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Stock code: RGD
Annual Report and Accounts
For the year ended 31 March 2017
25455-04 29 September 2017 11:10 AM Proof 8
Welcome
Real Good Food plc
Real Good Food operates in
three pillar markets: Cake Decoration, Food
Ingredients and Premium Bakery.
Renshaw,
Renshaw Europe,
Renshaw Americas,
Rainbow Dust Colours
R&W Scott,
Garrett Ingredients,
Brighter Foods
Haydens,
Chantilly Patisserie
Investor Proposition
✪ Diversified business markets: cake decoration, food ingredients, premium bakery
✪ Diversified sales channels: retail, manufacturing, wholesale, foodservice and export
✪ Market-led growth strategies identified for each division
✪ Investments completed in the major growth opportunities
✪ Following re-capitalisation, new focus on cash generation and value creation
Contents
Welcome
STRATEGIC REPORT
Overview
Group at a Glance
Statement from the Board
Marketplace Review
Strategy
Divisional Business Reviews
Cake Decoration
Food Ingredients
Premium Bakery
Corporate Social Responsibility
Finance Review
Key Performance Indicators
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
7
8
10
12
14
16
19
20
21
22
25
26
Consolidated Statement of Comprehensive Income 27
Navigating the Report
For further information within this
document and relevant page numbers
Additional information online
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Financial Position
www.realgoodfoodplc.com
Company Statement of Financial Position
Consolidated Cash Flow Statement
Company Cash Flow Statement
Notes to the Financial Statements
Advisers and Company Information
28
29
30
31
32
33
34
IBC
25455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017 GROUP
REVENUE
GROSS
PROFIT
GROUP
EBITDA*
£108.2m
£26.4m
£1.2m
GROUP
OPERATING
(LOSS)/PROFIT
£(5.8)m
2016
£100.4m
2016
£26.7m
2016
£5.0m
2016
£2.1m
Overview
Financial Highlights
{ Revenue increased by 8% from £100.4m to £108.2m
{ Gross profit reduced by 1% from £26.7m to £26.4m
{ EBITDA reduced from £5.0m to £1.2m leading to an operating loss of £(5.8)m
(2016: £2.1m)
— Delay in passing on raw material price inflation post-Brexit vote
— Significant sugar trading dispute unresolved during the financial year
— Increases in overheads and costs as part of growth plan
— Poor control of central costs
— Impairment of assets and goodwill
{ Net debt at 31 March 2017 was £16.2m (2016: £5.0m)
Operational Highlights and post period end events
{ Strategic decision taken to invest in increasing capacity at main Cake
Decoration and Premium Bakery sites
{ Re-financing undertaken post-year end to fund growth plan
{ Significant Board changes
{ Review of financial processes and procedures and corporate governance
being undertaken
{ Focus on cash generation
{ New banking covenants agreed
Read more in the Finance Review
on pages 16 to 19
*Represents adjusted EBITDA see note 5 for reconciliation
2016 represents continuing operations
1
STRATEGIC REPORTSTRATEGIC REPORT25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGD 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.
Head Office
The Group functions of Finance, HR, Information
Services, Technical, Marketing and the Innovation
Centre provide support to all the businesses on specific
strategic projects as well as promoting best practice.
Examples include management leadership training,
support for BRC and FDA audits, product and brand
development for major launches such as the new
Renshaw Simply Create brand as well as ongoing
promotion of best practice in health and safety and
environmental management.
The Group functions enable each of Real Good Food’s
individual businesses to operate to the highest
standards within the food industry.
REVENUE
£47.0m
EBITDA*
£6.5m
OPERATING
PROFIT
£5.5m
EMPLOYEES
358
REVENUE
£27.3m
EBITDA*
£(1.6)m
OPERATING
(LOSS)
£(5.8)m
EMPLOYEES
121
REVENUE
£33.9m
EBITDA*
£1.2m
OPERATING
PROFIT
£0.1m
EMPLOYEES
520
Read more on page 8
Read more on page 10
Read more on page 12
HEAD OFFICE &
CONSOLIDATION
EBITDA*
£(4.9)m
OPERATING
(LOSS)
£(5.6)m
EMPLOYEES
46
*Represents adjusted EBITDA see note 5 for reconciliation
2
EMPLOYEES
121
25455-04 - 26-09-2017 - Proof 8STRATEGIC REPORTAnnual Report and Accounts for the year ended 31 March 2017 Renshaw manufactures sugarpaste,
marzipan, soft icings, mallows and caramels
and sells across a broad range of sales
MM
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 310 employees
Rainbow Dust Colours: Preston 32 employees
Renshaw Europe: Brussels 10 employees
Renshaw Americas: 6 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. Brighter Foods (acquired
in April 2017) manufactures snack bars, both
branded and own label, targeted at areas such as
diet control, gluten free, lactose free, low
or no added sugar, sports nutrition, organic and
fair trade.
Garrett Ingredients: Thornbury, near Bristol and
Swindon 25 employees
R&W Scott: Carluke, near Glasgow
96 employees
Brighter Foods: 179 employees
Haydens bakes premium tarts, pies and
crumbles, Danish pastries, 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 483 employees
Chantilly: Paignton, Devon 37 employees
3
STRATEGIC REPORTSTRATEGIC REPORT25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGD Statement from the Board
2016/17 Performance
Real Good Food has recently
experienced a period of substantial
management change at the executive
leadership and Board level as well
as challenging trading conditions.
These management changes have
principally been instigated following
the recognition that the financial
performance of the business during
the reported period was substantially
below the level that might reasonably
have been anticipated. Poor corporate
governance and controls were also
identified and are being addressed.
While sales grew from £100.4 million
in 2015/16 to £108.2 million in
2016/17, EBITDA dropped from
£5.0 million in 2015/16 to £1.2m in
2016/17 leading to an operating loss
of £(5.8) million.
There were three main reasons for this.
First, there was the adverse effect of
the exchange rate on key commodity
prices following the Brexit vote and
a lag in implementing price increases
to restore margins. Secondly, there
was poor financial control of central
costs. Finally, a significant trading
dispute regarding the non-supply of
contracted sugar to Garrett Ingredients,
remained unexpectedly unresolved by
the year end.
The Board recognised these failings
and as a result has taken the following
actions.
Re-capitalisation
Shortly after the year end, the
acquisition of Brighter Foods took
place. The Board sees this as a
very strong addition to the Group’s
portfolio (details are given on Page 11).
Following this acquisition, it became
clear that the business was seriously
under-funded and was not in a position
to pursue its growth plan, particularly at
Renshaw and Haydens.
In June, a major re-capitalisation was
effected by raising £4.0 million of loans
from two existing shareholders and
£10.0 million of loan notes and equity
from a new shareholder.
There is a peak in capital investment
during the year 2017/18 and so in
July 2017 a further £2.0 million was
invested by the two existing major
shareholders to secure an overdraft
facility with Lloyds Bank plc and a
further £4.0 million has been raised
by all three major shareholders in
September 2017 to ensure that
sufficient working capital is now
available to enable the Company to
execute its strategy.
Right: Renshaw Simply Create.
4
Create Inspire Enjoy
25455-04 - 26-09-2017 - Proof 8STRATEGIC REPORTAnnual Report and Accounts for the year ended 31 March 2017 Left: Haydens iced twisted yum yums.
The major shareholders have
also stated that, while this is not
anticipated, they are prepared to
support as required any short term
working capital shortfall. In September,
following the conclusion of these
cash injections, new agreements on
covenants were concluded with Lloyds
Bank which has confirmed its continued
support for the business for at least 12
months.
Board changes
On 1st August Peter Salter (Non-
Executive Director) resigned and
Pieter Totté (Executive Chairman) and
Dave Newman (Finance Director and
Company Secretary) resigned on
7th August.
The Board has been significantly
strengthened by the appointment of
three new Directors. Judith MacKenzie
(non independent Non-Executive
Director) was appointed on 29th
June and Hugh Cawley (independent
Non-Executive Director) joined on 7th
August. Harveen Rai, was appointed
as Finance Director and Company
Secretary on 14th August
and on 8th August, Christopher
Thomas was appointed as Executive
Director (from Non-Executive) and
Pat Ridgwell assumed the post of
Interim Non-Executive Chairman
(from Deputy Chairman).
These changes were made to improve
the independence and corporate
governance structure of the Board and
to further strengthen the strategic and
turnaround expertise for the Group.
The Board intends to undertake a full
independent review of the Group’s
financial processes and procedures,
corporate governance and controls in
light of the previous failings.
Operating performance
and outlook
Following this challenging period,
the operating businesses are now
focused on cash generation and on
achieving short term targets with the
aim of creating strategic value for all
shareholders in the longer term.
Despite these unsettling times
the Board is confident that the
underlying position of each business
is fundamentally sound. Sales growth
performance is strong–in the first 22
weeks of the FY 2018, like-for-like
revenue is up 10% year-on-year in both
Cake Decoration and Premium Bakery
and up 28% in Food Ingredients though
this latter sector is partly impacted by
increased commodity prices–but it is
recognised that this must be converted
into operating profit and operating cash
flow at the Group level.
Real Good
Vision
Export
Americas, Europe and Australasia
Foodservice
New tailored range for out of home
Brand
Renshaw Simply Create to target the novice user
Frostings and Icing Discs
Export and novice opportunity
For the remainder of the 2017/2018
year, prior to the critical Christmas
trading period, sales prospects continue
to remain positive. The re-capitalisation
and cash injections have enabled the
investment programmes (£11 million
at Haydens on freezing capability and
a new Yum Yum line and £8 million
at Renshaw on new automated icing
discs and soft icing production lines)
to proceed. The delays have, however
deferred the delivery of benefits which
are now anticipated to be fully realised
in FY 2019.
Summary
The Board remains confident in the
future prospects for the Company.
With new leadership, a commitment
to improve the Group’s financial
controls and corporate governance,
the Board believes the business is
now well positioned to capitalise on
the investment being made to improve
profitability and cashflow over the
coming years for the benefit of all
shareholders.
5
STRATEGIC REPORTSTRATEGIC REPORT25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGD Marketplace Review
As a diversified food business, Real Good Food operates in a wide number of food
market sectors and sales channels. With a market-led philosophy, the business
carefully monitors trends which shape business plans. A summary of major trends
in each division is shown below.
Nine out of ten households in the UK bake at home
at some time. The growing interest in home-baking
has been fuelled by the likes of the Great British
Bake-Off which was the most watched television
programme in 2016 with 14 million viewers.
In the last 12 months the £135 million retail cake
decoration market has flattened off with the only area
in any growth being frostings (soft icings) which grew
by 3% value in 2016. (Kantar 12 months 2016) While
the market has benefited from positive attitudes
towards home-baking, there has been relatively little
branded support and innovation helping consumers
become more proficient. Renshaw’s planned launch
of a new retail brand ‘Simply Create’ is designed to
fulfil this opportunity.
Internationally, the market for icings is predicted to
show a compound growth rate of over 4% over the
next five years with America and Europe accounting
for over 80% of the market. (QYR Food Research
Centre)
This division encompasses a wide range of markets
such as sugar, dairy, jams, sauces, coatings and
health and nutrition. Consumer concerns about sugar
are well documented and manufacturers are reacting
accordingly by looking for added value alternatives.
Significantly, consumers who are most concerned
about their sugar consumption spend £5 per week
more on groceries underlining the added value
opportunity.
