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Stock code: RGD
Annual Report and Accounts
For the year ended 31 March 2016
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
Welcome
Real Good Food plc
Real Good Food operates in
three pillar markets: Cake Decoration,
Food Ingredients and Premium Bakery.
Renshaw,
Renshaw Europe,
Rainbow Dust Colours
R&W Scott,
Garrett Ingredients,
GI Nutrition
Haydens,
Chantilly Patisserie
Investor Proposition
✪ Experienced senior management team with strong heritage in food manufacturing
✪ Diversified business markets: cake decoration, food ingredients, and premium bakery
✪ Diversified market sectors including: retail, manufacturing, wholesale, foodservice and export
✪ Market-led growth strategies identified for each division
✪ Strong financial platform and balance sheet enabling investment for growth
✪ Emphasis on product development, innovation and sales growth
✪ Track record of successful bolt-on, earnings enhancing, acquisitions
Contents
Welcome
StRAteGic RepoRt
Highlights
Group at a Glance
Chairman’s Statement
Group Strategy
Divisional Business Reviews
Cake Decoration
Food Ingredients
Premium Bakery
Corporate Social Responsibility
Key Performance Indicators and Risks
Finance Review
ouR GoveRnAnce
Board of Directors
Executive Team
Report of the Directors
Audit Committee Report
and Remuneration Committee Report
ouR FinAnciAlS
Independent Auditor’s Report
IFC
1
2
4
6
8
10
12
14
16
17
20
21
22
25
26
Consolidated Statement of Comprehensive Income 27
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Cash Flow Statement
Company Cash Flow Statement
28
29
30
31
32
33
34
IBC
Navigating the Report
For further information within this
document and relevant page numbers
Additional information online
www.realgoodfoodplc.com
Notes to the Financial Statements
Advisers
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
Annual Report and Accounts for the year ended 31 March 2016 Highlights
operating Highlights
{ Following the successful disposal of Napier Brown, which generated a profit
of £9.1 million the Group made a statutory profit before tax of £12.9 million
in the year
{ Disposal transformed the Group balance sheet reducing net debt from £30.1
million down to £5.1 million
{ Group restructured into three pillar markets with stand-alone business
strategies for each
{ Continuing investment strategy in core markets and across business assets
to drive operating efficiency and future EBITDA growth
{ Acquisition strategy progressing to plan: Rainbow Dust Colours (January
2015); ISO2 Nutrition (December 2015); Chantilly Patisserie (February 2016)
successfully completed
{ New Development Centre in Liverpool opened providing a base for our Group
plc support functions (Technical, IT, HR, Operations) and a state-of-the art
Innovation Centre for new product development
{ Launch of ‘Renshaw Academy’ to further monetise the Renshaw brand and to
cement our position as industry leader in the global cake decorating market
{ Strong financial and operational platform in place for future growth in all three
pillar markets: Cake Decoration, Food Ingredients and Premium Bakery
* Throughout this report an underlying EBITDA is
calculated as operating profit before depreciation,
amortisation and significant items: see note 5.
Read more in the Finance Review
on pages 17 to 19
GROUP
REVENUE
£113.7m
2015
£232.9m
GROUP
EBITDA*
£5.0m
2015
£2.0m
GROSS
PROFIT
£28.0m
2015
£35.9m
CONTINUING
OPERATIONS
REVENUE
£100.4m
2015
£104.6m
CONTINUING
OPERATIONS
EBITDA
£5.0m
2015
£5.3m
CONTINUING
OPERATIONS
GROSS PROFIT
£26.7m
2015
£25.6m
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
1
www.realgoodfoodplc.com Stock Code: RGDStrategic report Group at a Glance
Real Good Food operates in
three distinct market sectors:
Cake Decoration, Food Ingredients
and Premium Bakery.
three pillar markets
While each Division comprises individual business
units, Group employees work to set overall Divisional
strategies based on market understanding and ensure
cooperation between the businesses so that synergy
opportunities are realised.
TURNOVER
£48.3m
EBITDA
EBITDA
£•.•m
£7.3m
EMPLOYEES
356
TURNOVER
£22.7m
EBITDA
EBITDA
£•.•m
£(0.1)m
EMPLOYEES
121
TURNOVER
£29.4m
EBITDA
EBITDA
£•.•m
£0.7m
EMPLOYEES
480
Read more on page 8
Read more on page 10
Read more on page 12
2
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
Annual Report and Accounts for the year ended 31 March 2016Strategic report Renshaw manufactures sugarpaste,
marzipan, soft icings, mallows and caramels
and sells across a broad range of sales
channels: mainstream and specialist retail,
wholesale, foodservice and food manufacturing
as well as export. Rainbow Dust Colours
produces a range of edible glitters, dusts,
powders and food paints, brushes and pens
for the specialist sugarcraft sector.
Renshaw Europe sells, markets and
distributes both Renshaw and Rainbow Dust
products across continental Europe.
Renshaw: Liverpool 318 employees
Rainbow Dust Colours: Preston 28 employees
Renshaw Europe: Brussels 10 employees
Garrett Ingredients sources dairy, sugar
and other specialist food ingredients from
across the UK, Eire and continental Europe and
sells them to large, medium and small food
manufacturers across the UK.
Through GI Nutrition, it also manufactures and
sells whey protein supplements and sports
nutrition products through retail and specialist
sales channels. R&W Scott manufactures
chocolate coatings, sauces, jams and dry powder
blends for industrial, retail, wholesale and
foodservice markets.
Garrett Ingredients: Thornbury, near Bristol
20 employees
GI Nutrition: Swindon 6 employees
R&W Scott: Carluke, near Glasgow
95 employees
Haydens bakes premium tarts, pies and
crumbles, Danish, sweet buns, yum yums and
doughnuts and sells to major retail customers
and through foodservice channels. It operates
both an ambient and frozen supply chain. It also
operates a same day consolidation service for
all Waitrose stores for both Haydens and
third party products. Chantilly manufactures
premium quality frozen desserts (e.g. gateaux,
cheesecakes, tarts and flans) and sells them to
pubs and restaurants.
Haydens: Devizes, Wiltshire 450 employees
Chantilly: Paignton, Devon 30 employees
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3
www.realgoodfoodplc.com Stock Code: RGDStrategic report chairman’s Statement
We now operate in three
pillar markets: Cake
Decoration, Food Ingredients
and Premium Bakery
Pieter Totté
Executive Chairman
”
The year to 31st March 2016 saw the
Group make a pre-tax profit of £12.9
million following the hugely successful
disposal of Napier Brown which
generated an exceptional profit of £9.1
million. While underlying EBITDA for the
continuing businesses was largely flat,
the Napier Brown sale has transformed
our balance sheet (net debt at the year-
end improved from £30.1 million to just
£5.1 million) and thereby enabled us to
begin a strategy of investing in building
strategic positions in our core markets.
In this respect the Napier Brown
case history (building and investing
strategically for the long term) is a
model for what we intend to do in our
remaining markets.
We have spent the time since the
Napier Brown disposal reviewing
our strategy, clarifying our focus and
restructuring the business accordingly.
We now operate in three pillar markets
(Cake Decoration, Food Ingredients and
Premium Bakery) and our objective will
be to build scale and strategic positions
in each of these through organic
growth, targeted investment and bolt-on
acquisitions as appropriate.
Each market has different
characteristics and will generate
different returns and our plans will
reflect this. We will also evolve our
management structures and approach
to make sure that the potential for each
of these divisions is maximised.
We have made progress on a number
of fronts. In Cake Decoration, the
acquisition of Rainbow Dust Colours
in January 2015 has now been fully
integrated and it is a core part of this
division. It will now be selling Renshaw
products directly to some of its
specialist customers who would prefer
to have a one-stop shop. We have also
recognised increased potential for
tackling the cake decoration market
globally and intend during the course of
the next 12 months to create a global
range under the Renshaw brand. While
there may be the need to tailor locally
either for reasons of different legislation
or local tastes, the essential market
positioning of the Renshaw brand and
products will be the same. To provide
additional focus for this initiative we
have renamed our European business
‘Renshaw Europe’ and also set up
Food Ingredients is a very different
market where inevitably margins are
lower but we also see increasing
opportunities for providing added value.
The acquisition of ISO2 Nutrition is an
example of finding a niche in an area
of our competences (whey protein
is the main ingredient) and thereby
providing diversification for Garrett
Ingredients from its commodity base in
dairy powders and sugar. Both these
commodity sectors have been extremely
difficult over the past two years with
prices hitting record lows. There are
already signs, particularly in sugar,
that prices will rise, but our strategy
is to reduce our reliance on this and
seek more lucrative and sustainable
sectors. We also believe that customer
service and an efficient supply chain
are important factors in this market and
we continue to investigate how we can
build competitive advantage in this way.
Read more about Renshaw in Our
Strategy on page 6
Above: This Avatar cake was displayed at the
opening of Wavertree Development Centre
a US company (Renshaw US Inc.) to
drive this initiative. We see similar
potential in Australasia and elsewhere.
The transition from being just a
manufacturer of products for other
people to becoming a market and
brand-led player (both with Renshaw
and Rainbow Dust Colours) will be
profound.
4
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Annual Report and Accounts for the year ended 31 March 2016Strategic report Read more about Chantilly on
pages 6 and 12
In Premium Bakery, the acquisition of
Chantilly Patisserie is a perfect example
of the type of business we are keen
to acquire and build on. It operates in
a small but fast growing market niche
– high quality out-of-home desserts.
The business brings to us great skills
in product and specific customer
knowledge while we can help it grow
and extend its technical capabilities
and customer reach. Meanwhile, we
have determined on a very clear vision
for our core business in this sector,
Haydens, by increasingly focusing
on fewer product lines and product
sectors – producing many more of fewer
products and thereby doing it better
and generating better returns. Part of
this initiative is to produce a branded
range from Haydens in the coming year.
We also see significant opportunity to
use our stronger cash resources to
automate non-added value processes
which will both reduce costs and
improve quality and consistency.
We have also been evolving our
management model. While we believe
in local accountability for stand-alone
businesses we increasingly see
divisional opportunities and the value
which expert Group functions can
deliver. To this end the opening of our
new Development Centre in Liverpool
is central to our strategy. The centre
provides three things: first, a base for
our Group support functions (Technical,
IT, HR, Operations) which previously
had been squeezed into the Renshaw
Crown Street site; secondly, a state-
of-the-art Innovation Centre for our
Group new product development and
applications teams who previously had
to use only site- based equipment.
The food industry is fast moving
with consumers becoming ever
more demanding in terms of health,
quality, shelf life, convenience and
personalisation. The challenge is to
find technical and process solutions
to deliver these benefits to consumers
and our Innovation Centre team are
fully focused on this with a number of
exciting projects in the pipeline.
Finally the Development Centre houses
our new ‘Renshaw Academy’. This
initiative is part and parcel of the
Renshaw global range launch and will
be the main marketing support vehicle
for it. Consumer aspiration to improve
cake decorating skills is a global
phenomenon and the Renshaw brand
has the reputation as the expert and
thus is well placed to lead the market
both in terms of product range and
customer and consumer inspiration.
More detail on our plans is given later
in this report.
outlook
The food industry faces challenging
times with diversifying sales channels,
increasing legislative burdens, the
growth in the minimum wage and ever-
demanding consumers. The response
to these trends requires being alert
to all these factors and having the
resources to invest and adapt. In this
respect I am confident that with our
clear strategy and strong balance sheet
we are in a good position to build three
increasingly strong businesses in our
three pillar markets.
Trading in the first three months
of the new financial year has been
satisfactory; with recent order intake
positive, and with the investments we
are making, I am confident that we will
deliver growth across all three divisions.
Pieter Totté
Executive Chairman
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5
www.realgoodfoodplc.com Stock Code: RGDStrategic report Group Strategy
The Group will deliver shareholder value by building
long term sustainable businesses in its three pillar
markets of Cake Decoration, Food Ingredients and
Premium Bakery.
MARKetplAce
Cake Decoration is a growing and global market with
a spectrum of consumers from experts to beginners
and a wide range of trade channels. The market
displays many similar characteristics to hobby, leisure
and fashion markets and as such has the potential
for above-average returns compared to the food
industry average. At the same time the need to invest
in innovation and manufacturing and supply chain
flexibility is paramount.
Food Ingredients is a broad market sector and
with major product sectors driven by commodity
pricing. However, within this, there are a number of
sources of competitive advantage and added value.
Customer service and logistics can be a significant
differentiator while technical support and (in traded
products) full traceability is an important element in
the customer proposition.
Premium Bakery is a growing sector with volume in
commodity bakery in decline alongside growth in
value as consumers migrate to higher value premium
offerings both in home and increasingly out-of-
home. Health concerns are relevant but high quality,
indulgent and occasional treats still represent a
growing opportunity. New product development is an
important facet of the market with opportunities to
deliver healthier yet still indulgent eating products a
particular focus.
Each of these markets has different
characteristics and our strategies will
be tailored to the specific market
needs but with the common theme of
building long term sustainable growth.
StRAteGY
Real Good Food will utilise Renshaw as its global brand to
access this market, leveraging its strong ‘The Professionals
Choice’ reputation. The launch of ‘The Renshaw Academy’
will be used to underpin and build its global reputation
as well as being a showcase for all Real Good Food cake
decoration products both from Renshaw and Rainbow Dust
Colours. As well as holding courses at the Academy facility
in Liverpool, the Academy will build a network of global
ambassadors for the Renshaw Academy. Courses will also
be webcast to international audiences.
Real Good Food will focus on its core competences of
dairy and sugar trading as well as chocolate coating, jam,
fruit preparations and sauces manufacture and seek to
develop added value opportunities on this strong base.
The acquisition of the sports nutrition brand ISO2 Nutrition
(using whey protein), the development of high quality sauces
for manufacturing and retail and of soft fillings for the
confectionery manufacturing industry are examples. Supply
partnerships and distributorships will be a part of developing
the portfolio.
Real Good Food will focus on a number of products and
processes where it has product quality leadership – e.g.
Danish, yum yums, frozen desserts. Haydens will launch
a branded range to showcase its product excellence and
extend its retail presence while the acquisition of Chantilly
Patisserie not only represents an extension of the range
portfolio but facilitates greater access to out-of-home eating
occasions. Investment will be made in automating non-added
value processes provided they maintain or even enhance
product consistency and quality.
6
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Annual Report and Accounts for the year ended 31 March 2016Strategic report the Real Good Food
DEvElOPMEnT CEnTRE
This new facility opened in
May 2016 and is central to Group
strategy providing direct support
to the growth of each division.
The building houses central Group
support functions of technical, IT and
Digital, HR and Operations.
It also contains the Group Innovation
Centre, a world class facility
looking to develop new products
for the businesses using emerging
technologies in product, process and
packaging. The Innovation Centre will
also be a source of inspiration for
customers on applications for Real
Good Food product ingredients, be they
for cake decoration or other ingredients.
Finally the building contains the new
‘Renshaw Academy’. The vision for
this is to be ‘the most inspirational
cake decorating academy in the world’
providing a showcase for all of Real
Good Food's cake decorating products.
The school will encompass both cake
decorating experts as well as the less
highly skilled hobbyists and teach
both traditional and contemporary
methods and techniques. It will be a
revenue generating facility though its
primary objective will be to underpin
the excellence of the Renshaw brand
reputation.
CASE hISTORy Product Innovation
Real Good Food has considerable
expertise in producing highly functional
sugarpaste (icing); the Renshaw brand
has a long-established reputation as
the benchmark product for professional
cake decorators who require stringent
standards of strength and elasticity
to produce the perfect looking cake.
The Innovation team was briefed to
look at the potential of a product
which maintained these essential
functional characteristics but also
incorporated improved taste and
texture for consumers wanting a more
everyday product. This has involved
combining traditional icing with in-
house manufactured caramel and
chocolate through careful control of
water activity, fat levels, emulsification
and natural gum systems. This blending
of a number of Real Good Food’s
manufacturing capabilities to produce
a product which meets the increasing
market for indulgently eating products
is a good example of how the central
Innovation team will operate. The new
product will launch in 2017.
7
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www.realgoodfoodplc.com Stock Code: RGDStrategic report Divisional Business Review
2015/16 performance
Sales revenue was slightly down on the
previous year as Renshaw removed a
manufacturing contract and Renshaw
Europe lost a private label contract.
Sales of Renshaw brand, however, grew
as the company focused on developing
its branded proposition. Export sales
outside Europe showed strong growth.
At Rainbow Dust Colours, sales of
Progel© food colouring and metallic
food paints in particular showed good
growth, both areas where we have
clear product superiority. As the market
matures opportunities are appearing
in more mainstream retailers such as
Hobbycraft and John Lewis.
Forward plans
The new focus on developing a global
branded range will take shape during
the course of 2016. A relaunch of the
core sugarpaste range in upgraded
packaging is already having a strong
impact in the market as is the
introduction of ‘Renshaw Extra’, a firmer
and more elastic product designed
for European tastes and also more
effective in hotter climates. Further
significant product initiatives will be
launched in early 2017. At Rainbow
Dust Colours a number of major product
initiatives are also in place; a relaunch
of the ‘food art’ pens, an upgraded
recipe on matt food paints and new
multi-lingual packs on Progel©.
pictured: Cupcakes – stencil design
using Rainbow Dust 'Plain & Simple'
12 MONThS TO MARCh
Revenue
EBITDA
Operating profit
Operating profit %
2015/2016
£m
2014/2015
£m
48.3
7.3
6.5
13.5
49.2
6.5
5.5
11.2
8
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
REVENUE
£48.3m
EBITDA
£7.3m
OPERATING
PROFIT
£6.5m
Annual Report and Accounts for the year ended 31 March 2016Strategic report 24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
9
www.realgoodfoodplc.com Stock Code: RGDStrategic report Divisional Business Review
2015/16 performance
Revenues were significantly down
year on year due to unprecedented
commodity price deflation particularly
in sugar and dairy. Both these markets
experienced record low levels of prices;
sugar was impacted not only by weak
world prices but also in Europe ahead
of the ending of quotas in 2017, while
dairy, where quotas have already ended,
was affected by the Russian export
ban. In this context Garrett Ingredients
did well to increase its traded dairy
volumes though sugar sales fell slightly.
