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Annual Report and Accounts
For the year ended 31 March 2019
Stock code: RGD
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Contents
STRATEGIC REPORT
Overview
The Group in Summary
Chairman’s Statement
Strategic Review
Marketplace Review
Divisional Business Review
Finance Review
Key Performance Indicators
Corporate Social Responsibility
Risk Management
GOVERNANCE
Board of Directors
Report of the Directors
Audit Committee Report
Remuneration Committee Report
FINANCIALS
Independent Auditor’s Report
Consolidated Statement of
Comprehensive Income
01
02
04
05
07
08
10
11
12
13
14
15
19
20
21
25
Consolidated Statement of Changes in Equity 26
Company Statement of Changes in Equity
27
Consolidated Statement of Financial Position 28
Company Statement of Financial Position
Consolidated Cash Flow Statement
Company Cash Flow Statement
Notes to the Financial Statements
29
30
31
32
OTHER INFORMATION
Advisors and Company Information
IBC
The Group’s current objective:
To deliver a return on investment for all our stakeholders.
The Group’s current strategy:
To improve our profitability by focusing on and investing in our
areas of competitive advantage, whilst partnering with our
customers to enhance the consumer experience.
www.realgoodfoodplc.com
Navigating the Report
For further information within this
document and relevant page numbers
Additional information online
IFC STRATEGIC REPORT
STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2019
Annual Report and Accounts for the year ended 31 March 2019
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notes-heading-level-one
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Overview
STRATEGIC REPORT
notes-heading-level-three
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notes-strapline
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{ notes-list-bullet
{ notes-list-bespoke
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Financial highlights
{ Revenue from continuing businesses decreased by 3.4% from £63.8
million to £61.6 million.
{ During a period of significant transition, the Group managed to deliver
an adjusted EBITDA* of £1.9 million against a loss of £0.3 million in the
prior year, despite a 3.4% decline in revenue.
{ The two remaining divisions, Cake Decoration and Food Ingredients are
profitable (before impairment charges) and cash generative; generating
an adjusted EBITDA* of £5.8 million before central costs.
{ Central costs have been materially reduced during the year by
£1.3 million, with further reductions after the period end.
{ Goodwill has been impaired this year by £18.7 million (2018: Nil), to
reflect the value today of the remaining businesses.
{ Bank term debt has largely been repaid; invoice discount financing
materially reduced.
{ Net debt stood at £ 35.7 million (2018: £37.8 million), being
predominantly shareholder loans, of which £9.6 million is in the
form of convertible loan notes.
Operational highlights
{ During the year, Garrett Ingredients, Haydens Bakery, R&W Scott and
Chantilly Patisserie sold with cash proceeds of £18 million, utilised in
debt reduction and working capital.
{ Capacity of Food Ingredients facility has been increased by 9% in the
year ended 31 March 2019, with a further 91% increase in the current
year-to-date, following completion of their capital investment programme.
At the time of writing, Brighter Foods, the largest company within the
Food Ingredients division, can sell whatever it has the capacity to make.
{ Appropriate Board structure now in place in line with our commitment to
improved corporate governance.
Post-period end events
{ Fine of £0.3 million paid following AIM Disciplinary Notice pertaining to
failings of corporate governance in and prior to 2017.
Current Trading
{ Current trading is in line with our modest expectations.
{ Cake Decoration has an improved capital base and operating structure,
reflective of the turnaround underway. Focus is now on strengthening
customer relationships and growing sales. Early progress evident
although the UK retail sector continues under pressure to rationalise
its supplier base.
{ Brighter Foods has increased capacity significantly since the period end,
on the back of demand from existing and new customers. This bodes
well for the division to outperform its modest expectations.
{ The Group remains focused on continuing to improve its results, and
reduce net debt.
GROUP
REVENUE
£61.6m
2018
£63.8m
GROSS
PROFIT
£18.0m
2018
£17.9m
GROUP EBITDA
(adjusted)
Profit/(Loss)*
£1.9m
2018
£(0.3)m
*See note 5 for reconciliation.
Financial information presented
relates to continuing operations.
www.realgoodfoodplc.com Stock Code: RGD
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The Group in Summary
Real Good Food now operates in just two areas
or divisions – Cake Decoration and Food Ingredients.
The divisions
Cake Decoration and Food Ingredients operate as stand-alone businesses,
with their own infrastructures and management teams. Given the two
businesses operate in discrete market sectors, the areas of overlap are
few, but where there might be mutual advantage to collaborate, then those
opportunities will be explored.
Head Office
The central functions have reduced markedly since the period under
review, and now comprise, in addition to the plc Board, Finance and
Information Services, providing support to the businesses as required.
Each business generally has the resources to operate as a stand-alone
unit, but clearly, each is able to call upon the centre or the other
businesses as required.
REVENUE
£46.4m
EBITDA Profit
(adjusted)*
£3.0m
OPERATING (LOSS)
£(17.3)m
EMPLOYEES
376
REVENUE
£15.2m
EBITDA Profit
(adjusted)*
£2.8m
OPERATING PROFIT
£1.2m
EMPLOYEES
194
HEAD
OFFICE
EBITDA (Loss)
(adjusted)*
£(3.9)m
OPERATING (LOSS)
£(5.4)m
EMPLOYEES
15
Read more on page 8
Read more on page 9
*See note 5 for reconciliation
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STRATEGIC REPORT
Renshaw manufactures sugarpaste, marzipan, soft icings, mallows and caramels and sells across a broad range of sales channels:
mainstream and specialist retail, wholesale, 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 and Renshaw Americas distributes products
principally in the USA.
Renshaw: Liverpool, 335 employees
Rainbow Dust Colours: Preston, 31 employees
Renshaw Europe: Liverpool, 6 employees
Renshaw Americas: New Jersey, 4 employees
Brighter Foods 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.
Brighter Foods: Tywyn, Wales, 194 employees
www.realgoodfoodplc.com Stock Code: RGD
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Strategy
The details of the Group’s strategy are set out
in more detail later in the Strategic Review, but,
in summary, the Group now has two stand-
alone business units which are leading in their
chosen markets and have the potential to
deliver better quality profits and are already
cash-generative. Management actions are
being taken within Cake Decoration to rebuild
customer relationships and trust, by improving
product quality and dependability, improving
operational efficiencies further and growing
sales in the UK and internationally. The recent
appointment of Steve Moon as Chief Executive
of Cake Decoration should accelerate these
improvements. Food Ingredients is meeting the
challenges of scaling up its production, its
sales and of broadening its customer base.
Outlook
We are fully committed to improving the
Group’s financial performance and reducing
its debt burden. The Board is confident that
the actions being taken by management are
the right ones and that, together with the
investments we have made, they should
deliver benefits in the coming year, strengthen
the Group’s profitability and begin to reduce
the debt burden.
Mike Holt
Non-Executive Chairman
15 August 2019
Chairman’s Statement
Overview
I am pleased to report that over the past
financial year, Real Good Food has made
significant progress. It is now a focused
Group of two businesses, both of which are
profitable at adjusted EBITDA level and
cash-generative – having changed from what,
at the start of the previous year, had been
an unprofitable, cash-absorbing Group of six
businesses with little clear strategic
direction.
During the year, we sold Garrett Ingredients,
Haydens Bakery, R&W Scott and Chantilly
Patisserie, with proceeds of some £18 million,
reduced central costs by £1.3 million, secured
£1 million of funding through an over-
subscribed open offer and £9.4 million from
major shareholders, We have rectified the
corporate governance failings of the previous
years, including introducing two new
Independent Non-Executive Directors onto the
Board. The prospects of the two remaining
businesses have also been improved. Brighter
Foods has grown its customer base and,
through the excellence of its development and
product offering, has secured new blue-chip
business, whilst the Cake Decoration
business, after an independent examination of
its customer relationships, has defined a set
of strategies which will guide it clearly through
the coming years.
None of this was achieved without financial
pain and the Group’s income Statement for the
past year clearly bears testament to the cost
of the transformation – the combination of one-
off charges (a sizeable impairment charge
recognised in the year and significant items)
amounted to some £20.4 million (2018:
£4.0 million). Your Group is now, however,
in a far stronger position, strategically and
operationally, where it can look forward with
confidence to the future and to rewarding the
patience and forbearance of its many
stakeholders. It is important to note that the
underlying adjusted EBITDA of the continuing
businesses during the year to March 2019
improved by £2.2 million, from a negative
£0.3 million to a positive £1.9 million (see
note 5); we believe this is a fair indication of
the progress being made in restoring the
Group to a sustainably profitable business.
Dividend
As with previous years, the Board is not
recommending the payment of a dividend for
the year. The focus is on investing in the
growth of Brighter Foods and the turnaround
of Cake Decoration in order to deliver the
best possible returns for shareholders.
Board changes
There have been significant changes made
to the board since the last Annual Report.
Steve Dawson and myself joined the Board
as Independent Non-Executives in September
and August 2018 respectively. Steve now
chairs the Remuneration Committee. I took
over the chair role from Pat Ridgwell at the
start of June, having previously chaired the
Audit Committee since joining. The Audit
Committee is now chaired by Judith
MacKenzie. Harveen Rai stepped down as
CFO in March 2019 and has been replaced
by Maribeth Keeling who assumed the role
last month. Maribeth retains her role as
Finance Director of Cake Decoration. I am
also pleased to welcome to the Board
Anthony Ridgwell who joined at the end of
May 2019, replacing his father, Pat Ridgwell.
Chris Thomas, after many years of service,
stepped down from the Board at the end of
July and I would like to thank Chris for his
years of service.
The result of these changes is that the
Board now has a much better balance
between Executive, Non-Executive and
Independent Non-Executive Directors, which
will be of benefit as the Group continues its
transformation process to create
shareholder value.
Corporate Governance
On 30 May 2019, the AIM regulator issued
a Disciplinary Notice, censuring the former
Board for a number of failures in corporate
governance which had occurred in the period
up to July 2017; the Group paid the
accompanying £0.3 million fine from its
existing financial resources. The Group regrets
these breaches and fully understands and
accepts the importance of sound corporate
governance and complying with the AIM Rules.
It cooperated fully with the London Stock
Exchange’s enquiry and, the former Chairman
and two other Directors had already left the
Group by the time of the censure.
Importantly in this context, having
announced its intention to do so in
September 2017, the Board has undertaken
significant remedial action, including
enhancing the Group’s procedures,
resources and controls, adopting new
corporate governance and implementing new
financial processes and procedures. This
included the appointment of two new,
independent Board members.
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STRATEGIC REPORT
Strategic Review
2018/19 performance
Revenue from continuing businesses
declined slightly from £63.8 million to
£61.6 million, with Food Ingredients
seeing a reduction of £0.9 million and Cake
Decoration’s sales down by £1.2 million
overall. The former principally resulted from
the short-term restriction of sales owing
to operational issues arising from the
expansion of capacity to accommodate
significant growth in the future, underlying
demand for the division’s products remained
strong throughout the period. Cake
Decoration was impacted by the loss of one
significant customer which unfortunately
more than offset the revenue growth
accomplished elsewhere within the division.
The combined effect of lost sales and extra
costs incurred in the capacity expansion
resulted in a reduction in underlying adjusted
EBITDA for Food Ingredients (continuing)
from £3.7 million to £2.8 million. In Cake
Decoration, underlying adjusted EBITDA
increased from £1.1 million in 2018 to
£3.0 million in 2019, despite the loss
of the customer referred to above.
Over the last two accounting periods,
significant costs (both cash costs and
non-cash costs) have been recognised in the
turnaround of the business – restructuring
costs necessary to align central resources with
the anticipated, smaller size of the group, for
example, losses on disposal of non-core
businesses and impairment charges where
future forecast profitability could not sustain
the value of goodwill recognised some years
ago. These have now all been recognised, and
the Board’s intention is to ensure that such
turnaround costs are now a thing of the past;
most importantly, the remaining businesses
are profitable at an adjusted EBITDA level and
they both generate cash. The Group’s central
resources have been pared back to minimal
levels and opportunities are continually sought
to reduce these further, consistent with good
governance. The Group retains higher levels of
shareholder debt than is ideal, debt on which
the coupon was determined in less profitable
times, and this interest burden, almost all of
which is rolled-up, will remain for the
foreseeable future.
Loss before taxation of continuing businesses
Depreciation of property, plant and equipment
Impairment charge
Amortisation of intangibles
Significant items
Finance costs
Other finance costs
EBITDA (adjusted) Profit/(Loss)
Capital structure
During the course of the financial year, the
Group formally stabilised its funding
structure. During July and August 2018,
principally through the provision of
shareholder loan notes convertible into equity
in the sum of up to £8.8 million, provided by
our three major shareholders (Napier Brown,
Omnicane and Downing LLP client funds),
supplemented by an oversubscribed open
offer for £1 million, the long-term survival of
the Group was assured, albeit with a
significant interest coupon attaching, and
details of those loans, and other funding
sources, are set out in note 23. These
financial restructuring arrangements were
approved at a general meeting of
shareholders in August 2018.
Although the Board believes the Group’s level
of debt outstanding remains higher than a
business such as Real Good Food should
have, given its business model, the presence
of bank debt within the Group was restricted
to asset-backed finance held by J F Renshaw
and its invoice discounting facility; as at
31 March 2019 there was no bank term loan
outstanding. At the same time, the Group’s
balance sheet retains a significant tangible
asset base, goodwill that has been written
down to realistic levels, and has net assets
significantly in excess of the Group’s current
stock market capitalisation. This is an
important measure in establishing the
Group’s financial worth in the future.