Both RGF’s acquisitions in this division, Garrett
Ingredients Nutrition and Brighter Foods, have
targeted the growing ‘health’ sector. Health is now
cited as a reason for food choice on 40% of food
occasions in home. ‘Free from’ products are now
bought annually by as many as 80% of households
with markets such as ‘Free From Cereal Bars’
growing at 35% year on year. The overall market for
groceries bought specifically for health reasons is
now worth in excess of £20 billion and is growing at
four times the rate of the total market. (Kantar)
The total market for sweet cakes and pastries is
£2.7 billion and is growing at 2%. Haydens operates
in seven premium categories within this, all of which
recorded positive value growth in 2016 such as
tarts (+4%), sweet buns (+3%), croissants (+5%) and
Danish pastries (+6%). (Kantar)
Haydens’ strategy is also to expand in foodservice
(the Chantilly Patisseries business is totally focused
in this sector) where consumer trends point to
further growth. 93% of consumers now eat out of
home every week in a total market worth £87 billion
and growing at 2.3% in 2016. Two specific relevant
sectors are coffee shops for Haydens and branded
food pubs for Chantilly. Turnover in coffee shops
grew 12% in 2016 and reached £8.9 billion – a
third of consumers now visit a coffee shop at least
four times a week and 20% daily. (Allegra 2016)
Meanwhile the number of branded food pubs has
grown by nearly 50% over the past five years. (CGA
Peach 2016)
6
25455-04 - 26-09-2017 - Proof 8STRATEGIC REPORTAnnual Report and Accounts for the year ended 31 March 2017 Strategy
Group strategy remains
to build long term
sustainable businesses in
each of the three
pillar markets of
Cake Decoration,
Food Ingredients and
Premium Bakery.
GROWTH DRIVERS
Brighter Foods health bars
(acquired April 2017)
Premium sauces and coatings
Bespoke soft fillings
GROWTH DRIVERS
Yum Yums
Broader retail customer base
Develop foodservice
GROWTH DRIVERS
Export
Americas, Europe
and Australasia
Brand
Renshaw Simply Create to
target the novice user
Frostings and Icing Discs
Export and novice opportunity
While acquisitions (e.g. Rainbow Dust in
January 2015 and Brighter Foods in April
2017) have played an important role in
expanding the existing businesses, the focus
going forward will be on investment in the
existing businesses. These investments will
target both growth and efficiency.
INVESTMENT
Site reconfiguration to improve
in-line processing
Automation of disc and
plaque production
New premium quality hot
process frostings
Reduction in
outside warehousing
INVESTMENT
Brighter Foods capacity
Preserves production
and retail jar facility
INVESTMENT
Freezing capability for quality,
efficiency and flexibility
Yum Yum capacity and in-line
processing
Site reconfiguration to
release space for
capacity growth
Read Our Strategy in
Action on page 9
Read Our Strategy in
Action on page 11
Read Our Strategy in
Action on page 13
7
STRATEGIC REPORTSTRATEGIC REPORT25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGD Divisional Business Review
2016/17 Performance
After a disappointing first half, sales
saw good growth in the second half
of the year. Volumes of sugarpaste
and caramels grew though marzipan
sales fell slightly. Sales for export
grew with increasing demand in the US
and the launch of Renshaw ‘Extra’ in
Europe. Rainbow Dust faced increased
competition but still managed to grow
sales by 13% with the Progel colours
range performing particularly strongly.
Overall divisional EBITDA was down
on the previous year by £0.9 million
as a result of increased overheads at
Rainbow Dust and in Europe as well as
set up costs and people investment in
the new Americas operation.
REVENUE
£47.0m
EBITDA*
£6.5m
OPERATING
PROFIT
£5.5m
Forward plans
Product plans at Renshaw include a
drive on discs and plaques from the
new automated line while frostings and
the Simply Create ranges will begin
sale in the final quarter. Significant new
business is anticipated internationally
with the developing American market
and the launch of the brand into
Australia. The Rainbow Dust range will
be relaunched during the year with
a refreshed logo, new designs and
internationally compliant packaging.
12 MONTHS TO MARCH
Revenue
EBITDA*
Operating profit
Operating profit %
2016/2017
£m
2015/2016
£m
47.0
6.5
5.5
11.7%
48.3
7.3
6.5
13.5%
The investment plan at the Renshaw
Crown street site has begun with the
installation of new sugar milling capacity,
the new, automated discs and plaques
line and the hot process frostings for the
Simply Create brand. At Rainbow Dust, the
site is being upgraded to BRC standard
which will open up sales opportunities
within the manufacturing sector.
8
MM
*Represents adjusted EBITDA see note 5 for reconciliation
25455-04 - 26-09-2017 - Proof 8STRATEGIC REPORTAnnual Report and Accounts for the year ended 31 March 2017 Strategy in Action
A real opportunity for
Renshaw to launch a
new brand and teach
novice consumers cake
decorating skills
Renshaw’s products are held in high esteem by professional
cake decorators. With the growing interest in cake decorating
by more novice consumers, the opportunity has been
identified for the launch of a Renshaw brand targeted at less
proficient consumers with products designed to help them
create impressively decorated cakes. This is seen as a major
source of market growth. Extensive consumer research was
undertaken and the new brand, Renshaw Simply Create, will be
introduced into mainstream retailers in 2018. The initial range
will include high quality frostings in a unique tub, easy-to-use,
tasty icings in a carton and pourable icings. All the products
are new to the market and will help less confident consumers
create professional looking results.
The brand will be supported by a television campaign as well as
PR and digital campaigns.
Read about Our Strategy
on page 7
Pictured: Simply Create range of
frostings, ready to roll icing and pour
over icing.
9
STRATEGIC REPORTSTRATEGIC REPORT25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGD Divisional Business Review
R&W Scott started supply of a major
jam contract in September while last
year’s investment will deliver operational
savings. R&W Scott has also worked on a
number of inter-company supply contracts,
particularly to Haydens, which will bring
margin in-house.
2016/17 Performance
Sales revenues grew by over 20% but
this was largely a result of recovering
commodity prices in sugar and dairy.
R&W Scott increased its sales by just
over 5% while Garrett’s pursued a
strategy of retaining customer volume
despite poor margins. Both businesses
suffered gross margin reverses with
Garrett Ingredients particularly suffering
around the sharp and unexpected
currency movements after the Brexit
vote leading to increased commodity
costs. A dispute regarding the supply
of sugar constrained Garrett’s trading
position and remained unresolved at
the year end. As a result the division
traded at an operating loss.
An annual impairment review was
conducted in accordance with IAS38
‘Intangible assets’ and IAS36
‘Impairment of assets’ and this
resulted in an impairment of goodwill
and fixed assets of £3.6 million.
REVENUE
£27.3m
EBITDA*
£(1.6)m
OPERATING
LOSS
£(5.8)m
Forward plans
The acquisition of Brighter Foods
transformed the scale and profitability
of this division and met the objective
of expanding our presence in the
added value health sector. New
supplier relationships following the
trading dispute should enable margin
recovery in sugar from October 2017,
while dairy trading should also present
opportunities during the second half
of the year providing currency trends
stabilise.
12 MONTHS TO MARCH
Revenue
EBITDA* (loss)
Operating (loss)
Operating (loss) %
2016/2017
£m
27.3
(1.6)
(5.8)
(21.2)%
2015/2016
£m
22.7
(0.1)
(0.4)
(2.0)%
10
*Represents adjusted EBITDA see note 5 for reconciliation
25455-04 - 26-09-2017 - Proof 8STRATEGIC REPORTAnnual Report and Accounts for the year ended 31 March 2017 Strategy in Action
The acquisition of an
84.3% share in Brighter
Foods has given Real
Good Food a strong
platform in the growing
health market.
Brighter Foods which was acquired in April 2017 creates
and manufactures snack bars for the healthy snacking
market from its factories in Tywyn, Gwynedd in Mid Wales,
where it is a major local employer with some 179 full-
time staff. The award-winning company produces snacks
which are targeted at areas such as diet control, gluten
free, lactose free, low or no added sugar, sports nutrition,
organic and fair trade. Brighter Foods manufactures both
partner branded products and has its own healthier brands
such as Wild Trail which is stocked in major retailers and
health stores.
Read about Our Strategy
on page 7
Pictured: Brighter Foods snack bars
and its manufacturing
11
STRATEGIC REPORTSTRATEGIC REPORT25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGD Divisional Business Review
2016/17 Performance
Divisional sales grew 15% YOY (partly
a result of the Chantilly acquisition)
though Haydens like for like sales were
over 7% higher. Most of the growth
came from established customers such
as Waitrose and Marks and Spencer.
Performance at Chantilly was frustrated
by capacity constraints with a delay
in the proposed move to a new site
nearby. At Haydens a strengthened
management team was in place for the
final quarter.
EBITDA increased by £0.4 million
despite a delay in price recovery on
raw materials (butter, Haydens’ biggest
raw material by value doubled in price
between July and October 2016) so the
strong Christmas trading period saw
lower margins.
REVENUE
£33.9m
EBITDA*
£1.2m
OPERATING
PROFIT
£0.1m
Forward plans
The factory investment plan at Devizes
will transform the operation with
significant added Yum Yum capacity
and freezing capability which will reduce
costs and increase flexibility. A number
of new products are planned with
the first stage of additional capacity
coming on stream in September and
the second from January 2018. There
is increasing interest in Haydens’
product capabilities from a number of
new retailers. The Haydens Distribution
operation is expected to continue to
perform well with Waitrose and growth
in third party sales. Following the delay
in moving the Chantilly operation, a
review of options will be undertaken
during the autumn of 2017.
12 MONTHS TO MARCH
Revenue
EBITDA*
Operating profit
Operating profit %
2016/2017
£m
2015/2016
£m
33.9
1.2
0.1
0.3%
29.4
0.7
(0.1)
(0.5)%
12
*Represents adjusted EBITDA see note 5 for reconciliation
25455-04 - 26-09-2017 - Proof 8STRATEGIC REPORTAnnual Report and Accounts for the year ended 31 March 2017 Strategy in Action
Haydens will have
the largest and most
efficient yum yum plant
in the world.
Haydens is one of only two main manufacturers in what
is a relatively small market (estimated £13 million) within
the overall indulgent sweet treat category. However, part
of this results from the restricted availability in major
retailers and this represents a significant opportunity.
Haydens’ product has a reputation for quality and a
development programme combined with significant
investment in more automated production will see sales
grow next year. The new line will be able to produce a
range of sizes from standard to mini, different shapes
including twists, as well as having filling and glazing
capability. Yum Yums are set to become the indulgent
treat of choice.
Read about Our Strategy
on page 7
Pictured: Haydens’ new yum yum
manufacturing
13
STRATEGIC REPORTSTRATEGIC REPORT25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGD Corporate Social Responsibility
Real Good Food plc is committed to
ensure that Corporate Social Responsibility
is part of daily business practice.
Corporate Social Responsibility is
integral to the mission of building long
term sustainable businesses in our
three pillar markets.
Each business now has a Corporate
Social Responsibility Plan that has been
built around the Group’s Responsible
Business Framework and is actively
engaged in its fulfilment.
The Responsible Business Framework
that was in put in place last year has
three key objectives:
{ To be the employer of choice
{ To be proactively involved within
our communities and build a strong
reputation for social responsibility
{ To continue to strengthen our
reputation for respect, integrity
and innovation with our customers,
suppliers, employees and partners.
14
The following are three examples which illustrate the type of activity that
our businesses are engaged in against each of those three objectives.
1) Greater employee
involvement
For each business, to be the ‘Employer
of Choice’ and the emphasis is on
training our people and ensuring health
and safety as well as rewarding and
celebrating success.
Renshaw has given particular emphasis
to Health and Safety training, giving
employees recognised qualifications
and increased participation in
commitment to procedure.
115 people completed L2 Food Safety,
113 people completed L2 Health &
Safety in the Workplace and 114 people
went through a site re-induction and
Allergen Awareness Training.
A full programme of Health and Safety
Legislative training has been completed
including DSEAR, Asbestos Awareness,
Legionella, PUWER and IOSH Managing
Safely for the managers on site.
Renshaw also managed to secure
funding for its courses from Skills for
Growth, an organisation which supports
SMEs in the Liverpool area to co-invest
in improving the skills and productivity
of a workforce to enable growth.
2016 saw all of the warehouse
employees and some engineers
complete their refresher fork lift truck
training and they are now registered
with the professional qualification
RTITB/NORS.
A key successful innovation in 2016
has been working with site operators
on the new marzipan disc line to write
their own Safe Operating Procedures
against the introduction of a new format
which includes more detailed training.
This has been a great success, and the
operators have enjoyed being involved
in creating them.
Pictured: Renshaw marzipan operatives.
Renshaw fork lift training. Carluke charity
bike ride. Carluke on the run 10k Run.
25455-04 - 26-09-2017 - Proof 8STRATEGIC REPORTAnnual Report and Accounts for the year ended 31 March 2017 2) Continued involvement in
community participation
All Real Good Food businesses have
good positive links with the community.