The acquisition of ISO2 Nutrition
generated a modest amount of sales
but set-up costs led to a small overall
loss in the year. Sales volume was
slightly ahead of the previous year
at R&W Scott though again price
deflation led to a marginal revenue
decline. Investment in management
teams at both businesses led to higher
costs and a decline in EBITDA. Both
businesses are now fully equipped to
run on a stand-alone basis and develop
their growth plans.
Forward plans
Garrett Ingredients is well placed
to benefit from any upturn in sugar
and dairy pricing and will build sales
in sports nutrition. At R&W Scott a
number of product initiatives (soft
fillings, fruit fillings, sauces, curds,
mallows and premium jams) have been
developed and are being sold across
all channels. The investment in jam
capacity at R&W Scott, which caused
some disruption last year, should
begin to yield benefits. R&W Scott will
also significantly increase its supply
into other Real Good Food companies
(especially Haydens) facilitated by the
central Innovations team.
pictured: R&W Scott chocolate sauce
12 MONThS TO MARCh
2015/2016
£m
2014/2015
£m
Revenue
EBITDA
Operating (loss)/profit
Operating (loss)/profit %
22.7
(0.1)
(0.4)
(2.0)
27.0
0.5
0.3
1.1
10
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REVENUE
£22.7m
EBITDA
(£0.1m)
OPERATING
LOSS
(£0.4m)
Annual Report and Accounts for the year ended 31 March 2016Strategic report 24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
11
www.realgoodfoodplc.com Stock Code: RGDStrategic report Divisional Business Review
2015/16 performance
Despite narrowing its product range
Haydens grew its sales by 4% year on
year with the growth rate quickening
to 12% in the second half of the year.
Customer service was excellent over
the critical Christmas and Easter
periods but at a cost of significantly
increased labour which impacted
margins leading to a decline in EBITDA
over last year. The extension of the
customer base had a positive effect on
sales but product complexity remains
the challenge and is being addressed
with an even greater focus on fewer
product lines. The impact of this was
already being seen in the final quarter.
The Chantilly acquisition took place late
in the year with sales and margins in
line with expectations.
Forward plans
The process of further focusing on core
lines and processes where Haydens
has recognised product superiority will
continue. Part of this will be the launch
of a small range of branded premium
indulgent sweet treats which will be
sold to a range of customers and
generate significant scale. The Chantilly
acquisition has already highlighted a
number of cross selling opportunities
(both opportunities for Haydens within
foodservice and also Chantilly within
retail) which will be pursued. There
are a number of opportunities for
automating non-added value, manual
processes and these will be prioritised
against the scale achieved in each
product sector.
pictured: Chantilly Rich Chocolate &
Raspberry tear
12 MONThS TO MARCh
2015/2016
£m
2014/2015
£m
Revenue
EBITDA
Operating (loss)/profit
Operating (loss)/profit %
29.4
0.7
(0.1)
(0.5)
28.4
1.3
0.4
1.5
12
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
REVENUE
£29.4m
EBITDA
£0.7m
OPERATING
LOSS
(£0.1m)
Annual Report and Accounts for the year ended 31 March 2016Strategic report 24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
13
www.realgoodfoodplc.com Stock Code: RGDStrategic report corporate Social Responsibility
We continue to develop our activities
in a socially responsible manner. The last
year has seen a number of key activities
across the Group:
Business in the community
We continue to work with Business in
the Community to develop our approach
to Corporate Social Responsibility.
During the year with their help and
support we developed a Responsible
Business Framework for the Group,
involving key stakeholders from each
business. This provided a framework
around our three core principles of
People, Communities and Operational
Responsibility. Key areas for action
were identified as follows:
people
communities
✪ Health & Safety
✪ Training &
Development
✪ Recognition
✪ Communication
✪ Health & Wellbeing
✪ Diversity & Inclusion
✪ Charitable Giving
✪ Proactive involvement
in local community
✪ Links with schools
and colleges
operational
Responsibility
✪ Environmental
Management
✪ Ethical Trading
✪ Customer
Engagement
✪ Responsible
Marketing
people
health and Safety
All companies within Real Good Food
have made improvements in health
and safety performance over the last
year. See table below. Rainbow Dust
Colours, acquired in January 2015, has
been introduced to the Real Good Food
Safety Management System and has
been included within the Real Good
Food audit programme.
Common areas for further continuous
improvement have been identified as:
1 Risk Assessments & Safe Operating
Procedures: These include Site
Transport, Manual Handling and
DSEAR (Dangerous Substances and
Explosive Atmospheres Regulations)
2 Safety Training
3 Machinery (Provision & Use of
Work Equipment Regulations)
Assessments
4 Effective planned preventative
maintenance
5 Business continuity plans are
progressing well across all sites
6 DSEAR – actions have been
identified as part of individual site
risk assessments
7 Occupational Health – a new
programme for routine screening
is required to include new starters,
audiometry, spirometry
Talent Development
2015–16 has seen the Group
further develop and strengthen
its management teams across all
businesses ensuring we are fit to meet
the challenges of the future, both
internationally and in the UK.
We seek to recruit the people of the
highest calibre and commit to their
ongoing development upon joining our
Group. To this end we have continued
to develop our people through our
leadership development programme
across the Group and are now seeing
the benefits of our investment during
the last three years in our leadership
teams. Clear roles and accountability,
coupled with behaviours consistent
with our 'RECIPE' values are being
demonstrated through improved
operational performance and employee
retention rates.
Our leadership framework is being
further developed with the clear
objective of the creation and
development of high performing teams
across the Group and 2016–17 will
see its conclusion and launch to our
leadership and management teams.
Each business was tasked with developing its own action plans to determine
exactly what it wanted to achieve and what could be done to support this. The
Group Directorate is working closely with each business to develop those activities
further and progress has been made throughout the year.
COMPANY
Haydens Bakery
Renshaw Liverpool
R&W Scott – Carluke
Rainbow Dust – Preston
AUDIT SCORE 2015
AUDIT SCORE 2014
94%
90%
86%
35%
90%
88%
82%
Recent Acquisition
14
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
Annual Report and Accounts for the year ended 31 March 2016Strategic report Above: The presentation of the new
Super MAD Award
Involvement
We seek to involve and empower
our people in key business
development activities and one
such example in March of this year
was when a team of key operatives
and engineers from Renshaw spent
a week in Switzerland providing
input to and receiving training on
a significant new process whilst
it was being built and before it
was commissioned and installed
in our factory at Renshaw. The
involvement of the team at the
outset was crucial to its success
when installed and the performance
of this process in the factory at
Liverpool has been outstanding
with full ownership by the team.
Reward and Recognition
Our MAD (Made a Difference)
award scheme saw many awards
made across the Group throughout
the year, with colleagues being
nominated by their peers and
recognised and rewarded for
exceptional performance, above
and beyond the call of duty.
This year, we held the first Group
Super MAD Award, with the best
of the best from around the
Group being nominated by their
businesses and rewarded and
recognised at a ceremony with our
Chairman at the new Development
Centre in Wavertree.
communities
Charitable Giving
Renshaw
2015–16 saw the Renshaw team
raise in excess of £5,000 for Cancer
Research in memory of a colleague who
had passed away during the year. This
was raised by raffles, charity race nights
and the annual Santa Dash in Liverpool.
The business supported such activities
by way of donating prizes, paying for
race entry fees and making donations
to worthy causes local to site such as
care homes and schools.
R&W Scott
As usual the R&W Scott team showed
their commitment to local causes and
fundraising during the year. Support
and promotion of the local Carluke Jam
& Ham Festival, hosting local primary
school visits and fundraising activities
were all highlights of the year.
Schools and colleges
Work experience initiatives and
school visits continue across the
Group in all businesses and our
collaboration with local colleges and
universities continues to bear fruit, with
apprenticeships in place for engineers,
food technologists and applications
technicians.
As we seek to develop our Group digital
strategy, we have created university
placements for students at our new
Development Centre. They will work
closely with the existing team at Group
level and across all of the businesses
to implement and develop leading
Below: The Charity run at Carluke
The Charity walk by Rainbow Dust
haydens
Over the past 12 months Haydens
donated cakes to at least one local
event every month varying from school
fundraising events and fire station fun
days to the Wiltshire Air Ambulance
Volunteers Christmas party. The
Wiltshire Air Ambulance continued to
be the Haydens 'Chosen Charity of
Choice' and during the year a group
from the bakery visited its head office
to understand more fully the vital role it
plays in the local community
Rainbow Dust
A team from Rainbow Dust undertook
the gruelling Yorkshire three peaks
challenge raising over £3,000 for a
local hospice.
edge techniques to ensure our on-line
presence is at the forefront, whilst also
gaining valuable work experience.
2016 will see us sponsor a scholarship
programme relevant to baking and
confectionery skills – we have worked
closely with further educational
establishments to develop this
programme which is to be launched
imminently. We will provide support,
guidance and materials to this exciting
new development and look forward to
reporting a successful launch of the
programme next year.
operational Responsibility
Modern Slavery
We have developed our statement on
Modern Slavery and Human Trafficking
which can be found on our website in
full. As a responsible organisation we
recognise our responsibilities and our
commitment to ensuring an ethical
approach to our activities remains
at the forefront of all we do and
throughout our supply chains.
Our commitment and support of the
Ethical Trading Initiative continues with
successful unplanned audits at Devizes
and Liverpool during the year.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
15
www.realgoodfoodplc.com Stock Code: RGDStrategic report
Key performance indicators and Risks
Key performance indicators
The Board of Directors monitors a range of financial and non-financial key
performance indicators, reported on a periodic basis, to measure the Group’s
performance over time. The key performance indicators, all based on continuing
operations, are set out below:
REVENUE GROwTh
Revenue is calculated for
continuing business and
excludes sugar for 2014 and
is from external sources only.
EBITDA
EBITDA is defined as earnings
before significant items,
interest, tax depreciation and
amortisation.
NET DEBT
Net Debt is the total Group
borrowings less cash at bank.
£100.4m £104.6m £110.2m
(3.9)%
GROWTH
(5.1)%
GROWTH
2.6%
GROWTH
2016
2015
2014
£5.0m
£5.3m
£4.9m
5.0%
OF SALES
5.1%
OF SALES
4.4%
OF SALES
2016
2015
2014
£30.1m
£31.1m
DEBT COVER
Debt cover is calculated by
dividing total Net Debt by
continuing EBITDA.
hEALTh & SAFETY SCORE
Health & Safety score
represents a weighted average
score across all sites and
is measured by an external
consultant. Figures are quoted
for calendar years.
£5.1m
2016
2015
2014
9.5
5.6
1.0
2016
2015
2014
90%
82%
92%
2016
2015
2014
coMMent
Revenue has fallen due to
falling commodity prices and
removal of manufacturing
contracts.
EBITDA has held steady in
what have been difficult food
market conditions.
With the sale of Napier
Brown Net Debt has reduced
significantly.
With the level of reduced debt
and the maintenance of the
EBITDA level then debt cover
is at a comfortable level.
In 2014, measures were reset
effectively toughening the
measure by approximately ten
percentage points.
principal Risks
The Group operates in a continually
changing environment and consequently
our risks change over time. The
assessment of risks and the
development of strategies for dealing
with them are dealt with on an ongoing
basis through Group management and
control processes. A formal review
is carried out on an annual basis.
This review includes the identification
of risks and the likelihood of them
impacting the business and the
potential severity of that impact and the
determination of what needs to be done
to manage them effectively.
The Directors have identified the
following as principal risks:
{ Key Customers
{ Customer Requirements
{ Product Quality
{ Labour Costs, Prices and Supply
{ Health and Safety
{ Raw Materials
Risks
Mitigation
Key Customers
The Group has a number of key
customers from which it derives its
revenue. Its key customers tend to work
without long term contracts
The Group works with its key customers to ensure product
development and customer service matches expectations and
is flexible to meet demands
Sales and Marketing strategies are set to attract new
customers and limit any reliance on one particular customer
Customer Requirements
Changes in overall economy and
consumer fashions may affect the
marketability of the Group's offering
Product Quality
Maintenance of product quality
standards is vital to sustained sales
performance
Labour costs, prices and supply
The Group employs an average of 1058
employees of which 743 are direct
labour employees and its success
depend on attracting and retaining
quality staff at the correct skill level
Health and Safety
Any breach of Health and Safety
legislation may lead to reputation
damage and penalties
Raw Materials
Raw materials used by the Group are
subject to price fluctuations and market
conditions
The Group Innovation Centre recently opened and the new
product development teams at the individual operating
businesses work together to ensure the Group is always
looking at new product areas to be ahead of any changes in
the markets
As a reputable food manufacturer our operating divisions
rigorously enforce our technical policies and procedures in
relation to production and storage of our products. Our larger
divisions are all BRC accredited and our smaller divisions are
SALSA accredited
The Group has established a strong HR team across all of
its operating sectors, with strict recruitment criteria and
processes
Personal development reviews are carried out every six
months to map out training and development needs
The Group has a compliance programme in place and this
is audited by an external party to ensure that all legal and
internal standards are met and adhered to
The Group purchasing managers liaise regularly to ensure
best buying practices are maintained and volume advantages
are earned
On commodities, forward purchase contracts are entered into
to ensure best prices are obtained and continuation of supply
is maintained
16
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Annual Report and Accounts for the year ended 31 March 2016Strategic report Finance Review
Below: The new Renshaw Academy
The business is now fully
focused on its three pillar
markets which are Cake
Decoration, Food Ingredients
and Premium Bakery
David Newman
Group Finance Director
”
profit Measure on
continuing operations
Delivered Margin on the continuing
businesses for the overall Group has
encouragingly increased to £21.1
million from £19.9 million. Cake
Decoration has increased margins by
4% as it has concentrated on higher
margin business and the benefit of the
Rainbow Dust acquisition is felt for the
full year.
Financial Summary
Revenue
Gross profit
Delivered Margin
(Gross profit after distribution costs)
EBITDA*
Operating profit*
(EBITDA less depreciation)
Operating profit %
Profit/(loss) before taxation*
* before significant items
overview
During this financial year the Group
completed its segregation programme
to achieve its model of each business
unit being a stand-alone legal entity.
It has also now fully focused the
business on its three pillar markets and
in this annual report will be reporting
on the Group results based on those
markets which are Cake Decoration,
Premium Bakery and Food Ingredients.
Comparative figures have been restated
to reflect these markets.
Revenue
Group revenue for the 12 months ended
March 2016 for continuing businesses
was £100.4 million which is drop of
4% on the revenue to March 2015.
This is the result of a move away from
low margin contract business in Cake
Decoration and also the low prices in
the Food Ingredients markets.
Premium Bakery has maintained a 13%
margin on increased turnover whilst the
Food Ingredients pillar has maintained
a 10% margin even though turnover has
declined in what has been a difficult
trading year.
EBITDA for the 12 months to March
2016 was £4.9 million, down by £0.5
million from March 2015 as the Group
continued to invest in overheads to
continue its drive towards a fully market
led operation.
Statutory profit before tax has been
boosted by the profit on sale of Napier
Brown Sugar of £9.1 million and an
exceptional write-back of a Rainbow
Dust liability no longer required of £3.2
million, as the contingent conditions
were not met. This has resulted in a
statutory profit before tax of £12.9
million (March 2015 loss £3.5 million)
giving a basic EPS of 18.36p per share
(2015 loss per share 4.9p).
31 March 2016
31 March 2015
Continuing
£’000s
100,439
26,670
21,303
5,043
3,082
3.1%
2,413
Total
£’000s
113,676
28,023
21,507
5,027
2,998
2.6%
1,423
Continuing
£’000s
104,580
25,561
19.989
5,319
3,202
3.1%
2,101
Total
£’000s
232,868
35,925
20,415
1,960
(741)
(0.3%)
(2,677)
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
17
www.realgoodfoodplc.com Stock Code: RGDStrategic report Finance Review (continued)
cash Flow and net Debt
Following the sale of Napier Brown
Sugar Ltd to Tereos in May 2015
and the receipt of the £44.4 million
disposal proceeds the Group was able
to repay all of its borrowings and to
close its position with PNC Business
Capital.
The Group was also at this time able
to repay the Loan Note that had been
outstanding with NB Ingredients since
the acquisition of Napier Brown by Real
Good Food.
The Group already had a relationship
with Lloyds Bank plc for its daily
banking arrangements and in
September 2015 in order to cover
working capital requirements and to
fund the Group's acquisition policy this
relationship was extended with the
addition of a £10 million invoice
finance facility.
net Debt Summary
Working Capital
(Inventories, trade and other receivables,
trade and other payables)
Net Borrowings (incl. Cash)
Net Debt/EBITDA
18
As noted above with the sale of
Napier Brown Sugar Ltd the Group
was able to clear its borrowings with
PNC and accordingly net debt has
reduced significantly during the year
finishing on 31 March 2016 at £5.1
million compared to £30.1 million at
March 2015.
Cash generated from operations for
the year was (£1.9 million) compared
to £4.8 million in 2015 reflecting a
higher working capital investment in
the business due to higher commodity
prices and more competitive trading
leading to longer credit terms to
customers.
The Group invested £6.4 million in
tangible fixed assets, an increase
of £4.2 million of 2015, reflecting
the modernisation of the Group’s
factories and its facilities. This sum
included £2.4 million on the new Group
Innovation Centre.
31 March
2016
£’000’s
16,054
5,067
1.0
31 March
2015
£’000’s
7,557
30,140
15.4
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Annual Report and Accounts for the year ended 31 March 2016Strategic report capital Restructuring
During the year the Group held an
extraordinary general meeting in order
to get approval from shareholders to
cancel its share premium reserve and
transfer the amount into distributable
reserves. This proposal was approved
and an application was then made to
the courts to complete this process.
This was approved by the courts on
4 May 2016. This will be reflected in
the financial statements for the year
ended 31 March 2017.
pension
The Group operates defined
contribution pension schemes with
contributions made to schemes
administered by major insurance
companies. Contributions to these
schemes are set as a percentage of an
employee’s earnings.
The Group also operates a defined
benefit pension scheme which has
been closed to further benefit accrual
since 2000. In preparation for the
disposal of the sugar business it was
decided to transfer the liability for this
scheme out of J F Renshaw Ltd into
Real Good Food plc.
The scheme deficit at 31 March 2016
was £6.1 million (2015 £5.7 million).
Cash contributions to the scheme in the
year ended 31 March 2016 amounted
to £282,000 in line with the agreed
recovery plan.