31 March
2019
£’000s
(26,090)
1,573
18,675
1,454
1,717
4,406
166
1,901
31 March
2018
£’000s
(9,078)
1,431
–
1,737
4,008
1,424
164
(314)
Operating performance
and outlook
For each component of the very much
simpler group, we have set budgets for the
year. So far, the performance of each of the
businesses is well aligned with the board’s
expectations and central costs are also in
line. The Cake Decoration market in the UK,
particularly in the retail sector, is proving
increasingly competitive but we are confident
that we can leverage the fund of experience
and expertise we have to deliver what our
customers need and want. The Cake
Decoration business has recently welcomed
a new Chief Executive, Steve Moon, whose
experience of the sector and business
improvement credentials are such that we
have high hopes of his continuing the
successful implementation of the newly
articulated strategy for that business. The
Food Ingredients division’s growth plans are
also now well in train under well-established,
experienced management and the future for
both businesses looks justifiably bright. The
uncertainties of Brexit for the business
community continue, of course, and we are
mindful that the Cake Decoration business
has European operations which may be
impacted.
After two challenging years in the period to
31 March 2019, the board wishes to thank
all the Group’s and businesses’ stakeholders
for their understanding and patience to date.
We are now entering a period when the
rewards for that patience should start to
become evident.
www.realgoodfoodplc.com Stock Code: RGD
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Strategic Review (continued)
Summary and Outlook
After a very difficult period in the Group’s
history and a great deal of corporate activity,
Real Good Food plc now comprises two
divisions, with clearly articulated objectives
and defined strategies to accomplish those
objectives. We believe we now have the
leadership, the senior management and the
resources capable of delivering a further
uplift in performance from both businesses,
and a substantially lower central cost base
more fit for purpose.
In the new financial year to date, current
trading from the two remaining, robust
and profitable businesses is in line with our
modest expectations for the year. The Group
remains focused on continuing to improve
its results and on reducing net debt, as
well as continuing to support the business’s
strategy and thereby to increase shareholder
value and returns.
We have made significant progress in our
corporate governance regime, and now have
in place an appropriate board structure,
balanced as to Executive, Non-Executive
and independent Non-Executive Directors.
The Board is grateful for the continued
support of all stakeholders who have shown
confidence in the Group during the past year
and will make every effort to retain the
positive momentum which is now clearly
evident in the underlying businesses. The
Board is confident in the future prospects
for the Group as a whole.
Group strategy
In the Report and Accounts last year, we
explained that the Board’s strategy was
to implement a turnaround plan for the
Group by focusing on its core assets and
that the first phase of the plan had broadly
been delivered, through business disposals,
some refinancing, cost reductions and
implementation of normalised accounting
policies. As an important part of our
determination to improve the profitability
and cash generation of the core assets, we
undertook a formal process, with third party
involvement, of understanding our customers’
perception of the Cake Decoration business
and setting a refreshed and invigorated
strategy for that division. We identified areas
of strength and weakness and have set in
motion processes to address each. The
strategy for the Food Ingredients division
continues to be relevant and focused on
delivering great products for our customers,
as evidenced by the significant potential for
growth in that business. After investing £3.2
million in that business over the past year, its
capacity has doubled and, such is the quality
of the product coming out of its Tywyn facility,
that the only current constraint on sales is
the business’s ability to make the product.
It was a part of the role of any Group staff
to work appropriately with the management
of each business to help improve its
performance, in its efforts to increase
the return on the considerable investment
that has been made in recent years. As
the number of businesses has decreased,
therefore so has the level of Group central
resource, such that each business is now
self-sufficient. Central resources are now
therefore limited to functions that relate
to finance and general management.
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STRATEGIC REPORT
Marketplace Review
The Group operated in two main divisions: Cake Decoration and
Food Ingredients. Our brief perspective on the major trends in each
division follows.
The Group’s Cake Decoration division comprises; Renshaw in the
UK, USA and Europe and Rainbow Dust Colours.
The home baking category is worth a significant £800 million* at
RSP (Retail Selling Price), although it declined 1% year on year, and
continues to have a high penetration of all households; it is a
category visited by 91% of all shoppers.
This reflects a sector with high levels of interest and user engagement.
Home bakers are continually looking for inspiration in the media – on
TV with programmes such as Extreme Cake Makers and The Great
British Bake Off where more than 7 million people tuned into watch the
final; and through social media sites such as Pinterest, Instagram and
Facebook where there lives a real community of home bakers and cake
decorators. Renshaw and Rainbow Dust will invest in developing real
innovation to the market to continue to lead new trends in the cake
decorating sector and invest in communication in the digital world to
educate and inspire new and experienced cake decorators of all levels.
The Group’s Food Ingredients division comprises; Brighter Foods.
One of the key trends in the huge food ingredients sector is towards
an ever-greater emphasis on healthy eating. Health considerations
are now prevalent throughout the food chain, and have been for
many years, with some 29% of all in-home food purchases cited as
being driven by health considerations*. Brighter Foods is especially
well positioned to benefit from consumer choice migrating from
confectionery to healthy snack bars; the whole of this latter market
is said now to be worth over £360 million at RSP.
*Kantar data
www.realgoodfoodplc.com Stock Code: RGD
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Divisional Business Review
2018/19 Performance
In a transitional year, the result for Cake
Decoration was encouraging in that the
division delivered a significantly improved
underlying adjusted EBITDA performance,
despite overall challenging consumer
demand and trading conditions, control of
overhead expenditure and the realignment of
resources from Group to Cake Decoration.
At the overall market level, consumer
demand for Cake Decorating products in the
Company’s core market, the UK, was in slight
decline at minus 1% year on year, but there
was some improvement in the key seasonal
trading period in the last three months of the
year when market volumes increased by 2%.
In the UK, where all the division’s
manufacturing facilities are located, sales
in the wholesale and retail distribution
channels were down on prior year with
the decision of one significant customer
in retail to move production in-house,
accounting for a year-on-year reduction of
£1.6 million in revenue, while sales within
the manufacturing channel grew by 8%, and
sales to the Company’s sister Company in
the USA, increased by £2.4 million, reflecting
increased customer demand and some
limited re-stocking in that market.
Following the establishment of a USA-based
warehouse, to fulfil orders for North America
and an increase in customer demand, sales in
North America grew by a healthy 22%. A review
of the order fulfilment model for Continental
Europe customers was also completed,
resulting in the closure of the Brussels
warehouse and office. Order fulfilment for
Continental Europe customers is now handled
by the Company’s main customer service and
warehouse operation based in Liverpool. The
change was well executed with the customer
base retained and sales down by only 3%
when compared with prior year, reflecting
increased competition and some economic
uncertainty rather than the change in
distribution model.
A new line to produce convenience formats
of Renshaw’s core product, rolled icing,
was fully operational, delivering increased
throughput and lower costs and a new soft
icings plant became fully commissioned with
the first orders for UK retailer own label
frostings being produced.
An independent customer survey was
undertaken, which in turn, led to a
comprehensive review of the Company’s
strategic plans. The survey acknowledged
the strength of the Renshaw brand, its
heritage and that for many customers it was
seen as a “must stock” brand. The survey
also highlighted the key areas that the
Company needed to address to further
secure its position in the market and grow.
Principally these were in the areas of new
product proposition development, customer
service and the performance reliability of
product. A comprehensive strategic plan and
associated schedule of actions was drawn
up to address each of the areas highlighted.
Related to the customer feedback, a review
of the Company’s sales and operations
planning process was undertaken with the
help of a specialist consultancy. The
resultant process redesign and associated
structure changes have been implemented
and are already providing customer service
and inventory benefits.
Forward plans
The business continues to implement its
strategic plans, arising from the strategic
review referred to above. These are focused
on reducing reliance on the Company’s core
product line, ready-to-roll icing, by developing
a wider range of products within the cake
decoration category. The products developed
and made available will be rooted in genuine
consumer insight and seek to address
consumer concerns and needs in the areas
of convenience, health, the environment
and providing accessible inspiration. The
Company’s marketing activities are also being
aligned in one function and reorganised to
support the revised strategy.
In addition to product and marketing
initiatives, the Company is making progress
in engaging with its key customers to provide
a more consultative approach to the overall
cake decorating category through the better
use of bought-in market data, insight
generation and application and digital
media content.
The B2B division continues to see and
capitalise on significant opportunities to
leverage its long-standing industry knowledge
and expertise to help cake manufacturers
through the provision of reliable core
products. It also continues to identify new
customers for products such as caramel
and mallow in rapidly growing emerging
categories, such as the snack bar market.
Export growth is focused on North America
where detailed strategies for three principal
areas have been identified and recruitment is
underway to ensure we have sufficient
resource and expertise to implement plans.
The US operation will agree closer distribution
partnerships with key industry players
throughout the year.
Following changes to the order fulfilment
model for Europe, the business will continue
to evaluate how it best serves its European
customer base, seeking constantly to
improve customer service and product
availability.
Ensuring the supply of consistently high-
quality product remains the key imperative
for the Company; as a result of which there
is now an active quality improvement
programme across the entire business.
In addition to continuous improvement
and preventative measures, the programme
involves acquiring the leading scientific
understanding of the products manufactured
by the Company to ensure it stays ahead
of the competition.
REVENUE
£46.4m
EBITDA Profit
(adjusted)*
£3.0m
OPERATING
LOSS
£(17.3)m
12 months to March
Revenue
EBITDA (adjusted)*
Impairment charge
Operating (loss)/profit
Operating (loss)/profit %
*See note 5 for reconciliation.
2019
£m
46.4
3.0
(18.7)
(17.3)
(37.3%)
2018
£m
47.6
1.1
–
(1.0)
(2.1%)
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STRATEGIC REPORT
2018/19 Performance
During the period under review, this division
has undergone significant change; at the
start of the year, it comprised three
businesses, R&W Scott, Garrett Ingredients
and Brighter Foods; the first two of these
were sold during the year and only Brighter
Foods remained as part of the Group by the
end of the year. Brighter Foods was acquired
in April 2017 and creates, develops and
manufactures snack bars for the healthy
snacking market from its factories in Tywyn,
Gwynedd in mid Wales. Brighter Foods is a
multi-award-winning company which 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 and its manufacturing capabilities,
even before recent expansion, are highly
regarded throughout the industry. As well as
manufacturing partner-branded products,
Brighter Foods has its own healthier brands
such as Wild Trail, which is stocked in
retailers and health food stores.
Brighter Foods itself also saw significant
change in growing its capacity by 9% in the
year ended 31 March 2019, with a further
91% increase in the current year-to-date, to
accommodate newly acquired business and
in preparation for further growth in the new
financial year. Some £3.2 million was
invested in new capacity and the workforce
REVENUE
£15.2m
EBITDA Profit
(adjusted)*
£2.8m
OPERATING
PROFIT
£1.2m
12 months to March
Revenue
EBITDA (adjusted)*
Operating profit
Operating profit %
*See note 5 for reconciliation.
2019
£m
15.2
2.8
1.2
7.8%
2018
£m
16.1
3.7
2.1
12.8%
grew substantially from 160 people to 297,
both of which transformations posed their
own short-term challenges. The impact of
this rapid, albeit planned and wholly
welcome expansion, was felt through a short-
term reduction in sales, as the operational
changes were implemented and the new
staff were trained and brought up to speed.
The result is that Brighter Foods is now
a larger business, with a more diverse
customer base and the ability to grow further
without more significant investment. The last
year has also seen a controlled growth in the
professional overhead base of the business,
in anticipation of the increasing demands of
its blue-chip clients, but the business retains
its well-run, entrepreneurial spirit and
continues to go from strength to strength.
During the period under review, as was
announced in early March 2019, the
dispute regarding the non-supply of
contracted sugar, to Garrett Ingredients
which had been outstanding for over a year,
was satisfactorily resolved, broadly in line
with the provision made within last year’s
accounts.
Forward plans
Following the disruption from the
implementation of changes necessary
for the future growth of the business
during 2018/19, Brighter Foods, well-
positioned as it is in the health and
wellness market, anticipates a resumption
of the growth in revenue which has
characterised every other year of the
business since its formation in 2014.
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Finance Review
Revenue
Group revenue the continuing businesses
for the 12 months ending 31 March 2019
was £61.6 million (2018: £63.8 million),
a decrease of 3.5% on the revenue to
31 March 2018. This results from reductions
in Cake Decoration of £1.2m (2.6%) and in
Food Ingredients of £0.9m (5.9%). The
decrease in Cake Decoration came
principally from the loss of one significant
customer, whereas the Food Ingredients
division reduction was driven mainly from
the practical difficulties arising out of the
implementation of new plant and equipment
and the simultaneous, rapid increase in
people numbers.
Profit measure on operations
Gross profit on the continuing businesses
for the overall Group was £18.0 million
(2018: £17.9 million). At 23.7%, the
delivered margin in the year, for the
continuing businesses, was above the prior
year of 23.0% and significantly above that
reported for the whole group in the prior year
of 14.9%, strongly indicative of the improved
quality of earnings for the Group as a whole.
Delivered margin is defined as gross profit
less costs of delivery.
The operating loss in the year of £21.5
million is reported after an impairment
charge of £18.7 million (see note 16),
depreciation and amortisation charge of
£3.0 million and significant costs of £1.7
million.
After finance costs of £4.6 million and the
inclusion of a £6.2 million loss from the
discontinued operations, this results in a
loss after tax for the year of £32.0 million
(2018: loss of £26.6 million). This equates
to a basic loss per share of 28.64 pence on
continuing operations (restated at 11.82
pence in 2018) and a loss per share of 6.85
pence on discontinued operations (restated
to 23.76 pence in 2018) (see note 15).
Cash flow and net debt
Shares issued in the year and additional
loans to 31 March 2019 amounted to £10.4
million, of which £7.7 million of cash was
used in investing activities and £2.7 million
of cash was used in operating activities.
Pension scheme
The Group offers a defined contribution
scheme for all current employees that is
funded on a monthly basis. In addition, the
Company operates a defined benefit scheme
that was closed to new members in 2000.
The defined benefit scheme is the Napier
Brown Retirement Pension Plan (the Plan).
The IAS 19 pension schemes valuation
reported a gross deficit at 31 March 2019 of
£7.4 million (2018: restated to £7.9 million).
The Plan assets increased by £0.3 million to
£13.8 million (2018: £13.5 million) and the
Plan liabilities are £21.2 million compared
to £21.4 million at 31 March 2018. The
2017 and 2018 deficit has been restated
in relation to certain pension increases
which were previously being considered
discretionary. The correction has been
adjusted via brought forward reserves from
2017, thus matching the cost and benefit,
rather than taken in the current period
accounts. See note 31 for further details.