R&W Scott has a long heritage of active
support of community projects and are
particularly committed to engaging with
the local community.
Last year they worked with a number
of charities including the Carluke
Development Trust, Carluke Bid, the
Beatson (a local cancer charity and
hospital facility), Macmillan Cancer
Support and Alzheimer’s Scotland.
Various events were held by staff such
as the 10k ‘Carluke on the Run’, and a
10-hour charity bike ride.
They also continue to develop links
with local nurseries and schools; a
number of managers and members of
the senior team gave up their time to
advise on career opportunities within
the food industry as well as support
Career Skills Week at the local high
school, giving interview advice to S5
and S6 year pupils.
The financial year 2017/18 will see
R&W Scott further develop these
relationships, not only through donations
and fundraising events, but also in
volunteering opportunities. Staff are
encouraged to come forward with events
and ideas to be more involved in the
local community and they aim to hold at
least one event per quarter next year.
Pictured: Codford Biogas
Codford Biogas which can handle all
types of food waste, packaged or not.
Through a process called Anaerobic
Digestion, it utilises the waste as a raw
material to create methane, which in
turn is used to generate electricity that
is 100% renewable and exported to the
National Grid. The plant generates 3.7
megawatts of power, which is sufficient
to supply up to 4,000 homes or 10,000
people. This environmentally friendly
solution has helped Haydens with
efficiency, reduced disposal costs and
significantly reduced transport costs.
3) New initiatives
for environmental
performance
All of the Group businesses focus
on building their relationships with
customers and suppliers and are
committed to ensure that Group
operations are managed to be
both ethically and environmentally
responsible.
An environmental initiative of note is
the work that Haydens has completed
with new food waste partner Codford
Biogas.
Historically, Haydens had this food
waste collected and transported to the
Midlands for pig feed. Some waste had
to be separated from its packaging by
hand which was inefficient in terms
of yield and labour. To address this
issue, Haydens now uses the industrial
processor of a food waste plant at
Health and Safety
Safety performance has remained
relatively consistent across the Group
with records being set at all of the major
sites. Renshaw went 180 consecutive
days without a reportable injury, while
R&W Scott went 330 days and Haydens,
at time of writing, are at 550 days
and counting. These are significant
milestones and the result of much pro-
active work across the businesses.
In November 2016 the Group created
a new role of Group Head of Health,
Safety and Environment. This role will
work with all of the operating sites in
helping smaller businesses ensure
legal compliance and continuous
improvement.
Common priorities for
2017/18 include:
✪ Training and competence: a
fundamental for performance and
defence of Employers’ Liability claims.
✪ Managing the safety associated
with the major capital expansions at
Haydens and Renshaw.
✪ Environmental management in terms
of legal compliance, Corporate Social
Responsibility and utilities cost.
✪ Ensuring adequate risk management.
Protecting our staff and our business
from the consequences of accidents
and ill health at all of our operating
sites.
15
STRATEGIC REPORTSTRATEGIC REPORT25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGD Finance Review
Overview
During the audit process for these full
year accounts for the year ended 31
March 2017, a number of issues were
identified, which ultimately resulted
in a significant profit downgrade for
the Company. As a result, the finance
team has been working together with
the Board of Directors, the Company’s
auditor, financial adviser and external
consultants in a comprehensive review
of the Company’s financial position.
Revenue
Group revenue for the 12 months
ending 31 March 2017 was £108.2
million (2016: £100.4 million) which
is an increase of 8% on the revenue to
31 March 2016. This is the result of
growth in the Food Ingredients business
of £4.6 million, and in Premium
Bakery of £4.5 million offset by Cake
Decoration which traded behind prior
year by £1.3 million. The increase of
revenue in Premium Bakery included
a full year effect of the acquisition
of Chantilly which amounted to £2.1
million in the year.
Results of continuing operations
Revenue
Gross Profit
Delivered Margin
EBITDA (adjusted)
Operating Loss/Profit
Operating Loss/Profit %
Loss/Profit before tax*
31 March
2017
£’000s
108,208
26,351
21,383
1,179
(5,819)
(5.4)%
(6,462)
31 March
2016
£’000s
100,439
26,670
21,303
5,043
2,137
2.1%
4,735
*The 2016 Profit before tax of £12,890k is made up of Continuing Operations of £4,735k and
Discontinued Operations of £8,155k
16
Above: Brighter Foods Wild Trail snack bars.
25455-04 - 26-09-2017 - Proof 8STRATEGIC REPORTAnnual Report and Accounts for the year ended 31 March 2017
Left: Haydens’ iced twisted yum yums
Profit measure on operations
Gross profit on the continuing
businesses for the overall Group was
broadly flat at £26.4 million (2016:
£26.7 million). At 19.8% of revenue
gross margin was lower than the 21%
reported in 2016. This reduction
in margin has reflected higher than
anticipated commodity ingredient costs,
in part due to an underestimation of
the impact of currency volatility post-
Brexit, compounded in some cases by a
later than expected price recovery from
customers following the increase in raw
material costs.
The operating loss for the 12 months
to 31 March 2017 was £(5.8) million,
down significantly from a profit of £2.1
million in 2016.
The operating loss in the year of £(5.8)
million is reported after the impairment
charge of £4.1 million, depreciation
charge of £2.4 million, amortisation of
£0.4 million and significant items of
£0.1 million.
An annual impairment review has been
conducted and this resulted in an
impairment of goodwill of £1.6 million
(see note 15) and an impairment
of fixed assets of £2.5 million
(see note 17)
This has resulted in a statutory loss
before tax of £6.5 million (2016: profit
of £12.9 million) giving a basic loss per
share of 8.50p in 2017 against an EPS
of 18.36p in the prior year (see note 14).
Right: Simply Create ganache
17
STRATEGIC REPORTSTRATEGIC REPORT25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGD Finance Review (continued)
Cash flow and net debt
Given the factors described above,
insufficient cash was generated to fund
the Company’s strategic investment
programme and further borrowings
were secured. Investment in tangible
and intangible assets in the year
amounted to £11.5 million which led
to the Company’s increasing net debt
by £11.2 million (2016: £5.1 million)
to £16.2 million as at 31 March 2017.
This led to a worsened ratio of net debt
to EBITDA from 1.0 in 2016 to 13.7 in
2017.
Working Capital (inventories, trade and other
receivables, trade and other payables)
Net Borrowings (incl cash)
Net Debt/EBITDA
31 March
2017
£’000s
14,096
16,231
13.7
31 March
2016
£’000s
16,156
5,066
1.0
Capital cancellation
and dividend
Following the capital cancellation of the
parent company share premium account
and following the Company statement
at the AGM, the Directors paid an
interim dividend in the
year of 0.04p in January 2017
(2016 – £Nil).
The Directors are not intending to
recommend payment of a final dividend
in respect of the 12 months ended
31 March 2017 (2016 – £Nil).
Re-financing
Following the year end, the Company
undertook a major re-capitalisation
exercise by raising loans from existing
shareholders and loan notes and equity
from a new shareholder. Together with
existing loan facilities the Company’s
cash position has now been stabilised
and this combination of sources has
injected a total of £20.0 million of
funds into the 2017/18 FY (see
notes 22 and 33).
The Board is now confident that
sufficient working capital is available
to enable the Company to complete its
investment programme and execute
its growth strategy.
Outlook
A key focus for the year is to ensure
that, with stronger financial controls
and improved corporate governance,
the management team supports the
planned growth of the businesses, to
increase shareholder value and returns.
18
Above: Brighter Foods Wild Trail snack bars.
25455-04 - 26-09-2017 - Proof 8STRATEGIC REPORTAnnual Report and Accounts for the year ended 31 March 2017 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. The key performance indicators, all based on continuing
operations, are set out below. The Board intends to review these Key Performance Indicators in the coming
year with a greater emphasis on targets for free cash flow generation.
REVENUE GROWTH
Revenue is calculated for continuing
business 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.
DEBT COVER
Debt cover is calculated by dividing total Net
Debt by continuing EBITDA.
HEALTH & SAFETY SCORE
Health & Safety score represents an average
score across the sites and is measured
against internal standards generated by an
external consultant. Figures are quoted for
calendar years.
COMMENT
Revenue in the year has increased by
8% driven by Premium Bakery and Food
Ingredients
£108.2m
£110.2m
£104.6m
£100.4m
2017
2016
2015
2014
£5.0m
£5.3m
£4.9m
2016
2015
2014
EBITDA of £1.2 million reflecting both
difficult market conditions, including
commodity price increases due to currency
volatility, and increased overhead costs
£30.1m
£31.1m
Net debt in the year has increased to £16.2
million to fund the Group’s investment
strategies
£5.1m
2016
2015
2014
£1.2m
2017
£16.2m
2017
13.7
1.0
2016
2017
5.6
6.3
2015
2014
88%
90%
82%
88%
2017
2016
2015
2014
As a result of increased net debt the
current net debt/EBITDA cover stands at
13.7
For 2018 the Group will change to an
industry HSE standard measurement of
Accident Frequency Rate to give a more
comparable measurement with other
industries
19
STRATEGIC REPORTSTRATEGIC REPORT25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGD Board of Directors
Patrick Ridgwell
Executive Interim Chairman
Assumed role of Interim Chairman 8 August 2017
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 Limited.
Christopher Thomas
Executive Director
Assumed role of Executive Director 8 August 2017
Chris qualified as a chartered accountant in 1969. In
1973 he joined Breakmate, a vending business, which
was admitted to the 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.
Harveen Rai
Finance Director and Company Secretary
(appointed 7 August 2017)
Harveen has 20 years of experience, predominately in
fast-moving consumer goods listed companies. She was
previously Chief Financial Officer at Arzyta UK Holdings
Limited (“Arzyta”), where she was involved in implementing
and streamlining the processes and controls of the company.
During her time at Arzyta, Harveen was also involved in
developing and strengthening the regional finance teams to
grow in line with the needs of the business. Prior to her time
at Arzyta, Harveen spent over ten years working at LSG Sky
Chefs, a global airline catering company which is owned by
Lufthansa. Harveen is a member of the Chartered Institute
of Management Accountants.
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.
Pieter Totté
Executive Chairman
(resigned 7 August 2017)
David Newman
Finance Director and Company Secretary
(resigned 7 August 2017)
Peter Salter
Non-Executive Director
(resigned 7 August 2017)
*Resignation and appointment dates as registered at
Companies House
Judith Mackenzie
Non-Executive Director
(appointed 21 July 2017)
Hugh CL Cawley
Non-Executive Director
(appointed 7 August 2017)
Judith joined Downing LLP in October 2009 and is Partner
and Head of Public Equity. Previously she was a partner at
Acuity Capital, a buy-out from Electra Private Equity, where
Judith managed small company assets. Prior to Acuity, she
spent seven years with Aberdeen Asset Management Growth
Capital as co-Fund Manager of the five Aberdeen VCTs,
focusing on technology and media investments in both the
public and private arenas. Judith has held a number of public
and private directorships.
Hugh has extensive public company experience with a
particular focus on helping businesses facing a major
strategic challenge or undergoing significant corporate
change. After working for Procter & Gamble and ICI plc in
the early part of his career, his more recent public company
executive roles have included spells with S Daniels PLC,
Dawson Holdings PLC, office2office plc and, most recently,
Driver Group plc. Hugh is also a founding member of the
advisory board of the Confucius Institute for Business at the
University of Leeds.
20
25455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR GOVERNANCE
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 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.
Harveen Rai
Finance Director and
Company Secretary
Harveen has 20 years of experience,
predominately in fast moving consumer
goods listed companies. She was previously
Chief Financial Officer at Arzyta UK Holdings
Ltd (“Arzyta”), Harveen is a member of
the Chartered Institute of Management
Accountants.
21
25455-04 - 26-09-2017 - Proof 8OUR GOVERNANCEwww.realgoodfoodplc.com Stock Code: RGDOUR GOVERNANCE Report of the Directors
The Directors present their report and
the audited financial statements for the
12-month period ended 31 March 2017
Corporate governance
The Directors acknowledge the
importance of the principles set out
in the UK Corporate Governance Code
2012. The UK Corporate Governance
Code 2012 is not compulsory for AIM
quoted companies and has not been
complied with. However, the Directors
apply the principles as considered
appropriate given the size and nature
of the Company in accordance with the
UK Corporate Governance Code 2012,
and the more relevant QCA Corporate
Governance Code for Small and Mid-
Size Quoted Companies 2013.