For further information see note 31 to
the financial statements.
This report was approved by the Board
on 31 July 2016.
P W Totté
Chairman
D P Newman
Finance Director
Acquisitions
The Group has been successful in
acquiring two business during the year
in accordance with its stated policy of
looking for bolt-on acquisitions.
In December 2015 it acquired the ISO2
Nutrition sports supplement brand from
the administrators of Cre8tive Health
Ltd. This business has been integrated
into Garrett Ingredients, part of the
Food Ingredients sector, and is seen
as an enabler to the entry into a new
and interesting product and portfolio
diversification. The total consideration
was £15,995.
In February 2016 it acquired Chantilly
Patisserie, based in Paignton,
Devon, employing some 30 staff,
and producing high quality, hand-
made frozen desserts, supplying the
foodservice sector, with customers
such as Marston’s Brewery, Warner
Leisure, Brakes, and Country Range.
The business complements the offering
of Haydens extremely well and it is
envisaged that significant commercial
opportunities for both businesses will
be identified as a result. The total
consideration was £1.75 million.
Further details of these acquisitions are
given in Note 33 to the accounts.
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19
www.realgoodfoodplc.com Stock Code: RGDStrategic report ouR GoveRnAnce
Board of Directors
pieter totté
Chief Executive
Pieter has extensive knowledge of the food sector
having acted as a corporate finance adviser on many
transactions over the past 20 years. Pieter founded
RGF in 2003 and acted as Non-Executive Chairman
until November 2009, when he assumed the role
of Executive Chairman. Since then, Pieter has led
the growth plan for RGF and has developed strong
management teams across all the businesses,
allowing him to devote more time to the strategic
development of the Group.
David newman
Finance Director
David joined Napier Brown & Co Ltd in 1995
following spells in the finance functions at John
Mowlem plc and Pirelli Group plc. David began as a
financial accountant until being promoted in 2005 to
Group Financial Controller when Napier Brown Foods
Group was acquired by RGF plc. David was appointed
Company Secretary in 2010 to assist the Board in
corporate governance and investor relations and was
appointed Finance Director in September 2015.
peter Salter
Non-Executive Director
Peter was in practice for 20 years as a tax partner
with Chartered Accountants Crowe Clark Whitehill,
latterly as CEO. In 1998 he moved into international
corporate consultancy, where he advised on a
number of mergers, acquisitions and fundraisings,
working with various financial institutions in the UK
and USA. In recent years he has gained considerable
experience of the food sector and AIM and is
currently a non-executive director of Peter Thompson
Group PLC. He is chairman of both the Audit and
Remuneration Committees of the Group.
patrick Ridgwell
Non-Executive Deputy Chairman
Pat has extensive knowledge of the sugar industry
and other food sectors having acquired and
developed a number of food businesses during
his career. He joined Napier Brown and Company
in 1964 and became Managing Director in 1972
following its acquisition of his family interests in
1970. He is a director of Napier Brown Ingredients
Ltd.
Jacques d’unienville
Non-Executive Director
Jacques has nearly 20 years’ experience of
sugar and related industries (independent power
production, waste and environment management
and renewable energy) in France, the Seychelles
and Mauritius. He is the CEO of Omnicane and the
chairperson of Omnicane Thermal Energy Operations
(La Baraque) Limited and Omnicane Thermal Energy
Operations (St. Aubin) Limited. He has served as
president of the Mauritius Sugar Syndicate and
as president of the Mauritius Sugar Producers’
Association.
christopher thomas
Non-Executive Director
Chris qualified as a chartered accountant in 1969.
In 1973 he joined Breakmate, a vending business,
which was admitted to Unlisted Securities Market in
1984. He joined the Napier Brown Foods Group in
1992 as Group Finance Director and was involved
in the day to day operations of the Group before
becoming Chief Executive Officer of Napier Brown
Foods.
20
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
Annual Report and Accounts for the year ended 31 March 2016 executive team
Andrew Brown
Group Brand and
Marketing Director
Andrew joined Napier Brown Foods as
Managing Director in August 2008. He
has over 30 years’ experience within the
food industry; he was marketing director
at British Bakeries and Manor Bakeries
and then managing director at both Manor
Bakeries and RHM Cereals. Andrew moved
to his current role in June 2012 to drive the
Group’s ‘market-led’ agenda.
Heather Billington
Group hR Director
A Fellow of the Chartered Institute of
Personnel & Development, Heather joined
the Renshaw business in 1981 and was
appointed Human Resources Manager in
1990. She continued to hold this role for the
wider business throughout the subsequent
changes in ownership and business
structure. In 2007 Heather was appointed
Group HR Manager for Real Good Food plc
before being appointed Group HR Director in
January 2009.
David newman
Finance Director
David joined Napier Brown & Co Ltd in 1995
following spells in the finance functions
at John Mowlem plc and Pirelli Group plc.
David began as a financial accountant until
being promoted in 2005 to Group Financial
Controller when Napier Brown Foods
Group was acquired by RGF plc. David was
appointed Company Secretary in 2010 to
assist the Board in corporate governance
and investor relations and was appointed
Finance Director in September 2015.
David Wright
Group Operations Director
David joined Real Good Food in 2006 as
Operations Director of Renshaw. In early
2012 he was invited to join the Real
Good Food management board as Group
Operations Director. As well as coordinating
health and safety and capital expenditure,
David’s role is to manage and implement
strategic projects and deliver the operational
needs of the business to meet the future
growth plans.
www.realgoodfoodplc.com Stock Code: RGD
ouR GoveRnAnce
21
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
Report of the Directors
The Directors present their report and
audited financial statements for the
12 month period ended 31 March 2016.
Statement of Directors’
responsibilities
The statutory Directors are responsible
for preparing the Strategic Report,
the Report of the Directors, other
information included in the Annual
Report and the financial statements
in accordance with applicable law and
regulations.
Company law requires the Directors
to prepare financial statements for
each financial year. Under that law
the statutory Directors have elected
to prepare the financial statements in
accordance with International Financial
Reporting Standards (IFRSs) as
adopted by the EU and applicable law.
Under company law the statutory
Directors must not approve the financial
statements unless they are satisfied
that they give a true and fair view of
the state of affairs of the Company
and the Group and of the profit or
loss of the Group for that period. In
preparing these financial statements,
the Directors are required to:
{ select suitable accounting policies
and then apply them consistently;
{ make judgements and accounting
estimates that are reasonable and
prudent;
{ state whether applicable accounting
standards have been followed,
subject to any material departures
disclosed and explained in the
financial statements;
{ prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group will continue in business.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Company and Group’s transactions
and disclose with reasonable accuracy
at any time the financial position of
the Company and Group and enable
them to ensure that the financial
statements comply with the Companies
Act 2006. They are also responsible
for safeguarding the assets of the
Company and Group and hence for
taking reasonable steps for the
prevention and detection of fraud and
other irregularities.
They are further responsible for
ensuring that the Strategic Report,
the Report of the Directors and other
information included in the Annual
Report and financial statements is
prepared in accordance with applicable
law in the United Kingdom.
The maintenance and integrity of the
Real Good Food plc website is the
responsibility of the Directors; the
work carried out by the auditor does
not involve the consideration of these
matters and, accordingly, the auditor
accepts no responsibility for any
changes that may have occurred in
the accounts since they were initially
presented on the website.
Legislation in the United Kingdom
governing the preparation and
dissemination of the accounts and the
other information included in annual
reports may differ from legislation in
other jurisdictions.
Going concern
The Group’s business activities,
together with the factors likely to affect
its future development, performance
and position, are set out in the
Divisional Reviews on pages 8 to 13.
The financial position of the Group,
its cash flows and liquidity position
are described in the Finance Review
on pages 17 to 19. In addition, notes
23 and 25 to the financial statements
include the Group’s objectives, policies
and processes for managing its
capital; its financial risk management
objectives; details of its financial
instruments and hedging activities;
and its exposure to credit risk and
liquidity risk. As detailed in note 23
to the financial statements, the Group
has a successful banking arrangement
with Lloyds Bank plc and this, together
with customer contracts and supplier
agreements, enabled the Directors to
believe that the Group is well placed
to manage its business risks. Note
that following the disposal of Napier
Brown the Group’s outstanding loans
were repaid in full, with Lloyds Bank
plc remaining as the sole provider of
clearing facilities and funding.
The Directors have a reasonable
expectation that the Group has
adequate resources to continue
in operational existence for the
foreseeable future. Thus they continue
to adopt the going concern basis of
accounting in preparing the financial
statements.
provision of information
to auditor
Each person who is a Director at the
time when this Report of the Directors
is approved has confirmed that:
{ as far as that Director is aware,
there is no relevant audit information
of which the Group’s auditor is
unaware
{ that Director has taken all the steps
that ought to have been taken as
Director in order to be aware of any
information needed by the Group’s
auditor in connection with preparing
its report and to establish that the
Group’s auditor is aware of that
information.
22
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR GOVERNANCEAnnual Report and Accounts for the year ended 31 March 2016 principal continuing activities
The principal activity of the Group is that of a food manufacturing and distribution
business. The Group trades through three operating divisions as follows:
Below: Chantilly white chocolate and
raspberry bar gateau
Manufactures, sells and supplies cake
decoration products and ingredients for the
baking sector in the UK and abroad.
Sources, manufactures and supplies a range of
food ingredients from bagged sugars and dairy
powders to chocolate coatings and jams to food
manufacturers, wholesalers and retailers.
Manufactures, sells and distributes added value
bakery and dessert products to UK retailers and
foodservice customers.
The Group’s profit for the period after
taxation was £12,820k (2015 – Loss
£3,409k) with continuing operations
before significant items, delivering a
profit of £2,375k as compared with
£1,046k last year.
The Directors do not recommend
payment of a dividend in respect of
the 12 months ended 31 March 2016
(2015 – £nil).
Business review and
future developments
These topics are covered in detail within
the Chairman’s Statement, Divisional
Reviews and Finance Reviews on pages
4 to 5 and 17 to 19 respectively.
Results and dividends
The Group’s revenue from continuing
operations for the 12 month period
was £100,439k (2015 – £104,580k),
yielding a gross profit of £26,670k
(2015 – £25,561k) and an operating
profit of £3,082k (2015 – £3,202k)
from continuing operations before
significant items.
non-current assets
Details of changes in non-current
assets are given in notes 16, 17 and
18 to the financial statements.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
23
www.realgoodfoodplc.com Stock Code: RGDOUR GOVERNANCE Report of the Directors (continued)
Directors
On 31 August 2015 M McDonough
resigned from his position as Finance
Director. On 15 September 2015 D P
Newman was elected to the Board in
the position of Finance Director.
The beneficial interests of the Directors
in the ordinary share capital of the
Company at the financial period end are
set out below:
Substantial interests
At 31 March 2016 there were the
following substantial interests (3% or
more) in the Company’s ordinary share
capital:
Napier Brown Ingredients
Limited
Omnicane International
Investors Limited
% Holding
in Ordinary
Share Capital
31.8%
29.7%
2016
P W Totté*
P G Ridgwell†
P C Salter
C O Thomas
D P Newman
J d’Unienville
31 March
2016
31 March
2015
2,716,124
2,624,124
22,502,354 22,502,354
131,000
240,363
24,225
—
181,000
290,363
24,225
—
* 1,925,000 shares are held directly by Menton
Investments Limited which is wholly owned by the
Tulip Trust, a discretionary trust, of which
P W Totté and certain members of his family are
discretionary beneficiaries. In addition, shares
are held by J M Finn Nominees Limited on behalf
of Menton Investments Limited. P W Totté holds
a further 791,124 shares directly.
† Napier Brown Ingredients Limited holds
22,139,998 shares which are controlled by a
trust, of which P G Ridgwell is a trustee. P G
Ridgwell holds a further 362,356 shares directly.
Details of the Directors’ share options
are shown in note 12 to the financial
statements.
Directors’ indemnities
The Company has paid £9,987 (2015
– £9,927) in respect of Directors’ and
Officers’ Indemnity Insurance.
corporate governance
As the Group is listed on AIM its is not
required to apply a particular corporate
governance code. However, the Board
recognises the importance of good
governance and has implemented
corporate governance processes that
are appropriate for a group of its size
and resource constraints.
During the year the Group held an
extraordinary general meeting in order
to get approval from shareholders to
cancel its share premium reserve and
transfer the amount into distributable
reserves. This proposal was approved
and an application was then made to
the courts to complete this process.
This was approved by the courts on
4 May 2016. This will be reflected in
the financial statements for the year
ended 31 March 2017.
Financial instruments
The Group’s financial instruments
comprise bank term loans and two
revolving credit facilities, hire purchase
and finance leases, cash and liquid
resources and various items arising
directly from its operations, such as
trade receivables and trade payables.
The main purpose of these financial
instruments is to finance the Group’s
operations.
The main risks arising from the Group’s
financial instruments are interest rate
risk and liquidity risk. The Group also
has some currency exposure regarding
its sugar trade but the majority of this
risk is offset by purchasing and selling
sugar in matching currencies. The
Board reviews and agrees policies,
which have remained substantially
unchanged for the period under review,
for managing these risks. Full details
of the Group’s financial assets and
liabilities are set out in note 23 to the
financial statements.
liquidity risk
Short term flexibility is available through
existing bank facilities and the netting
off of surplus funds.
employee involvement
The Group aims to improve the
performance of the organisation
through the development of its
employees. Their involvement is
encouraged by means of team working,
team briefings, consultative committees
and working parties.
Bonus schemes linked to profitability
and personal objectives are in place for
all senior managers and Directors.
Disabled employees
The Group is committed to equality of
employment and its policies reflect a
disregard of factors such as disability
in the selection and development of
employees. The Group is involved in
various initiatives which promote a
positive understanding of disability and
the integration of the disabled into the
workforce.
charitable and political
donations
During the current financial period the
Group made charitable donations of
£5,568 (2015 – £1,918). No political
donations were made during the current
or previous financial period.
Research and development
During the period the Group incurred
costs of £1,220k (2015 – £750k) in
relation to research and development
of new products. These costs included
costs associated with development
chefs, development technologists
and materials consumed in product
development.
This report was approved by the Board
on 31 July 2016.
P W Totté
Chairman
D P Newman
Finance Director
24
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR GOVERNANCEAnnual Report and Accounts for the year ended 31 March 2016 Audit committee Report and Remuneration committee Report
Audit committee Report
The Audit Committee comprises
P C Salter (Chairman) and C O Thomas
and meets formally twice per year with
the auditor in relation to the annual
and interim accounts. Its brief is to
monitor the integrity of the financial
statements of the Group as audited,
to consider and agree any significant
financial judgements contained in
them and to review all formal reporting
announcements relating to the Group’s
financial performance.
In addition, the Committee regularly
reviews the Group’s finance function
with particular reference to internal
financial controls and risk management
and reporting systems. It also ensures
appropriate procedures are in place
such as for bribery and whistleblowing.
As the external auditor provides other
services in addition to the Group’s audit
(as detailed in note 7), the Committee
also annually reviews the independence
and objectivity of the auditor and
the effectiveness of the audit. The
Committee Chairman maintains a close
dialogue with the auditor throughout the
year to keep him apprised of relevant
events.
Remuneration
committee Report
The Remuneration Committee
comprises P C Salter (Chairman)
and P G Ridgwell, with C O Thomas
being co-opted from time to time. It is
responsible for setting and reviewing
annually the remuneration packages
of Executive Directors and senior
managers within the Group. Packages
are structured to attract, motivate and
retain key personnel who have the
capabilities, experience and ambition to
drive forward and achieve the Group’s
strategic aims.
The Remuneration Committee is
responsible for ensuring that the mix
of incentives reflects the Company’s
needs, establishes an appropriate
balance between fixed and variable
remuneration, and is based on targets
that are appropriately stretching,
verifiable and relevant, and which
take account of risk. This is achieved
through a market related base salary,
plus a range of benefits and an
annual bonus scheme set to reward
achievement of Group or divisional
EBITDA targets, cash controls and
personal objectives.
Auditor
The auditor, Crowe Clark Whitehill LLP,
will be proposed for reappointment in
accordance with Section 489 of the
Companies Act 2006.
This report was approved by the Board
on 31 July 2016.
D P Newman
Finance Director
Cake decorating class at Renshaw Academy
In addition, the Committee oversees the
Group's share option schemes both of
which closed for issue of new options
during 2015/16. The Committee is
currently reviewing possible future
incentive schemes.
The Committee meets twice per year
unless there are compelling reasons
to meet more regularly. The Chairman
works closely with the Group Human
Resources Director in relation to all
relevant matters, including the terms
of compromise agreements which in
turn are approved by the Committee.
External intelligence is sourced as
necessary regarding market salary
levels and professional advice sought
as required.
The remuneration of Non-Executive
Directors is set by the Executive
Directors.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
25
www.realgoodfoodplc.com Stock Code: RGDOUR GOVERNANCE independent Auditor’s Report
to the shareholders of Real Good Food plc
We have audited the financial
statements of Real Good Food Plc for
the year ended 31 March 2016 which
comprise the Consolidated Statement
of Comprehensive Income, the
Consolidated Statement of Financial
Position, the Company Statement of
Financial Position, the Consolidated
Statement of Changes in Equity, the
Company Statement of Changes in
Equity, the Consolidated Statement of
Cash Flows, the Company Statement
of Cash Flows Statements, the Group
and Parent Company Statement of
Changes in Equity and the related notes
numbered 1 to 34.
The financial reporting framework that
has been applied in their preparation
is applicable law and International
Financial Reporting Standards (IFRSs)
as adopted by the European Union and,
as regards the parent company financial
statements, as applied in accordance
with the provisions of the Companies
Act 2006.
This report is made solely to the
company’s shareholders, as a body,
in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our
audit work has been undertaken so
that we might state to the company’s
shareholders those matters we are
required to state to them in an auditor’s
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 and the
company’s shareholders as a body, for
our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of
directors and auditors
As explained more fully in
the Statement of Directors’
Responsibilities, the directors are
responsible for the preparation of
the financial statements and for
being satisfied that they give a true
and fair view. Our responsibility is to
audit and express an opinion on the
financial statements in accordance
with applicable law and International
Standards on Auditing (UK and Ireland).
Those standards require us to comply
with the Auditing Practices Board’s
Ethical Standards for Auditors.