Dividend
The Directors, considering the Group’s
performance and cash resources, do not
recommend the payment of a final dividend for
the year ended 31 March 2019 (2018: nil).
12 months
to March
Revenue
2019
£m
2018
£m
61,560
63,788
Gross profit
18,027
17,904
Delivered margin
14,612
14,680
Delivered margin
%
EBITDA
(adjusted)* (loss)
Operating loss
before impairment
and significant
items
Operating loss after
impairment and
significant items
23.7%
23.0%
1,901
(314)
(1,126)
(3,482)
(21,518)
(7,490)
Operating loss %
(35.0%)
(11.7%)
Loss before tax
(26,090)
(9,078)
All figures refer to continuing businesses.
*See note 5 for reconciliation.
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STRATEGIC REPORT
Key Performance Indicators
The Board monitors a range of financial and non-financial key
performance indicators, reported on a regular basis, to measure the
Group’s performance. The key performance indicators, all based on
continuing operations, are set out below. The Board has reviewed these
key performance indicators and considers they remain appropriate.
REVENUE GROWTH
Revenue is calculated for continuing
business and is from external
sources only.
£61.6m
£63.8m
£46.9m
£48.3m
2019
2018
2017
2016
EBITDA (ADJUSTED)
EBITDA (adjusted) is defined as
earnings before significant items,
interest, tax depreciation,
amortisation and impairment
charges.
£4.3m
£1.9m
£0.8m
£(0.3)m
2019
2018
2017
2016
COMMENT
Revenue in the year decreased by 3.5%. This
arises partially from disruption associated with
carefully managed growth in Food Ingredients
and partially from the loss of a significant
customer in the Cake Decoration division. The
sustainable quality of the revenue is regarded
as important.
The EBITDA (adjusted) profit was £1.9 million
as against a loss in the prior year of £0.3
million.
NET DEBT
Net debt is the total Group
borrowings less cash at bank.
£35.7m
£37.8m
£16.2m
2019
2018
2017
£5.1m
2016
Net debt in the year has reduced to
£35.7 million; these funds were required to
fund the Group’s investment plan, its
divisional performance and the significant
one-off costs incurred in the year.
DEBT COVER
Debt cover is calculated by dividing
total net debt by continuing EBITDA
(adjusted).
18.79
20.25
1.18
(126)
2019
2018
2017
2016
As a result of reduced net debt and EBITDA
(adjusted) profits in the year net debt:
EBITDA (adjusted) cover stands at 18.79.
ACCIDENT FREQUENCY RATE
The accident frequency rate is the
number of RIDDOR accidents per
100,000 hours worked.
1.12
0.90
0.79
0.07
2019
2018
2017
2016
A higher number denotes a higher risk.
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Corporate Social Responsibility
Real Good Food plc recognises its responsibility to, and how much it
benefits from, the communities of which it is a part, and embracing its
corporate social responsibility is therefore an important part of building
long term sustainable businesses in our group. Notwithstanding that it
was a difficult year for the Group, we continued to play our part with our
stakeholders and in our communities.
Brighter Foods recognise the importance of
their role as the largest employer in the
locality of Tywyn and play an active part in
the community. During 2018/19, Brighter
Foods donated a large number of Read Write
Inc books and teaching materials to Ysgol
Craig Y Deryn, a local primary school, for
example.
During the hot summer of 2018, the
company also provided local farmers with
empty containers to help bring water to their
livestock when other water sources dried up.
A large number of used empty plastic tubs
were donated to the Borth Wild Animal
Kingdom to be reused by the zoo-keepers
and animals.
Brighter Foods continues to sponsor
Monmouth RFC (who have been promoted
twice in consecutive seasons) and also
Tywyn/Bryncrug FC. The company also
continues to sponsor and support the
annual Kymin Dash race in Monmouth and
the Race the Train event in Tywyn as well as
the Dyfi Enduro mountain biking event near
Tywyn. A team from Brighter Foods took part
in Ysgol Uwchradd Tywyn, the local
secondary school’s “Sporting Challenge’
event raising funds for some of the pupils’
annual trip to Morocco. As part of Heart
Awareness week, Brighter Foods also
provided free CPR training in the town’s
cinema hall for members of the local
community.
Brighter Foods donated £2,697 to the above
causes in the period.
Health and safety
Commentary 2018/19
{ After a period of rapid expansion,
involving intensive training of staff new
to the business, Brighter Foods have
appointed a full-time professional Health
and Safety Manager. Reporting of health
and safety issues has already improved
within the business and details of the
Health and Safety performance are now
reported to the Group plc board each
month.
{ Renshaw experienced a number of
accidents and incidents during the year
reflecting the introduction of a large
number of new employees in the
business.
2019/20 Priorities
{ We must maintain and improve our legal
compliance and health and safety
performance in our stand alone
businesses – an appropriate periodic
audit process is being implemented to
help ensure improving standards in this
important area.
{ Targeting a reduction in the number of
incidents in both Brighter’s and
Renshaw’s operational HSE
performance.
Each business has a Corporate Social
Responsibility Plan that was 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 during 2016 has three
key objectives:
{ To be the employer of choice in its local
community.
{ To be actively involved within our
communities and to build a reputation
for social responsibility.
{ To continue to strengthen our reputation
for respect, integrity and innovation with
our customers, suppliers, employees
and partners.
The following are examples which help
illustrate the type of activity that our
businesses are engaged in against those
objectives.
During 2018/19, Renshaw raised £3,961
for our local charity, KIND – which helps
children and their families cope with the
effects of disadvantage and poverty –
through sponsored activities such as bike
rides, raffles and a parachute jump. The
business also raised funds for MacMillan
supporting the coffee morning initiative and
for Children in Need. The business continues
to work with another local charity, The
Whitechapel Centre – a homelessness and
housing charity – through the winter, by
supplying food and clothes donated by
employees for the homeless in Liverpool.
Our team at Rainbow Dust Colours raised
£385 for the Alzheimer’s Society by holding
an Elf day in the run up to Christmas, money
was raised through running fun elf activities
on site.
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Regulatory and legal
The company has previously acknowledged,
and recently been fined for, failings in
corporate governance in a variety of areas.
These failings resulted in censure from the
regulatory authorities and a substantial fine
of £300,000. Considerable steps have been
taken to rectify the failings and ensure no
repetition. The company is currently not
aware of any continuing regulatory interest in
these past events, but is not relaxing its
more rigorous regime in any sense.
Following the corporate governance review
carried out by Ernst & Young during the prior
year, the vast majority of the resulting
recommendations have been implemented in
their entirety.
This report was approved by the Board on
15 August 2019 and is signed on its
behalf by
Hugh CL Cawley
Chief Executive Officer
STRATEGIC REPORT
Risk Management
The risks the Group faces relate to events, and
depend on circumstances, that may or may not
occur in the future. The Board recognises that
risks and uncertainties could affect the
delivery of its strategic objectives. The past
year has seen significant improvements within
the Group’s governance and, with the
appointment of an independent Chair of the
Audit Committee, the development of a risk
management framework became an area of
focus. The principal risks of the Group as a
whole are set out below, in no particular order
of priority.
Demand for products
and market share
Many factors affect the level of consumer
spending in the food industry and consumer
preferences and spending habits change
through factors that are difficult to predict,
including lifestyle, nutritional and health
considerations. The Group has expertise in
the categories within which it operates and
builds on shopping insights to predict a
change in trends and develop new products
for changing habits. The business disposals
during the period and the acquisition of
Brighter Foods were examples of the Group’s
focusing on the added value health sector
and away from sectors where we could not
establish effective competitive advantage.
The Group may experience increased
competition from existing or new
companies, especially at a time when
the major retailers may experience more
difficult trading conditions. The Group’s
sales fluctuate seasonally, with products
sold during Christmas and Easter
accounting for a significant portion of the
Group’s overall revenue. The Group
maintains close relationships with its
existing customer base and continues to
develop research-led innovative products.
To reduce dependency on the UK further, the
Group has focused on growing its market
share in selected export markets.
Macroeconomic environment
and Brexit
The Group has no control over fluctuations in
the longer-term price and availability of
ingredients and there remains uncertainty
over the exit from the EU. The Group
manages the impact of commodity price
inflation and foreign exchange through
natural hedging.
Regulations and safety
Food safety, environmental protection and
employee health and safety are constantly
evolving areas of responsibility for the
business, and subject to increasing
regulation at home and abroad. Any incident
could have an impact on the Group’s
reputation and customer confidence. The
individual businesses of the Group have
responsibility for ensuring that safe
standards are maintained.
Pension liabilities
The Group operates a now-closed defined
benefit pension scheme which exposes the
Group to changes in investment returns,
discount rates, life expectancy and inflation.
Although the Group currently expects to be
able to meet its obligations under the
pension scheme, the funding of the scheme
exposes the Group to further risks.
Working capital
In order for the Group to have sufficient
working capital for its needs, it has
historically been dependent upon significant
financial support from its major investors,
the disposal of businesses, and central
profit improvement initiatives. The Board
regularly monitors the Group’s cash position.
The Directors, after due consideration, have
a reasonable expectation that the company
and the Group have adequate resources to
continue in operational existence for the
next 12 months.
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Board of Directors
Mike Holt Non-Executive Chairman
Steve Dawson Non-Executive Director
Appointed 30 May 2019, having been Non-Executive Director since joining
the Board on 7 August 2018.
Mike has significant public company board and financial experience. He was
CFO of Low & Bonar PLC, an international performance materials Group,
between 2010 and 2017. Prior to that, he was CFO of Vp plc, the specialist
equipment rental group, for over six years from 2004. Before joining Vp,
Mike held senior financial positions within Rolls-Royce Group in the UK, USA
and Hong Kong. He is a fellow of The Institute of Chartered Accountants
in England and Wales and a member of The Association of Corporate
Treasurers. Mike qualified as a Chartered Accountant with Arthur Andersen.
Mike is also a Non-Executive Director, and chair of the audit and risk
committee, of Schroders Asian Total Return Investment Trust Company plc,
and a Non-Executive Director at nmcn plc. In addition, Mike is a Trustee and
Director of Hollybank Trust Ltd. and The Nottingham Hospice Ltd.
Hugh C L Cawley
Chief Executive Officer and Company Secretary
Appointed Interim Chief Financial Officer and Company Secretary on
22 March 2019, following the resignation of Harveen Rai
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 included spells with S Daniels PLC, Dawson Holdings PLC, office2office
plc and Driver Group plc. Hugh is also a founding member of the advisory
board of the Confucius Institute for Business at the University of Leeds.
Maribeth Keeling Chief Financial Officer
Appointed 15 July 2019
Maribeth has considerable public company experience, having specialised
particularly in the turnaround and performance improvement of various
companies in a variety of sectors, and has worked predominantly in listed
entities (main market and AIM), but also in private companies and the not-
for-profit sector. Maribeth retains her role as Finance Director of the Cake
Decoration division.
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) Ltd and Omnicane Thermal Energy Operations (St. Aubin)
Ltd. He has served as president of the Mauritius Sugar Syndicate and as
president of the Mauritius Sugar Producers’ Association.
Appointed 19 September 2018
Steve has extensive experience of the food and beverage industry, both
in the UK and in North America, from both advising clients on how to
improve and build their businesses and from practising such skills himself.
He is currently the Managing Director and founder of BrandGrowth LLC,
a consultancy focused on advising food and beverage brands on how to
achieve their growth strategies. From August 2016 to May 2018, Steve was
Interim CEO of Bahlsen North America, stabilising the business and setting
it well on the path for successful growth. Prior to founding BrandGrowth,
Steve had enjoyed success as the CEO of Walkers Shortbread Inc for
nearly nine years and had spent eight years as Managing Director of Food
From Britain North America.
Anthony Ridgwell Non-Executive Director
Appointed 30 May 2019
Anthony Ridgwell, aged 47, has been working within the Napier Brown
group of companies since leaving university. He is also a director of Napier
Brown and of Napier Brown Holdings Limited where he deals with and
manages their investments.
Harveen Rai Finance Director and Company Secretary
Resigned 22 March 2019
Harveen has 20 years’ experience, predominantly in fast-moving consumer
goods listed companies. She was previously Chief Financial Officer at
Aryzta UK Holdings Limited, where she was involved in implementing and
streamlining the processes and controls of the company. Prior to Aryzta,
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.
Patrick Ridgwell Interim Non-Executive Chairman
Resigned 30 May 2019
Pat has extensive knowledge of the sugar industry and other food sectors
having acquired and developed a number of food businesses during
his career. Pat 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 Non-Executive Deputy Chairman
Judith A MacKenzie Non-Executive Director
Resigned 31 July 2019
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.
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. Chris has announced his intention to stand down from the
Board by 31 July 2019.
Resignation and appointment dates as registered at Companies House.
14
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GOVERNANCE REPORT
Report of the Directors
The Directors present their report and the audited financial statements
for the year ended 31 March 2019.
Corporate governance
The Board is very clear that, historically, the standards of corporate governance and reporting were below those which investors might
reasonably have expected and has taken steps to rectify this important aspect of operations and disclosure. The Board appointed specialist
external advisors from Ernst & Young to conduct a full review of the Group’s corporate governance and financial reporting procedures in early
2018, since which time their recommendations have been implemented.
The Board recognises the importance of good corporate governance, and welcomes the changes to the AIM Rules which require the adoption
of a recognised governance code, and how the principles of that code are complied with. We have elected to adopt the Quoted Companies
Alliance Corporate Governance Code (the ‘QCA Code’) which we believe has been constructed in a simple, practical and effective style and
that meaningful compliance with its 10 main principles should provide shareholders with confidence in how the Group operates.
Below shows each principle, and how the Group complies:
Principle
How Real Good Food plc complies
1. Establish a strategy and business
model which creates long-term
value for shareholders.
The objective and strategy of any Group will be influenced by events and the recent history of the Group has
clearly shaped our current objective. It is our intention to deliver a return on investment for all our shareholders,
providing a stable financial platform through improving the profitability of the Group as a whole and its constituent
businesses.