On 21 July the Board was strengthened
by the appointment of Judith MacKenzie
(non-independent Non-Executive
Director) and on 7 August of Hugh
Cawley (independent Non-Executive
Director). On 7 August, Christopher
Thomas was appointed as Executive
Director (from Non-Executive) and
Pat Ridgwell assumed the post of
Interim Non-Executive Chairman (from
Deputy Chairman). Harveen Rai was
appointed as Finance Director on
7 August. On 7 August Peter Salter
resigned as Non-Executive Director,
Pieter Totte resigned as Executive
Chairman of the Company and David
Newman resigned as Finance Director.
These changes were made to improve
the independence and corporate
governance structure of the Board.
The Board is clear that the standards
of Corporate Governance and reporting
have historically been below those
which investors might reasonably
expect and is committed to rectifying
this important aspect of operations
and disclosure. The Board therefore
intends to appoint external advisers to
conduct a full review of the Company’s
Corporate Governance and Financial
Reporting procedures
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
Company 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 Directors have considered the
Group’s business activities together
with the factors likely to affect its future
development and performance. These
assumptions have been projected and
shared with the Company’s bank and
advisers.
The Company has now successfully
renegotiated new banking covenants
and confirmed the support of the
bank for the next 12 months. The
principal shareholders of the Group
have shown considerable support for
the working capital requirements and,
22
25455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR GOVERNANCE having carefully considered the liquidity
of the Company in line with future
performance, the Directors believe that
there are sufficient resources in place
for the Group to meet its liabilities and
that the Group is well placed to manage
its business risks. The Directors believe
the Group is a going concern and
the financial statements have been
prepared and submitted on that basis.
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, and
{ That each 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.
Principal continuing
activities
The principal activities of the Group
are the sourcing, manufacture and
distribution of food to the retail and
industrial sectors.
Business review and future
developments
These topics are covered in detail
within the Statement from the Board,
Divisional Reviews and Finance
Director’s Report on pages 4 – 24.
Non-current assets
Details of changes in non-current
assets are given in notes 15, 16 and
17 to the financial statements.
Directors
Subsequent to the year end P Totté,
P Salter and D P Newman resigned their
positions as Directors of the Company
and H Rai, J Mackenzie and H Cawley
were appointed to the Board; details
are given on page 20.
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
There were the following substantial
interests (3% or more) in the Company’s
ordinary share capital:
2
31 March
2017
31 March
2016
2,816,124
P W Totté*
2,816,124
P G Ridgwell** 22,502,354 22,502,354
181,000
P C Salter
290,363
C O Thomas
24,225
D P Newman
—
J d’Unienville
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
891,124 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 11 to the financial
statements.
31 March 2017
Napier Brown Ingredients
Limited
Omnicane International
Investors Limited
28 September 2017
Napier Brown Ingredients
Limited
Omnicane International
Investors Limited
Downing LLP
% Holding
in Ordinary
Share Capital
31.9%
29.7%
% Holding
in Ordinary
Share Capital
28.2%
26.3%
10.0%
Directors’ indemnities
The Company has paid £9,450 (2016
– £9,987) in respect of Directors’ and
Officers’ Indemnity Insurance.
23
25455-04 - 26-09-2017 - Proof 8OUR GOVERNANCEwww.realgoodfoodplc.com Stock Code: RGDOUR GOVERNANCE
Report of the Directors (continued)
Financial instruments
The Group’s financial instruments
comprise bank term loans and a
revolving credit facility, 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 to its
commodity purchases which is offset
in part by foreign currency sales. 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 24 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
Executive 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
£3,689 (2016 – £5,568). No political
donations were made during the current
or previous financial period.
Research and development
During the period the Group incurred
costs 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. Of these
costs £291k (2016 – £nil) has been
capitalised as an intangible asset in
line with the Group’s accounting policy
and IAS 38.
This report was approved by the Board
on 28th September 2017 and is signed
on its behalf by
C O Thomas
Executive Director
H Rai
Finance Director
24
25455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR GOVERNANCE Audit Committee Report and Remuneration Committee Report
Audit Committee Report
Between April 2016 and August 2017,
the Audit Committee consisted of Peter
Salter (Chairman) and Christopher
Thomas. Following Peter Salter’s
resignation on 1 August 2017, the
Committee now comprises Hugh Cawley
(Chairman) and Christopher Thomas.
Whilst the Committee is scheduled to
meet formally only twice a year with
the auditors, in relation to the annual
and interim accounts, the Chairman of
the Committee also maintains a close
dialogue with them throughout the
year, to ensure they remain apprised
of relevant events. Executive Directors
are ordinarily present at Committee
meetings by invitation only, with the
Finance Director ordinarily attending.
The Committee’s brief is to monitor
the integrity of the audited financial
statements of the Group, to consider
and determine any significant financial
judgements contained in them and
to review all published financial
statements on behalf of the Board.
The Committee is also responsible
for the independent monitoring of the
systems of internal control, compliance,
accounting policies, and keeping
under review, including seeking written
confirmation annually from them, the
independence and objectivity of the
external auditor (including a review of
any non-audit services provided to the
Group).
In light of recent disclosures, a review
of the effectiveness of the Corporate
Governance and Financial Reporting
procedures is to be undertaken, and the
effective operation of the Committee
will be encompassed within that review.
Remuneration
Committee Report
Between April 2016 and August 2017,
the remuneration committee consisted
of Peter Salter (Chairman) and Pat
Ridgwell. Peter Salter resigned and
Judith MacKenzie assumed the Chair of
the Remuneration Committee on
7 August 2017. Pat Ridgwell and
Jacques d’Unienville are also members
of the Remuneration Committee.
The current Board acknowledges
failings in the process of determining
and reporting of historic remuneration
of Directors and is committed
to improving governance and
accountability going forward.
As such the Committee believes that its
primary role is to:
Determine and agree with the Board
the framework of remuneration for the
group of Executives within its remit;
Ensure that effective performance
management systems are in place
to assess the performance of the
Executives and the Company;
Set the remuneration for the plc
Directors, selected senior management
and the Company Chairman;
Oversee the implementation and
operation of short term and long term
incentive arrangements for senior
management;
Agree the policy for authorising claims
for expenses from the Chairman and
plc Directors.
In future reports the Directors’
remuneration policy will be clearly
defined, aiming to align the interests
of all shareholders and management.
The framework will recognise the need
to recruit, retain and appropriately
incentivise high calibre individuals to
deliver the strategy set by the Board.
The Report will outline the base
salary, pension, benefits and long term
incentive plans of all Board Executives.
Non-Executive Director
Remuneration
Subject to annual re-election by
shareholders, Non-Executive Directors
are appointed for an initial term of
three years. Subsequent terms of
three years may be granted. The
appointment and the Remuneration
of the Non-Executive Directors are
matters reserved for the full Board. The
appointments are terminable by either
party with one month’s written notice.
The Non-Executive Directors are no
longer eligible to participate in the
Company’s performance related bonus
plan, long term incentive plans or
pension arrangements. Full terms
and conditions for each of the Non-
Executive Directors are available
at the Company’s registered office
during normal business hours and will
be available at the AGM prior to the
meeting and during the meeting.
It is the intention of the current
Remuneration Committee to review
the long term incentives of key
management during the coming year.
25
25455-04 - 26-09-2017 - Proof 8OUR GOVERNANCEwww.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 which
comprise the Group and Parent
Company Statements of Financial
Position, the Group and Parent
Company Statements of Comprehensive
Income, the Group and Company Cash
Flow Statements, the Group and Parent
Company Statement of Changes in
Equity and the related notes numbered
1 to 33.
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 members, 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 members
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
members as a body, for our audit work,
for this report, or for the opinions we
have formed.
Respective responsibilities
of Directors and auditor
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
A description of the scope of an
audit of financial statements is
provided on the Financial Reporting
Council’s website at www.frc.org.uk/
auditscopeukprivate.
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 2017 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, based on the work
undertaken in the course of our audit:
{ the information given in the Strategic
Report and the Directors’ Report
for the financial year for which the
financial statements are prepared
is consistent with the financial
statements; and
{ the Directors’ Report and Strategic
Report have been prepared in
accordance with applicable legal
requirements.
Matters on which we
are required to report by
exception
In light of the knowledge and
understanding of the Company and its
environment obtained in the course
of the audit, we have not identified
material misstatements in the Strategic
Report or the Directors’ Report.
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.
Darren Rigden
Senior Statutory Auditor
For and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
Maidstone
28 September 2017
26
25455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS Consolidated Statement of Comprehensive Income
Year ended 31 March 2017
Year ended 31 March 2017
Year ended 31 March 2016
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Notes
Total
£’000s
REVENUE
Cost of sales
GROSS PROFIT
Distribution costs
Administration expenses
Impairment Charge
Significant items
OPERATING (LOSS)/PROFIT
Fair value gain on contingent consideration
Finance costs
Other finance costs
Profit on disposal of discontinued operations
(LOSS)/PROFIT BEFORE TAXATION
Income tax credit/(expense)
Tax on discontinued business
Income tax on significant items
(LOSS)/PROFIT ATTRIBUTABLE TO THE EQUITY
HOLDERS OF THE PARENT
OTHER COMPREHENSIVE LOSS
Items that will not be reclassified to profit or loss
Foreign exchange differences on translation
Actuarial (losses) on defined benefit plan
Income tax relating to components of other comprehensive loss
OTHER COMPREHENSIVE LOSS
TOTAL COMPREHENSIVE (LOSS) FOR THE YEAR ATTRIBUTABLE
TO THE EQUITY HOLDERS OF THE PARENT
Earnings per share
– basic
– diluted
4
6
8
9
10
13
13
14
108,208
(81,857)
26,351
(4,968)
(23,006)
(4,109)
(87)
(5,819)
—
(427)
(216)
—
(6,462)
618
—
(135)
(5,979)
(48)
(1,847)
351
(1,544)
(7,523)
(8.50)p
(8.50)p
The notes on pages 34 to 84 form part of these financial statements.
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
108,208
(81,857)
26,351
(4,968)
(23,006)
(4,109)
(87)
(5,819)
—
(427)
(216)
—
(6,462)
618
—
(135)
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
—
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
(5,979)
4,409
8,411
12,820
(48)
(1,847)
351
(1,544)
—
(484)
35
(449)
—
—
—
—
—
(484)
35
(449)
(7,523)
3,960
8,411
12,371
(8.50)p
(8.50)p
6.31p
5.83p
12.05p
11.13p
18.36p
16.96p
27
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS Consolidated Statement of Changes in Equity
Year ended 31 March 2017
Issued
Share
Capital
£’000s
Share
Premium
Account
£’000s
Share
Option
Reserve
£’000s
FX Translation
Reserve
£’000s
Retained
Earnings
£’000s
Total
£’000s
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 distributions to owners of the Group
Shares issued in the year
Share based payment expense
Total contributions by and distributions to owners of the Group
Balance as at 31 March 2016
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 distributions to owners of the Group
Shares issued in the year
Deferred Tax on Share based payments
Dividends paid
Cancellation of share premium
Total contributions by and distributions to owners of the Group
Balance as at 31 March 2017
1,392
71,272
577
—
—
—
10
—
10
1,402
—
—
—
9
—
—
—
9
1,411
—
—
—
103
—
103
71,375
—
—
—
19
—
—
(71,272)
(71,253)
122
—
—
—
—
15
15
592
—
—
—
—
(177)
—
—
(177)
415
—
—
—
—
—
—
—
—
—
(48)
(48)
—
—
—
—
—
(48)
8,678
81,919
12,820
(449)
12,371
12,820
(449)
12,371
—
—
—
21,049
(5,979)
(1,496)
(7,475)
—
—
(28)
71,272
71,244
84,818
113
15
128
94,418
(5,979)
(1,544)
(7,523)
28
(177)
(28)
—
(177)
86,718
28
25455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS Company Statement of Changes in Equity
Year ended 31 March 2017
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
Total contributions by and distributions to owners of the Company
Balance at 31 March 2016
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 Company, recognised directly in equity
Contributions by and distributions to owners of the Group
Shares issued in the year
Dividends paid in year
Deferred Tax on Share based payments
Cancellation of share premium
Total contributions by and distributions to owners of the Company
Balance at 31 March 2017
Issued
Share
Capital
£’000s
1,392
—
1,392
—
—
—
10
—
10
1,402
—
—
—
9
—
—
9
1,411
Share
Premium
Account
£’000s
71,272
—
71,272
—
—
—
103
—
103
71,375
—
—
—
19
—
(71,272)
(71,253)
122
Share
Option
Reserve
£’000s
577
—
577
—
—
—
—
15
15
592
—
—
—
—
(177)
—
(177)
415
Retained
Earnings
£’000s
(17,163)
1,500
(15,663)
6,004
(449)
5,555
—
—
—
(10,108)
(5,963)
(1,496)
(7,459)
—
(28)
—
71,272
71,244
53,677
Total
£’000s
56,078
1,500
57,578
6,004
(449)
5,555
113
15
128
63,261
(5,963)
(1,496)
(7,459)
28
(28)
(177)
—
(177)
55,625
The notes on pages 34 to 84 form part of these financial statements.
