,093 65,363,906 4.7 435 65,014,537 0.7 ------- -------- ------- ------- --------- -------- Diluted adjusted earnings per share 1,863 65,363,906 2.9 1,188 65,014,537 1.8 ------- -------- ------- ------- --------- -------- THE REAL GOOD FOOD COMPANY PLC NOTES TO THE INTERIM RESULTS -------------------------------------------------------------------------------- 6. DIVIDENDS No dividend is proposed for the six months ended 30th June 2007. 7. 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. THE REAL GOOD FOOD COMPANY PLC NOTES TO THE INTERIM RESULTS 8. 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 £87,500. Following completion of the scheme's tri-annual valuation as at April 2006, completed in June, the company's annual contributions have been reduced from £175,000 to £97,740. 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 2007 31 December 2006 % per annum % per annum -------------------------------------------------------------------------------- Rate of increase in pensions in payment 3.30 3.25 Discount rate 5.90 5.20 Inflation assumption 3.30 3.25 Revaluation rate for deferred pensions 3.30 3.25 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 2007 31 December 2006 % % -------------------------------------------------------------------------------- Equities 7.50 7.50 Bonds 5.00 5.00 Property 6.00 6.00 Cash 4.50 4.50 -------------------------------------------------------------------------------- 30 June 2007 31 December 2006 £'000s £'000s -------------------------------------------------------------------------------- Total fair value of assets 17,315 16,585 Present value of scheme liabilities (15,978) (17,808) ---------------------------------- Surplus/(Deficit) in the scheme 1,337 (1,223) Related deferred tax asset (401) 367 ---------------------------------- Net Surplus/(Deficit) 936 (856) -------------------------------------------------------------------------------- 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 £936k is not reflected in the Group balance sheet. THE REAL GOOD FOOD COMPANY PLC APPENDIX TO THE INTERIM RESULTS Reporting Under International Financing Reporting Standards This interim report is the first report to be prepared under IFRS. The Group's date of transition is 1st January 2006, therefore the opening balance sheet for IFRS purposes is that reported at 31st December 2005 as amended for changes due to IFRS. The comparative figures have been prepared on the same basis and have therefore been restated from those previously prepared under UK GAAP. Notes below explain the effect of converting from UK GAAP to IFRS in these accounts. To show the impact of adopting IFRS, reconciliation schedules have been included in this appendix as follows: - 1. Reconciliation of Group Balance Sheet as at 31st December 2005 UK GAAP to IFRS 2. Reconciliation of Group Balance Sheet as at 30th June 2006 UK GAAP to IFRS 3. Reconciliation of Group Balance Sheet as at 31st December 2006 UK GAAP to IFRS 4. Reconciliation of Group Income Statement for six months ending 30th June 2006 The transition of UK GAAP to IFRS does not affect the cash flows generated by the Group. There is therefore no reconciliation statement required for its impact on cash flows. Goodwill and business combinations The Group has taken exemption not to apply IFRS 3 retrospectively to business combinations occurring prior to the date of transition to IFRS. Goodwill arising on acquisitions has been retained at its carrying value as at 1st January 2006, with the exception of the negative Goodwill in the Bakery Division which has been written back to the Income statement, and these values are subject to annual revaluations. Goodwill amortisation is no longer allowed under IAS 36, which has resulted in this charge being reversed in these accounts. Intangible Assets The Group has applied IAS 38 'Intangible Assets' and reclassified computer software from Tangible to Intangible assets. Derived Financial Instruments The Group uses forward currency contracts in order to reduce its exposure to currency fluctuations, due to exchange rate movements in its dealings with both customers and suppliers. The Group has applied IAS 39 Financial Instruments: Recognition and Measurement, and valued these instruments at their fair value at each balance sheet date, taking any gain or loss to the income statement. The Group also has a