The execution of the strategy to date has seen the disposal of four of our businesses, Garretts Ingredients,
Haydens Bakery, R&W Scott and Chantilly Patisserie. In all cases the value to the Group from their sale, and the
benefits to other stakeholders, were estimated to be greater than the value to be realised from retention and
executing a turnaround.
The two remaining businesses are guided in their daily operations by clear objectives and articulated strategies,
such strategies being updated as necessary on a regular basis.
2. Seek to understand and meet
shareholder needs and
expectations.
The Board has representation of a large proportion of its shareholder base – they can, and do, communicate the
thoughts and requirements of the shareholders regularly.
Contact details of Executive Directors are made available to other shareholders who wish to make contact. This
is actively encouraged.
3. Take into account wider stakeholder
and social responsibilities and their
implications for long-term success.
The Board receives share register analysis reports to monitor the shareholder base and identify the types of
investors on the register.
All shareholders are invited to attend the AGM and Directors make themselves available before and after the
meeting for further discussion.
The Group regards its shareholders, employees, customers, suppliers and advisors as all being important parts
of the wider stakeholder group.
Management clearly places particular importance on its day-to-day relationships with customers and staff, with
significant effort directed to ensuring these are managed appropriately. Regular individual employee reviews are
undertaken to ensure any issues are addressed promptly.
An independent review of the relationship of one of the key businesses with its customers was commissioned
during the year, for example, to learn what we can about the need for improvement in that important sphere.
The Group records customer service levels – OTIF (on time in full), for example. There is a feedback system in
place for service levels and issues raised can be addressed.
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Report of the Directors (continued)
Principle
How Real Good Food plc complies
4. Embed effective risk management,
considering both opportunities and
threats, throughout the
organisation.
5. Maintain the Board as a well-
functioning, balanced team led by
the Chair.
A risk register has been compiled by the Audit Committee, detailing the risks identified within the divisions, and
the Group as a whole. It is regularly updated, and is presented at Board meetings for discussion each time a
change has been made, or bi-annually, whichever is the shorter period.
Following further changes to the Board since the year end, the Board, chaired by Mike Holt, currently comprises
two Executive and six Non-Executive Directors. As chairman, Mike is primarily responsible for the Group’s
approach to corporate governance and the application of the principles of the QCA Code. Steve Dawson and Mike
Holt are the Group’s independent Directors.
Each Board member commits sufficient time to fulfil her or his duties and obligations to the Board and the Group.
Each Director attends monthly Board meetings and joins ad hoc Board discussions as necessary.
The Board is supported by its Audit Committee and its Remuneration Committee. The plc Board meets at least
once a month, with additional meetings held as and when required. The Audit and Remuneration Committees
meet at least twice a year.
6. Ensure that between them the
Directors have all appropriate
experience, skills and capabilities.
The descriptions on page 14 identify each member of the Board and describes her or his relevant experience,
skills and qualities. The Chairman and the Board as a whole believes that the Board has a more than sufficient
and suitable mix of experience, skills and competence which covers all the disciplines essential to bring a
balanced perspective to enable the Group to deliver its objective.
The Board is currently comprised of two Executive Directors and six Non-Executive Directors, two of whom are
independent and comprises six men and two women, ranging in age from their mid-40s to early 70s. Updates to
members of the Board on regulatory matters are given by Board members themselves where appropriate and/or
by Group’s professional advisors.
7. Evaluate Board performance based
on clear and relevant objectives,
seeking continuous improvement.
Against the background of the articulated objective for the Group, the performance of the Board as a whole may
be judged in due course, through the eventual attainment of financial measures, including adjusted EBITDA,
operating cash flow and net debt.
8. Promote a corporate culture that is
based on ethical values and
behaviours.
The Board recognises that the values it espouses provide the framework which influences all parts of the Group.
The Chief Executive Officer takes the lead in developing the corporate culture and looks to encourage all employees
to contribute to the enjoyment and success of the business, the formulation of the tactics to deliver the objective
and strategy and to the promulgation of the core values. The Human Resources team have long promoted the
Group’s values which underpin conditions of employment. The Board believes that, although the difficulties of the
past have dented the culture of confidence, we now have the leadership capable of engendering the environment
which will rebuild the successful team atmosphere.
9. Maintain governance structures and
processes that are fit for purpose
and support good decision making
by the Board.
The Executive Board members generally have clear overall responsibility for managing the day-to-day operations of
the Group and the Board as a whole is responsible for monitoring performance against the Group’s goals and
objectives.
The roles of the Audit Committee, the Remuneration Committee and the Board of Directors are clearly defined
within this report.
10. Communicate how the Group is
governed and is performing by
maintaining a dialogue with
shareholders and other relevant
stakeholders.
The Group strives to maintain a regular dialogue with stakeholders including shareholders to enable any
interested party to make informed decisions about the Group and its performance. The Board believes that
greater transparency in its dealings offers a level of comfort to stakeholders and an understanding that their
views will be heard and considered appropriately.
A number of changes were made during the period under review, and shortly after, to improve the independence and corporate governance
structure of the Board.
On 7 August 2018, the Board was strengthened by the appointment of Mike Holt as an Independent Non-Executive Director and chair of the
Audit Committee, succeeding Christopher Thomas in this latter role, and on 19 September 2018, Steve Dawson joined the Board as a
second Independent Non-Executive Director. With effect from 22 March 2019, Harveen Rai stood down as CFO. Maribeth Keeling was
appointed to the role of CFO on 15 July 2019. With effect from 30 May 2019, Patrick Ridgwell, the Interim Non-Executive Chairman, retired
from the Board and was succeeded as Non-Executive Chairman by Mike Holt; Judith MacKenzie, was appointed Chair of the Audit Committee
and relinquished her role as Chair of the Remuneration Committee which was assumed by Steve Dawson, and Anthony Ridgwell joined the
Board as a Non-Executive Director. At the same time, Christopher Thomas, the Non-Executive Deputy Chairman, announced his intention to
retire from the Board not later than 31 July 2019.
The Board meets once per month and reviews the performance of the business at each meeting. The Board has delegated certain
responsibilities to the Audit and Remuneration Committees, details of which can be found on pages 19 and 20.
16
GOVERNANCE
Annual Report and Accounts for the year ended 31 March 2019
Resignation and appointment dates as registered at Companies House
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GOVERNANCE REPORT
Principal continuing activities
The principal activities of the Group are the
sourcing, manufacture and distribution of
food to the retail, manufacturing, wholesale
and export sectors.
Business review and
future developments
These topics are covered in detail within the
Strategic Review and Divisional Reviews on
pages 5, 6, 8 and 9.
Non-current assets
Details of changes in non-current assets
are given in notes 16–20 to the financial
statements.
Directors
During the financial year, and shortly after its
close, a number of changes took place to the
Board. The Board was initially strengthened
by the appointment of Mike Holt as an
Independent Non-Executive Director and
chair of the Audit Committee, succeeding
Christopher Thomas in this latter role;
Steve Dawson joined the Board as a second
Independent Non-Executive Director. After
the period end, Patrick Ridgwell, the Interim
Non-Executive Chairman, retired from the
Board and was succeeded as Non-Executive
Chairman by Mike Holt; Judith MacKenzie,
was appointed Chair of the Audit Committee
and relinquished her role as Chair of the
Remuneration Committee which was
assumed by Steve Dawson, and Anthony
Ridgwell joined the Board as a Non-Executive
Director. At the same time, Christopher
Thomas, the Non-Executive Deputy Chairman,
announced his intention to retire from the
Board, which he did at the end of July 2019.
Harveen Rai stood down as CFO and Maribeth
Keeling was appointed as CFO in July. Details
of the Directors are given on page 14.
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 planned future
performance. The forecasts, agreed with the
businesses, consider reasonable possible
changes in trading performance and these
assumptions have been projected and
shared with the Group’s advisors.
The principal shareholders of the Group have
shown considerable support for the working
capital requirements and, having carefully
considered the liquidity of the Group and
Company in line with the current strategy
and future performance, the Directors have a
reasonable expectation that the Company
and the Group have adequate resources to
continue in operational existence for the
next 12 months and therefore continue to
adopt the going concern basis in preparing
the consolidated financial statements.
Provision of information
to auditor
Each person who is a Director at the time
when this Report of the Directors is
approved has confirmed that:
{ As far as that Director is aware, there is
no relevant audit information of which
the Group’s auditor is unaware, and
{ That each Director has taken all the
steps that ought to have been taken as
a 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.
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;
and
{ prepare the financial statements on the
going concern basis unless it is
inappropriate to assume 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
are prepared in accordance with applicable
law in the United Kingdom.
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Director
Mike Holt
Hugh Cawley
Harveen Rai
Christopher Thomas
Patrick Ridgwell
Jacques d’Unienville
Judith MacKenzie
Steve Dawson
Eligible
to attend
Meetings
attended
8
12
11
12
12
12
12
7
7
12
11
11
9
10
12
7
The above table sets out the number of
Directors’ meetings held during the year and
the eligibility and attendance by members of
the Board.
Report of the Directors (continued)
Substantial interests
There were the following substantial
interests (3% or more) in the Company’s
ordinary share capital:
31 March 2019
NB Ingredients Limited
Omnicane International
Investors Limited
Downing LLP
Mr J & Mrs S O’Driscoll
% Holding
in ordinary
share capital
22.3%
20.8%
7.9%
5.6%
Directors’ indemnities
The Company has paid £20,440 (2018:
£22,880) in respect of Directors’ and
Officers’ Indemnity Insurance.
Financial instruments
The Group’s financial instruments comprised
bank term loans and a revolving credit
facility, hire purchase and finance leases,
loan notes from the major shareholders,
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 25 to the financial
statements.
Liquidity risk
Short term flexibility is available through
existing bank facilities.
Employee involvement
The Group aims to improve the performance
of the organisation through the development
of its employees. Their involvement is
encouraged by a variety of means including
team working, team briefings, consultative
committees and working parties.
Equal opportunities
The Group continues to embrace and
champion the principles of equality of
opportunity and diversity in all aspects of
employment. During the year, our
employment policies and procedures have
been reviewed to ensure best practice
continues to be adopted, and we continue to
apply those principles to enable a workplace
which is free from discrimination and where
development opportunities are open to all.
The Group also encourages an active
approach to those who require additional
support in order to achieve their potential.
During the year, the Group’s second gender
pay report was published, providing added
guidance for future development plans and
activities, particularly in terms of leadership.
Through our Leadership Framework we look
forward to creating the opportunities for
developing greater diversity throughout our
management structures in the future.
Charitable and political
donations
During the current financial period the Group
made charitable donations of £2,697 (2018:
£3,237). No political donations were made
during the current or previous financial
period.
This report was approved by the Board
on 15 August 2019 and is signed on its
behalf by
Hugh CL Cawley
Chief Executive Officer
18
GOVERNANCE
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GOVERNANCE REPORT
Audit Committee Report
Audit Committee Report
With effect from January 2018, Christopher
Thomas had assumed the role as Chair of
the Audit Committee, pending the
appointment of an appropriately qualified
independent Non-Executive Director. On the
appointment of Mike Holt to the Board on
7 August 2018, the Committee then
comprised Mike Holt (as Chair) and
Christopher Thomas. Collectively, they had
the skills and experience required to
discharge their duties fully and Mike Holt
meets the requirement of recent and
relevant financial experience. Since 30 May
2019, Mike Holt stood down as Chair of the
Committee and Judith MacKenzie was
appointed as Chair of the Audit Committee;
as Partner and Head of Public Equity at
Downing LLP, Judith has the relevant and
recent financial experience. Christopher
Thomas stood down from the Committee
when he left the Board on 31 July, 2019.
The Committee is scheduled to meet
formally twice a year with the auditor, in
relation to the annual and interim accounts,
but in addition, the Chairman of the
Committee also maintains a close dialogue
with them throughout the year to ensure they
remain apprised of relevant events. The
Audit Committee met on three occasions
during the year. Executive Directors are
ordinarily present at Committee meetings by
invitation only, with the CFO ordinarily
attending. The Committee’s primary role is
to ensure the integrity of the financial
reporting and audit process and the
maintenance of sound internal control and
risk management systems. It is responsible
for monitoring and reviewing:
{ the integrity of the Group’s financial
statements and any formal
announcements relating to its financial
performance;
{ the Group’s internal financial controls
and internal control and risk
management systems;
{ the effectiveness of the external audit
process and making recommendations
to the Board on the appointment,
reappointment and removal of the
external auditor;
{ the policy on the engagement of the
external auditor to supply non-audit
services; and
{ taking specific responsibility for certain
key areas of risk management to
support the Board’s role in overseeing
an enterprise-wide approach to risk
identification, management and
mitigation.
The past year has seen significant
improvements to the governance regime
throughout the Group, through the
implementation of the recommendations of
the review carried out by Ernst & Young
during early 2018, notably appointing two
independent Non-Executive Directors to the
Board, one of whom is now appointed
Chairman, and the other of whom chairs the
Remuneration Committee; setting out
matters reserved for the Board;
improvements in reporting to the Board,
financial accounting and reporting and
strategic planning. The Committee seeks
to ensure continual improvements in the
Group’s governance in order to be and
remain compliant with the QCA’s Code of
Best Practice for small to medium sized
companies.
The Audit Committee reviewed a wide range
of financial reporting and related matters in
respect of the Company’s Annual Report
prior to their consideration by the Board.
Reports highlighting key accounting matters
and significant judgements were also
received from BDO LLP in respect of the year
end financial statements and discussed by
the Committee. In particular, these included
the significant judgement areas of the
impairment of goodwill and the going
concern basis of accounting.
The following table sets out the number of
Audit Committee meetings held during the
year, and the attendance by committee
member:
Director
Mike Holt
Christopher Thomas
Meetings
attended
3
3
Description of Risk
Overview of Risk
Company response
Asset Impairment
Going Concern
The Group now has £50.4 million of
goodwill, relating to excess of consideration
paid to the fair value of acquisitions,
and £18.2 million of property, plant and
equipment, and intangible assets. The
carrying value of goodwill is reviewed at
least annually to check that it is not in
excess of its recoverable amount. The
value of property, plant and equipment and
intangible assets are stated at cost less
accumulated depreciation or amortisation
and impairment losses.