29
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS Consolidated Statement of Financial Position
Year ended 31 March 2017
NON-CURRENT ASSETS
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset
CURRENT ASSETS
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
TOTAL ASSETS
CURRENT LIABILITIES
Bank overdrafts
Trade and other payables
Borrowings
Financial instrument
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
Foreign exchange translation reserve
Retained earnings
TOTAL EQUITY
Notes
31 March
2017
£’000s
31 March
2016
£’000s
15
16
17
19
20
21
23
22
24
22
19
30
25
26
26
26
26
69,416
1,155
23,932
1,435
95,938
13,323
16,016
233
464
30,036
125,974
619
15,243
11,375
146
—
27,383
4,701
1,278
5,894
11,873
39,256
86,718
1,411
122
415
(48)
84,818
86,718
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
These financial statements were approved by the Board of Directors and authorised for issue on 28 September 2017.
They were signed on its behalf by:
C O Thomas
Executive Director
H Rai
Finance Director
The notes on pages 34 to 84 form part of these financial statements.
30
25455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS
Company Statement of Financial Position
Year ended 31 March 2017
NON-CURRENT ASSETS
Investments
Property, plant and equipment
Deferred tax asset
Intangible assets
CURRENT ASSETS
Trade and other receivables
Current tax asset
TOTAL ASSETS
CURRENT LIABILITIES
Bank overdraft
Trade and other payables
Borrowings
NON-CURRENT LIABILITIES
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
31 March
2017
£’000s
31 March
2016
£’000s
18
17
19
16
21
23
22
30
19
22
25
26
26
26
64,594
2,369
1,278
227
68,468
36,122
1,470
37,592
106,060
210
41,827
1,000
43,037
5,894
4
1,500
7,398
50,435
55,625
1,411
122
415
53,677
55,625
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
*The loss after tax of the Company was £5,963k (2016: Profit £6,004k)
These financial statements were approved by the Board of Directors and authorised for issue on 28th September 2017.
They were signed on its behalf by:
C O Thomas
Executive Director
H Rai
Finance Director
The notes on pages 34 to 84 form part of these financial statements.
31
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS Consolidated Cash Flow Statement
Year ended 31 March 2017
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss)/Profit before taxation
Finance and other finance costs
Share based payment expense
Depreciation of property, plant and equipment
Impairment charge
Profit on disposal of Napier Brown
Fair value gain on contingent consideration
Past service gain on pension
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
Dividends paid
Repayment of borrowings
Repayment of loans
Net movements on revolving credit facilities
Advances net of repayments on 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
The notes on pages 34 to 84 form part of these financial statements.
32
12 months ended
31 March 2017
£’000s
12 months ended
31 March 2016
£’000s
(6,462)
643
—
2,434
4,109
—
—
(1,330)
365
(241)
(963)
1,021
(310)
1,497
1,004
(237)
(427)
340
—
(686)
(10,820)
—
—
(11,506)
28
(28)
—
(688)
5,628
4,074
9,014
(2,152)
1,997
(2,152)
(155)
464
(619)
(155)
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
25455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS
Company Cash Flow Statement
Year ended 31 March 2017
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Loss before taxation
Finance costs
Impairment charge
Share based payment expense
Past service (gain)/loss on pension
Depreciation of property, plant and equipment and intangibles
Operating Cash Flow
Decrease in receivables
Pension contributions
(Decrease)/increase in payables
Cash generated from operations
Interest paid
Income taxes paid
Net Cash from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Intangible Assets
Purchase of property, plant and equipment
Net cash used in investing activities
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in period
Dividend Payment
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
The notes on pages 34 to 84 form part of these financial statements.
12 months ended
31 March 2017
£’000s
12 months ended
31 March 2016
£’000s
(6,935)
398
1,425
—
(1,330)
571
(5,871)
63,627
(310)
(55,058)
2,388
(182)
(234)
1,972
(249)
(234)
(483)
28
(28)
(750)
(750)
739
(949)
739
(210)
--
(210)
(210)
(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)
33
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS Notes to the Financial Statements
Year ended 31 March 2017
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).
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
business in year to March 2016, as described in note
31, gave 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 been
adopted by the European Union. The directors have
assessed the potential impact of IFRS 15 and do not
expect that the adoption of this standard will have a
material impact on the financial statements of the
Group in future periods. IFRS 16 may have an impact
on the measurement and treatment of operating
leases and the related disclosures. As at 31 March
2017 the estimated impact of the transition to IFRS
16 would be to increase tangible fixed assets and
liabilities by approximately £1.9m The impact on the
profit and loss account is not expected to be material
to the 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 16 to 18. In addition, note 22 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 22 to the financial
statements, 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
25455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 2. Significant accounting policies
(continued)
The Directors believe 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 result for the financial
year, of the holding company, as approved by the
Board, was £(5,963)k (2016 – £6,004k).
c) 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. Sales are
recorded 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 and 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.
d) 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 applied or substantially applied 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.
35
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 2. Significant accounting policies
(continued)
e) 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.
f) 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 30 to the financial statements.
g) Property, plant and equipment
Property, plant and equipment are 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 assets’
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.
h) Intangible assets
Intangible assets consist of computer software,
development costs and business relationships
software is considered to have an economic life of five
years; business relationships which are considered
to have an estimated useful economic life of two
years and development which have been internally
generated and capitalised in accordance with IAS 38
which have an estimated commercial life of 5 years.
All of these assets are amortised on a straight-line
basis over these periods. The average remaining
life of intangible assets is three years (2016 –
three years). The charge for the year is included in
administration expenses within the Statement of
Comprehensive Income.
i) 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.
j) Investments
Investments in the Company accounts relate to
investments in subsidiaries and are stated at cost
less provision for any impairment in value.
k) 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
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 2. Significant accounting policies
(continued)
l) 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.
m) 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 only when they have a short maturity
of three months or less at the date of acquisition.
n) 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.
o) Trade payables
Trade payables are recognised initially at fair value
and are subsequently measured at amortised cost
using the effective interest method.
p) 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.
q) 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 arising from
transaction in the year are presented in the Statement
of Comprehensive Income within the administration
expense heading.
Foreign currency differences on the translation
of foreign subsidiaries are included in other
comprehensive income and are shown as a separate
reserve on the Statement of Financial Position.
The Group mitigates foreign exchange risk by taking
out forward exchange rate contracts. These are
recognised at fair value on the Statement of Financial
Position at the year end.
r) 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.
IFRS 3 “Business Combinations” requires that
goodwill arising on the acquisition of subsidiaries is
capitalised and included in intangible assets. IFRS
3 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.
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.
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
remeasured 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.
37
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 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
significantly to 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 2% growth rate. A discount factor, based upon the
Group’s weighted average cost of capital, which has
been increased to reflect the increased risk of the
Company being listed on AIM rather than the full
market, is applied to obtain a current value (‘value in
use’).
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.
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.
Further details are set out in note 15.
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 5%. Changes to the discount rate of 0.5% would
result in a change in the scheme liabilities of (7)%
and a 0.5% movement in the rate of inflation would
change the liabilities of the scheme by 2%.
38
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 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.
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. There is also 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.
Full details of these assumptions, which are based
on advice from the Group’s actuaries, are set out in
note 30.
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 included within significant items only 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.
e) Going concern
The Directors have considered the Group’s business
activities together with the factors likely to affect
its future development and performance. These
assumptions have been projected and shared with the
Company’s bank and advisers.
The Company has now successfully renegotiated
new banking covenants and confirmed the support
of the bank for the next 12 months. The principal
shareholders of the Group have shown considerable
support for the working capital requirements
and, having carefully considered the liquidity of
the Company in line with future performance, the
Directors believe that there are sufficient resources
in place for the Group to meet its liabilities and that
the Group is well placed to manage its business risks.
The Directors believe the Group is a going concern
and the financial statements have been prepared and
submitted on that basis.
39
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 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.
12 months ended 31 March 2017
Total revenue
Revenue – internal
External revenue
Underlying adjusted EBITDA (see table below)
Operating profit before Head Office
Head Office and consolidation adjustments
Impairment Charge
Significant items
Operating profit/(loss)
Net finance costs
Pension finance income
Profit/(loss) before tax
Tax
Profit/(loss) after tax as per
comprehensive statement of income
Cake
Decoration
£’000s
Food
Ingredients
£’000s
Premium
Bakery
£’000s
Head Office and
Consolidation
£’000s
Total
Group
£’000s
51,042
(4,053)
46,989
6,528
5,758
—
(264)
5,494
(129)
5,365
(1,280)
4,085
31,667
(4,340)
27,327
(1,564)
(2,049)
(3,589)
(141)
(5,779)
(34)
(5,813)
763
(5,050)
33,892
—
33,892
1,167
192
—
(95)
97
(83)
14
(29)
(15)
—
—
—
—
—
(5,524)
(520)
413
(5,631)
(181)
(216)
(6,028)
1,029
(4,999)
116,601
(8,393)
108,208
6,131
3,901
(5,524)
(4,109)
(87)
(5,819)
(427)
(216)
(6,462)
483
(5,979)
Included in the Premium Bakery segment, one single customer accounts for 19.8% of the continuing Group’s external sales for the year ended 31 March 2017.
Geographical segments
The Group earns revenue from countries outside the United Kingdom, but as these only represent 11.6% 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.
40
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 5. Segment reporting (continued)
Reconciliation of underlying EBITDA
to operating profit
Operating profit/(loss)
Significant items
Impairment Charge
Depreciation
Amortisation
Underlying adjusted EBITDA
31 March 2017
Segment assets
Segment liabilities
Net operating assets
Non-current asset additions
Depreciation
Amortisation
Cake
Decoration
£’000s
Food
Ingredients
£’000s
Premium
Bakery
£’000s
5,494
264
—
719
51
6,528
(5,779)
141
3,589
469
16
(1,564)
Cake
Decoration
£’000s
Food
Ingredients
£’000s
86,663
11,411
75,252
3,904
719
51
18,654
8,391
10,263
2,525
469
16
97
95
—
696
279
1,167
Premium
Bakery
£’000s
16,885
9,044
7,841
4,175
696
279
Head Office
& Consol
Total
£’000s
(5,631)
(413)
520
550
22
(4,952)
Head Office
& Consol
Discontinued
£’000s
3,772
10,410
(6,638)
233
550
22
Total
Group
£’000s
(5,819)
87
4,109
2,434
368
1,179
Total
Group
£’000s
125,974
39,256
86,718
10,838
2,434
368
41
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 5. Segment reporting (continued)
12 months ended
31 March 2016
Cake
Decoration
£’000s
Food
Ingredients
£’000s
Total revenue
Revenue – internal
External revenue
Underlying adjusted EBITDA
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
49,231
(933)
48,298
7,350
6,579
(81)
6,498
3,267
(270)
—
9,495
(1,377)
—
8,118
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
Discontinued
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
13,237
—
13,237
(15)
(84)
—
—
(84)
—
(906)
—
9,145
8,155
256
—
8,411
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
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.