Scope of the audit of the
financial statements
An audit involves obtaining evidence
about the amounts and disclosures
in the financial statements sufficient
to give reasonable assurance that
the financial statements are free
from material misstatement, whether
caused by fraud or error. This includes
an assessment of: whether the
accounting policies are appropriate
to the company’s circumstances
and have been consistently applied
and adequately disclosed; the
reasonableness of significant
accounting estimates made by the
directors; and the overall presentation
of the financial statements.
In addition, we read all the financial
and non-financial information in the
Strategic Report, the Report of the
Directors’ and any other surround
information to identify material
inconsistencies with the audited
financial statements and to identify
any information that is apparently
materially incorrect based on, or
materially inconsistent with, the
knowledge acquired by us in the
course of performing the audit. If we
become aware of any apparent material
misstatements or inconsistencies we
consider the implications for our report.
opinion on financial
statements
In our opinion:
{ the financial statements give a true
and fair view of the state of the
group’s and of the parent company’s
affairs as at 31 March 2016 and of
the group‘s profit for the year then
ended;
{ the group financial statements
have been properly prepared in
accordance with IFRSs as adopted
by the European Union;
{ the parent company financial
statements have been properly
prepared in accordance with IFRSs
as adopted by the European Union
as applied in accordance with the
provisions of the Companies Act
2006; and
{ the financial statements have been
prepared in accordance with the
requirements of the Companies Act
2006.
opinion on other matter
prescribed by the companies
Act 2006
In our opinion the information given in
the Strategic Report and the Report
of the Directors for the financial year
for which the financial statements are
prepared is consistent with the financial
statements.
Matters on which we
are required to report by
exception
We have nothing to report in respect
of the following matters where the
Companies Act 2006 requires us to
report to you if, in our opinion:
{ adequate accounting records
have not been kept by the parent
company, or returns adequate for our
audit have not been received from
branches not visited by us; or
{ the parent company financial
statements are not in agreement
with the accounting records and
returns; or
{ certain disclosures of directors’
remuneration specified by law are
not made; or
{ we have not received all the
information and explanations we
require for our audit.
Keith Newman
Senior Statutory Auditor
For and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
Maidstone
31 July 2016
26
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 consolidated Statement of comprehensive income
year ended 31 March 2016
REVENUE
Cost of sales
GROSS PROFIT
Distribution costs
Administration expenses
Significant items
OPERATING PROFIT/(LOSS)
Fair value gain on contingent consideration
Finance income
Finance costs
Other finance costs
Profit on disposal of discontinued operations
PROFIT/(LOSS) BEFORE TAXATION
Income tax (expense)/credit
Tax on discontinued business
Income tax on significant items
PROFIT/(LOSS) ATTRIBUTABLE TO THE EQUITY
HOLDERS OF THE PARENT
OTHER COMPREHENSIVE LOSS
Items that will not be reclassified to profit or loss
Actuarial (losses)/gains on defined benefit plan
Income tax relating to components of other comprehensive loss
OTHER COMPREHENSIVE LOSS
TOTAL COMPREHENSIVE INCOME/(LOSS)FOR THE YEAR
ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT
Earnings per share
– basic
– diluted
Notes
4
6
8
9
10
11
14
14
Year ended 31 March 2016
Year ended 31 March 2015
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
100,439
(73,769)
26,670
(5,367)
(18,221)
(945)
2,137
3,267
—
(478)
(191)
—
4,735
(439)
—
113
13,237
(11,884)
1,353
(1,149)
(288)
—
(84)
—
—
(906)
—
9,145
8,155
—
256
—
Total
£’000s
113,676
(85,653)
28,023
(6,516)
(18,509)
(945)
2,053
3,267
—
(1,384)
(191)
9,145
12,890
(439)
256
113
4,409
8,411
12,820
(484)
35
(449)
—
—
—
(484)
35
(449)
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
£’000s
104,580
128,288
232,868
(79,019)
25,561
(5,572)
(16,787)
(117,924)
10,364
(9,938)
(4,369)
(196,943)
35,925
(15,510)
(21,156)
(522)
2,680
—
—
(866)
(235)
—
1,579
(1,055)
—
110
634
(2,237)
447
(1,790)
(328)
(4,271)
—
—
(845)
—
—
(5,116)
1,005
—
68
(850)
(1,591)
—
—
(1,711)
(235)
—
(3,537)
(50)
—
178
(4,043)
(3,409)
—
—
—
(2,237)
447
(1,790)
3,960
8,411
12,371
(1,156)
(4,043)
(5,199)
15
6.31p
5.83p
12.05p
11.13p
18.36p
16.96p
0.91p
0.85p
(5.81)p
(5.81)p
(4.90)p
(4.90)p
The notes on pages 34 to 82 form part of these financial statements.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
27
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS consolidated Statement of changes in equity
year ended 31 March 2016
Balance as at 31 March 2014
Total comprehensive income for the year
Loss for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners of the Group, recognised directly in equity
Contributions by and distribution to owners of the Group
Shares issued in the year
Share based payment expense
Deferred tax on share options
Total contributions by and distributions to owners of the Group
Balance as at 31 March 2015
Total comprehensive income for the year
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners of the Group, recognised directly in equity
Contributions by and distribution to owners of the Group
Shares issued in the year
Share based payment expense
Deferred tax on share options
Total contributions by and distributions to owners of the Group
Balance as at 31 March 2016
Issued
Share
Capital
£’000s
1,389
—
—
—
3
—
—
3
1,392
—
—
—
10
—
—
10
1,402
Share
Premium
Account
£’000s
71,244
—
—
—
28
—
—
28
71,272
—
—
—
103
—
—
103
71,375
Share
Option
Reserve
£’000s
504
—
—
—
—
47
26
73
577
—
—
—
—
15
—
15
592
Retained
Earnings
£’000s
13,877
(3,409)
(1,790)
(5,199)
—
—
—
—
8,678
12,820
(449)
12,371
—
—
—
—
21,049
Total
£’000s
87,014
(3,409)
(1,790)
(5,199)
31
47
26
104
81,919
12,820
(449)
12,371
113
15
—
128
94,418
28
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 company Statement of changes in equity
year ended 31 March 2016
Balance at 31 March 2014
Total comprehensive income for the year
Loss for the year (as restated)
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners of the Company, recognised directly in equity
Contributions by and distributions to owners of the Group
Shares issued in the year
Share based payment expenses
Deferred tax on share options
Total contributions by and distributions to owners of the
Company
Balance at 31 March 2015 (as restated)
Balance at 31 March 2015 (as previously stated)
Prior year adjustment (note 27)
Balance at 31 March 2015 (as restated)
Total comprehensive income for the year
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners of the Company, recognised directly in equity
Contributions by and distributions to owners of the Group
Shares issued in the year
Share based payment expenses
Deferred tax on share options
Total contributions by and distributions to owners of the
Company
Balance at 31 March 2016
Issued
Share
Capital
£’000s
1,389
Share
Premium
Account
£’000s
71,244
—
—
—
3
—
—
3
1,392
1,392
—
1,392
—
—
—
10
—
—
10
1,402
—
—
—
28
—
—
28
71,272
71,272
—
71,272
—
—
—
103
—
—
103
71,375
The notes on pages 34 to 82 form part of these financial statements.
Share
Option
Reserve
£’000s
504
—
—
—
—
47
26
73
577
577
—
577
—
—
—
—
15
—
15
592
Retained
Earnings
£’000s
Total
£’000s
(13,689)
59,448
(1,974)
—
(1,974)
(1,974)
—
(1,974)
—
—
—
—
15,663
(17,163)
1,500
(15,663)
6,004
(449)
5,555
—
—
—
—
(10,108)
31
47
26
104
57,578
56,078
1,500
57,578
6,004
(449)
5,555
113
15
—
128
63,261
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
29
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS
consolidated Statement of Financial position
year ended 31 March 2016
NON-CURRENT ASSETS
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset
CURRENT ASSETS
Inventories
Trade and other receivables
Assets relating to discontinued business
Current tax assets
Cash and cash equivalents
TOTAL ASSETS
CURRENT LIABILITIES
Bank overdrafts
Trade and other payables
Borrowings
Liabilities relating to discontinued business
Current tax liabilities
NON-CURRENT LIABILITIES
Borrowings
Deferred tax liabilities
Retirement benefit obligation
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium account
Share option reserve
Retained earnings
TOTAL EQUITY
Notes
16
17
18
20
21
22
32
24
23
32
23
20
31
26
27
27
27
31 March
2016
£’000s
71,005
834
18,066
1,556
91,461
12,360
17,039
—
—
2,946
32,345
123,806
949
13,243
7,008
—
127
21,327
55
1,925
6,081
8,061
29,388
94,418
1,402
71,375
592
21,049
94,418
31 March
2015
£’000s
70,019
841
13,599
1,866
86,325
10,328
15,229
41,406
—
6,687
73,650
159,975
51
18,000
17,190
27,300
613
63,154
6,677
2,537
5,688
14,902
78,056
81,919
1,392
71,272
577
8,678
81,919
These financial statements were approved by the Board of Directors and authorised for issue on 31 July 2016.
They were signed on its behalf by:
P W Totté
Executive Chairman
D P Newman
Director
The notes on pages 34 to 82 form part of these financial statements.
30
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 company Statement of Financial position
year ended 31 March 2016
NON-CURRENT ASSETS
Investments
Property, plant and equipment
Deferred tax asset
Trade and other receivables
CURRENT ASSETS
Trade and other receivables
Current tax asset
Cash and cash equivalents
TOTAL ASSETS
CURRENT LIABILITIES
Bank overdraft
Trade and other payables
Borrowings
NON-CURRENT LIABILITIES
Trade and other payables
Retirement benefit obligation
Deferred tax liability
Borrowings
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium account
Share option reserve
Retained earnings
TOTAL EQUITY
Notes
19
18
20
22
22
24
23
24
20
23
26
27
27
27
31 March
2016
£’000s
65,499
3,204
1,478
—
70,181
55,798
705
—
56,503
126,684
949
56,377
—
57,326
—
6,081
16
—
6,097
63,423
63,261
1,402
71,375
592
(10,108)
63,261
31 March
2015
£’000s
restated
57,892
77
327
44,776
103,072
2,100
3,167
5,267
108,339
—
675
1,541
2,216
44,866
—
—
3,679
48,545
50,761
57,578
1,392
71,272
577
(15,663)
57,578
These financial statements were approved by the Board of Directors and authorised for issue on 31 July 2016.
They were signed on its behalf by:
P W Totté
Chairman
D P Newman
Director
The notes on pages 34 to 82 form part of these financial statements.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
31
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS consolidated cash Flow Statement
year ended 31 March 2016
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Profit/(loss) before taxation
Finance and other finance costs
Share based payment expense
Depreciation of property, plant and equipment
Profit on disposal of Napier Brown
Fair value gain on contingent consideration
Profit on disposal of property, plant and equipment
Amortisation of intangibles
Operating Cash Flow
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Pension contributions
(Decrease) in payables
Cash generated from operations
Income taxes received/(paid)
Interest paid
Net cash from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment
Purchase of intangible assets
Purchase of property, plant and equipment
Disposal of Discontinued business
Acquisition of business, net of cash acquired
Net cash used in investing activities
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in year
Additional loans
Repayment of borrowings
Repayment of loans
Net movements on revolving credit facilities
Repayment of obligations under finance leases
Net cash used in financing activities
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
Net movement in cash and cash equivalents
Cash and cash equivalents at end of period
Cash and cash equivalents comprise:
Cash
Overdrafts
12 months ended
31 March 2016
£’000s
12 months ended
31 March 2015
£’000s
12,890
1,575
15
1,917
(9,061)
(3,267)
—
113
4,182
(1,900)
(2,034)
(282)
(1,866)
(1,900)
(614)
(1,661)
(4,175)
160
—
(6,408)
37,201
(1,666)
29,287
113
—
(33,447)
—
3,705
(122)
(29,751)
(4,639)
6,636
(4,639)
1,997
2,946
(949)
1,997
(3,537)
1,946
47
2,341
—
—
(11)
360
1,146
3,393
4,678
(457)
(3,955)
4,805
576
(1,711)
3,670
11
(99)
(1,428)
—
(1,243)
(2,759)
32
4,000
—
(1,954)
(4,832)
(89)
(2,843)
(1,932)
8,568
(1,932)
6,636
6,687
(51)
6,636
The notes on pages 34 to 82 form part of these financial statements.
32
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016
company cash Flow Statement
year ended 31 March 2016
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Loss before taxation
Finance costs
Share based payment expense
Pension finance costs
Depreciation of property, plant and equipment
Operating Cash Flow
(Increase)/decrease in receivables
Pension contributions
Increase in payables
Cash generated from operations
Interest paid
Income taxes received/(paid)
Net Cash from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Investment
Purchase of property, plant and equipment
Net cash used in investing activities
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in period
Additional borrowings
Repayment of borrowings
Net cash used in financing activities
Net increase in cash and cash equivalents
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
Net movement in cash and cash equivalents
Cash and cash equivalents at end of period
Cash and cash equivalents comprise:
Cash
Overdrafts
12 months
ended
31 March
2016
£’000s
12 months
ended
31 March
2015
£’000s
(3,726)
118
15
191
26
(3,376)
490
(282)
7,430
4,262
(118)
—
4,144
—
(3,153)
(3,153)
113
—
(5,220)
(5,107)
(4,116)
3,167
(4,116)
(949)
—
(949)
(949)
(3,480)
235
47
49
(3,149)
694
7,597
5,142
(235)
—
4,907
—
(3)
(3)
32
—
(1,954)
(1,922)
2,982
185
2,982
3,167
3,167
—
3,167
The notes on pages 34 to 82 form part of these financial statements.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
33
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements
year ended 31 March 2016
1. presentation of financial statements
General information
Real Good Food plc is a public limited company
incorporated in England and Wales under the
Companies Act (registered number 4666282). The
Company is domiciled in England and Wales and
its registered address is International House, 1 St
Katharine’s Way, London, E1W 1XB. The Company’s
shares are traded on the Alternative Investment Market
(AIM).
The principal activities of the Group are the sourcing,
manufacture and distribution of food to the retail and
industrial sectors.
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 have been prepared in
accordance with AIM rules and the Companies Act
2006, as applicable to companies reporting
under IFRS.
These consolidated financial statements have been
prepared in accordance with the accounting policies
set out in note 2 and under the historical cost
convention, except where modified by the revaluation
of certain financial instruments and commodities.
Discontinued operations
A discontinued operation is a component of the
Group’s business that represents a separate major
line of business or geographical area of operations
that has been disposed of or is held for sale, or is a
subsidiary acquired exclusively with a view to resale.
Classification of a discontinued operation occurs upon
disposal or when the operation meets the criteria
to be classified as held for sale, if earlier. When an
operation is classified as a discontinued operation,
the comparative income statement is presented as
if the operation had discontinued from the start of
the comparative period. The disposal of the Napier
Division, as described in note 32, gives rise to a
discontinued operation.
New IFRS standards and interpretations
adopted
A number of new standards and amendments to
standards and interpretations have been issued but
are not yet effective and in some cases have not yet
been adopted by the EU.
The Directors are still assessing whether the
application of IFRS 9, IFRS 15 and IFRS 16, once
effective, will have a material impact on the results of
the group. Application of these standards may result
in changes in presentation of information within the
Group’s financial statements.
2. Significant accounting policies
The following accounting policies have been
applied consistently in dealing with items which are
considered material in relation to the Group’s financial
statements.
a) Basis of accounting
The financial statements have been prepared in
accordance with applicable accounting standards.
The Group’s business activities, together with
the factors likely to affect its future development,
performance and position, are set out in the
Divisional Reviews on pages 8 to 13. The financial
position of the Group, its cash flows and liquidity
position are described in the Finance Review on
pages 17 to 19. In addition, note 23 to the financial
statements includes the Group’s objectives, policies
and processes for managing its capital; its financial
risk management objectives; details of its financial
instruments and hedging activities; and its exposure
to credit risk and liquidity risk.
Also as detailed in note 23 to the financial
statements, the Group repaid its borrowings
with PNC Business Credit facility in full from the
proceeds arising from, the disposal of Napier Brown
Sugar Limited. The Group has a long term banking
arrangement with Lloyds Bank Plc and this, together
with customer contracts and supplier agreements,
enables the Directors to believe that the Group is well
placed to manage its business risks.
34
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 2. Significant accounting policies
(continued)
The Directors have a reasonable expectation that
the Group has adequate resources to continue in
operational existence for the foreseeable future.
Thus they continue to adopt the going concern
basis of accounting in preparing the annual financial
statements.
b) Basis of consolidation
The Group financial statements consolidate the
financial statements of the Company and its
subsidiary undertakings. The purchase method of
accounting has been adopted. Under this method the
results of all the subsidiary undertakings are included
in the Consolidated Statement of Comprehensive
Income from the date of acquisition or up to the date
of disposal. Intra-group revenues and profits are
eliminated on consolidation and all revenue and profit
figures relate to external transactions only.
Under Section 408 of the Companies Act 2006 the
Company is exempt from the requirement to present
its own income statement. The profit for the financial
period, of the holding company, as approved by the
Board, was £6,004k (2015 – loss £1,974k).
c) Goodwill
Goodwill is calculated as the difference between the
fair value of the consideration exchanged, and the
net fair value of the identifiable assets and liabilities
acquired and is capitalised. Goodwill is tested for
impairment annually and whenever there is an
indication of impairment. Goodwill is carried at cost
less accumulated impairment losses.
When the acquired interest in the net fair value of the
identifiable assets and liabilities exceeds the cost of
the business combination, the excess is recognised
immediately in the income statement.
Gains and losses on the disposal of a business
combination include the carrying amount of goodwill
relating to the entity sold.
d) Revenue recognition
Revenue comprises the invoiced value of goods
and services supplied by the Group, exclusive of
Value Added Tax and trade discounts. Revenue is
recognised at the point or points at which the Group
has performed its obligations in connection with the
contractual terms of the revenue agreement, and in
exchange obtains the right to consideration.
(a) Sales of Goods: Sales of Goods are recognised
when goods are delivered and title passed net of
discounts, Value Added Tax (VAT) and other sales
related taxes.
(b) Finance Income: Interest income is accrued on a
time basis, by reference to the principal outstanding
and at the effective interest rate applicable. Other
finance costs includes net interest costs on the net
defined benefit pension scheme liabilities.