Given the losses incurred by the Group, and
its level of indebtedness, the assumption
of going concern has been subject to
challenge.
Cash flow projections for each Cash Generating Unit “CGU” have
been prepared and reviewed, which take into account current
market conditions and the long-term growth expectations for the
key markets served by the CGUs. A sensitivity analysis was also
applied to stress test the assumptions and future economic
value of assets. These resulted in the impairment of £18.7m of
goodwill carried forward from previous years, and no impairment
of property, plant and equipment. The Audit Committee discussed
the underlying assumptions, and discount rates used, with both
management and BDO LLP. Following discussion of headroom and
sensitivity, the Committee was satisfied that, these adjustments
having been made, the carrying values are appropriate.
The Board has critically reviewed the planned future performance
of the Group and its cash flows and funding. Following a number
of disposals, the refinancing of the Group and the deferral of
shareholder loan note repayments, the Committee and the Board, as
a whole, is satisfied that a going concern approach is fully justified.
Disclosure of Related
Party Transactions
There have historically been a number of
related party transactions in relation to
former Directors that were not properly
disclosed in the relevant accounts.
The Committee critically reviewed related party transaction
disclosures and discussed these with the Board, management
and BDO LLP to ensure that all appropriate disclosures have
been made.
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The following table sets out the number of
Remuneration Committee meetings held
during the year, and the attendance by
committee member:
Director
Judith A MacKenzie
Patrick Ridgwell
Mike Holt
Steve Dawson
Jacques d’Unienville
Meetings
attended
2
2
1
2
1
Remuneration Committee Report
Directors’ remuneration
On her departure from the Group, Harveen
Rai, Finance Director, received her contractual
entitlement to pay in lieu of notice, and a
bonus of £45k in recognition of her role in the
turnaround of the business. Hugh Cawley’s
salary was reviewed during the year, in light of
the challenges facing the Group, and brought
in line with market norms; he was also paid a
bonus of £250k in recognition of the role he
has played in the turnaround of the business.
The salaries of the Executive Directors are
benchmarked against other AIM-listed
businesses of a similar size and complexity.
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 generally terminable
by either party with three months’ written
notice.
The Non-Executive Directors are not 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.
Current Directors’ base salaries and fees
are disclosed in note 11.
Remuneration
Committee Report
Judith MacKenzie was Chair of the
Remuneration Committee throughout the
period, and Pat Ridgwell and Jacques
d’Unienville were also members of the
Remuneration Committee throughout the year.
At the time of the appointment of Steve
Dawson in September 2018, Mike Holt and he
were then appointed members, ensuring that
the Committee included two Independent
Directors. On 30 May 2019, the Remuneration
Committee’s composition became Steve
Dawson, as Chair, Judith MacKenzie, Jacques
d’Unienville and Mike Holt.
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; and;
{ agree the policy for authorising claims
for expenses from the Chairman and plc
Directors. The Directors’ remuneration
policy aims to align the interests of all
shareholders and management. The
framework recognises the need to
recruit, retain and appropriately
incentivise high-calibre individuals to
deliver the strategy set by the Board.
This report outlines the base salary, pension,
benefits and long term incentive plans,
where appropriate of all Board Executives.
20
GOVERNANCE
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OUR FINANCIALS
Independent Auditor’s Report
to the members of Real Good Food plc
Opinion
We have audited the financial statements of Real Good Food plc (the
‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 March 2019 which comprise the consolidated statement
of comprehensive income, consolidated statement of changes in
equity, company statement of changes in equity, consolidated
statement of financial position, company statement of financial
position, consolidated cash flow statement, company cash flow
statement and notes to the financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the financial statements 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.
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
2019 and of the group’s loss 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.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of
our report. We are independent of the group and the parent company
in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you where:
{ the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is not appropriate; or
{ the directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant doubt
about the group’s or the parent company’s ability to continue to
adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements
are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on the overall audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
Key Audit Matter
How We Addressed the Key Audit Matter in the Audit
Pension Scheme Assumptions
We consider there to be a significant risk concerning the
appropriateness of the actuarial assumptions applied in
calculating the group’s defined benefit pension scheme liability
of £7.4 million (2018: £7.9 million) as shown in Note 31. This
is also considered in Note 2 (accounting policies) and Note 3
(estimates and judgements).
The valuation of the group’s pension scheme liability was
performed by the group’s external actuary and involves
significant judgement from the directors and the actuary in
the choice of discount rate used and in the key sources of
estimation uncertainty, in particular in relation to the inflation
assumptions and mortality rates, as described in the group’s
accounting policies.
We assessed the appropriateness of the assumptions underpinning the
valuation of the scheme assets and liabilities.
Specifically we challenged the discount rate, inflation and mortality
assumptions applied in the calculation by using our auditor engaged
pension specialists to benchmark the assumptions applied against
comparable third party data and assessed the appropriateness of the
assumptions in the context of the group’s own position.
Key observations
Based on our audit work, we considered the assumptions used in the
calculation of the pension liability are within an acceptable range.
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Independent Auditor’s Report
to the members of Real Good Food plc
Key Audit Matter
How We Addressed the Key Audit Matter in the Audit
Disposal Accounting
As described in Note 32, throughout the year the group
disposed of two of its main trading subsidiaries (Haydens
Bakery Limited, R&W Scott Limited), sold the trade and assets
of another trading subsidiary (Real Good Food Ingredients
Limited (formerly Garrett Ingredients Limited) and sold RGF
Patisserie Limited.
We reviewed the sale and purchase agreements entered into and used
these to assess the appropriateness of the directors’ accounting
treatment.
We tested the components’ statement of financial positions at the
relevant date of disposal to ensure cut off around the sale was correctly
treated. We also ensured any disposal adjustments had been correctly
considered by management.
We focused on this area due to the significance to the group of
the disposals and due to the potential for error in the disposal
accounting, which contained several adjustments to consider in
addition to the closing balance sheet.
We verified the disposal accounting, including checking that costs of
disposal had been included and any deferred consideration recognised
appropriately. We also ensured the sale proceeds had been received
into bank.
Due to the significance of the disposals, there is also a risk
that the disclosures in the financial statements do not contain
all information required by the standards.
We considered the disclosures regarding the disposals in the financial
statements to ensure that they were adequate and in line with
accounting standards.
Key observations
Based on the procedures we performed, the disposal accounting and
associated disclosures are considered to be in line with applicable
accounting standards and materially reflect the transactions.
Key Audit Matter
How We Addressed the Key Audit Matter in the Audit
Going Concern
The group incurred a net loss of £32.0 million during the year
ended 31 March 2019. Furthermore, the group incurred a
negative operating cash flow of £2.7 million during the year.
The group had cash of £2.9 million and borrowings of £38.6
million as at the year end. Within the borrowings of £38.6
million are shareholder loans of £27.2 million which at the
31 March 2019 year end were due for repayment in June 2020
or earlier.
The above factors necessitated further assessment of whether
it is appropriate for the group and the parent company to
continue preparing the consolidated financial statements on a
going concern basis.
We considered this to be a key audit matter because
management's assessment involves significant assumptions
and judgements which are based on their best estimates,
analysis of the current market conditions and the group's
performance.
Our audit procedures included obtaining and examining management's
business plan until March 2021, which is also used as a basis for the
discounted cash flow model in the impairment assessment of goodwill
and other non-current assets. We examined the cash flow forecasts as
well as considered downside sensitivities to these.
We challenged management's assumptions used in the forecast period
by considering available evidence, including recent and past
performance, to support these assumptions.
We also reviewed the renegotiated financing arrangements in relation to
borrowings from shareholder loans, of which the amounts previously due
in June 2020 have now been extended to May 2021.
Key observations
Our observations are covered in the conclusions relating to going
concern section of our audit report.
22
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OUR FINANCIALS
Key Audit Matter
How We Addressed the Key Audit Matter in the Audit
Asset impairment
Given the loss incurred during the year, there were indicators of
impairment of the group’s non-current assets.
This relates to goodwill, investments and tangible fixed asset
balances. The impairment assessments resulted in an impairment
charge processed for goodwill (£18.7 million in relation to Cake
Decorations and £0.9 million in relation to Real Good Food
Ingredients – see Note 16). This is also considered in Note 2
(accounting policies) and Note 3 (estimates and judgements).
We focused on this area as the directors exercise significant
judgement in determining the underlying assumptions used in
impairment reviews, including the future results of the business
and the discount rate applied to the forecasted future cash flows.
We examined the assumptions and forecasts made by the directors to
assess the recoverability of the carrying amount of goodwill, investments
and tangible fixed asset balances. We focused on the appropriateness of
CGU identification, methodology applied to estimate recoverable
amounts, discount rates and forecast cash flows. Specifically:
{ We compared the methodology applied in the value in use calculation
with the relevant accounting standard and checked the mathematical
accuracy of management's model.
{ We checked that the cash flow forecasts used in the valuation are
consistent with the information used by the board.
{ We challenged management on their cash flow forecasts and the
growth rates for 2019/20 and beyond by considering evidence
available to support these assumptions, their consistency with
findings from other areas of our audit, and by performing a sensitivity
analysis.
{ We used our valuation experts to assist us in assessing the discount
rate and long-term growth rates applied within the model.
Key observations
Based on the audit procedures above we did not find any material
misstatements in the calculation of the impairment provisions or the
need for any further provisions.
Our application of materiality
We consider materiality to be the magnitude by which
misstatements, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of the
financial statements. We use materiality both in planning the scope
of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Group materiality
£428,000 (2018: £500,000)
Basis for materiality 0.6% of Revenue from continuing operations
(2018: 0.4% of Revenue)
Rationale for
benchmark adopted
As the group is loss making in the current and
prior year, a profit based measure was not
considered suitable to be used. Revenue was
concluded to be the most suitable benchmark
due to this being one of the headline figures
in the financial statements and a key
consideration in the finance review by
the directors.
In considering individual account balances and classes of
transactions we apply a lower level of materiality in order to reduce
to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality.
Performance materiality was set at £257,000 (2018: £300,000),
representing 60% of materiality. The performance materiality
threshold was unchanged from the prior year and was chosen due
to a significant number of areas of the financial statements subject
to high levels of estimation.
Our audit work on each component was executed at levels of
materiality applicable to each individual entity which was lower than
group materiality. Component materiality ranged from £51,000 to
£278,000 (2018: £2,000 to £375,000). Parent company materiality
was £107,000 (2018: £350,000).
We agreed with the audit committee that we would report to the
committee all individual audit differences identified during the course
of our audit in excess of £13,000 (2018: £15,000). We also agreed
to report differences below these thresholds that, in our view,
warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding of the
group and its environment, including group-wide controls, and
assessing the risks of material misstatement at the group level.
In assessing the risk of material misstatement to the group financial
statements, and to ensure we had adequate quantitative coverage of
significant accounts in the financial statements, we determined that
there were four (2018: six) significant components for the purposes
of the group audit. The audit of all of the significant components was
performed by ourselves and a full scope audit was performed in
each case.
For the remaining components within the group that were not fully
scoped in for group audit purposes, we performed an audit of the
complete financial statements of four further components due to
statutory local requirements. In relation to the remaining non-
significant components, we performed audit procedures on specific
accounts within those components that we considered had the
potential for the greatest impact on the significant accounts in the
financial statements, either because of the size of these accounts or
their risk profile.
As a consequence of the audit scope determined, we achieved the
following approximate coverage of:
Full scope audits
and audit of
significant
components
disposed of
Specific
procedures on
non significant
components
disposed of
78%
77%
99%
11%
10%
n/a
Total
coverage
99%
87%
99%
Revenue
Gross profit
Net assets
www.realgoodfoodplc.com Stock Code: RGD
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Independent Auditor’s Report
to the members of Real Good Food plc
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual
report, other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement
set out on page 17, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due
to fraud or error.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in
the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in
this regard.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the course of
the 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 strategic report and the directors’ report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by
exception
In the light of the knowledge and understanding of the group and the
parent 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 in
relation to which 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.
In preparing the financial statements, the directors are responsible
for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group
or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of these financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Use of our report
This report is made solely to the parent 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 parent 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 parent company and the
parent company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Gary Harding (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Manchester
15 August 2019
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
24
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2019
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Consolidated Statement of
Comprehensive Income
Year ended 31 March 2019
Revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses
Operating loss before impairment and significant items
Impairment charge
Significant items
Operating loss after impairment and significant costs
Finance costs
Other finance costs
Loss before tax
Income tax credit
Loss from continuing operations
Loss from discontinued operations
Net loss
Attributable to:
Owners of the parent
Non-controlling interests
Net loss
Items that will or may be reclassified to profit or loss
Foreign exchange differences on translation of subsidiaries
Items that will not be reclassified to profit or loss
Actuarial gains/(losses) on defined benefit plan
Tax relating to items which will not be reclassified
Other comprehensive gain/(loss)
Total comprehensive loss for the year
Attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive loss for the year
OUR FINANCIALS
Notes
4, 5
16
6
8
9
10
14
32
31
20
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
(restated*)
£’000s
61,560
(43,533)
18,027
(3,415)
(15,738)
(1,126)
(18,675)
(1,717)
(21,518)
(4,406)
(166)
(26,090)
349
(25,741)
(6,243)
(31,984)
63,788
(45,884)
17,904
(3,223)
(18,163)
(3,482)
–
(4,008)
(7,490)
(1,424)
(164)
(9,078)
613
(8,465)
(18,100)
(26,565)
(32,321)
(27,099)
337
534
(31,984)
(26,565)
(32)
441
(75)
334
61
(599)
100
(438)
(31,650)
(27,003)
(31,987)
(27,537)
337
534
(31,650)
(27,003)
* The result for the year ended 31 March 2018 has been restated to reflect the change in continuing and discontinued operations.