42
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 5. Segment reporting (continued)
Inter-segment sales are charged at prevailing market rates.
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
Food
Ingredients
£’000s
Premium
Bakery
£’000s
Discontinued
£’000s
Unallocated
£’000s
Total
Group
£’000s
85,133
19,763
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
—
—
—
—
—
—
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
1,917
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.
43
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 6. Significant items
Continuing operations
Head Office relocation following Napier disposal
Past service gain on pensions (note 30)
Management restructuring
Acquisition and legal costs
Subtotal
Taxation on significant items
Total significant items
2017
£’000s
2016
£’000s
—
1,155
(419)
(823)
(87)
(135)
(222)
(446)
—
(119)
(380)
(945)
113
(832)
Following a recent review by the Plan’s legal advisors, it was identified that for members who left pensionable service before 22 June 1995, all pension increases are at the
sole discretion of the Company. Historically, an allowance for future pension increases of 3% pa has been included in the defined benefit obligation. The past service gains
of £1,155k (actual gain of £1,584k less costs of service gains £254k and ETV exercise costs of £175k) reflects the value of this discretionary option, rather than the fixed
3% pa assumed historically.
The company incurred acquisition and legal costs, these costs consists of both the successful acquisition of Brighter Foods (April 2017) but also costs relating to abortive
acquisitions.
The majority of the restructuring cost relate to the Cake Decoration pillar.
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
Audit related assurance
Tax compliance services
Tax advisory services
Other assurance services
Total fees paid to auditor
44
12 months
ended
31 March
2017
£’000s
12 months
ended
31 March
2016
£’000s
255
42
21
35
70
423
216
–
28
28
56
328
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS
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
Impairment Charge
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 loss
Notes
12
17
16
6
15, 17
28
28
21
31 March
2017
£’000s
108,208
31,245
53,588
2,434
365
87
4,109
409
436
1,839
(92)
19
19,588
114,027
(5,819)
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
* The costs incurred in research and development are not capitalised where they do not meet the definitions of an intangible asset in accordance with IAS 38.
45
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 12 months
ended
31 March
2017
£’000s
12 months
ended
31 March
2016
£’000s
409
—
18
427
427
—
467
906
11
1,384
478
906
31 March
2017
£’000s
31 March
2016
£’000s
754
(538)
216
738
(547)
191
9. Finance costs
Interest on bank loans and overdrafts
Loan note redemption fee
Interest on obligations under finance leases
Continuing business
Discontinued business
10. Other finance costs
Interest on pension scheme liabilities
Interest on pension scheme assets
46
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 11. Directors’ remuneration
Fees
Executive salaries and benefits
The emoluments of the Directors for the period were as follows:
31 March
2017
£’000s
31 March
2016
£’000s
131
425
556
131
757
888
M J McDonough (to Sept 2015)
P W Totté
D P Newman
P G Ridgwell
P C Salter
J M d'Unienville
C O Thomas
Short Term
Employee
Benefits*
£’000s
Share Based
payments
£’000s
Post Employment
Benefits
£’000s
31 March
2017
£’000s
31 March
2016
£’000s
2
237
164
30
36
25
40
534
—
—
—
—
—
—
—
—
—
—
22
—
—
—
—
22
2
237
186
30
36
25
40
556
435
223
102
30
36
25
40
891
* 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 29.
The Company Directors disclosed are considered as key management personnel.
47
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS
11. Directors’ remuneration (continued)
Directors’ interests in share options:
Option Type
Date of
Grant
Number of
options at
31 March
2017
Number of
options at
31 March
2016
P W Totté
Unapproved options 2009
Unapproved options 2010
July 2009
May 2010
1,000,000
1,000,000
142,857
142,857
Unapproved options 2011
March 2011
3,817,725
3,817,725
P G Ridgwell Unapproved options 2009
Unapproved options 2010
P C Salter
Unapproved options 2009
Unapproved options 2010
C O Thomas Unapproved options 2009
Unapproved options 2010
D P Newman Approved options 2009
Approved options 2010
Approved options 2015
July 2009
May 2010
July 2009
May 2010
July 2009
May 2010
June 2009
May 2010
May 2015
476,190
61,224
285,714
102,040
304,762
40,816
333,333
20,408
16,666
476,190
61,224
285,714
102,040
304,762
40,816
333,333
20,408
16,666
Exercise
Price
5.25p
24.50p
25.00p
5.25p
24.50p
5.25p
24.50p
5.25p
24.50p
5.25p
24.50p
45.00p
Earliest
Exercise
Date
Exercise
Expiry
Date
July 2012
May 2013
April 2011
July 2012
May 2013
July 2012
May 2013
July 2012
May 2013
July 2012
May 2013
May 2018
July 2019
May 2020
Mar 2021
July 2019
May 2020
July 2019
May 2020
July 2019
May 2020
July 2019
May 2020
July 2019
No new options were granted to Directors during the year (2016 – 16,666). 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 2017 was 26p and the range during the year was 46p to 26p.
No Director exercised share options during the year.
During the period retirement benefits were accruing to one (2016 – two) Director in respect of money purchase pension schemes.
48
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 12. 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
2017
31 March
2016
576
304
165
1,045
743
159
156
1,058
31 March
2017
£’000s
31 March
2016
£’000s
27,347
2,669
1,229
—
31,245
24,640
2,503
1,299
15
28,457
49
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 31 March
2017
£’000s
31 March
2016
£’000s
84
(84)
(134)
(134)
—
168
219
(764)
28
—
(349)
(483)
—
(483)
(483)
247
(113)
(7)
127
(256)
17
198
73
(89)
(57)
326
(256)
70
70
13. 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 Brown
Deferred tax charge re pension scheme
Deferred tax on significant items
Origination and reversal of timing differences
Adjustments in respect of prior years
Adjustments in respect of change in deferred tax rate
Total deferred tax
Tax – continuing operations
Tax – discontinued operations
Total tax
Tax on profit
50
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 13. Taxation (continued)
Factors affecting tax charge for the period:
The tax assessed for the period is lower (2016 – lower) than the standard rate of corporation tax in the UK of 20% (2016 – 20%).
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% (2016 – 20%)
Expenses not deductible for tax purposes
Ineligible depreciation
Share option relief
Current year losses not recognised – deferred tax
Income not taxable
Adjustments 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
2017
£’000s
12 months
ended
31 March
2016
£’000s
(6,462)
(1,292)
189
520
(26)
204
—
28
(106)
—
(483)
(483)
—
(483)
12,890
2,598
207
—
(26)
77
(2,502)
(94)
66
(256)
70
326
(256)
70
51
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 14. 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
2017
£’000s
Continuing
operations
(5,979)
(5,979)
—
70,272
(8.50)p
—
(8.50)p
12 months
ended
31 March
2016
£’000s
Continuing
operations
12,820
4,409
8,411
69,818
6.31p
12.05p
18.36p
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 outstanding
share options. The potential ordinary shares are considered antidilutive as they decrease the loss per share. Therefore diluted EPS is the same as basic.
52
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 14. Earnings per share (continued)
The weighted average number of shares in issue for the year was 70,272k, the number of options outstanding was 9,171k. If these were all exercised
the cash raised would be equivalent to that which would be raised by issuing 4,235k shares at the average share price during the year. The difference
between these figures is the weighted average number of dilutive potential ordinary shares of 74,507k.
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
2017
£’000s
31 March
2016
£’000s
(5,979)
(5,979)
—
74,507
(8.02)p
—
(8.02)p
12,820
4,409
8,411
75,564
5.83p
11.13p
16.96p
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
2017
£’000s
31 March
2016
£’000s
(5,979)
(5,979)
—
87
—
—
135
(5,757)
70,272
(8.19)p
74,507
(8.19)p
12,820
4,409
8,411
945
(3,267)
(9,145)
(113)
1,240
69,818
1.78p
75,564
1.64p
53
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 15. Goodwill
Cost
Carried forward 31 March 2016
Impairment
Carried forward 31 March 2017
Group
£’000s
71,005
(1,589)
69,416
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:
An annual impairment review conducted in accordance with IAS38 ‘Intangible assets’ and IAS36 ‘Impairment assets’ resulted in an impairment of
goodwill relating to RW Scott of £1.0 million and Garrett Ingredients of £0.6 million.
Garrett Ingredients
Renshaw
R&W Scott
Rainbow Dust Colours
Haydens Bakery – Chantilly Patisserie
Carried forward 31 March 2016
31 March
2017
£’000s
31 March
2016
£’000s
4,411
57,796
—
6,223
986
69,416
5,000
57,796
1,000
6,223
986
71,005
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, or ‘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
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 15. 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 7% (2016 – 3%) which has been increased to 11% to take
account of the increased risk of being listed on AIM rather than the main market. A period of 19 years has been applied to the projected cash flows, based on a 2%
annual growth rate. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. This is based on our base
expectations for the trading period to 31 March 2018. The discounted cash flow forecasts include discounted disposal proceeds based upon 5 times the year 2018/19
forecast EBITDA.
An increase in the Group’s weighted average cost of capital to above 11.5% (2016 – 12%) would cause the Board to impair the carrying value of goodwill of Renshaw.
The Board have considered this but believe due to trading expectations and a strong brand the recoverable amount would support the value.
As a result of the impairment review goodwill for Garretts has been impaired by £0.6 million whilst goodwill of £1.0 million and tangible fixed assets amounting to
£2.0 million have been impaired in respect of R&W Scott compared to the values which are shown in the table below:
Chantilly
Rainbow Dust Colours
Renshaw
Garretts
R&W Scott
Book value of
income
generating unit
£’000s
Estimated
recoverable
amount/value
in use
£’000s
1,077.0
6,684.0
65,604.0
4,719.0
4,095.5
2,883.00
10,748.0
68,169.0
4,719.0
4,095.5
55
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 16. Other intangible assets
Cost
At 1 April 2016
Additions
At 31 March 2017
Amortisation
At 1 April 2016
Charge
At 31 March 2017
Net book value at 31 March 2017
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
Customer
Relationships
£’000s
Computer
Software
£’000s
Development
Costs
Group
£’000s
Company
£’000s
473
—
473
55
209
264
209
—
405
68
—
473
—
55
—
55
418
786
395
1,181
370
127
497
684
2,964
—
—
(2,178)
786
2,123
58
(1,811)
370
416
—
291
291
—
29
29
262
—
—
—
—
—
—
—
—
—
—
1,259
686
1,945
425
365
790
1,155
2,964
405
68
(2,178)
1,259
2,123
113
(1,811)
425
834
—
249
249
—
22
22
227
4
—
—
(4)
—
4
—
(4)
—
—
Intangible assets all relate to intangible assets acquired from third parties other than development costs which are generated internally and capitalised
in accordance with IAS 38.
There is no indication of any impairment of these intangible assets.
56
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 17. Property, plant and equipment
Group
Cost
At 1 April 2016
Additions
Disposals
Reclassifications
At 31 March 2017
Depreciation
At 1 April 2016
Disposals
Impairment Charge*
Charge
At 31 March 2017
Net book value at 31 March 2017
Cost
At 1 April 2015
Acquired on acquisition of business
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
Continuing business
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
Assets in the course
of construction
£’000s
9,477
313
(8)
43
9,825
2,935
(8)
1,575
327
4,829
4,996
13,539
—
542
(4,604)
—
9,477
3,891
(1,242)
286
2,935
6,542
6,542
27,088
6,800
(471)
299
33,716
15,906
(471)
945
2,107
18,487
15,229
32,615
108
5,122
(11,588)
831
27,088
21,221
(6,946)
1,631
15,906
11,182
11,182
342
3,707
—
(342)
3,707
—
—
—
—
—
3,707
537
—
636
—
(831)
342
—
—
—
—
342
342
Total
£’000s
36,907
10,820
(479)
—
47,248
18,841
(479)
2,520
2,434
23,316
23,932
46,691
108
6,300
(16,192)
—
36,907
25,112
(8,188)
1,917
18,841
18,066
18,066
*An annual impairment review conducted in accordance with IAS36 ‘Impairment of assets’ resulted in an impairment of fixed assets of £2.0m for R&W Scott. In addition an impairment review
for assets at Head Office indicated an impairment of £0.5 million which has been made.