(c) Rebates and discounts: all discounts, rebates
etc are accounted for in line with contractual
commitments and netted off gross sales to reflect the
net income earned any costs incurred in promotional
activity are expensed within commercial overheads. In
all cases these accounts will reflect the net position
after any contractual discounts and rebates along with
any promotional costs. Full accruals are made for any
unpaid elements.
e) Income tax
The charge for taxation is based on the results for the
year and takes into account taxation deferred because
of timing differences between the treatment of certain
items for taxation and accounting purposes.
Deferred tax is recognised on temporary differences
arising between the tax basis of assets and liabilities
and their carrying amounts.
The carrying amount of deferred tax assets is
reviewed at each balance sheet date and is reduced
to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all
or part of the assets to be recovered.
Deferred tax is calculated at the tax rates that have
been enacted or substantially enacted by the balance
sheet date. Deferred tax is charged or credited to the
Statement of Comprehensive Income, except where it
relates to items charged or credited directly to equity,
in which case the deferred tax is also dealt with in
equity.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to set off current
tax assets against current tax liabilities, and when
they relate to income taxes levied by the same
taxation authority, and the Group intends to settle its
current tax assets and liabilities on a net basis.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
35
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
2. Significant accounting policies
(continued)
f) Significant items
It is the Group’s policy to show items that it considers
are of a significant nature separately on the face of
the Statement of Comprehensive Income in order
to assist the reader to understand the accounts.
The Group defines the term ‘significant’ as items
that are material in respect of their size and/or
nature, at a segment reporting level, for example,
a major restructuring of the management of that
segment. The Group believes that by identifying
these items separately as significant it enhances the
understanding of the true performance of the segment
trading position. Summary details of significant items
are shown in note 6 to these accounts.
g) Pension costs
The Group operates a defined contribution and a
defined benefit pension scheme. Payments to the
defined contribution scheme are charged as an
expense as they fall due. For the defined benefit
scheme the cost of providing benefits is determined
using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet
date.
Actuarial gains and losses are recognised in full in the
period in which they occur. Further details are given in
note 31 to the financial statements.
h) Property, plant and equipment
Property, plant and equipment is stated at historical
cost or fair value at the date of acquisition, less
accumulated depreciation and impairment provisions.
Depreciation is provided to write off the cost, less
the estimated residual value, of property, plant and
equipment by equal instalments over their estimated
useful economic lives as follows:
Freehold buildings
Short term leasehold buildings
Plant and equipment
Motor vehicles
Fixtures and fittings
Computer equipment
2% – 2.5%
Length of lease
7.5% – 50%
25%
7.5% – 25%
25%
Impairment reviews of property, plant and equipment
are undertaken if there are indications that the
carrying values may not be recoverable or that the
recoverable amounts may be less than the asset’s
carrying value.
Assets in the course of construction relate to plant
and equipment in the process of construction, which
were not complete, and hence were not in use at the
year end. Assets in the course of construction are
not depreciated until they are completed and available
for use.
i) Intangible assets
Intangible assets consist of computer software that
is considered to have an economic life of five years
and business relationships which are considered to
have an estimated useful economic life of two years
and the assets are amortised on a straight-line basis
over these periods. The average remaining life of
intangible assets is three years (2015 – three years).
The charge for the year is included in administration
expenses within the Statement of Comprehensive
Income.
j) Leases
Where a lease is entered into which entails taking
substantially all the risks and rewards of ownership
of an asset, the lease is treated as a finance lease.
The asset is recorded in the Statement of Financial
Position as an item of property, plant and equipment
and is depreciated over the shorter of its estimated
useful life or the term of the lease. Future instalments
under such leases, net of finance charges, are
included within borrowings. Rentals payable are
apportioned between the finance element, which is
charged to the profit or loss, and the capital element,
which reduces the outstanding obligation for future
instalments.
All other leases are treated as operating leases and
the rentals payable are charged on a straight-line
basis to the profit or loss over the lease term.
k) Investments
Investments in the company accounts relate to
investments in subsidiaries and are stated at cost
less provision for any impairment in value.
l) Inventories
Inventories are stated at the lower of cost and net
realisable value after making due allowance for
obsolete and slow-moving inventory. Cost includes
all direct costs and an appropriate proportion of
fixed and variable overheads. Cost is calculated
using the standard cost or weighted average cost
methods, appropriate to the materials and production
processes involved. Net realisable value is based
upon estimated selling price allowing for all further
costs of completion and disposal.
36
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 2. Significant accounting policies
(continued)
m) Derivative financial instruments
The Group uses derivative financial instruments to
reduce exposure to commodity price and foreign
exchange rate movements. The Group does not
hold or issue derivative financial instruments for
speculative purposes.
Derivative financial instruments are held by the Group
as assets or liabilities on the Statement of Financial
Position measured at the fair values at the year end
date. Changes in the value of derivative financial
instruments arising from fair value hedges are
recognised in the income statement.
For a hedging relationship to qualify for hedge
accounting it must be documented at inception and it
must be highly effective in offsetting the changes in
cash flows or fair value attributed to the hedged risk.
n) Cash and cash equivalents
Cash and cash equivalents on the Statement of
Financial Position consist of cash in hand and at the
bank. Cash and cash equivalents recognised in the
Cash Flow Statement include cash in hand and at
the bank, and bank overdrafts which are payable on
demand. Deposits are only included within cash and
cash equivalents when they have a short maturity of
three months or less at the date of acquisition.
o) Trade receivables
Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using
the effective interest method, less provision for
impairment.
p) Trade payables
Trade payables are recognised initially at fair value
and are subsequently measured at amortised cost
using the effective interest method.
q) Bank borrowings
Interest bearing bank loans and overdrafts are
recorded as the proceeds received net of direct issue
costs and are valued at amortised cost.
r) Foreign currencies
The consolidated financial statements are presented
in sterling which is the Group’s functional and
presentation currency.
Transactions in foreign currencies are recorded at
the rate of exchange at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are reported at
the rates of exchange prevailing at that date.
All foreign exchange gains and losses are presented
in the Statement of Comprehensive Income within the
administration expense heading.
s) Intangible assets
IFRS 3 (revised) “Business Combinations” requires
that goodwill arising on the acquisition of subsidiaries
is capitalised and included in intangible assets. IFRS
3 (revised) also requires the identification of other
intangible assets at acquisition. The assumptions
involved in valuing these intangible assets require the
use of estimates and judgements which differ from
the actual outcome. These estimates and judgements
cover future growth rates, expected inflation rates and
the discount rate used.
t) Contingent consideration
Determining the value of contingent consideration
recognised as part of the acquisition of subsidiaries
requires assumptions to determine the expected
performance of the acquired business and the amount
of contingent consideration that will therefore become
payable. Initial estimates of expected performance
are made by Directors responsible for completing the
acquisition and form a key component of the financial
due diligence that takes place prior to completion.
Subsequent measurement of contingent consideration
is based on the Directors’ fair value appraisal of
the acquired business’s performance in the post-
acquisition period with any required adjustments to
the amount payable recognised in the Consolidated
Income Statement as required under IFRS 3.
u) Business combinations and goodwill
Business combinations are accounted for using
the acquisition method as at the acquisition date,
which is the date on which control is transferred
to the Group. The Group measures goodwill at the
acquisition date as:
{ the fair value of the consideration transferred; plus
{ the recognised amount of any non-controlling
interests in the acquiree; plus
{ the fair value of the existing equity interest; less
{ the net recognised amount (generally fair value)
of the identifiable assets acquired and liabilities
assumed.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
37
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
2. Significant accounting policies
(continued)
Costs related to the acquisition, other than those
associated with the issue of debt or equity securities,
are expensed as incurred. Any contingent purchase
consideration payable is recognised at fair value
at the acquisition date. If the contingent purchase
consideration is classified as equity, it is not re-
measured and settlement is accounted for within
equity. Otherwise, subsequent changes to the fair
value of the contingent purchase consideration are
recognised in the Consolidated Income Statement.
3. critical accounting estimates and
judgements
In order to prepare these consolidated financial
statements in accordance with the accounting policies
set out in note 2 management have used estimates
and judgements to establish the amounts at which
certain items are recorded. Critical accounting
estimates and judgements are those that have the
greatest impact on the financial statements and
require the most difficult, subjective and complex
judgements about matters that are inherently
uncertain. Estimates are based on factors including
historical experience and expectations of future
events that management believe to be reasonable.
However, given the judgemental nature of such
estimates, actual results could be different due to the
assumptions used. The critical accounting estimates
are set out below.
a) Impairment of goodwill
An impairment of goodwill has the potential to
significantly impact upon the Group’s Statement of
Comprehensive Income for the period. In order to
determine whether impairments are required the
Directors estimate the recoverable amount of the
goodwill. This calculation is based on the Group’s
cash flow forecasts for the following financial year
extrapolated over a rolling 19 year period assuming
a zero growth rate. A discount factor, based upon the
Group’s weighted average cost of capital, is applied to
obtain a current value (‘value in use’). The fair value
less costs to sell of the cash generating unit is used
if this results in an amount in excess of value in use.
Estimated future cash flows for impairment
calculations are based on management’s expectations
of future volumes and margins based on plans and
best estimates of the productivity of the income
generating units in their current condition. Future cash
flows therefore exclude benefits from major expansion
projects requiring future capital expenditure.
Future cash flows are discounted using a discount
rate based on the Group’s weighted average cost
of capital. The weighted average cost of capital is
impacted by estimates of interest rates, equity returns
and market related risks. The Group’s weighted
average cost of capital is reviewed on an annual
basis.
Further details are set out in note 16.
b) Retirement benefits
The Company sponsors the Napier Brown Foods
Retirement Benefits Plan which is a funded defined
benefit arrangement. The amounts recorded in the
financial statements for this type of scheme are
based on a number of assumptions, changes to
which could have a material impact on the reported
amounts.
Any net deficit or surplus arising on the defined
benefit plan is shown in the Statement of Financial
Position. The amount recorded is the difference
between plan assets and liabilities at the Statement
of Financial Position date. Plan assets are based on
market value at that date. Plan liabilities are based
on actuarial estimates of the present value of future
pension or other benefits that will be payable to
members.
The most sensitive assumptions involved in
calculating the expected liabilities are mortality rates
and the discount rate used to calculate the present
value. If the mortality rate assumption changed, a one
year increase to longevity would increase the liability
by 4%. Changes to the discount rate of 0.5% would
result in a change in the scheme liabilities of 7.0%
and a 0.5% movement in the rate of inflation would
change the liabilities of the scheme by 2.0%.
38
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 3. critical accounting estimates and
judgements (continued)
The Statement of Comprehensive Income generally
comprises a regular charge to operating profit for
the current and past service cost. Past service costs
represent the change in the present value of the
benefits obligation that arises from benefit charges
that are applied retrospectively to prior year benefits
that have accrued. Past service costs are charged
in full in the year when the changes to benefits are
made and a finance charge, which represents the
net of expected income from plan assets and an
interest charge on plan liabilities. These calculations
are based on expected outcomes at the start of
the financial year. The Statement of Comprehensive
Income is most sensitive to changes in expected
returns from plan assets and the discount rate used
to calculate the interest charge on plan liabilities.
A 10% change in the assumption of the real
discount rate would change the finance expense by
approximately £0.07 million.
Full details of these assumptions, which are based
on advice from the Group’s actuaries, are set out in
note 31.
c) Significant items
In determining whether an item should be classified
as a significant item the Board reviews the
expenditure in question and assesses whether the
expenditure meets the definition of a significant item
as defined in the Group’s accounting policy (note 2).
Items are only included within significant items if,
following this review, the Board is satisfied that the
expenditure meets with the definition set out in the
accounting policy.
d) Business claims
In common with comparable food groups, the Group
is involved in a number of disputes in the ordinary
course of business which may give rise to claims.
Provision representing the cost of defending and
concluding claims is made in the financial statements
for all claims where costs are likely to be incurred.
The Group carries a wide range of insurance cover and
no separate disclosure is made of the detail of claims
or the costs covered by insurance, as to do so could
seriously prejudice the position of the Group.
4. Revenue
The revenue for the Group for the current year arose
from the sale of goods in the following areas:
Cake Decoration Manufactures, sells and supplies
cake decorating products and
ingredients for the baking sector.
Food Ingredients Manufactures and supplies a
range of food ingredients from
bagged sugar and dairy powders to
chocolate coatings and jams.
Premium Bakery
The manufacture and supply of high
quality ambient cakes and desserts
to the retail and foodservice
sectors.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
39
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
5. Segment reporting
Business segments
The divisional structure reflects the management teams in place and also ensures all aspects of trading activity have the specific focus they need in order to achieve
our growth plans. This structure has been changed in this financial year with Renshaw, Rainbow Dust and RGFE being combined into the Cake Decoration segment, R&W
Scott and Garrett combined into Food Ingredients and Haydens and Chantilly forming the Premium Bakery. Comparative figures have been restated.
12 months ended
31 March 2016
Total Revenue
Revenue – Internal
External Revenue
Underlying adjusted EBITDA (see table below)
Operating Profit before
Head Office
Head Office and consolidation adjustments
Significant items
Significant Items relating to Head Office
Operating Profit/(loss)
Fair value gain on contingent consideration
Net finance costs
Pension finance income
Profit on disposal of discontinued operation
Profit/(loss) before tax
Tax
Unallocated Tax
Profit/(loss) after tax as per
comprehensive statement of income
Cake
Decoration
£’000s
49,231
(933)
48,298
7,350
6,579
(81)
6,498
3,267
(270)
—
9,495
(1,377)
—
8,118
Food
Ingredients
£’000s
25,799
(3,104)
22,695
(147)
(413)
(38)
(451)
—
—
—
(451)
49
—
(402)
Premium
Bakery
£’000s
29,446
—
29,446
758
(162)
(162)
—
(47)
—
(209)
101
—
(108)
Continuing
Operations
Total
£’000s
104,476
(4,037)
100,439
7,961
6,005
(2,923)
(119)
(826)
2,137
3,267
(478)
(191)
—
4,735
(1,227)
901
4,409
Discontinued
Operations
Total
£’000s
13,237
—
13,237
(15)
(84)
—
—
(84)
—
(906)
—
9,145
8,155
256
—
8,411
Inter segment sales are charged at prevailing market rates.
Included in the Premium Bakery segment, one single customer accounts for 17.1% of the continuing Group’s external sales for the year ended 31 March 2016.
Reconciliation of underlying EBITDA to Operating Profit
Operating Profit/(loss)
Significant Items
Depreciation
Amortisation
Underlying adjusted EBITDA
Head Office
Underlying adjusted EBITDA as above
Cake
Decoration
£’000s
Food
Ingredients
£’000s
6,498
81
771
7,350
7,350
(451)
38
255
11
(147)
(147)
Premium
Bakery
£’000s
(162)
818
102
758
758
Head Office
& Consol
Total
£’000s
(3,748)
826
4
—
(2,918)
2,918
—
Discontinued
Operations
Total
£’000s
(84)
—
69
—
(15)
(15)
Total
Group
£’000s
117,713
(4,037)
113,676
7,946
5,921
(2,923)
(119)
(826)
2,053
3,267
(1,384)
(191)
9,145
12,890
(971)
901
12,820
Total
Group
£’000s
2,053
945
1,917
113
5,028
2,918
7,946
40
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 5. Segment reporting (continued)
31 March 2016
Segment assets
Unallocated assets
Property, plant and equipment
Deferred tax assets
Trade and other receivables
Current tax asset
Total assets
Segment liabilities
Unallocated liabilities
Trade and other payables
Borrowings
Current tax liabilities
Deferred tax liabilities
Pension liability
Total liabilities
Net operating assets
Non-current asset additions
Depreciation
Amortisation
Cake
Decoration
£’000s
85,133
Food
Ingredients
£’000s
19,763
Premium
Bakery
£’000s
13,818
85,133
7,601
19,763
3,905
13,813
5,990
7,601
77,532
1,626
771
—
3,905
15,858
991
255
11
5,990
7,823
1,077
818
102
Discontinued
£’000s
Unallocated
£’000s
Total
Group
£’000s
—
—
—
—
—
—
69
—
—
118,714
3,204
1,479
409
—
123,806
17,496
765
4,146
(913)
1,813
6,081
29,388
94,418
6,477
1917
113
—
—
—
—
2,783
4
—
Unallocated
Relates primarily to the Head Office and non-current asset additions, depreciation and amortisation which cannot be meaningfully allocated to individual operating
divisions.
Geographical segments
The Group earns revenue from countries outside the United Kingdom, but as these only represent 11.3% of the total revenue of the Group, segmental reporting of a
geographical nature is not considered relevant. The Cake Decoration segment accounts for the majority of this turnover
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
41
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
5. Segment reporting (continued)
12 months ended
31 March 2015
Total Revenue
Revenue – Internal
External Revenue
EBITDA
Operating Profit before
Head Office
Head Office and consolidation adjustments
Significant Items relating to Head Office
Operating Profit/(loss)
Net finance costs
Pension finance income
Profit/(loss) before tax
Tax
Unallocated Tax
Profit/(loss) after tax as per comprehensive
statement of income
Cake
Decoration
£’000s
50,705
(1,492)
49,213
6,523
5,519
—
—
5,519
(457)
—
5,062
532
—
5,594
Food
Ingredients
£’000s
30,104
(3,104)
27,000
516
260
—
—
260
(206)
—
54
—
—
54
Premium
Bakery
£’000s
28,367
—
28,367
1,252
444
—
—
444
(203)
—
241
(48)
—
193
Continuing
Operations
Total
£’000s
109,176
(4,596)
104,580
8,291
6,223
(3,021)
(522)
2,680
(866)
(235)
1,579
506
(1,451)
Discontinued
Operations
Total
£’000s
137,456
(9,168)
128,288
(3,359)
(3,943)
—
(328)
(4,271)
(845)
—
(5,116)
1,073
—
Total
Group
£’000s
246,632
(13,764)
232,868
4,932
2,280
(3,021)
(850)
(1,591)
(1,711)
(235)
(3,537)
574
(446)
634
(4,043)
(3,409)
42
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 5. Segment reporting (continued)
Inter-segment sales are charged at prevailing market rates.