Basic and diluted loss per share – continuing operations
Basic and diluted loss per share – discontinued operations
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
(restated*)
£’000s
(28.64)p
(6.85)p
(11.82)p
(23.76)p
Notes
15
15
* Earnings per share for the year ended 31 March 2018 has been restated for a prior period adjustment to remove the effect of non-controlling interests, which
were included in the figures to 31 March 2018 in error. It has also been restated to reflect the change in continuing and discontinued operations.
The notes on pages 32 to 75 form part of these financial statements.
www.realgoodfoodplc.com Stock Code: RGD
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Consolidated Statement of Changes in Equity
Year ended 31 March 2019
Issued
Share
Capital
£’000s
Share
Premium
Account
£’000s
Other
Reserves
£’000s
Share
Option
Reserve
£’000s
Foreign
Translation
Reserve
£’000s
Retained
Earnings
£’000s
Total
£’000s
Non–
Controlling
Interest
£’000s
Balance as reported at
31 March 2017
Restated brought forward
retained earnings (note 31)
1,411
122
–
–
Restated balance at 31 March
2017
1,411
122
Total comprehensive loss
for the year
Loss for the year
Other comprehensive loss for
the year
Total comprehensive loss for
the year
Transactions with owners of
the Group, recognised directly
in equity
–
–
–
–
–
–
Shares issued in the year
158
2,598
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4,796)
–
415
(48)
84,818
86,718
–
–
(1,479)
(1,479)
415
(48)
83,339
85,239
–
–
–
Total
Equity
£’000s
86,718
(1,479)
85,239
–
–
–
–
(5)
(100)
–
–
–
(27,099)
(27,099)
534
(26,565)
61
(499)
(438)
–
(438)
61
(27,598)
(27,537)
534
(27,003)
–
–
–
–
–
–
–
–
–
–
–
–
2,756
(5)
(100)
(4,796)
–
–
–
–
2,756
(5)
(100)
(4,796)
–
1,269
1,269
(2,145)
1,269
(876)
158
2,598
(4,796)
(105)
1,569
2,720
(4,796)
310
13
55,741
55,557
1,803
57,360
–
–
–
–
–
–
418
566
–
–
–
–
418
566
–
–
–
–
–
–
–
–
–
–
–
(38)
(34)
(72)
–
(32,321)
(32,321)
337
(31,984)
(32)
366
334
–
334
(32)
(31,955)
(31,987)
337
(31,650)
–
–
–
–
–
–
–
–
984
(38)
(34)
912
–
–
–
–
984
(38)
(34)
912
1,987
3,286
(4,796)
238
(19)
23,786
24,482
2,140
26,622
Share based payments
Deferred tax on share based
payments
Long-term liabilities
Acquisition of majority interest
Total contributions by and
distributions to owners of
the Group
Balance as at
31 March 2018 (restated)*
Total comprehensive loss
for the year
Loss for the year
Other comprehensive loss
for the year
Total comprehensive loss
for the year
Transactions with owners
of the Group, recognised
directly in equity
Shares issued in the year
(note 26)
Share based payments
(note 28)
Deferred tax on share based
payments
Total contributions by and
distributions to owners of
the Group
Balance as at
31 March 2019
*Balance as at 31 March 2018 is restated to reflect the impact of the prior period adjustment shown above. Full details are in note 31.
The notes on pages 32 to 75 form part of these financial statements.
26
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2019
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Company Statement of Changes in Equity
Year ended 31 March 2019
OUR FINANCIALS
Balance as reported at
31 March 2017
Restated brought forward retained
earnings (note 31)
Restated balance at 31 March 2017
Total comprehensive income
for the year
Loss for the year
Other comprehensive loss for the year
Total comprehensive income
for the year
Transactions with owners of the
Group, recognised directly in equity
Shares issued in the year
Share based payments
Deferred tax on share based payments
Total contributions by and
distributions to owners of the Group
Balance as at 31 March 2018
(restated)*
Total comprehensive income
for the year
Loss for the year
Other comprehensive loss for the year
Total comprehensive income
for the year
Transactions with owners of the
Group, recognised directly in equity
Shares issued in the year
Share based payments
Deferred tax on share based
payments
Total contributions by and
distributions to owners of the Group
Balance as at 31 March 2019
Issued
Share
Capital
£’000s
1,411
–
1,411
–
–
–
158
–
–
158
1,569
–
–
–
418
–
–
418
1,987
Premium
Share
Account
£’000s
Share
Option
Account
£’000s
122
–
122
–
–
–
2,598
–
–
2,598
2,720
–
–
–
566
–
–
566
3,286
415
–
415
–
–
–
–
(5)
(100)
(105)
310
–
–
–
–
(38)
(34)
(72)
238
Retained
Earnings
£’000s
Total
Equity
£’000s
53,677
55,625
(1,479)
52,198
(1,479)
54,146
(27,067)
(599)
(27,067)
(599)
(27,666)
(27,666)
–
–
–
–
2,756
(5)
(100)
2,651
24,532
29,131
(21,983)
(21,983)
441
441
(21,542)
(21,542)
–
–
–
–
2,990
984
(38)
(34)
912
8,501
*Balance as at 31 March 2018 is restated to reflect the impact of the prior period adjustment shown above. Full details are in note 31.
The notes on pages 32 to 75 form part of these financial statements.
www.realgoodfoodplc.com Stock Code: RGD
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Consolidated Statement of Financial Position
Year ended 31 March 2019
NON-CURRENT ASSETS
Goodwill
Other intangible assets
Tangible fixed assets
Investments
Deferred tax asset
CURRENT ASSETS
Inventories
Trade and other receivables
Current tax assets
Cash collateral
Cash and cash equivalents
Assets classed as held for sale
TOTAL ASSETS
CURRENT LIABILITIES
Bank overdrafts
Trade and other payables
Borrowings
Financial instrument
NON-CURRENT LIABILITIES
Borrowings
Long-term liabilities – NCI put option
Derivative liability – Convertible loan notes
Deferred tax liabilities
Retirement benefit obligation
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium account
Other reserve
Share option reserve
Foreign exchange translation reserve
Retained earnings
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
Non-controlling Interest
TOTAL EQUITY
Notes
31 March 2019
£’000s
31 March 2018
(restated*)
£’000s
31 March 2017
(restated*)
£’000s
16
17
18
19
20
21
22
13
33
24
23
23
25
25
20
31
26
50,375
1,599
16,578
81
1,259
69,892
6,840
8,614
52
2,000
2,909
20,415
148
90,455
–
10,629
668
–
11,297
37,961
4,997
294
1,881
7,403
52,536
63,833
26,622
1,987
3,286
(4,796)
238
(19)
23,786
24,482
2,140
26,622
69,955
3,247
30,098
81
1,129
104,510
10,582
15,296
27
2,000
2,731
30,636
–
69,416
1,155
23,932
–
1,435
95,938
13,323
16,016
233
–
464
30,036
–
135,146
125,974
–
22,486
24,160
–
46,646
16,390
4,796
–
2,035
7,919
31,140
77,786
57,360
1,569
2,720
(4,796)
310
13
55,741
55,557
1,803
57,360
619
15,243
11,375
146
27,383
4,701
–
–
1,278
7,373
13,352
40,735
85,239
1,411
122
–
415
(48)
83,339
85,239
–
85,239
*Retirement benefit obligation and retained earnings have been restated for an error in the 31 March 2017 accounts. See note 31 for full details.
These financial statements were approved by the Board of Directors and authorised for issue on 15 August 2019.
They were signed on its behalf by:
Hugh CL Cawley
Chief Executive Officer
The notes on pages 32 to 75 form part of these financial statements.
Maribeth Keeling
Chief Financial Officer
28
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Annual Report and Accounts for the year ended 31 March 2019
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Consolidated Statement of Financial Position
Year ended 31 March 2019
Company Statement of Financial Position
Year ended 31 March 2019
OUR FINANCIALS
Registered Company Number: 04666282
NON-CURRENT ASSETS
Investments
Other intangible assets
Property, plant and equipment
Deferred tax asset
CURRENT ASSETS
Trade and other receivables
Current tax assets
Cash collateral
Cash and cash equivalents
TOTAL ASSETS
CURRENT LIABILITIES
Bank overdrafts
Trade and other payables
Borrowings
NON-CURRENT LIABILITIES
Borrowings
Derivative liability – Convertible loan notes
Retirement benefit obligation
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium account
Share option reserve
Retained earnings
TOTAL EQUITY
Notes
31 March 2019
£’000s
31 March 2018
(restated*)
£’000s
31 March 2017
(restated*)
£’000s
19
17
18
20
22
13
24
23
23
25
31
26
54,670
150
1,617
1,259
57,696
70,441
27
2,000
1,140
73,608
131,304
–
78,391
–
78,391
36,715
294
7,403
44,412
122,803
8,501
1,987
3,286
238
2,990
8,501
55,575
217
1,932
1,176
58,900
76,908
–
2,000
477
79,385
138,285
–
76,087
13,894
89,981
11,254
–
7,919
19,173
109,154
29,131
1,569
2,720
310
24,532
29,131
64,594
227
2,369
1,274
68,464
36,122
1,470
–
–
37,592
106,056
210
41,827
1,000
43,037
1,500
–
7,373
8,873
51,910
54,146
1,411
122
415
52,198
54,146
* Retirement benefit obligation and retained earnings have been restated for an error in the 31 March 2017 accounts. See note 31 for full details.
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act and not presented a statement of
comprehensive income for the Company alone. The result for the period is a loss of £21,542k (2018: a loss of £27,666k).
These financial statements were approved by the Board of Directors and authorised for issue on 15 August 2019.
They were signed on its behalf by:
Hugh CL Cawley
Chief Executive Officer
The notes on pages 32 to 75 form part of these financial statements.
Maribeth Keeling
Chief Financial Officer
www.realgoodfoodplc.com Stock Code: RGD
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Consolidated Cash Flow Statement
Year ended 31 March 2019
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss) before taxation
Finance and other finance costs
FX movement
Impairment charge
Share based payment expense
Loss on discontinued business
Loss on disposal of intangible assets
Loss on disposal of property, plant and equipment
Past service cost on pension
Fair value of derivative liability
Fair value of NCI put option
Depreciation of property, plant and equipment
Amortisation of intangibles
Operating Cash Flow
Decrease in inventories
Decrease in receivables
Pension contributions
NCI put option
(Decrease)/increase in payables
Cash (used in) from operations
Income taxes (paid)/received
Interest paid
Net cash (outflow) from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of intangible assets
Purchase of property, plant and equipment
Disposal of discontinued business, net of cash disposed of
Acquisition of business, net of cash acquired
Payment of deferred consideration
Net cash inflow/(outflow) from investing activities
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in year
Repayment of borrowings
Inflow of investor loans
Inflow of funds from convertible loan notes
Drawdowns on revolving credit facilities
Repayments on revolving credit facilities
Asset finance cash flow
Capital repayments on finance leases
Net cash (outflow)/inflow from financing activities
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
Effects of currency translations on cash and cash equivalents
Net movement in cash and cash equivalents
Cash and cash equivalents at end of period
The notes on pages 32 to 75 form part of these financial statements.
Notes
31 March 2019
£’000s
31 March 2018
£’000s
(32,333)
(26,512)
9, 10
16
32
31
18
17
31
17
18
32
26
23
23
23
13
4,572
(98)
18,675
(38)
5,202
123
135
106
294
201
2,656
1,464
959
186
613
(347)
–
(3,511)
(2,100)
(68)
(493)
(2,661)
(10)
(4,474)
16,669
–
(4,520)
7,665
984
(1,750)
856
8,545
57,266
(65,935)
–
(4,783)
(4,817)
187
2,731
(10)
188
2,909
1,805
152
10,494
(5)
142
–
107
115
–
–
2,929
2,274
(8,499)
3,675
1,641
(942)
(4,796)
3,155
(5,766)
1
(809)
(6,574)
(249)
(10,961)
–
(1,781)
–
(12,991)
2,756
(750)
21,398
–
99,266
(99,930)
1,008
(1,306)
22,442
2,877
(155)
9
2,877
2,731
30
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Annual Report and Accounts for the year ended 31 March 2019
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Company Cash Flow Statement
Year ended 31 March 2019
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss) before taxation
Finance and other finance costs
Impairment charge
Share based payment expense
Loss on disposal of property, plant and equipment
Past service cost on pension
Fair value of derivative liability
Depreciation of property, plant and equipment
Amortisation of intangibles
Operating Cash Flow
Decrease/(increase) in receivables
Pension contributions
Increase in payables
Cash (used in) from operations
Income taxes received
Interest paid
Net cash (outflow) from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash (outflow) from investing activities
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in year
Inflow of investor loans
Inflow of funds from convertible loan notes
Repayment of borrowings
Net cash inflow from 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
The notes on pages 32 to 75 form part of these financial statements.
OUR FINANCIALS
Notes
31 March 2019
£’000s
31 March 2018
£’000s
9, 10
19
31
18
17
31
17
18
26
23
23
23
13
(22,127)
4,236
905
(38)
2
106
294
313
67
(16,242)
6,503
(347)
2,268
(7,818)
–
(154)
(7,972)
–
–
–
984
856
8,545
(1,750)
8,635
663
477
663
1,140
(25,834)
1,374
9,019
(5)
77
115
–
428
57
(14,769)
(40,787)
(942)
34,153
(22,345)
235
(493)
(22,603)
(47)
(67)
(114)
2,756
21,398
–
(750)
23,404
687
(210)
687
477
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Notes to the Financial Statements
Year ended 31 March 2019
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
04666282). The Company is domiciled in England and Wales
and its registered address is 61 Stephenson Way, Wavertree,
Liverpool L13 1HN. 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. The
accounts are prepared on a going concern basis, as disclosed in
note 3.
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 operation 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.
During the twelve months to 31 March 2019, the Group sold Garrett
Ingredients Ltd, Haydens Bakery Ltd, R&W Scott Ltd, and RGF
Patisserie Ltd. Details of the discontinued operations are disclosed
in note 32. At 31 March 2019, some remaining assets in relation
to the disposed businesses are classed as held for sale. For further
details please refer to note 33.