The net book value of assets held under finance leases or hire purchase contracts, included above, is as follows:
Plant and equipment
31 March
2017
£’000s
31 March
2016
£’000s
4,990
353
£18.1 million (2016 – £nil) of property, plant and equipment has been pledged as security for borrowings; see note 22.
57
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 17. Property, plant and equipment (continued)
Company
Cost
At 1 April 2016
Additions
At 31 March 2017
Depreciation
At 1 April 2016
Impairment Charge
Charge
At 31 March 2017
Net book value at 31 March 2017
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
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
498
55
553
—
—
11
11
542
—
498
—
—
498
—
—
—
—
—
498
3,451
178
3,629
745
520
537
1,802
1,827
162
2,285
1,664
(660)
3,451
85
(660)
1,294
26
745
2,706
Total
£’000s
3,949
233
4,182
745
520
548
1,813
2,369
162
2,783
1,664
(660)
3,949
85
(660)
1,294
26
745
3,204
The net book value of assets held under finance leases or hire purchase contracts, included above, is as follows:
Plant and equipment
58
31 March
2017
£’000s
31 March
2016
£’000s
—
—
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 18. Investments
Company
Investments in shares of subsidiary undertakings:
Napier Brown
Foods Limited
£’000s
53,900
—
53,900
At 31 March 2016
Impairment
At 31 March 2017
FSF Dormant
Limited/
TD Dormant
Limited
£’000s
R&W Scott Limited
Garrett Ingredients
Limited
£’000s
Haydens Bakery
Limited
£’000s
Eurofoods plc/
Coolfresh
Limited
£’000s
Real Good
Food Europe
SA
£’000s
—
—
—
7,500
(905)
6,595
3,248
—
3,248
79
—
79
772
—
772
Total
£’000s
65,499
(905)
64,594
The aggregate of the share capital and reserves at 31 March 2017 and of the profit or loss for the year ended on that date are as follows:
Napier 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
63,909
1,020
7,115
(101)
1,906
1,891
(663)
—
4,343
(143)
875
—
(734)
(2,702)
(618)
59
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS Description and Number
of Shares Held
Proportion of Nominal
Value of Shares Held
18. Investments (continued)
Haydens Bakeries Limited*
Eurofoods plc*
FSF Dormant Limited*
TD Dormant Limited*
Napier Brown Foods Limited*
Renshaw Us Incorporated
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
Cake Decoration Supplier
Cake Decoration Supplier
Holding Company
Cake Decoration Supplier
Food Ingredients Supplier
Food Ingredients Supplier
Dormant
Premium Bakery
Cake Decoration Supplier
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
200 ordinary shares of 1$
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
* Held directly by Real Good Food plc. All entities have their registered office at International House, 1 St Katharines’ Way London E1W 1XB.
Renshaw Europe SA registered office is Tollaon 71, 1932 Sint Steven, Woluwe, Belgium.
Renshaw USA Incorporated registered office is 400 Commons Way, Rockaway, New Jersey, USA
19. 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
2017
Group
£’000s
2017
Company
£’000s
369
—
(352)
—
—
(174)
(157)
1,278
(1,435)
(157)
(1,462)
—
362
—
—
(174)
(1,274)
4
(1,278)
(1,274)
2016
Group
£’000s
671
74
(58)
(283)
—
(35)
369
1,925
(1,556)
369
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2016
Company
£’000s
(327)
—
38
—
(1,138)
(35)
(1,462)
16
(1,478)
(1,462)
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 19. 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 2016
Charge/(credit) to income
(Credit) to equity
At 31 March 2017
Within 12 months
Greater than 12 months
Deferred tax provisions
At 31 March 2016
Charged to income
At 31 March 2017
Losses
£’000s
Options
£’000s
Provisions
£’000s
Pension
£’000s
Total
£’000s
—
—
—
—
—
—
(324)
9
177
(138)
—
(138)
(76)
(101)
—
(177)
—
(177)
Intangible
Assets
£’000s
1,136
69
1,205
(1,155)
386
(351)
(1,120)
—
(1,120)
Tangible
Assets
£’000s
789
(716)
73
(1,555)
294
(174)
(1,435)
—
(1,435)
Total
£’000s
1,925
(647)
1,278
There were £3.7 million of unused tax losses on which deferred tax is not recognised due to uncertainty over when they could be utilised.
61
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 19. Deferred taxation liability/(asset) (continued)
Company
The deferred tax balances arise from temporary differences in respect of the following:
At 31 March 2016
Charge/(credit) to income
Charge/(credit) to equity
At 31 March 2017
Within 12 months
Greater than 12 months
20. Inventories
Materials
Work in progress
Finished goods
Continuing business
Provisions
£’000s
—
(20)
—
(20)
—
(20)
Pension
Scheme
£’000s
(1,155)
386
(351)
(1,120)
—
(1,120)
31 March
2017
Group
£’000s
8,159
45
5,119
13,323
13,323
Tangible
Assets
£’000s
16
—
(12)
4
—
4
31 March
2017
Company
£’000s
—
—
—
—
—
Share
Options
£’000s
(323)
8
177
(138)
—
(138)
31 March
2016
Group
£’000s
5,495
641
6,224
12,360
12,360
Total
£’000s
(1,462)
374
(186)
(1,274)
—
(1,274)
31 March
2016
Company
£’000s
—
—
—
—
—
Inventories totalling £13,323k (2016 – £12,360k) 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
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 21. Trade and other receivables
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
31 March
2017
Group
£’000s
31 March
2017
Company
£’000s
31 March
2016
Group
£’000s
31 March
2016
Company
£’000s
13,584
(68)
13,516
1,300
—
1,200
16,016
—
—
—
31
35,871
220
36,122
15,006
(204)
14,802
1,068
—
1,169
17,039
—
—
—
12
55,390
396
55,798
63
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 21. Trade and other receivables (continued)
Provision for impairment of receivables
At 31 March 2016
Charge for period (Note 8)
Uncollectable amounts written off
At 31 March 2017
31 March
2017
Group
£’000s
31 March
2017
Company
£’000s
31 March
2016
Group
£’000s
31 March
2016
Company
£’000s
(204)
92
44
(68)
—
—
—
—
(111)
(165)
72
(204)
—
—
—
—
The creation and release of the provision for
impaired receivables has been included in the
income statement within administration costs.
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. 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 credit of £92k (2016
– charge of £165k) 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, in line with last year,
driven by continued tight credit control
programme. The ageing analysis of these
receivables is as follows:
Up to 30 days past due
One to three months past due
Over three months past due
64
31 March
2017
Group
£’000s
1,846
126
122
2,094
31 March
2016
Group
£’000s
740
1,040
378
2,158
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 22. Borrowings and capital management
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
Features of the Group’s borrowings
are as follows:
The Group’s financial instruments comprised
cash, a term loan, hire purchase and finance
leases, a revolving credit facility, an 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.
31 March
2017
Group
£’000s
31 March
2017
Company
£’000s
31 March
2016
Group
£’000s
31 March
2016
Company
£’000s
2,500
9,333
4,243
16,076
11,375
4,701
16,076
2,500
—
—
2,500
1,000
1,500
2,500
3,200
3,705
158
7,063
7,008
55
7,063
—
—
—
—
—
—
—
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 Euro and US Dollar
commodity purchases. However, this is
mitigated by matching in part 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.
During the year ended 31 March 2017 the
Group successfully negotiated extended
borrowing facilities with Lloyds Bank plc.
The Group entered into an invoice finance
facility of £20 million on a revolving basis
with a minimum term of 12 months and a
three-month notice period. This facility is
secured against the debtors across the whole
of the Group’s UK businesses, and comprise
a sterling, euro and US dollar facility with an
interest rate of 1.5% above base rate.
65
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 22. Borrowings and capital management (continued)
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 three 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 five 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 Group also entered into a £6.2 million facility to be secured against new items of plant and machinery with ABN Ambro Lease nv bank. This facility is for 5 years and
interest is payable at 4%.
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.
Post Year End Borrowings
Post Year end £16.75 million has been secured from existing major shareholders.
{ £4.0 million secured one year term loan facilities from existing shareholders of the Company, (Napier Brown Holdings Limited and Omnicane Limited)
{ Lloyds bank agreed to provide the company with an overdraft facility of up to £2.0 million with two major shareholders (Napier Brown and Omnicane Limited) each
putting £1.0 million into an account as security. The shareholder loans have an interest rate of 6.5% per annum.
{ £4.0 million additional short term debt facilities were secured (Omnicane International Investors Limited, NB Ingredients Ltd and Downing LLP). Each of the three
shareholders participated equally. The Facility and the Loan Notes are secured on unencumbered chattel assets of the Company with a 10% coupon. A premium of
10% payable on redemption if not repaid on or before 30 September 2018.
{ A new injection of capital was raised by way of the issue of a secured loan note instrument of up to £8.75 million from funds managed and controlled by Downing LLP.
The Loan Notes are redeemable in full after three years.
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 Group’s approach to capital management 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
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 22. Borrowings and capital management (continued)
The following table details the Group’s maturity profile of its financial liabilities:
2017
Trade and other payables
Bank term loans
Revolving credit facilities
Finance leases
Interest
Total
2016
Trade and other payables
Bank term loans
Revolving credit facilities
Finance leases
Interest
Total
Less than
1 month
£’000s
1–3
months
£’000s
3 months
to 1 year
£’000s
11,022
—
—
87
11,109
7
11,116
3,101
250
—
260
3,611
43
3,654
1,120
750
9,333
695
11,898
295
12,193
Less than
1 month
£’000s
1–3
months
£’000s
3 months
to 1 year
£’000s
3,640
—
—
10
3,650
19
3,669
4,167
—
3,705
20
7,892
57
7,949
517
3,200
—
73
3,790
153
3,943
1–5
years
£’000s
—
1,500
—
3,201
4,701
318
5,019
1–5
years
£’000s
—
—
—
55
55
15
70
5+
years
£’000s
Total
£’000s
—
—
—
—
—
—
—
15,243
2,500
9,333
4,243
31,319
633
31,952
5+
years
£’000s
Total
£’000s
—
—
—
—
—
—
—
8,324
3,200
3,705
158
15,387
244
15,631
The profile of the trade payables has been taken as being consistent with the Group’s payment terms to suppliers.
67
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 22. Borrowings and capital management (continued)
Analysis of market risk sensitivity
Currency risks:
The Group is exposed to currency risks on purchases of commodities made from USA and Europe. The risk associated with these purchases is mitigated by sales also
made to customers in these countries, however to the extent that these do not cover each other there is a risk of exposure to the Group.
The effect of the exposure is calculated as being:
{ With an excess of $ debtors to $ suppliers then a 10 cent strengthening of the US dollar would result in an increase in pre tax profits of £212k.
{ With an excess of € suppliers to € debtors then a 10 cent strengthening of the Euro would result in an increase in pre tax profits of £212k.
The Group also buys sugar in Euros and sells this sugar on fixed sterling contracts with customers through its Ingredients division. To reduce the currency risk on these
forward currency purchase contracts are entered into. These forward contracts have been fair valued at the year end and this has resulted in a £146k loss being taken
against this year’s results.
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
£118k.
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
2017
£’000s
31 March
2016
£’000s
1,042
3,201
4,243
(365)
3,878
1,010
2,868
3,878
103
55
158
(11)
147
98
49
147
It is the Group’s policy to lease certain property, plant and equipment under finance leases. For the period ended 31 March 2017 the average effective borrowing rate
was 4.0% (2016 – 4.0%). 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
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 23. Trade and other payables
Amounts due within one year
Trade payables
Social security
Amounts owed to Group undertakings
Accruals
Other payables
31 March
2017
Group
£’000s
31 March
2017
Company
£’000s
31 March
2016
Group
£’000s
31 March
2016
Company
£’000s
10,634
913
—
3,336
360
15,243
238
99
39,896
1,594
—
41,827
8,324
654
—
3,600
665
13,243
236
89
55,593
459
—
56,377
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.