31 March 2015
Segment assets
Unallocated assets
Property, plant and equipment
Deferred tax assets
Trade and other receivables
Current tax asset
Total assets
Segment liabilities
Unallocated liabilities
Trade and other payables
Borrowings
Current tax liabilities
Deferred tax liabilities
Pension liability
Total liabilities
Net operating assets
Non-current asset additions
Depreciation
Amortisation
Cake
Decoration
£’000s
89,199
Food
Ingredients
£’000s
15,521
Premium
Bakery
£’000s
11,333
Discontinued
£’000s
41,406
Unallocated
£’000s
Total
Group
£’000s
—
157,459
89,199
22,053
15,521
5,020
11,333
6,936
41,406
27,005
22,053
67,146
641
661
343
5,020
10,501
218
239
17
6,936
4,397
643
808
—
27,005
14,401
1,750
584
—
77
—
573
1,866
159,975
61,014
924
7,994
—
2,436
5,688
78,056
81,919
3,255
2,341
360
—
—
—
—
3
49
—
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
43
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
5. Segment reporting (continued)
Unallocated
Relates primarily to the Head Office and non-current asset additions, depreciation and amortisation which cannot be meaningfully allocated to individual operating
divisions.
Geographical segments
The Group earns revenue from countries outside the United Kingdom, but as these only represent 11.1% of the total revenue of the Group, segmental reporting of a
geographical nature is not considered relevant. The Cake Decoration segment accounts for the majority of this turnover.
6. Significant items
Continuing operations
Head office relocation following Napier Disposal
Management restructuring
Acquisition costs
Sub total
Taxation on significant items
Total significant items
2016
£’000s
2015
£’000s
(446)
(119)
(380)
(945)
113
(832)
—
(568)
(282)
(850)
178
(672)
During the year the Group incurred a number of significant items as detailed above. Following the disposal of the Sugar business it was decided to relocate the
head office function to the London office. The profit on disposal of the sugar business was the result of the sale to Tereos in May 2015. The reversal of contingent
consideration relates to a liability created on the acquisition of Rainbow Dust Colours Limited. The current year acquisition costs relates to the purchase of Chantilly
Patisserie £306k, plus additional costs for the acquisition of Rainbow Dust Colours Limited of £74k.
44
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 7. Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor for other services — continuing operations
The audit of the Company’s subsidiaries pursuant to legislation
Tax compliance services
Tax advisory services
Other assurance services
Total fees paid to Auditor
Discontinued operations
The audit of the Company’s subsidiaries pursuant to legislation
Tax compliance services
Tax advisory services
Other assurance services
Total fees paid to Auditor
12 months
ended
31 March
2016
£’000s
12 months
ended
31 March
2015
£’000s
36
180
28
28
56
292
—
—
—
—
—
30
143
31
35
24
233
85
—
—
—
85
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
45
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS
notes to the Financial Statements (continued)
year ended 31 March 2016
8. operating profit
External sales
Staff costs
Inventories:
— cost of inventories as an expense (included in cost of sales)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Significant items
Operating lease payment:
— land and buildings
— other assets
Research and development expenditure*
Impairment of trade receivables
Foreign exchange (gains)/losses
Other net operating expenses
Total
Operating profit
Notes
13
18
17
6
29
29
22
31 March
2016
£’000s
113,676
28,457
62,805
1,917
113
945
560
795
1,220
165
(385)
15,031
111,623
2,053
31 March
2015
£’000s
232,868
32,787
166,035
2,341
360
850
559
621
750
81
(450)
30,525
234,459
(1,591)
* The costs incurred in research and development are not capitalised as they do not meet the definitions of an intangible asset in accordance with IAS 38.
9. Finance income
There was no finance income in the period (2015 – £nil).
10. Finance costs
Interest on bank loans and overdrafts
Loan note redemption fee
Interest on obligations under finance leases
Continuing business
Discontinued business
46
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
12 months
ended
31 March
2016
£’000s
467
906
11
1,384
478
906
12 months
ended
31 March
2015
£’000s
1,700
—
11
1,711
866
845
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 11. other finance costs
Interest on pension scheme liabilities
Interest on pension scheme assets
Past service cost
12. Directors’ remuneration
Fees
Executive salaries and benefits
Share based payments
31 March
2016
£’000s
738
(547)
—
191
31 March
2016
£’000s
131
757
—
888
31 March
2015
£’000s
857
(695)
73
235
31 March
2015
£’000s
106
472
16
594
The emoluments of the Directors for the period were as follows:
M J McDonough (to Sept 15)**
P W Totté
D P Newman (from Sept 15)
P G Ridgwell
P C Salter
J M d'Unienville
C O Thomas
Short term
Employee
Benefits*
£’000s
392
223
92
30
36
25
40
838
Share based
payments
£’000s
Post Employment
Benefits
£’000s
31 March
2016
£’000s
31 March
2015
£’000s
—
—
—
—
—
—
—
—
40
—
10
—
—
—
—
50
432
223
102
30
36
25
40
888
257
231
—
30
36
—
40
594
* Short term Employee Benefits include Salaries received as an officer of the Company. Separate to these payments, consultancy fees are paid to entities in which Directors hold a beneficial interest.
These payments are disclosed as related party transactions in note 30.
** Totals for M J McDonough include compensation for loss of office amounting to £326k.
Key management personnel are considered to be the Company Directors.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
47
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS
notes to the Financial Statements (continued)
year ended 31 March 2016
12. Directors’ remuneration (continued)
Directors’ interests in share options:
Option Type
Date of
Grant
Number of
options at
31 March
2016
Number of
options at
31 March
2015
Exercise
Price
Earliest
Exercise
Date
Exercise
Expiry
Date
P W Totté
Unapproved options 2009
July 2009
1,000,000
1,000,000
5.25p
July 2012
July 2019
Unapproved options 2010
May 2010
142,857
142,857
24.50p
May 2013
May 2020
Unapproved options 2011
March 2011
3,817,725
3,817,725
P G Ridgwell
Unapproved options 2009
July 2009
476,190
476,190
Unapproved options 2010
May 2010
P C Salter
Unapproved options 2009
July 2009
Unapproved options 2010
May 2010
C O Thomas
Unapproved options 2009
July 2009
Unapproved options 2010
May 2010
61,224
285,714
102,040
304,762
40,816
61,224
285,714
102,040
304,762
40,816
D P Newman
(appointed
Sept 15)
Approved options 2009
June 2009
333,333
333,333
Approved options 2010
Approved options 2015
May 2010
May 2015
20,408
16,666
20,408
—
25.0p
5.25p
April 2011
Mar 2021
July 2012
July 2019
24.50p
May 2013
May 2020
5.25p
July 2012
July 2019
24.50p
May 2013
May 2020
5.25p
July 2012
July 2019
24.50p
May 2013
May 2020
5.25p
24.50p
45.00p
July 2012
July 2019
May 2013
May 2018
May 2020
July 2019
16,666 new options were granted to Directors during the year (2015 – none). Options have been granted to Directors whose performances and potential
contribution were judged to be important to the operations of the Group, as incentives to maximise their performance and contribution.
The mid-market price of the ordinary shares on 31 March 2016 was 45.25p and the range during the year was 32.0p to 59.0p.
No Director exercised share options during the year.
During the period retirement benefits were accruing to two (2015 – one) Director in respect of money purchase pension schemes.
48
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 13. Staff numbers and costs
The average monthly number of people employed by the Group (including Executive Directors) during the year, analysed by category, were as follows:
Continuing operations
Production
Selling and distribution
Directors and administrative
The aggregate payroll costs were as follows:
Continuing operations
Wages, salaries and fees
Social Security Costs
Other pension costs
Share based payment expense
31 March
2016
31 March
2015
743
159
156
1,058
31 March
2016
£’000s
24,640
2,503
1,299
15
28,457
673
110
81
864
31 March
2015
£’000s
21,813
2,179
1,558
30
25,580
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
49
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
14. taxation
Current tax
UK Current tax on profit of the period
UK Current tax on significant items
Adjustments in respect of prior years
Total current tax
Deferred tax relating to sale of Napier
Deferred tax charge re pension scheme
Origination and reversal of timing differences
Adjustments in respect of prior years
Adjustment in respect of change in deferred tax rate
Total deferred tax
Tax – continuing operations
Tax – discontinued operations
Total tax
Tax on profit
31 March
2016
£’000s
31 March
2015
£’000s
247
(113)
(7)
127
(256)
17
198
73
(89)
(57)
326
(256)
70
70
201
(178)
85
108
—
44
(260)
(20)
—
(236)
945
(1,073)
(128)
(128)
50
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 14. taxation (continued)
Factors affecting tax charge for the period:
The tax assessed for the period is lower (2015 – higher) than the standard rate of corporation tax in the UK 20% (2015 – 21%).
The differences are explained below:
Tax reconciliation
(Loss)/profit per accounts before taxation
Tax on (loss)/profit on ordinary activities at standard CT rate of 20% (2015 – 21%)
Expenses not deductible for tax purposes
Additional deduction for R&D expenditure
Share option relief
Current year losses not recognised – deferred tax
Income not taxable
Adjustment in respect of change in deferred tax rate
Adjustments to tax in respect of prior years
Deferred tax relating to sale of Napier Brown
Total tax
Tax on continuing operations
Tax on discontinued operations
Tax charge for the period
12 months
ended
31 March
2016
£’000s
12 months
ended
31 March
2015
£’000s
12,890
2,598
207
—
(26)
77
(2,482)
(94)
66
(256)
70
326
(256)
70
(3,521)
(732)
77
(47)
(3)
502
—
11
64
—
(128)
945
(1,073)
(128)
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
51
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
15. earnings per share
Basic earnings per share
Basic earnings per share is calculated on the basis of dividing the profit/(loss) attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares in issue during the year.
Earnings after tax attributable to ordinary shareholders (£’000s)
– Continuing operations
– Discontinued operations
Weighted average number of shares in issue (’000s)
– Continuing operations
– Discontinued operations
Basic earnings per share
12 months
ended
31 March
2016
£’000s
Continuing
operations
12,820
4,409
8,411
69,818
6.31p
12.05p
18.36p
12 months
ended
31 March
2015
£’000s
Continuing
operations
(3,409)
634
(4,043)
69,568
0.91p
(5.81)p
(4.90)p
Diluted earnings per share
The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of all the outstanding the
share options. The difference represents the dilutive potential ordinary shares.
52
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OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 15. earnings per share (continued)
The weighted average number of shares in issue for the year was 69,818k, the number of options outstanding was 9,969. If these were all exercised the cash raised
would be equivalent to that which would be raised by issuing 5,746 shares at the average share price during the year. The difference between these figures is the
dilutive potential ordinary shares of 75,564.
Earnings after tax attributable to ordinary shareholders (£’000s)
– Continuing operations
– Discontinued operations
Weighted average number of shares in issue (’000s)
– Continuing operations
– Discontinued operations
Diluted earnings per share
31 March
2016
£’000s
12,820
4,409
8,411
75,564
5.83p
11.13p
16.96p
31 March
2015
£’000s
(3,409)
634
(4,043)
74,203
0.85p
(5.8)p
(4.9)p
Adjusted earnings per share
An adjusted earnings per share and a diluted adjusted earnings per share, which exclude significant items, have also been calculated as in the opinion of the Board
this allows shareholders to gain a clearer understanding of the trading performance of the Group.
Earnings after tax attributable to ordinary shareholders (£’000s)
– Continuing operations
– Discontinued operations
Add back significant items (note 6)
Add Back Fair value gain
Add Back Profit on Napier disposal
Add back tax on significant items
Adjusted earnings after tax attributable to ordinary shareholders (£’000s)
Weighted average number of shares in issue (’000s)
Basic earnings per share
Total potential weighted average number of shares in issue (’000s)
Basic diluted earnings per share
31 March
2016
£’000s
12,820
4,409
8,411
945
(3,267)
(9,145)
(113)
1,240
69,818
1.78p
75,564
1.64p
31 March
2015
£’000s
(3,409)
634
(4,043)
850
—
—
(178)
(2,737)
69,568
(3.93)p
74,203
(3.93)p
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
53
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
16. Goodwill
Cost
Carried forward 31 March 2015
Disposal during year
Addition in year (note 33)
Carried forward 31 March 2016
Group
£’000s
82,019
(12,000)
986
71,005
Goodwill acquired on business combinations is allocated at acquisition to the Cash Generating Units that are expected to benefit from that business
combination. Before any recognition of impairment losses, the carrying amount of goodwill has been allocated as follows:
Napier Brown (disposed in May 2015)
Garrett Ingredients
Renshaw
R&W Scott
Rainbow Dust Colours
Haydens Bakery – Chantilly Patisserie
Carried forward 31 March 2016
Continuing business
Discontinued business
31 March
2016
£’000s
—
5,000
57,796
1,000
6,223
986
71,005
71,005
—
31 March
2015
£’000s
12,000
5,000
57,796
1,000
6,223
—
82,019
70,019
12,000
The Goodwill on Renshaw; R&W Scott and Garrett Ingredients originally arose on the acquisition of Napier Brown Foods Limited. As previously reported the
strategy in recent years has been to establish each of these as separate trading businesses, ‘divisions’, with their own management teams leading to them
all being re-established as separate Limited companies. This process was fully completed in October 2015.
The goodwill on Rainbow Dust Colours Limited arises out of the acquisition in January 2015. The goodwill on Hayden Bakery Limited arises out of the
acquisition of the Chantilly Patisserie business in February 2016.
54
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OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 16. Goodwill (continued)
An assessment of the underlying cash generation, based on current EBITDA performance less ongoing maintenance capital expenditure, has been used to determine
the future cash generation profile for each of the divisions. In line with the established impairment tests logic this profile has been used in establishing the Net Present
Value of the individual future income streams.
The Board is keen to point out the outcome reflects the specific dynamics and nature of each division and that the respective values should not be viewed as a
‘judgement’ on each. All the divisions have exciting growth plans that are being implemented and all will contribute to the future success of the Group.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be impaired.
The recoverable amounts of the Cash Generating Units are determined from value in use calculations. The key assumptions for the value in use calculations are those
regarding discount rates and expected changes to selling prices and direct costs.
The rate used to discount the forecast cash flows is the Group’s pre-tax weighted average cost of capital of 3.0% (2015 – 7.07%). A period of 19 years has been applied
to the projected cash flows, based on the logic above assuming no annual growth, as the Directors used this period to assess the viability of the acquisition when the
business was acquired in 2005. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. Using these
parameters and allowing for disposal income at the end of this timescale the recoverable amounts exceed the carrying value by £97.3 million for continuing operations.
This is based on our base expectations for the trading period to 31 March 2017.
An increase in the Group’s weighted average cost of capital to above 12% (2015 – 10.5%) would cause the Board to impair the carrying value of goodwill across all
continuing divisions.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
55
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
17. other intangible assets
Cost
At 1 April 2015
Acquired on acquisition of Chantilly Patisserie
Acquired on acquisition of ISO2 Nutrition
Disposals
At 31 March 2016
Amortisation
At 1 April 2015
Charge
Disposals
At 31 March 2016
Net book value at 31 March 2016
Cost
At 1 April 2014
Additions
Disposals
At 31 March 2015
Amortisation
At 1 April 2014
Charge
Disposals
At 31 March 2015
Net book value at 31 March 2015
Customer
Relationship
£’000s
Computer
Software
£’000s
—
405
68
—
473
—
55
—
55
418
—
—
—
—
—
—
—
—
—
2,964
—
—
(2,178)
786
2,123
58
(1,811)
370
416
2,925
99
(60)
2,964
1,823
360
(60)
2,123
841
Group
£’000s
2,964
405
68
(2,178)
1,259
2,123
113
(1,811)
425
834
2,925
99
(60)
2,964
1,823
360
(60)
2,123
841
Company
£’000s
4
—
—
(4)
—
4
—
(4)
—
—
4
—
—
4
4
—
—
4
—
Intangible assets all relate to intangible assets acquired from third parties and there are no internally generated intangible assets.
There is no indication of any impairment of these intangible assets.
56
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 18. property, plant and equipment
Group
Cost
At 1 April 2015
Acquired on acquisition of business (note 33)
Additions
Disposals
Reclassifications
At 31 March 2016
Depreciation
At 1 April 2015
Disposals
Charge
At 31 March 2016
Net book value at 31 March 2016
Cost
At 1 April 2014
Acquired on acquisition of subsidiary
Additions
Disposals
Reclassifications
At 31 March 2015
Depreciation
At 1 April 2014
Disposals
Charge
At 31 March 2015
Net book value at 31 March 2015
Continuing business
Discontinued business
Land and
Buildings
£’000s
13,539
—
542
(4,604)
—
9,477
3,891
(1,242)
286
2,935
6,542
13,094
—
1,571
(1,455)
329
13,539
3,576
—
315
3,891
9,648
6,278
3,370
Plant and
Equipment
£’000s
32,615
108
5,122
(11,588)
831
27,088
21,221
(6,946)
1,631
15,906
11,182
31,599
201
1,132
(614)
297
32,615
19,737
(542)
2,026
21,221
11,394
6,784
4,610
The net book value of assets held under finance leases or hire purchase contracts, included above, is as follows:
Plant and equipment
Assets in the
course of
construction
£’000s
537
—
636
—
(831)
342
—
—
—
—
342
911
—
252
—
(626)
537
—
—
—
—
537
537
—
31 March
2016
£’000s
353
Total
£’000s
46,691
108
6,300
(16,192)
—
36,907
25,112
(8,188)
1,917
18,841
18,066
45,604
201
2,955
(2,069)
—
46,691
23,313
(542)
2,341
25,112
21,579
13,599
7,980
31 March
2015
£’000s
586
£ NIL (2015 – £21.0 million) of property, plant and equipment have been pledged as security for borrowings; see note 23.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
57
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
18. property, plant and equipment (continued)
Company
Cost
At 1 April 2015
Additions
Group Transfers
Disposals
At 31 March 2016
Depreciation
At 1 April 2015
Disposals
Group Transfers
Charge
At 31 March 2016
Net book value at 31 March 2016
Cost
At 1 April 2014
Additions
Disposals
At 31 March 2015
Depreciation
At 1 April 2014
Disposals
Charge
At 31 March 2015
Net book value at 31 March 2015
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
—
498
—
—
498
—
—
—
—
—
498
1,455
—
(1,455)
—
—
—
—
—
—
162
2,285
1,664
(660)
3,451
85
(660)
1,294
26
745
2,706
309
3
(150)
162
114
(78)
49
85
77
Total
£’000s
162
2,783
1,664
(660)
3,949
85
(660)
1,294
26
745
3,204
1,764
3
(1,605)
162
114
(78)
49
85
77
The net book value of assets held under finance leases or hire purchase contracts, included above, are as follows:
Plant and equipment
58
31 March
2016
£’000s
—
31 March
2015
£’000s
—
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 19. investments
Company
Investments in shares of subsidiary undertakings:
Napier Brown
Foods Limited
£’000s
53,900
—
53,900
FSF Dormant
Limited/
TD Dormant
Limited
£’000s
610
(610)
—
—
R&W Scott Limited
Garrett Ingredients
Limited
Haydens Bakery
Limited
£’000s
—
3,248
7,500
7,500
—
3,248
Eurofoods plc/
Coolfresh
Limited
£’000s
Real Good
Food Europe
SA
£’000s
79
—
79
55
717
772
Total
57,892
(610)
8,217
65,499
At 31 March 2015
Impairment
Capitalisation of
intercompany loans
At 31 March 2016
The additions in the year relate to the creation of trading limited companies and the increase in share capital as a result of the capitalisation of a Group loan balance.