Any references to discontinued operations throughout this report
refer to Garrett Ingredients Ltd, Haydens Bakery Ltd, R&W Scott Ltd
and RGF Patisserie Ltd.
IFRS standards and interpretations adopted
New standards which are effective from 1 January 2018, and have
been considered within the Group’s accounting policies are:
{ IFRS 9 Financial Instruments; and
{ IFRS 15 Revenue from Contracts with Customers.
Details of the impact of IFRS 9 can be found in Note 22. It has not had
a material impact in the presentation of the accounts of the Group.
There is no impact in the accounts from the implementation of IFRS
15 Revenue from Contracts with Customers, as the requirements of
this standard are in line with those already adopted by the Group in
regards to recognition of revenue.
There are a number of standards and amendments to standards
that have been issued, but are not yet effective. The Group has not
decided to adopt these early. These are:
{ IFRS 16 Leases (effective for periods beginning after
1 January 2019);
{ Amendments to IFRS 9 Prepayment Features with Negative
Compensation (effective 1 January 2019);
{ Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures (effective 1 January 2019); and
{ IFRS 17 Insurance Contracts (effective 1 January 2021)
The adoption of IFRS 16 Leases, will require the Group to recognise
right-of-use assets and liabilities for all contracts that contain
a lease. The Group does not currently recognise related assets
or liabilities for operating leases, but instead spreads the lease
payments on a straight-line basis over the lease term. As such, the
Group will no longer recognise an operating expense for the lease
payments, but will replace this with interest on its lease liabilities
and amortisation of the right to use assets. This will increase
EBITDA for the Group.
The Board has decided to apply the modified retrospective adoption
method in IFRS 16, and will therefore only recognise leases on
the balance sheet as at 1 April 2019. They have also decided to
measure the asset as the lease liability on that date, meaning there
will be no immediate impact on net assets at 1 April 2019, as the
asset will offset with the liability.
At 31 March 2019, there are £0.4 million (note 29) of operating
lease commitments outstanding, with a reduction of £0.2 million
expected in the year to 31 March 2020. The impact expected on
EBITDA for the year ended 31 March 2020 is therefore £0.2 million,
being the current operating lease cost.
The Group does not expect any other standards issued by the IASB,
but not yet effective, to have a material impact on the Group.
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 9. The financial position of
the Group, its cash flows and liquidity position are described in the
Finance Review on page 10. In addition, note 23 to the financial
statements includes the Group’s objectives, policies and processes
for managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and its
exposure to credit risk and liquidity risk.
Also detailed in note 23 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.
The principal shareholders have considered the liquidity of the
Company in line with the current strategy and future performance.
The Directors have a reasonable expectation that the Company
and the Group have adequate resources to continue in operational
existence for the next 12 months and therefore continue to adopt
the going concern basis in preparing the consolidated financial
statements.
32
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OUR FINANCIALS
2. Significant accounting policies (continued)
b) Basis of consolidation
The consolidated financial statements include the financial
statements of Real Good Food plc and entities controlled by the
Company (its subsidiaries). Control is achieved where the Company
is exposed to or has rights to variable returns from involvement with
an investee and has the ability to affect those returns through its
power over the investee.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
e) Significant items
It is the Group’s policy to show separately on the face of the
Statement of Comprehensive Income, items that it considers to be
significant, to assist the reader’s understanding of 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 full actuarial valuations being
carried out every three years. Actuarial gains and losses are
recognised in full in the period in which they occur. Further details
are given in note 31 to the financial statements.
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:
Land and buildings
Freehold buildings
Short-term leasehold buildings
Plant and equipment
Plant and equipment
Motor vehicles
Fixtures and fittings
Computer equipment
40 to 50 years
Length of lease
2 to 13 years
4 years
4 to 13 years
4 years
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.
c) Revenue recognition
Revenue comprises the invoiced value for the sale of goods net of
sales rebates, discounts, value added tax and other taxes directly
attributable to revenue and after eliminating sales within the Group.
Revenue is recognised when the outcome of a transaction can be
measured reliably and when it is probable that the economic benefits
associated with the transaction will flow to the Group.
a. Sales of Goods: Sales of goods are recognised when goods are
despatched. Sales are recorded net of discounts, Value Added Tax
(VAT) and other sales-related taxes. The implementation of IFRS
15 has not impacted the recognition of revenue for the Group.
b. Finance income/costs: 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 marketing 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. Refunds: Refunds are issued to customers when product is
damaged or not fit for purpose upon receipt. Refunds are
recorded net of discounts, Value Added Tax (VAT) and other
sales-related taxes.
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.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and is reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or
part of the assets to be recovered.
Deferred tax is calculated at the tax rates that have been enacted
or substantially enacted by the balance sheet date. Deferred tax
is charged or credited to the Statement of Comprehensive Income,
except where it relates to items charged or credited directly to equity,
in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities, and when they relate to income taxes levied by the same
taxation authority, and the Group intends to settle its current tax
assets and liabilities on a net basis.
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
2. Significant accounting policies (continued)
h) Intangible assets
Intangible assets include computer software, development costs
and business relationships. The following assets are amortised on
a straight-line basis over the following periods:
Computer software
Development costs, and business relationships
5 years
3 years
The charge for the year is included in administration expenses within
the Statement of Comprehensive Income.
Impairment reviews of intangible assets 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.
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 and Group accounts relate to
investments in subsidiaries and associated companies which are
stated at cost less provision for any impairment in value.
k) Inventories
Inventory is valued at the lower of cost and net realisable value.
Where appropriate, cost includes production and other attributable
overhead expenses as described in IAS 2 Inventories. Cost is
calculated on a first-in, first-out basis by reference to the invoiced
value of supplies and attributable costs of bringing the inventory to
its present location and condition.
Net realisable value is the estimated selling price in the ordinary
course of business less estimated costs of completion and the
estimated costs necessary to make the sale. All inventories are
reduced to net realisable value where the estimated selling price is
lower than cost. A provision is made for slow moving, obsolete and
defective inventory where appropriate.
l) Research and development
Research and development expenditure is charged to the income
statement in the period in which it is incurred. Development
expenditure is capitalised when the criteria for recognising an asset
are met. When the recognition criteria have been met, expenditure
is capitalised as an intangible asset. Property, plant and equipment
used for research and development are capitalised and depreciated
in accordance with the Group’s policy.
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 repayable on demand.
Deposits are included within cash and cash equivalents only when
they have a short maturity of three months or less at the date of
acquisition.
The cash and cash equivalents figure for the Group is inflated by £2
million in relation to security provided by Omnicane and Napier Brown
Holdings (see note 23) to Lloyds Banking Group. The £2 million
has been supplied as investor loans and attracts interest. This is
referred to as Cash Collateral throughout the financial statements
and is not displayed on the cash flow.
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. Following the
implementation of IFRS 9, the Group calculates impairments using
an expected credit loss model, based upon the payment history of
their customers, and any resultant bad debt write downs they have
incurred. The application of this method has not had a material
impact on the presentation of trade receivable impairments within
the financial statements, as the occurrence of bad debt historically
has been rare.
o) Trade payables
Trade payables are recognised initially at fair value and are
subsequently measured at amortised cost using the effective
interest method.
p) Borrowings
Interest-bearing loans and overdrafts are recorded as the proceeds
received net of direct issue costs and are valued at fair value net
of any transaction costs directly attributable to the borrowing.
Interest-bearing liabilities are subsequently measured at amortised
cost using the effective interest rate method, which ensures that
any interest expense over the period to repayment is at a constant
rate on the balance of the liability carried in the consolidated
statement of financial position. For the purposes of each financial
liability, interest expense includes initial transaction costs and any
premium payable on redemption, as well as any interest or coupon
payable while the liability is outstanding. The Group has an invoice
discounting facility secured on the trade debtors as specified in note
23. Liabilities under this arrangement are shown in borrowings.
The Group has convertible loan notes repayable in 3 years from
the date of issue (May 2021), which can be converted at any time
into shares at the holder’s option. A host loan at amortised cost
and an embedded derivative liability, being measured at fair value
with changes in value being recorded in profit or loss, have been
recognised.
34
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
2. Significant accounting policies (continued)
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 transactions in
the year are presented in the Statement of Comprehensive Income
within the administration expenses 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.
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.
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 may 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.
s) Government grants
Grants which have been received for which the grant criteria have
been met are included in operating income. Grants which have been
received where the grant criteria have not yet been met are included
in liabilities.
t) Invoice discounting
The Group has an invoice discounting facility of £8 million with
Lloyds Banking Group secured on the trade debtors on a revolving
basis with a minimum term of 12 months and a six-month notice
period. This facility is secured against the debtors of JF Renshaw Ltd
and Rainbow Dust Colours Ltd, with an interest rate of 1.5% above
Base Rate. Trade debtors remain assets of the Group and are shown
at the total amount collectable. Liabilities under this arrangement
are shown in borrowings.
u) Non-controlling Interest (NCI) put option
Upon acquisition of Brighter Foods Ltd, the Group entered into a
shareholder agreement regarding the management stake whereby
the management of Brighter Foods can elect to sell 50% of the
management stake to the Group after March 2020 and 50% after
March 2021. The consideration for the stake is based upon an
agreed valuation linked to profit, cash and capital expenditure. The
net present value of the estimated financial liability in the event of
the exercise of the non-controlling interest put option is recognised
in long-term liabilities and other reserves. Subsequent changes in
the carrying amount resulting from remeasurement of the amount
payable on exercising the options would be recognised in the
Statement of Comprehensive Income.
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 has 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
believes to be reasonable. However, given the judgemental nature
of such estimates, actual results could be different owing to the
assumptions used. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are
discussed below.
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
The Statement of Comprehensive Income includes 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 changes 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 interest income from Plan assets and an interest charge on Plan
liabilities. These calculations are based on the discount rate at the
start of the financial year. The Statement of Comprehensive Income
is most sensitive to changes in the discount rate used to calculate
the interest income from Plan assets and interest charge on Plan
liabilities.
Full details of these assumptions, which are based on advice from
the pension fund actuaries, are set out in note 31.
c) Business claims
In common with comparable food groups, the Group is involved in
disputes in the ordinary course of business which may give rise
to claims. Provision representing the known cost of defending and
concluding claims is made in the financial statements in accruals
as part of other payables for 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 prejudice the position of the
Group. The dispute regarding the non-supply of contracted sugar to
the Group was resolved during the year.
d) Going concern
The Directors have considered the Group’s business activities
together with the factors likely to affect its planned future
performance. The forecasts, agreed with the businesses, consider
reasonable possible changes in trading performance and these
assumptions have been projected and shared with the Company’s
advisors.
The principal shareholders of the Group have shown considerable
support for the working capital requirements and, having carefully
considered the liquidity of the Group and Company in line with
the current strategy and future performance, the Directors have
a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the next
12 months and therefore continue to adopt the going concern basis
in preparing the consolidated financial statements.
3. Critical accounting estimates and
judgements (continued)
a) Impairment of goodwill
An impairment of goodwill has the potential to impact significantly
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 5-year period, with
a terminal value applied to the fifth year, 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
cash generating units in their current condition. Future cash flows
therefore exclude benefits from major expansion projects requiring
future capital expenditure and estimate an amount for routine capital
expenditure.
Further details are set out in note 16.
b) Retirement benefits
The Company sponsors the Napier Brown Foods Retirement Benefits
Plan which is a funded defined benefit arrangement. The amounts
recorded in the financial statements for this type of scheme are
based on a number of assumptions, changes to which could have a
material impact on the reported amounts.
Any net deficit or surplus arising on the defined benefit plan is shown
in the Statement of Financial Position. The amount recorded is the
difference between Plan assets and Plan 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
Plan 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 Plan
liability by 5%. An increase in the discount rate would result in
a reduction of the Plan liabilities and an increase in the rate of
inflation would increase the liabilities of the Plan.
36
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
4. Revenue
The revenue for the Group for the current year arose from the sale of goods in the following areas:
Cake Decoration
£46.4 million
Food Ingredients
£15.2 million
Manufactures, sells and supplies cake decorating products and ingredients for the baking sector.
Manufactures and supplies a range of snack bars to the retail sector.
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.
The Group operates in two main divisions: Cake Decoration and Food Ingredients. The Head Office functions of Finance, Technical and
Information Services provide support to the divisions in varying scale.