69
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 24. 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
Financial liabilities at fair value through profit and loss
Forward foreign exchange contracts
Amounts due for settlement
Within 12 months
After 12 months
Group
2017
£’000s
464
13,516
26,710
26,710
146
146
22,155
4,701
26,856
2016
£’000s
2,946
14,802
15,387
15,387
—
—
15,332
55
15,387
Company
2017
£’000s
2016
£’000s
—
—
210
210
—
—
210
—
210
—
—
949
949
—
—
949
—
949
Loans and receivables
The Group’s policies on managing credit risk are set out in note 21 of these financial statements. The carrying amount of financial assets
represents the maximum credit exposure. The Group has taken out insurance to cover the credit risk, see note 21.
During the year the group took out forward foreign currency contracts to mitigate against foreign exchange risk.
In accordance with IFRS 13 the above financial instrument has been assigned a hierarchy level. IFRS 13 categorises the inputs into valuation of a financial
instrumentheld at fair value into three levels. The highest priority is given to quoted prices (level 1 inputs) and the lowest priority to unobservable inputs (level 3). The
inputs into the valuation of the above are considered to be level 2. Observable inputs include the forward rate at the date the contract was taken out and the forward
rate at the end of the year. There are no unobservable inputs. The contracts are not discounted as the impact is not considered to be material given the timeframes
over which the contracts are settled.
The total exposure under forward contracts at the year end was €4 million. The movement in fair value of £0.146 million has been recognised in the Statement of
Comprehensive Income for the year.
70
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 25. Share capital
Number of
Shares
2017
Number of
Shares
2016
31 March
2017
£’000s
31 March
2016
£’000s
Allotted, called up and fully paid equity share capital
At 31 March 2016
Issued in the year
At 31 March 2017
70,066,903
496,598
70,563,501
69,588,400
478,503
70,066,903
1,402
9
1,411
1,392
10
1,402
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 9,171,350 shares reserved for issue under options, with expiry dates beyond 2017, outstanding at the end of the year.
26. 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.
Foreign exchange translation reserve: The Foreign exchange reserve represents the difference generated when converting profit and loss results
at average rates and balance sheets at year end closing rates.
27. 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*
* 3,817,726 options to P. Totte not exercisable until share price exceeds £1.00.
31 March
2017
Number of
Share Options
31 March
2017
Weighted Average
Exercise Price (£)
31 March
2016
Number of
Share Options
31 March
2016
Weighted Average
Exercise Price (£)
9,969,454
—
(496,598)
(301,506)
9,171,350
5,899,624
0.20
—
(0.05)
(0.46)
0.20
0.17
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
71
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 27. Equity-settled share option scheme (continued)
A breakdown of the range of exercise prices for options outstanding as at 31 March 2017 is shown in the table below:
2017
Weighted
average
remaining
contractual
life
(years)
Number
outstanding
at end of
period
Weighted
average
exercise
price
(pence)
Number
outstanding
at end of
period
2016
Weighted
average
remaining
contractual
life
(years)
Weighted
average
exercise price
(pence)
£0.00 – £0.50
9,171,350
1
20.65
9,969,454
1
19.84
No 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.
72
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 28. 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
31 March
2017
£’000s
31 March
2016
£’000s
757
1,222
1,264
374
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 15 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
2017
£’000s
2016
£’000s
Commitments for the acquisition of property, plant and equipment
5,954
930
73
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 29. Related party transactions
Consultancy fees were paid to the following entities in which Directors hold a beneficial interest:
Osmond Consultancy Limited
P Totté
Menton Investments
Universal Sucrose Services Limited
Nuevocoloro SL
P G Ridgwell
The Salter Consultancy LLP
Director
P Totté
P Totté
P Totté
P Totté
P Totté
P G Ridgwell
P Salter
31 March
2017
£’000s
31 March
2016
(Restated) £’000s
220
10
5
—
—
55
94*
384
110
—
—
1,100
109
55
124*
1,498
* Includes expenses of £11k in FY2017 and £15k in FY2016.
In the previous year P Totté received payments totalling £1,319,000 and P Salter received payments of £15,000, which were included in the financial
statements but not disclosed to the auditors or disclosed within the financial statements.
A loan of £39k was also provided to P Totté in the year to March 2016 which was subsequently repaid in June 2017.
74
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 29. 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
Rainbow Dust Colours Limited
R&W Scott Limited
Garrett Ingredients Limited
Amounts due to subsidiaries
JF Renshaw Limited
Rainbow Dust Colours Limited
31 March
2017
£’000s
31 March
2016
£’000s
720
360
60
240
120
1,500
555
350
—
120
50
1,075
31 March
2017
£’000s
31 March
2016
£’000s
58,352
5,768
51,240
4,576
JF Renshaw Limited is a related party because it is a 100% owned subsidiary of Napier Brown Foods Limited which is a 100% owned subsidiary of
Real Good Food plc.
Amounts due from subsidiaries
Renshaw Europe SA
Haydens Bakery Limited
Renshaw USA Incorporated
Napier Brown Foods Limited
RGFC Dust Limited
R&W Scott Limited
Garrett Ingredients Limited
31 March
2017
£’000s
31 March
2016
£’000s
1,082
4,612
723
45,801
8,255
809
204
121
4,489
—
45,801
5,055
1,503
152
75
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 30. 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 11 years 8 months, increasing at 4% per annum. 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 2015 actuarial valuation has been approximately updated to reflect liabilities on the
accounting basis at 31 March 2017. This has resulted in a deficit in the scheme of £5,894,000.
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
2017
£’000s
19,840
(13,946)
5,894
—
5,894
(1,120)
4,774
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
31 December
2013
£’000s
19,033
(15,360)
3,673
—
3,673
(735)
2,938
19,153
(15,613)
3,540
—
3,540
(814)
2,726
76
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 30. Pensions arrangements (continued)
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
Settlements
Past service gain
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
Settlements
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 2017 was £1,190k (2016 – £(575)k).
31 March
2017
£’000s
31 March
2016
£’000s
21,094
754
2,499
(2,060)
(1,584)
(863)
19,840
21,799
738
(638)
—
—
(805)
21,094
12 months
ended
31 March
2017
£’000s
12 months
ended
31 March
2016
£’000s
15,013
538
652
920
(2,314)
(863)
13,946
16,111
547
(1,122)
282
—
(805)
15,013
77
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 30. 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
31 March
2017
£’000s
31 March
2016
£’000s
754
(538)
216
—
216
738
(547)
191
—
191
31 March
2017
£’000s
31 March
2016
£’000s
652
(103)
228
(2,624)
(1,847)
(1,122)
—
(42)
680
(484)
78
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 30. Pensions arrangements (continued)
Assets
UK equity
Overseas equity
Absolute return fund
Bonds
Gilts
Property
Cash
Alternative assets
Current assets
Current liabilities
Total assets
31 March
2017
£’000s
31 March
2016
£’000s
31 March
2015
£’000s
1,907
4,120
3,732
1,139
1,646
152
284
2,671
610
(2,315)
13,946
1,608
4,462
3,826
1,020
2,104
72
473
1,448
—
—
15,013
1,759
4,634
4,126
933
1,382
354
1,444
1,479
—
—
16,111
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.
79
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 30. 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
2017
% per annum
31 March
2016
% per annum
31 March
2015
% per annum
31 March
2014
% per annum
3.20
—
2.85
3.10
2.20
90% of max
allowance
2.80
—
3.65
2.70
1.80
90% of max
allowance
2.90
—
3.45
2.80
1.90
90% of max
allowance
3.30
—
4.65
3.20
2.20
75% of max
allowance
Assumption
Discount rate
Rate of inflation
Rate of mortality
Increase/decrease of 0.5% p.a.
Increase/decrease of 0.5% p.a.
1 year increase in life expectancy
Decrease by 7%
Increase by 2%
Increase by 5%
Change in assumption
Change in liability
The mortality assumptions adopted at 31 March 2017 imply the following life expectancies:
Male retiring at age 65 in 2017
Female retiring at age 65 in 2017
Male retiring at age 65 in 2037
Female retiring at age 65 in 2037
22 years
24 years
23 years
25 years
80
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 30. 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
2017
£’000s
13,946
(19,840)
(5,894)
652
(103)
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. Discontinued Operations
As disclosed in the year end March 2016 accounts the Group disposed of its Napier Brown Sugar Limited 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
Year end
31 March
2017
£’000s
—
—
—
—
—
—
Year end
31 March
2016
£’000s
13,237
(11,884)
1,353
(1,149)
(288)
(84)
81
25455-04 - 26-09-2017 - Proof 8www.realgoodfoodplc.com Stock Code: RGDOUR FINANCIALSOUR FINANCIALS 31. 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
March 2017
Total
£;000s
March 2016
Total
£’000s
—
—
—
—
—
—
—
44,408
(12,000)
(8,211)
(10,706)
(2,024)
(2,322)
9,145
32. Acquisitions
Real Good Food plc (AIM: RGD) and Tywyn based Brighter Foods announced on 5 April 2017 a new partnership to build on the success of the Wales
based food manufacturing company, with Robin Williams remaining as CEO. Real Good Food plc acquired an 84.33% interest in Brighter Foods for total
consideration of up to £9 million, on a cash and debt free basis, to be paid in two equal instalments, 50% on completion and 50% upon finalisation of
the Company’s 2017/18 audited accounts. The consideration will be satisfied from the Group’s existing debt facilities. The acquisition is expected to be
immediately earnings enhancing to the Group.
82
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS 32. Acquisitions (continued)
Non Current Assets
Intangible Assets
Tangible Assets
Investments
Current Assets
Inventories
Trade and other receivables
Cash at Bank
Current liabilities
Trade and other payables
Income Tax
Amounts falling due after one year
Provision of Liabilities
Net Current Assets
Purchase Price
Paid April 2017
Due to be paid on completion of 17/18 accounts
Total paid or payable
Balance as Goodwill
£
28,712
1,874,998
81,667
1,985,377
762,877
990,221
1,734,792
3,487,890
(3,178,554)
(252,157)
(335,517)
(167,411)
1,539,628
4,520,088
4,520,088
9,040,176
(7,500,548)
The Group consider that the value of assets and liabilities is equal to the fair value of these items and that all receivables are fully recoverable.
Senior management of Brighter Foods has retained 15.67% stake in the business. The value of this non controlling stake on completion was £682k.
The Group has also entered into a separate shareholder agreement regarding the Management Stake whereby the senior management of Brighter Foods can elect
to sell 50 per cent of the Management Stake to the Group after March 2020 and 50 per cent after March 2021. The consideration for the entire Management Stake
will be based upon an agreed valuation formula, linked to profit before interest and tax of Brighter Foods in the years ending 31 March 2020 and 31 March 2021
respectively, and is capped at £8 million in aggregate. Additionally the Group can elect to acquire the Management Stake after March 2021 based upon the same
valuation formula. For the 12 months to 31 March 2016, Brighter Foods reported profit before tax of £2.3 million and net assets of £2.7 million as at 31 March 2016.
The deferred consideration is payable after 12 months of trading and will be in range of £Nil to £4.5 million and is based on performance of the company.
Costs incurred in acquiring this company amount to £361k, of which £151k has been included in these accounts as part of significant items (note 6).
83
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EQUITY
Downing agreed to subscribe for 7,844,924 new ordinary shares of 2 pence each in the Company (the “New Shares”) at 35 pence each (the “Placing Price”) to raise
gross proceeds of approximately £2.75 million representing 10% of the Company’s overall issued share capital.
84
Notes to the Financial Statements (continued)Year ended 31 March 201725455-04 - 26-09-2017 - Proof 8Annual Report and Accounts for the year ended 31 March 2017OUR FINANCIALS Advisers and Company Information
OUR FINANCIALS
Directors
C O Thomas
H Rai
P G Ridgwell
J M d’Unienville
J Mackenzie
H C L Cawley
Company Secretary
H Rai
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 JD LLP
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
OUR FINANCIALS
IBC
25455-04 29 September 2017 11:10 AM Proof 8
International House, 1 St Katharine’s Way, London E1W 1XB
T 020 3056 1516
enquiries@realgoodfoodplc.com
www.realgoodfoodplc.com
Create Inspire Enjoy
25455-04 29 September 2017 11:10 AM Proof 8