The aggregate of the share capital and reserves at 31 March 2016 and of the profit or loss for the year ended on that date are as follows:
N Brown Foods Limited
JF Renshaw Limited
Haydens Bakery Limited
Rainbow Dust Colours Limited
RGFC Dust Limited
Garrett Ingredients Limited
R&W Scott Limited
Real Good Food Europe SA
Aggregate of Share
Capital and reserves
£’000s
Profit/(loss)
£’000s
37,277
59,569
1,160
6,240
(101)
2,640
4,593
(3)
(759)
3,555
(108)
1,085
(68)
140
(407)
(320)
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
59
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
19. investments (continued)
Subsidiary
Haydens Bakeries Limited*
Eurofoods plc*
FSF Dormant Limited*
TD Dormant Limited*
Napier Brown Foods Limited*
JF Renshaw Limited
RGFC Dust Limited*
Rainbow Dust Colours Limited
R & W Scott Limited
Garrett Ingredients Limited
Whitworths Sugars Limited
Haydens Bakery Limited*
Real Good Food Europe SA
Principal
Activities
Dormant
Dormant
Dormant
Dormant
Holding Company
Sugar Paste and Marzipan Supplier
Holding Company
Cake Decoration Supplier
Chocolate compound and Jam Supplier
Food Ingredients Supplier
Dormant
Cake and Dessert Supplier
Sugar & Ingredient Supplier
* Held directly by Real Good Food plc.
20. Deferred taxation liability/(asset)
The gross movements on the deferred tax account are as follows:
Opening position
Acquired on the acquisition
Income statement charge
Transfer on sale
Transfer on pension
Charge to equity/(credit)
Closing position
Shown as follows
Liabilities
Assets
60
Description and Number
of Shares Held
Proportion of Nominal
Value of Shares Held
4,052,659 Ordinary £1
260,000 Ordinary £1
50,000 Preference £1
11,112 Ordinary £1
5,000 Ordinary £1
28,248,096 Ordinary 50p
15,685,000 Ordinary £1
1 Ordinary £1
500 Ordinary £1
1 Ordinary £1
1 Ordinary £1
2,000,000 Ordinary £1
1 Ordinary £1
61,500 Ordinary €1
2016
Group
£’000s
671
74
(58)
(283)
—
(35)
369
1,925
(1,556)
369
2016
Company
£’000s
(327)
—
38
—
(1,138)
(35)
(1,462)
16
(1,478)
(1,462)
2015
Group
£’000s
1,367
13
(236)
—
—
(473)
671
2,537
(1,866)
671
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2015
Company
£’000s
(294)
—
(7)
—
—
(26)
(327)
—
(327)
(327)
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 20. Deferred taxation liability/(asset) (continued)
Group
Deferred tax assets
The deferred tax balances arise from temporary differences in respect of the following:
At 31 March 2015
Charge/(credit) to income:
— current period
— prior years
(Credit) to equity
At 31 March 2016
Within 12 months
Greater than 12 months
Deferred tax provisions
At 31 March 2015
Acquired on acquisition
Charged to income:
— current period
— prior period
Transfer on sale of Napier
At 31 March 2016
Losses
£’000s
(359)
—
359
—
—
—
—
Options
£’000s
(324)
—
—
—
(324)
—
(324)
Provisions
£’000s
(45)
(36)
5
—
(76)
(76)
—
Intangible
Assets
£’000s
1,022
74
40
—
—
1,136
Pension
£’000s
(1,138)
17
—
(34)
(1,155)
—
(1,155)
Tangible
Assets
£’000s
1,515
—
(153)
(290)
(283)
789
Total
£’000s
(1,866)
(19)
364
(34)
(1,555)
(76)
(1,479)
Total
£’000s
2,537
74
(113)
(290)
(283)
1925
There were £2.52 million of unused tax losses not recognised due to uncertainty over when they could be utilised.
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61
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
20. Deferred taxation liability/(asset) (continued)
Company
Deferred tax assets
The deferred tax balances arise from temporary differences in respect of the following:
At 31 March 2015
Charge/(credit) to income:
— current period
— transfers from Group companies
Charge/(credit) to equity
At 31 March 2016
Within 12 months
Greater than 12 months
21. inventories
Materials
Work in progress
Finished goods
Continuing business
Discontinued business
Pension
Scheme
17
(1,138)
(34)
(1,155)
—
(1,155)
31 March
2016
Group
£’000s
5,495
641
6,224
12,360
12,360
—
Tangible
Assets
£’000s
(4)
20
—
—
16
—
16
31 March
2016
Company
£’000s
—
—
—
—
—
—
Share
Options
£’000s
(323)
—
—
—
(323)
—
(323)
31 March
2015
Group
£’000s
5,491
743
10,293
16,527
10,328
6,199
Total
£’000s
(327)
37
(1,138)
(34)
(1,462)
—
(1,462)
31 March
2015
Company
£’000s
—
—
—
—
—
—
Inventories totalling £12,360k (2015 – £16,527k) are valued at the lower of cost and net realisable value. The Directors consider that this value
represents the best estimate of the fair value of those inventories net of costs to sell. The write-off of inventories during the period is not material.
62
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OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 22. trade and other receivables
Non-current trade and other receivables
Amounts owed by Group undertakings
Current trade and other receivables
Trade receivables
Less: provision for impairment of receivables
Net trade receivables
Other receivables
Amounts owed by Group undertakings
Prepayments
Total
Continuing business
Discontinued business
31 March
2016
Group
£’000s
31 March
2016
Company
£’000s
31 March
2015
Group
£’000s
31 March
2015
Company
£’000s
—
—
—
43,626
15,006
(204)
14,802
1,068
—
1,169
17,039
17,039
—
—
—
—
12
55,390
396
55,798
26,012
(111)
25,901
1,566
—
2,591
30,058
15,229
14,829
—
—
—
—
1,527
573
2,100
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
63
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS
notes to the Financial Statements (continued)
year ended 31 March 2016
22. trade and other receivables (continued)
Provision for impairment of receivables
At 31 March 2015
Charge for period
Uncollectable amounts written off
At 31 March 2016
31 March
2016
Group
£’000s
(111)
(165)
72
(204)
31 March
2016
Company
£’000s
—
—
—
—
31 March
2015
Group
£’000s
(50)
(81)
20
(111)
31 March
2015
Company
£’000s
—
—
—
—
The creation and release of the provision for impaired receivables has been included in the income statement within administration costs (note 8).
Trade receivables primarily represent Blue Chip customers with good credit ratings. In assessing and granting credit the Group relies on professional credit rating
agencies and has credit insurance policies in place for added protection. This credit insurance covers £10 million of the Group’s trade receivables, the remaining amount
of £5 million relates to sales from the Group’s Premium bakery division to high street retailers, which the Group has not taken credit insurance on as we deem this to be
of limited credit risk. There is no concentration of credit risk within trade receivables as the Group trades with a broad base of customers primarily within the UK, over
various different sectors.
The Group recognised a charge of £165k (2015 – charge of £81k) for impairment of its trade receivables during the period, to reflect debts significantly past their due
dates. This loss has been included in operating profit in the Statement of Comprehensive Income.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. The Directors consider the maximum credit risk at the
balance sheet date is equivalent to the carrying value of trade and other receivables, less any amounts claimable under the Group’s credit insurance policies.
Trade receivables of £2.1 million were past due but not impaired, a slight decline on last year driven by a tighter credit control programme. The ageing analysis of these
receivables is as follows:
Up to 30 days past due
1–3 months past due
Over 3 months past due
64
31 March
2016
Group
£’000s
740
1,040
378
2,158
31 March
2015
Group
£’000s
3,069
498
311
3,878
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OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 23. Borrowings and capital management
Unsecured borrowings at amortised cost
Loan notes
Secured borrowings at amortised cost
Bank term loans
Revolving credit facilities
Hire purchase
Amounts due for settlement within 12 months
Amounts due for settlement after 12 months
Continuing business
Discontinued business
31 March
2016
Group
£’000s
31 March
2016
Company
£’000s
—
3,200
3,705
158
7,063
7,008
55
7,063
7,063
—
—
—
—
—
—
—
—
—
31 March
2015
Group
£’000s
2,774
9,170
24,430
376
36,750
30,073
6,677
36,750
23,867
12,883
31 March
2015
Company
£’000s
—
5,220
—
—
5,220
1,541
3,679
5,220
Features of the Group’s borrowings are as follows:
The Group’s financial instruments comprise cash, a term loan, hire purchase and finance leases, revolving credit facility, overdraft and various items arising
directly from its operations such as trade payables and receivables. The main purpose of these financial instruments is to finance the Group’s operations.
Following the sale of Napier Brown Sugar in May 2015 the facilities with PNC Business Credit have been fully repaid along with the loan note that was due to
Napier Brown Ingredients Limited. During the year a new revolving credit invoice discount facility has been entered into with Lloyds Bank Plc.
The main risks from the Group’s financial instruments are interest rate risk and liquidity risk. The Group also has some currency exposure in relation to its
sugar trade and also some currency exposure in relation to the purchase of almonds from the United States. However, this is mitigated by matching against
foreign currency sales. The Board reviews and agrees policies, which have remained substantially unchanged for the year under review, for managing these
risks.
The Group’s policies on the management of interest rate, liquidity and currency exposure risks are set out in the Report of the Directors.
At the end of March 2016 the Group has one term loan and a revolving credit facility with Lloyds Bank Plc. The term loan was taken out in January 2015
to assist with the acquisition of Rainbow Dust Colours Limited, the original term was for 365 days and due for repayment in January 2016, this has been
extended and is repayable in July 2016. The balance outstanding was £3.2 million (2015 £3.95 million).
During the year the Group negotiated a £10 million revolving credit facility comprising Sterling Euro and US Dollar invoice discounting facilities which bears
interest at 1.5% above base rate and at the year-end £3.7 million was outstanding under this facility. This facility is secured primarily on the debtors of JF
Renshaw Limited and Haydens Bakery Limited.
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65
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS
notes to the Financial Statements (continued)
year ended 31 March 2016
23. Borrowings and capital management (continued)
Since the year end the Group has successfully negotiated extended borrowing facilities with Lloyds Bank plc to enable it to continue its acquisition and
investment strategy. The Group has entered into an invoice finance facility of £20 million on a revolving basis with a minimum term of 12 months and a 3
months’ notice period. This facility is secured against the debtors across the whole of the Groups UK businesses, and comprise a Sterling, Euro and US
Dollar facility with an interest rate of 1.5% above base rate.
In addition a new term loan of £3 million has been agreed with Lloyds Bank plc to replace the loan taken out to finance the acquisition of Rainbow Dust
Colours Limited. The new loan has a term of 3 years expiring in July 2019 and is repayable in quarterly instalments of £250k. Interest on this loan is charged
at 2.75% above base rate.
To aid the capital expenditure growth planned for the Group it has also entered into a £4 million facility secured against specific items of plant and machinery
with Lloyds Bank plc. This loan is for a term of 5 years ending July 2021 and is repayable in monthly instalments of £73k plus VAT. Interest on this loan is
charged at 3.5% above base rate.
The fixed interest rate liabilities relate to amounts payable on hire purchase agreements £0.2 million. The weighted average interest rate of these liabilities
was 2% (2015 – 2%) and the weighted average period for which the interest rates are fixed was 28 months (2015 – 40 months).
The financial assets of the Group are surplus funds, which are offset against borrowings under the facility, and there is no separate interest rate exposure.
Lloyds Bank Plc has a debenture incorporating a floating charge over the undertaking and all property and assets present and future including goodwill, book
debts, uncalled capital, buildings, fixtures, intangible assets, fixed plant and machinery. In addition, our banking arrangements with Lloyds Bank plc contain
certain cross guarantees.
Hire purchase and finance lease liabilities are secured upon the underlying assets.
Capital management
The Group is subject to the risk that its capital structure will not be sufficient to support the growth of the business. The Group’s objectives when managing
capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to reduce the cost of capital.
The sale of Napier Brown Sugar enabled the Group to repay all of its borrowings at the time, however there has been no change to the Group’s approach to
capital management, which is to fund its working capital requirements by trading generated cash flows supplemented by asset based lending, which is the
most favourable source of finance available to the business at this time, to assist in managing its seasonal requirements.
Liquidity risk management
The Board reviews the Group’s liquidity position on a monthly basis and monitors its forecast and actual cash flows against maturing profiles of its financial
assets and liabilities.
66
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OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 23. Borrowings and capital management (continued)
The following table details the Group’s maturity profile of its financial liabilities:
2016
Trade and other payables
Bank term loans
Revolving credit facilities
Finance leases
Interest
Total
2015
Trade and other payables
Loan notes
Bank term loans
Revolving credit facilities
Finance leases
Interest
Total
Less than
1 month
£’000s
3,640
—
—
10
3,650
19
3,669
Less than
1 month
£’000s
24,657
—
403
—
10
25,070
148
25,218
1–3
months
£’000s
4,167
—
3,705
20
7,892
57
7,949
1–3
months
£’000s
3,675
—
556
24,430
20
28,681
338
29,019
3 months
to 1 year
£’000s
517
3,200
—
73
3,790
153
3,943
3 months
to 1 year
£’000s
3,687
—
4,532
—
122
8,341
451
8,792
1–5
years
£’000s
5+
years
£’000s
—
—
—
55
55
15
70
1–5
years
£’000s
—
2,774
3,679
—
224
6,677
1,845
8,522
—
—
—
—
—
—
—
5+
years
£’000s
—
—
—
—
—
—
—
—
Total
£’000s
8,324
3,200
3,705
158
15,387
244
15,631
Total
£’000s
32,019
2,774
9,170
24,430
376
68,769
2,782
71,551
The profile of the trade payables has been taken as being consistent with the Group’s payment terms to suppliers.
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67
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
23. Borrowings and capital management (continued)
Analysis of market risk sensitivity
Currency risks:
The Group is exposed to currency risk on purchases made of almonds from the United States. The risk associated with these purchases is mitigated by matching with
sales in foreign currencies. The effect of a 10¢ strengthening of the US dollar against sterling exchange rate at the balance sheet date on the trade payables carried at
that date would, with all other variables being held constant, have resulted in a decrease in pre-tax profits of £32k. The impact of a 10¢ strengthening of the US dollar
against sterling at the balance sheet date on our trade receivables carried at that date would, all other variables being held constant, have resulted in an increase in pre-
tax profits of £41k.
The Group is also exposed to currency risk on purchases of sugar from Europe. The risk associated with these purchases is mitigated by matching with sales in foreign
currencies. These sales form part of our Invoice Discounting facilities with Lloyds Bank Plc, which generate a euro loan obligation. The effect of a €0.05 strengthening of
the euro versus sterling exchange rate at the balance sheet date on our overall euro net position carried at that date would, all other variables being held constant, have
resulted in a decrease in pre-tax profits of £22k.
Interest rate risks:
The Group has an exposure to interest rate risk arising from fluctuations in sterling and euro base rates. The impact of a 1% increase in the applicable interest rates at
the balance sheet date on the variable rate debt carried at that date would, all other factors remaining unchanged, have resulted in a decrease in pre-tax profits of £70k.
Obligation under finance leases
Finance lease liabilities – minimum lease payments
Due within one year
Due within one to five years
Future finance charges on finance leases
Present value of finance lease liabilities
The present value of finance lease liabilities is as follows:
Due within one year
Due within one to five years
31 March
2016
£’000s
31 March
2015
£’000s
103
55
158
(11)
147
98
49
147
152
224
376
(27)
349
143
206
349
It is the Group’s policy to lease certain property, plant and equipment under finance leases. For the period ended 31 March 2016 the average effective borrowing rate
was 4.0% (2015 – 4.01%). Interest rates are fixed at the contract dates. All leases are on a fixed repayment basis and no arrangements have been entered into for
contingent rental payments. All lease obligations are denominated in sterling.
The fair value of the Group’s lease obligations approximates to their carrying amount.
68
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OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 24. trade and other payables
Amounts due in more than one year
Amounts owed to Group undertakings
Accruals
Amounts due within one year
Trade payables
Social security
Amounts owed to Group undertakings
Accruals
Other payables
Continuing business
Discontinued business
31 March
2016
Group
£’000s
31 March
2016
Company
£’000s
31 March
2015
Group
£’000s
—
—
—
236
89
55,593
459
—
56,377
—
—
—
8,324
654
—
3,600
665
13,243
13,243
—
—
295
295
17,831
636
—
6,877
6,380
31,724
18,000
14,019
31 March
2015
Company
£’000s
45,216
—
45,216
258
65
—
352
—
675
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
The Directors consider that the carrying amount of trade payables approximates to their fair value.
Included within accruals is £nil (2015 – £3.5 million) being the fair value of the contingent consideration in respect of a business combination that occurred during
the year.
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69
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
25. Financial instruments
Set out below are the Company’s financial instruments. The directors consider there to be no difference between the carrying value and fair
value of the Company’s financial instruments.