number of interest rate swap contracts; these have also been valued at fair value and revalued at each balance sheet date. Non Current Assets Held for Resale Under IFRS 5 Non current assets held for sale and discontinued operations any assets that the Group have decided are for sale have to be reclassified as a separate item under Current Assets. Accordingly in 2005 a decision was made to dispose of the Runcorn property along with some of the Plant and Equipment at the site. Therefore the Net Book Value of these assets has been reclassified as Held for Resale in the 31st December 2005 Balance Sheet and the 30th June 2006 Balance Sheet. The site was disposed of in October 2006; however some of the Plant and Equipment was retained for use in the business. These remaining assets were reclassified back into Non Current Plant and Equipment and a depreciation adjustment has been put through to the December 2006 income statement. Finance & Operating Leases IAS 17 'Leases' details the distinction between an operating and a finance lease. The Group has reviewed all leases to consider whether they have been treated correctly within the new definition. This review has led to some leases for Forklift trucks to now be considered as Finance Leases, due to the term of the lease being considered to be for the major part of the assets life. These assets have been capitalised and depreciated in accordance with the normal accounting policies of the group. Reconciliation of Group Balance Sheet at 31st December 2005 from UK GAAP to IFRS (Unaudited) IFRS 5 IAS 39 IAS 39 Assets IFRS ASSETS IAS 38 Foreign Interest IAS 36 IAS 12 Held as at UK Goodwill Exchange Rate IAS 17 Goodwill Income for 31st December GAAP Impairment Contracts Swaps Leases Amortisation Taxes Resale 2005 Non Current £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s Assets Goodwill 88,724 98 - - - - - - 88,822 Property, Plant and Equipment 18,451 - - - 71 - - (487) 18,035 ------------------------------------------------------------------------------------------------------ 107,175 98 - - 71 - - (487) 106,857 ------------------------------------------------------------------------------------------------------ Current Assets Inventory 14,390 - - - - - - - 14,390 Trade and Other Receivables 28,892 - - - - - - - 28,892 Financial Instruments at fair value - - 38 25 - - - - 63 Cash and cash equivalents 11,999 - - - - - - - 11,999 ------------------------------------------------------------------------------------------------------ 55,281 - 38 25 - - - - 55,344 ------------------------------------------------------------------------------------------------------ Non Current Assets held for sale 487 487 ------------------------------------------------------------------------------------------------------ Total Assets 162,456 98 38 25 71 - - - 162,688 ------------------------------------------------------------------------------------------------------ LIABILITIES Current Liabilities Borrowings 11,151 - - - 18 - - - 11,169 Trade & Other Payables 22,661 - - - - - - - 22,661 Financial Instruments at fair value - - - - - - - - - Corporation Tax (396) - - - - - - - (396) ------------------------------------------------------------------------------------------------------ 33,416 - - - 18 - - - 33,434 ------------------------------------------------------------------------------------------------------ Non Current Liabilities Borrowings 60,413 - - - 60 - - - 60,473 Deferred Tax 143 - - - - - 342 - 485 Provisions 746 - - - - - - - 746 Pension Scheme Deficit 806 - - - - - - - 806 ------------------------------------------------------------------------------------------------------ 62,108 - - - 60 - 342 - 6,510 ====================================================================================================== TOTAL ASSETS LESS LIABILITIES 66,932 98 38 25 (7) - (342) - 66,744 ====================================================================================================== Shareholders' Equity Called up share capital 1,297 - - - - - - - 1,297 Share premium account 68,773 - - - - - - - 68,773 Other reserves 34 - - - - - - - 34 Profit and loss account (3,172) 98 38 25 (7) - (342) - (3,360) ------------------------------------------------------------------------------------------------------- EQUITY SHAREHOLDERS' FUNDS 66,932 98 38 25 (7) - (342) - 66,744 ====================================================================================================== Reconciliation of Group Balance Sheet at 30th June 2006 from UK GAAP to IFRS (Un-audited) IFRS 5 IAS 39 IAS 39 Assets IFRS ASSETS IAS 38 Foreign Interest IAS 36 IAS 12 Held as at UK Goodwill Exchange Rate IAS 17 Goodwill Income for 30 June GAAP Impairment Contracts Swaps Leases Amortisation Taxes Resale 2006 Non Current £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s Assets Goodwill 86,455 98 - - - 2,301 - - 88,854 Property, Plant & Equipment 18,638 - - - 62 - - (487) 18,213 ------------------------------------------------------------------------------------------------------- 105,093 98 - - 62 2,301 - (487) 107,067 ------------------------------------------------------------------------------------------------------- Current Assets Inventory 15,226 - - - - - - - 15,226 Trade & Other Receivables 28,184 - - - - - - - 28,184 Financial Instruments at fair value - - 3 27 - - - - 30 Cash and cash equivalents 8,987 - - - - - - - 8,987 ------------------------------------------------------------------------------------------------------- 52,397 - 3 27 - - - - 52,427 ------------------------------------------------------------------------------------------------------- Non Current Assets held for sale - 487 487 ------------------------------------------------------------------------------------------------------- Total Assets 157,490 98 3 27 62 2,301 - - 159,981 ------------------------------------------------------------------------------------------------------- LIABILITIES Current Liabilities Borrowings 8,994 - - - 19 - - - 9,013 Trade & Other Payables 22,658 - - - - - - - 22,658 Financial Instruments at fair value - - 7 - - - - - 7 Corporation Tax (402) - - - - - - - (402) ------------------------------------------------------------------------------------------------------- 31,250 - 7 - 19 - - - 31,276 ------------------------------------------------------------------------------------------------------- Non Current Liabilities Borrowings 59,479 - - - 50 - - - 59,529 Deferred Tax (536) - - - - - 1331 - 795 Provisions 671 - - - - - - - 671 Pension Scheme Deficit 36 - - - - - - - 36 ------------------------------------------------------------------------------------------------------- 59,650 - - - 50 - 1331 - 61,031 ======================================================================================================= TOTAL ASSETS LESS LIABILITIES 66,590 98 (4) 27 (7) 2,301 (1331) - 67,674 ======================================================================================================= Shareholders' Equity Called up share capital 1,297 - - - - - - - 1,297 Share premium account 68,773 - - - - - - - 68,773 Other Reserves 44 - - - - - - - 44 Profit and loss account (3,524) 98 (4) 27 (7) 2,301 (1331) - (2,440) ------------------------------------------------------------------------------------------------------ Equity Shareholders' Funds 66,590 98 (4) 27 (7) 2,301 (1331) - 67,674 ====================================================================================================== Reconciliation of Group Balance Sheet at 31st December 2006 from UK GAAP to IFRS (Unaudited) IFRS 5 IAS 39 IAS 39 Assets IFRS ASSETS IAS 38 Foreign Interest IAS 36 IAS 12 Held as at UK Goodwill Exchange Rate IAS 17 Goodwill Income for 31st December GAAP Impairment Contracts Swaps Leases Amortisation Taxes Resale 2006 Non current £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s Assets Goodwill 85,831 98 - - - 4,683 - - 90,612 Property, Plant & Equipment 18,754 - - - 54 - - (90) 18,718 ------------------------------------------------------------------------------------------------------- 104,585 98 - - 54 4,683 - (90) 109,330 ------------------------------------------------------------------------------------------------------- Current Assets Inventory 14,685 - - - - - - - 14,685 Trade and Other Receivables 29,224 - - - - - - - 29,224 Financial Instruments at fair value - - - 63 - - - - 63 Cash and cash equivalents 12,412 - - - - - - - 12,412 ------------------------------------------------------------------------------------------------------ 56,321 - - 63 - - - - 56,384 ------------------------------------------------------------------------------------------------------ Non Current Assets held for sale - - ------------------------------------------------------------------------------------------------------ Total Assets 160,906 98 - 63 54 4,683 - (90) 165,714 ------------------------------------------------------------------------------------------------------ LIABILITIES Current Liabilities Borrowings 10,215 - - - 19 - - - 10,234 Trade & Other Payables 20,605 - - - - - - - 20,605 Financial Instruments at fair value - - 19 - - - - - 19 Corporation Tax 629 - - - - - - - 629 -------------------------------------------------------------------------------------------------------- 31,449 - 19 - 19 - - - 31,487 -------------------------------------------------------------------------------------------------------- Non Current Liabilities Borrowings 58,952 - - - 40 - - - 58,992 Deferred Tax 826 - - - - - 298 - 1124 Provisions 596 - - - - - - - 596 Pension Scheme Deficit 856 - - - - - - - 856 -------------------------------------------------------------------------------------------------------- 61,230 - - - 40 - 298 - 61,568 ======================================================================================================== TOTAL ASSETS LESS LIABILITIES 68,227 98 (19) 63 (5) 4,683 (298) (90) 72,659 ======================================================================================================== SHAREHOLDERS' EQUITY Called up share capital 1,297 - - - - - - - 1,297 Share premium account 68,773 - - - - - - - 68,773 Other 53 - - - - - - - 53 reserves Profit and loss account (1,896) 98 (19) 63 (5) 4,683 (298) (90) 2,536 -------------------------------------------------------------------------------------------------------- EQUITY SHAREHOLDERS' FUNDS 68,227 98 (19) 63 (5) 4,683 (298) (90) 72,659 ======================================================================================================== Reconciliation of Group Income Statement for the six months ended 30th June 2006 from UK GAAP to IFRS (Unaudited) UK GAAP IAS 39 Foreign IAS 17 Leases IAS 39 Interest IAS 36 Goodwill IAS 12 IFRS Exchange Rate Swaps Amortisation Income Taxes Contracts CONTINUING OPERATIONS £'000s £'000s £'000s £'000s £'000s £'000s £'000s TURNOVER 99,348 - - - - - 99,348 Cost of Sales 86,690 - (2) - - - 86,688 ----------------------------------------------------------------------------------------------- 12,658 - 2 - - - 12,660 ----------------------------------------------------------------------------------------------- Distribution Expenses 3,564 - - - - - 3,564 Administration 6,250 - 1 - - - 6,251 - - - - - ----------------------------------------------------------------------------------------------- Operating Profit 2,844 - 1 - - - 2,845 ----------------------------------------------------------------------------------------------- Finance Income 128 - - - - - 128 Finance Costs 2186 43 1 (3) - - 2,227 Net Pension Finance income 199 - - - - - 199 - - - - - ----------------------------------------------------------------------------------------------- Profit Before Tax 985 (43) - 3 - - 945 ----------------------------------------------------------------------------------------------- Amortisation 2,301 - - - 2,301 - - Exceptionals 753 - - - - - 753 Income Tax Charge 25 - - - - 989 1,014 - - - - - - - ----------------------------------------------------------------------------------------------- (2,094) (43) - 3 2,301 (989) (822) =============================================================================================== DISCONTINUED OPERATIONS Revenue 14,024 - - - - - 14,024 Expenses 12,315 - 1 - - - 12,316 Operating Profit 1,709 - - - - - 1,708 Income Tax Charge 451 - - - - - 451 ----------------------------------------------------------------------------------------------- 1,258 - 1 - - - 1,257 =============================================================================================== Total Profit/ (Loss) for the period (836) (43) 1 3 2,301 (989) 435 =============================================================================================== 10. ENQUIRIES Pieter Totte/ Stephen Heslop/ Lee Camfield The Real Good Food Company Plc International House 1 St Katharines' Way London E1W 1XB 020 7335 2600 www.realgoodfoodplc.co.uk Guy Peters Shore Capital 020 7408 4090 Emma Kane/Adam Leviton Redleaf Communications 020 7822 0200 This information is provided by RNS The company news service from the London Stock Exchange

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