Loans and receivables at amortised cost
Cash and cash equivalents
Loans and receivables
Financial liabilities at amortised cost
Liabilities at amortised cost
Amounts due for settlement
Within twelve months
After twelve months
Group
Company
2016
£’000s
2,946
14,802
15,387
15,387
15,332
55
15,387
2015
£’000s
6,687
25,901
54,607
54,607
47,930
6,677
54,607
2016
£’000s
—
—
949
949
949
—
949
2015
£’000s
3,167
—
5,504
5,504
1,825
3,679
5,504
Loans and receivables
The Group’s policies on managing credit risk are set out in note 22 of these financial statements. The carrying amount of financial assets
represents the maximum credit exposure. The maximum exposure to credit risk at 31 March 2016 was £14.8 million (2015 – £25.9 million).
70
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OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 25. Financial instruments (continued)
Financial Liabilities at Amortised cost
Features of the Group’s borrowing costs are detailed in note 23 of these financial statements. The following table analyses the Company’s financial
liabilities into relevant maturity groupings based on the remaining period at the balance sheet dated to the contractual maturity date. The amounts
disclosed in the table are the contracted undiscounted cash flows. Discounting is not required as this has no material effect on the financial statements.
Contingent consideration obligations
At 31 March 2016 a financial liability of £nil has been recognised in respect of the fair value of the contingent consideration due in respect of acquisitions
(2015 – £3,500,000).
Financial assets/
financial liabilities
Contingent
consideration
in a business
combination
Fair value as at
31/3/2015
31/3/2016
Fair value hierarchy
Valuation technique(s)
and key input(s)
Significant unobservable
input(s)
Relationship of unobservable
inputs to fair value
£3,500,000
—
Level 3
Gross margin based upon
actual gross margins
achieved.
The higher the gross
margin, the higher
the fair value.
The gross margin
achieved within the
acquired business was
less than expected and
as a result the contingent
consideration payable
was significantly less than
previously estimated. The
contingent consideration
paid on 3 March 2016
was £233k, the difference
between this amount and
the liability recognised in
the prior year represents
a fair value gain on a
financial instrument and
has been credited to the
income statement as
finance income.
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71
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
26. Share capital
Allotted, called up and fully paid equity share capital
At 31 March 2015
Issued in the year
At 31 March 2016
Number of
Shares
2016
Number of
Shares
2015
31 March
2016
£’000s
69,588,400
478,503
70,066,903
69,465,952
122,448
69,588,400
1,392
10
1,402
31 March
2015
£’000s
1,389
3
1,392
Ordinary shares carry the right to participate in dividends and each share entitles the holder to one vote on matters requiring shareholder approval.
There are 9,969,454 shares reserved for issue under options, with expiry dates beyond 2016, outstanding at the end of the year.
27. Reserves
Share premium: The share premium reserve comprises the premium paid over the nominal value of shares for shares issued.
Share option reserve: The share option reserve represents the cumulative share option charge.
Retained earnings: The retained earnings reserve represents the cumulative surplus or deficit of the Group.
The Company retained earnings have been restated by £1,500k in respect of late management charge invoices raised to subsidiary companies, which were accrued in
the subsidiaries accounts but not in the Company accounts.
28. equity-settled share option scheme
The Company has a share option scheme for certain employees of the Group. Options are exercisable at a price equal to the average quoted market price of the
Company’s shares at the date of grant. The vesting period is three years. If the options remain unexercised after a period of ten years from the date of grant the options
expire. Options are forfeited if the option holder leaves the Group before the options vest.
Details of the share options outstanding during the year are as follows:
Outstanding at the beginning of the period
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at the end of the period
Exercisable at the end of the period
72
31 March
2016
Number of share
options
31 March
2016
Weighted Average
Exercise Price (£)
31 March
2015
Number of share
options
31 March
2015
Weighted Average
Exercise Price (£)
9,588,025
1,164,932
(478,503)
(305,000)
9,969,454
4,786,797
0.18
0.43
(0.23)
(0.46)
0.20
0.11
9,610,473
200,000
(122,448)
(100,000)
9,588,025
5,370,300
0.18
0.39
0.05
0.43
0.18
0.12
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 28. equity-settled share option scheme (continued)
A breakdown of the range of exercise prices for options outstanding as at 31 March 2016 is shown in the table below:
2016
Weighted
average
remaining
contractual
life
(years)
1
Number
outstanding
at end of
period
9,969,454
Weighted
average
exercise
price
(pence)
19.84
Number
outstanding
at end of
period
9,588,025
2015
Weighted
average
remaining
contractual
life
(years)
Weighted
average
exercise price
(pence)
1
18.33
2016
£’000s
15
43.4p
2015
£’000s
46
33.9p
£0.00 – £0.50
IFRS 2 Fair value charge
Average share price
New options have been issued during this current period. At the time of the issue of options the inputs into the Black–Scholes option pricing model were as
follows:
Expected volatility
Expected life
Risk-free rate
Dividend yield
35%
3 years
2.88%
Nil
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous three years. The expected life
used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restriction, and behavioural
considerations.
The share option expense is shown as an expense in administration expenses in the Company as the majority of the charge relates to employees of the
Company.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
73
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
29. commitments
Operating lease arrangements
At the balance sheet date the Group had total future minimum lease payments under non-cancellable operating leases for each of the following periods:
Due within one year
Due between one and five years
Due beyond five years
31 March
2016
£’000s
1,264
374
—
31 March
2015
£’000s
885
1,322
1,127
Operating lease payments represent rentals payable by the Group in respect of its properties and machinery. For properties, the lease periods are negotiated for an
average of fifteen years with five year reviews and for machinery the lease periods vary up to five years.
Operating lease payments payable by the Company are considered immaterial for these accounts.
Capital commitments
Commitments for the acquisition of property, plant and equipment
30. Related party transactions
Consultancy fees were paid to the following entities in which Directors hold a beneficial interest:
Payee
P G Ridgwell
The Salter Consultancy LLP
2016
£’000s
930
2015
£’000s
690
Director
P G Ridgwell
P Salter
31 March
2016
£’000s
55
109
164
31 March
2015
£’000s
55
69
124
During the year the Group repaid the loan notes of £2,774k to Napier Brown Ingredients Limited, a company in which P G Ridgwell, who is a director of Real Good Food
Plc, has significant influence. Together with the principal amount of £2,774k the Group also repaid accrued interest of 10% for 2014/15 of £277k, interest for the
period of £43k and a redemption premium fee of £906k.
74
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OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 30. Related party transactions (continued)
Transactions between the Company and its subsidiaries are as follows:
Provision of services to related parties
JF Renshaw Limited
Haydens Bakery Limited
R&W Scott Limited
Garrett Ingredients Limited
Amounts due to subsidiaries
JF Renshaw Limited
Rainbow Dust Colours Limited
31 March
2016
£’000s
555
350
120
50
1,075
31 March
2016
£’000s
51,240
4,576
31 March
2015
£’000s
1,150
350
—
—
1,500
31 March
2015
£’000s
restated
40,858
3,208
Renshaw Napier Limited is a related party because it is a 100% owned subsidiary of Napier Brown Foods Limited which is a 100% subsidiary of
Real Good Food Plc.
Purchases from related parties have been made at market prices; settlement of the debt is made under normal trading terms.
Amounts due from subsidiaries
Real Good Food Europe SA
Haydens Bakery Limited
Napier Brown Sugar Limited
Napier Brown Foods Limited
RGFC Dust Limited
R&W Scott Limited
Garrett Ingredients Limited
31 March
2016
£’000s
121
4489
—
45,801
5,055
1,503
152
31 March
2015
£’000s
restated
838
357
1,527
41,800
281
—
—
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
75
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
31. pensions arrangements
The Group operates one defined benefits scheme which was closed to new members in 2000. From 1 April 2016 the Group annual contributions were agreed at
£320k for 4 years 7 months. The Group is confident this will continue to meet the trustees’ needs and the pension regulator’s guidance.
In preparation for the disposal of the sugar business it was decided to transfer the liability for this scheme out of JF Renshaw Limited into Real Good Food plc.
For the purposes of IAS 19 the data provided for the 31 March 2012 actuarial valuation has been approximately updated to reflect liabilities on the accounting
basis at 31 March 2016. This has resulted in a deficit in the scheme of £6,081,000.
It is the policy of the Company to recognise all actuarial gains and losses in the year in which they occur in the Statement of Comprehensive Income.
Present values of defined benefit obligations, fair value of assets and deficit
Present value of defined benefit obligation
Fair value of plan assets
Deficit/(surplus) in plan
Amount not recognised in accordance with IAS 19
Gross amount recognised
Deferred tax at 19% (2014 – 20%)
Net liability
31 March
2016
£’000s
21,094
(15,013)
6,081
—
6,081
(1,155)
4,926
31 March
2015
£’000s
21,799
(16,111)
5,688
—
5,688
(1,138)
4,550
31 March
2014
£’000s
19,033
(15,360)
3,673
—
3,673
(735)
2,938
31 March
2013
£’000s
19,153
(15,613)
3,540
—
3,540
(814)
2,726
31 December
2012
£’000s
17,085
(16,005)
1,080
—
1,080
(259)
821
76
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 Reconciliation of opening and closing balances of the present value of the defined benefit obligations
Defined benefit obligation at start of period
Interest cost
Actuarial losses
Benefits paid, death in service insurance premiums, expenses and past service costs
Defined benefit obligation at end of period
Reconciliation of opening and closing balances of the fair value of plan assets
Fair value of scheme assets at start of the period
Interest income on scheme assets
Actuarial (losses)/gains
Contributions paid by the Group
Benefits paid, death in service insurance premiums and expenses
Fair value of scheme assets at end of the period
The actual return on the scheme assets over the period ended 31 March 2016 was £(575)k (2015 – £1,580k).
31 March
2016
£’000s
21,799
738
(638)
(805)
21,094
12 months
ended
31 March
2016
£’000s
16,111
547
(1,122)
282
(805)
15,013
31 March
2015
£’000s
19,033
857
3,122
(1,213)
21,799
12 months
ended
31 March
2015
£’000s
15,360
695
885
457
(1,286)
16,111
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
77
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
31. pensions arrangements (continued)
Total expense recognised in the Statement of Comprehensive Income within other finance income
Interest on liabilities
Interest on assets
Net Interest
Past service cost
Total income
Statement of recognised income and expenses
Actuarial (losses)/gain
Experience gains and losses arising on the scheme liabilities: loss
Actuarial gains/(losses) arising from changes in demographic assumptions
Actuarial gains/(losses) arising from changes in financial assumptions
Total amount recognised in Statement of Other Comprehensive Income
Assets
UK equity
Overseas equity
Absolute return fund
Bonds
Gilts
Property
Cash
Alternative assets
Total assets
31 March
2016
£’000s
31 March
2015
£’000s
738
(547)
191
—
191
31 March
2016
£’000s
(1,122)
—
(42)
680
(484)
857
(695)
162
73
235
31 March
2015
£’000s
885
—
(11)
(3,111)
(2,237)
31 March
2016
£’000s
1,608
4,462
3,826
1,020
2,104
72
473
1,448
15,013
31 March
2015
£’000s
31 March
2014
£’000s
1,759
4,634
4,126
933
1,382
354
1,444
1,479
1,977
5,141
3,929
1,798
645
301
748
821
16,111
15,360
None of the fair values of the assets shown above include any of the Group’s own financial instruments or any property occupied by, or other assets
used by, the Group. All assets stated above have a quoted market price in an active market.
78
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OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 31. pensions arrangements (continued)
Assumptions
Inflation
Salary increases
Rate of discount
Allowance for pension in payment increases
Allowance for revaluation of deferred pensions
Allowance for commutation of pension for cash at retirement
31 March
2016
% per annum
2.80
—
3.65
2.70
1.80
90% of max
allowance
31 March
2015
% per annum
2.90
—
3.45
2.80
1.90
90% of max
allowance
31 March
2014
% per annum
3.30
—
4.65
3.20
2.20
75% of max
allowance
31 March
2013
% per annum
3.20
—
4.70
3.10
1.90
75% of max
allowance
Assumption
Discount rate
Rate of inflation
Rate of mortality
Change in assumption
Increase/decrease of 0.5% p.a.
Increase/decrease of 0.5% p.a.
1 year increase in life expectancy
Change in liability
Decrease/increase by 7.0%
Increase/decrease by 2.0%
Increase by 4.0%
The mortality assumptions adopted at 31 March 2016 imply the following life expectancies:
Male retiring at age 65 in 2016
Female retiring at age 65 in 2016
Male retiring at age 65 in 2036
Female retiring at age 65 in 2036
21.9 years
23.9 years
23.2 years
25.4 years
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
79
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
31. pensions arrangements (continued)
The long term expected rate of return on cash is determined by reference to UK long dated government bond yields at the balance sheet date. The long term expected
return on bonds is determined by reference to UK long dated government and corporate bond yields at the balance sheet date. The long term expected rate of return on
equities is based on the rate of return on bonds with an allowance for outperformance.
Expected long term rates of return
The expected long term rates of return applicable at the start of each period are as follows:
Fair value of assets
Defined benefit obligation
Surplus/(deficit) in scheme
Experience adjustment on scheme assets
Experience adjustment on scheme liabilities
31 March
2016
£’000s
15,013
(21,094)
(6,081)
(1,122)
—
31 March
2015
£’000s
16,111
(21,799)
(5,688)
885
—
31 March
2014
£’000s
15,360
(19,033)
(3,673)
(382)
—
31 March
2013
£’000s
15,613
(19,153)
(3,540)
208
(1,923)
31 March
2012
£’000s
16,005
(17,085)
(1,080)
(984)
(46)
32. Discontinued Business
As disclosed in the year end March 2015 accounts the Group disposed of its Napier Brown Sugar business on 19 May 2015. This disposal was consistent with the
Group’s strategy for the sugar business and allows it to focus on its remaining businesses. The result of the disposed business is shown below.
Revenue
Cost of Sales
Gross Margin
Distribution
Administration
Operating Loss
80
Year end
31 March
2016
£’000s
13,237
(11,884)
1,353
(1,149)
(288)
(84)
Year end
31 March
2015
£’000s
128,288
(117,924)
10,364
(9,938)
(4,697)
(4,271)
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 32. Discontinued operations (continued)
Calculation of profit on disposal
Disposal proceeds
Assets disposed of
Goodwill
Property plant and equipment
Net Working Capital
Disposal Costs
Legal and consultancy fees
Other costs arising directly from the sale of the business
Profit on disposal
Assets held for sale
Goodwill
Property, plant and equipment
Inventories
Trade and other receivables
Other financial assets
Assets of Napier Brown business classified as held for sale
Trade and other payables
Borrowings
Other financial liabilities
Liabilities of Napier Brown business classified as held for sale
Net assets of Napier Brown business held for sale
Total
£’000s
44,408
(30,917)
(4,346)
9,145
(12,000)
(8,211)
(10,706)
(2,024)
(2,322)
March 2016
£000’s
March 2015
£ 000’s
—
—
—
—
—
—
—
—
—
—
—
12,000
7,980
6,199
14,829
398
41,406
13,724
12,883
398
27,005
14,401
33. Acquisitions
The Group acquired the trading and assets of a business called Chantilly Patisserie on 2 February 2016. This acquisition was transacted through Haydens
Bakery Limited.
Chantilly Patisserie employs around 40 employees and produces high quality, hand made frozen desserts, supplying the food sector market.
The Real Good Food management believes that there are considerable synergies between Chantilly Patisserie and Haydens Bakery Limited and the
acquisition is expected to bring mutual benefits to the two businesses, particularly in developing new products, producing production efficiencies and
opening up new sales channels.
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
81
www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALS notes to the Financial Statements (continued)
year ended 31 March 2016
33. Acquisitions (continued)
Table of the assets and liabilities acquired and the purchase consideration
Non-current assets
Property, plant and equipment
Business relationships
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Non current liabilities
Deferred tax
Total liabilities
Fair value net assets of businesses acquired
Initial cash consideration paid
Deferred consideration due
Total consideration
Goodwill arising on current year acquisition
Book
Value
£’000
Fair Value
Adjustment
£’000
108
—
132
411
2
653
217
—
217
436
—
405
—
—
—
405
—
77
77
328
Total
£’000
108
405
132
411
2
1,058
217
77
294
764
1,650
100
1,750
986
Effect on 2016 Results
The business of Chantilly Patisserie generated revenue of £408k and a profit of £60k for the 2 months to 31 March 2016 which has been included in the consolidated
figures within the Premium Bakery sector, see note 5 Segment analysis for further information.
Acquisition costs amounting to £306k have been shown as significant costs in the consolidated accounts of Real Good Food plc as disclosed in note 6 of the accounts.
A review of the assets and liabilities of the acquired business has been undertaken and it was determined that the trade debtors were all collectable and no provision
was required.
It was determined that a value could be placed on intangible assets acquired as a result of the transaction, relating to business relationships that were in place. A value
of £405k has been placed on these intangibles which are estimated to have a useful life of 2 years. Deferred tax of £77k has been recognised to impact on these
accounts. Goodwill includes non identified, buyer specific synergies, know-how and workforce related industry specific knowledge. Increase in Group revenue of £2.5
million and additional profit of £0.5 million would have been reflected in these accounts if the acquisition had occurred at the start of this financial year.
34. Subsequent events
After the balance sheet date the courts approved the Capital restructuring proposal which will have the effect of cancelling the share premium account and releasing the
total value into distributable reserves. The effect of the capital restructuring will be reflected in the financial statements for the year ended 31 March 2017. The Board
intend to review and implement a Group dividend policy as a result of this decision.
82
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2016 Advisers and company information
Directors
P W Totté
D P Newman
P G Ridgwell
P C Salter
C O Thomas
J M d’Unienville
company Secretary
D P Newman
Registered office
International House
1 St Katharine’s Way
London
E1W 1XB
Registered number
4666282
Auditor
Crowe Clark Whitehill LLP
10 Palace Avenue
Maidstone, Kent
ME15 6NF
Solicitors
Joelson Wilson & Co.
30 Portland Place
London
W1B 1LZ
Bankers
Lloyds Bank plc
5 St Paul’s Square
Old Hall Street
Liverpool
L3 9SJ
www.realgoodfoodplc.com Stock Code: RGD
24831-02 - RGF AR 2016 2 August 2016 5:57 PM Proof 12
International House, 1 St Katharine’s Way, London E1W 1XB
T 020 3056 1516
enquiries@realgoodfoodplc.com
www.realgoodfoodplc.com
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