12 months ended 31 March 2019
Total revenue
Intercompany sales
External revenue
Cost of sales
Gross profit/(loss)
Cake
Decoration
£’000s
Food
Ingredients
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
56,340
(9,931)
46,409
15,151
–
15,151
(31,716)
(11,585)
14,693
3,566
–
–
–
(232)
(232)
71,491
(9,931)
61,560
26,365
97,856
(346)
(10,277)
26,019
87,579
(43,533)
(21,615)
(65,148)
18,027
4,404
22,431
Distribution expenses
Administrative expenses
(3,074)
(9,662)
(341)
(1,998)
–
(3,415)
(4,078)
(15,738)
(1,227)
(9,267)
(4,642)
(25,005)
Operating profit/(loss) before impairment
and significant items
1,957
1,227
(4,310)
(1,126)
(6,090)
(7,216)
Significant items
Impairment charge
(589)
(18,675)
(42)
–
(1,086)
(1,717)
–
(18,675)
(46)
–
(1,763)
(18,675)
Operating (loss)/profit after impairment
and significant items
(17,307)
1,185
Finance costs
Other finance costs
(Loss)/profit before tax
Income tax expense/(credit)
(Loss)/profit after tax as per
comprehensive statement of income
(141)
–
(17,448)
18
–
–
1,185
(122)
(5,396)
(4,265)
(166)
(21,518)
(6,136)
(27,654)
(4,406)
(166)
(107)
–
(4,513)
(166)
(9,827)
(26,090)
(6,243)
(32,333)
453
349
–
349
(17,430)
1,063
(9,374)
(25,741)
(6,243)
(31,984)
Geographical segments
The Group earns revenue from countries outside the United Kingdom, as shown below:
UK
Europe
USA
Rest of World
Total
Cake Decoration
£’000s
Food Ingredients
£’000s
30,276
6,201
8,643
1,289
46,409
15,149
2
–
–
15,151
The Group has two customers which constitute over 10% of revenue; one providing 22% of revenue, and the other 13%.
www.realgoodfoodplc.com Stock Code: RGD
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
5. Segment reporting (continued)
Reconciliation of operating (loss)/profit to
underlying adjusted EBITDA
Cake
Decoration
£’000s
Food
Ingredients
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
Operating (loss)/profit
(17,307)
1,185
(5,396)
(21,518)
(6,136)
(27,654)
Significant items
Impairment charge
Loss on disposal
Depreciation
Amortisation
Underlying adjusted EBITDA
31 March 2019
Segment assets
Segment liabilities
Net operating assets
Non–current asset additions
Depreciation
Amortisation
589
18,675
–
1,016
12
2,985
Cake
Decoration
£’000s
108,357
23,985
84,372
102
(1,016)
(12)
42
–
–
242
1,376
2,845
1,086
–
–
315
66
(3,929)
1,717
18,675
–
1,573
1,454
1,901
46
–
5,202
1,083
10
205
Food
Ingredients
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£ ’000s
Discontinued
Operations
£’000s
13,460
3,073
10,387
4,581
(242)
(1,376)
(31,362)
36,775
(68,137)
–
(315)
(66)
90,455
63,833
26,622
4,683
(1,573)
(1,454)
–
–
–
–
(1,083)
(10)
1,763
18,675
5,202
2,656
1,464
2,106
Total
Group
£’000s
90,455
63,833
26,622
4,683
(2,656)
(1,464)
In line with the Group strategy of allowing each business to understand its true cost base as a stand-alone business, during the 12 months
ended 31 March 2019, Head Office costs of £1.4 million have been re-allocated to the Cake Decoration division. In order to provide clear and
consistent comparisons, the 12 months ended 31 March 2018 have been restated.
12 months ended 31 March 2018 - Restated
Total revenue
Intercompany sales
External revenue
Cost of sales
Gross profit/(loss)
Cake
Decoration
£’000s
55,175
(7,544)
47,631
16,096
–
16,096
(33,744)
(11,876)
13,887
4,220
Food
Ingredients
£’000s
Head Office and
non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
61
–
61
(264)
(203)
71,332
(7,544)
63,788
71,035
142,367
(4,697)
(12,241)
66,338
130,126
(45,884)
(59,753)
(105,637)
17,904
6,585
24,489
Distribution expenses
Administrative expenses
(2,906)
(10,937)
(317)
(1,842)
–
(3,223)
(5,384)
(18,163)
(2,287)
(9,429)
(5,510)
(27,592)
Operating profit/(loss) before impairment
and significant items
44
2,061
(5,587)
(3,482)
(5,131)
(8,613)
Significant items
Impairment charge
Operating (loss)/profit after impairment
and significant items
Finance costs
Other finance costs
(Loss)/profit before tax
Income tax credit/(expense)
Profit/(loss) after tax as per
comprehensive statement of income
(1,060)
–
(1,016)
(214)
–
(1,230)
1,364
(5)
–
2,056
–
–
2,056
185
(2,943)
(4,008)
(1,477)
(5,485)
–
–
(10,494)
(10,494)
(8,530)
(1,210)
(164)
(9,904)
(936)
(7,490)
(1,424)
(164)
(17,102)
(24,592)
(332)
–
(1,756)
(164)
(9,078)
(17,434)
(26,512)
613
(666)
(53)
134
2,241
(10,840)
(8,465)
(18,100)
(26,565)
38
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2019
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
5. Segment reporting (continued)
Reconciliation of operating (loss)/profit to
underlying adjusted EBITDA
Cake
Decoration
£’000s
Food
Ingredients
£’000s
Head Office and
non trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
Operating (loss)/profit
Significant items
Impairment charge
Depreciation
Amortisation
Underlying adjusted EBITDA
6. Significant items
Abnormal costs relating to ongoing capital projects
Investigation work and penalties
Professional fees in relation to refinancing costs
Asset write-offs
Commercial disputes
Management restructuring
Acquisition and legal costs
Significant items
Continuing business
Discontinued business
Total significant items
(1,016)
1,060
–
797
276
1,117
2,056
5
–
209
1,404
3,674
(8,530)
2,943
–
425
57
(7,490)
(17,102)
(24,592)
4,008
–
1,431
1,737
1,477
10,494
1,498
537
5,485
10,494
2,929
2,274
(5,105)
(314)
(3,096)
(3,410)
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
Reference
1
2
3
4
5
6
(38)
(315)
(380)
(330)
(118)
(582)
–
(1,763)
(1,717)
(46)
(1,763)
(885)
(1,207)
(669)
(920)
(239)
(1,254)
(311)
(5,485)
(4,008)
(1,477)
(5,485)
The Group’s underlying profit figure excludes a number of items which are material and non-recurring and are detailed separately to ensure
the underlying operating performance of the businesses is clearly visible, without the distortions of these non-recurring costs.
The year to 31 March 2019 has seen a lower level of significant items than in the previous year. A number of the costs shown are carried
forward in relation to activities from the year to 31 March 2018. They are explained in the notes below:
1. Abnormal costs during improving capacity of business units. Considerable funds have been invested throughout the Group in the past two years in capital
projects, to improve the capacity and operating efficiency of the Group. The costs incurred in the year ended 31 March 2019 are in relation to different
capital projects from those reflected in the year ended 31 March 2018.
2.
Investigation work and penalties relating to corporate governance failings. There were well-publicised failings in the area of corporate governance. The costs
of securing the services of external agencies sufficiently specialised, experienced and qualified to ensure all failings were fully investigated and identified,
and remedial actions highlighted on a timely basis have been identified separately.
3. Professional fees relating to refinancing. The very unusual frequency and short-term costs of refinancing in the period are highlighted here, as being the
costs associated with providing repeated emergency funding before any form of longer-term package was able to be negotiated. All loans have now been
renegotiated.
4. Asset write-offs. The costs incurred in the year ended 31 March 2019 relate to inventory and intangible asset write offs in relation to an abandoned product
launch. In the period to 31 March 2018 this relates to the closure of Garrett Ingredients Nutrition, and asset write offs in relation to aborted projects.
5. Commercial disputes. These costs relate to the well-publicised issues, identified separately in previous announcements to the City, arising from disputes
over material sugar contracts. The value of the disputes was unusually large and occurred some years after the original contracts were entered. They are not
expected to re-occur. All claims are now settled.
6. Management restructuring. Individual redundancies are generally a matter of everyday business, however, significant restructuring has been required and
effected right across the Group during the past 24 months, as fundamental changes in the operations have been brought about, while deliberate, one-off
changes have been delivered. The central functions have been largely disbanded, for example, as the Group can demonstrably no longer afford to sustain a
central overhead of marketing, operations, or HR. The costs of severance for these staff members have been separately identified and disclosed here.
www.realgoodfoodplc.com Stock Code: RGD
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
7. Auditor’s remuneration
Fees payable to the Company's auditor for the audit of the Group's annual accounts
Fees payable to the Company's auditor for other services:
Audit related assurance services
Tax compliance services
Tax advisory services
Other assurance services
Other assurance services – investigation work (note 6)
Total fees paid to auditor
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
(215)
(31)
(45)
(23)
(21)
–
(335)
(220)
–
(25)
(5)
(6)
(199)
(455)
The fee payable to the Company’s auditor for the audit of the annual accounts has been split between Real Good Food plc, and its
subsidiaries, as follows:
Annual Accounts audit fee apportioned by division
Real Good Food plc
Brighter Foods Ltd
Real Good Food Ingredients Ltd
Haydens Bakery Ltd
J F Renshaw Ltd
R&W Scott Ltd
Rainbow Dust Colours Ltd
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
(107)
(20)
(8)
–
(60)
–
(20)
(215)
(92)
–
(20)
(20)
(50)
(18)
(20)
(220)
40
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2019
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
8. Operating profit
Operating profit for continuing operations
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 losses/(gains)
Other net operating expenses
Total
Operating loss
9. Finance costs
Interest on bank loans, overdrafts and investor loans
Interest on obligations under finance leases
Interest on non-controlling interest put option
Past service cost on pension (note 31)
Continuing business
Discontinued business
10. Other finance costs
Interest on pension scheme liabilities (note 31)
Interest on pension scheme assets (note 31)
OUR FINANCIALS
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
Notes
12
5
5
6
16
22
61,560
(20,622)
63,788
(21,800)
(25,917)
(29,545)
(1,573)
(1,454)
(1,717)
(18,675)
(486)
(57)
(803)
(100)
(327)
(11,347)
(83,078)
(21,518)
(1,431)
(1,737)
(4,008)
–
(651)
(124)
(1,172)
(146)
415
(11,079)
(71,278)
(7,490)
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
(4,164)
(154)
(89)
(106)
(4,513)
(4,406)
(107)
(1,311)
(330)
–
(115)
(1,756)
(1,424)
(332)
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
(516)
350
(166)
(553)
389
(164)
www.realgoodfoodplc.com Stock Code: RGD
41
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
11. Directors’ remuneration
Directors’ salaries, benefits and fees
Final payments in relation to services rendered
Related party Directors’ fees and consultancy fees (note 30)
The emoluments of the Directors for the period were as follows:
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
(1,103)
(180)
(6)
(1,289)
(682)
–
(134)
(816)
P W Totté (to Aug 2017)
D P Newman (to Aug 2017)
P C Salter (to Aug 2017)
P G Ridgwell
J M d’Unienville
C O Thomas
H C L Cawley (from Aug 2017)
H Rai (from Aug 2017)
J A Mackenzie (from June 2017)
S Dawson (from Sept 2018)
M Holt (from Aug 2018)
Fees/Salaries
inc. Er’s NIC
£’000s
Taxable
Benefits
£’000s
Bonus
£’000s
Pension
Contributions
£’000s
12 months
ended
31 March 2019
£’000s
12 months
ended
31 March 2018
£’000s
–
–
–
39
25
46
426
348
25
17
22
948
–
–
–
–
–
–
11
11
–
–
–
22
–
–
–
–
–
–
250
45
–
–
–
295
–
–
–
–
–
–
–
18
–
–
–
18
–
–
–
39
25
46
687
422
25
17
22
1,283
110
68
15
38
25
171
85
151
19
–
–
682
This includes salaries and fees (including Employer’s NI) received as an officer of the Company. Taxable benefits include car allowance, health
and other taxable payments for expenses paid by the Company.
All salaries and fees disclosed are included in current year trading results. Payments to H Rai (£25k), J A MacKenzie (£2k) and J M
d’Unienville (£19k) disclosed but not paid in prior years were paid in the current year.
At 31 March 2019, there were £473k of salaries and fees outstanding for payment to Directors of the Group (H CL Cawley £285k,
H Rai £180k, J M d’Unienville £4k, S Dawson £2k and J A MacKenzie £2k). These were settled in April and May 2019 and have been
included in the numbers above.
Directors fees paid to J A MacKenzie are charged and paid to Downing LLP.
Consultancy fees and expenses paid to entities in which Directors hold a beneficial interest, for services provided to the Group by the
Directors, are disclosed as related party transactions in note 30.
The current Company Directors disclosed are considered as key management personnel.
42
OUR FINANCIALS
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
11. Directors’ remuneration (continued)
The current base annual salaries and fees paid to the Directors are as follows:
M Holt
H C L Cawley
J M d'Unienville
J A MacKenzie
S Dawson
A Ridgwell
M Keeling
Directors’ interests in share options:
No. of options
at 31 March
2019
No. of options
at 31 March
2018
Date of Grant
P W Totté
(Menton Investments)
Unapproved options
Mar 11
3,817,725
3,817,725
P G Ridgwell
Unapproved options
Unapproved options
C O Thomas
Unapproved options
Unapproved options
July 09
May 10
July 09
May 10
476,190
476,190
61,224
61,224
304,762
304,762
40,816
40,816
Exercise
Price
25.00p
5.25p
24.50p
5.25p
24.50p
Earliest
Exercise
Date
Apr 11
July 12
May 13
July 12
May 13
Base Salary
£’000s
60
325
25
25
25
25
134
619
Exercise
Expiry
Date
Mar 21
July 19
May 20
July 19
May 20
No new options were granted to Directors during the year (2018: nil). Options have historically 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 2019 was 5.75p and the range during the year was 16.00p to 5.25p.
No Director exercised share options during the year.
During the period retirement benefits were accruing to one director (2018: two) in respect of money purchase pension schemes.
www.realgoodfoodplc.com Stock Code: RGD
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
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:
31 March 2019
Group
31 March 2019
Company
31 March 2018
Group
31 March 2018
Company
Continuing operations
Production
Selling and distribution
Directors and administrative
Discontinued operations
Production
Selling and distribution
Directors and administrative
452
70
63
585
501
46
84
631
–
–
15
15
–
–
–
–
402
74
99
575
495
67
74
636
Total no. of staff
1,216
15
1,211
The aggregate payroll costs were as follows:
–
–
47
47
–
–
–
–
47
Continuing operations
Wages, salaries and fees
Social security costs
Other pension costs
Discontinued operations
Wages, salaries and fees
Social security costs
Other pension costs
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
31 March 2018
Group
£’000s
31 March 2018
Company
£’000s
(17,831)
(1,786)
(1,005)
(20,622)
(6,939)
(590)
(291)
(7,820)
(1,919)
(239)
(124)
(2,282)
–
–
–
–
(18,763)
(1,882)
(1,155)
(21,800)
(17,207)
(1,418)
(509)
(19,134)
(3,169)
(347)
(289)
(3,805)
–
–
–
–
Total payroll costs
(28,442)
(2,282)
(40,934)
(3,805)
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
Group, other than those already listed in the Directors remuneration in note 11.
Wages, salaries and fees
Social security costs
Other pension costs
Total payroll costs
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
31 March 2018
Group
£’000s
31 March 2018
Company
£’000s
(682)
(94)
(53)
(829)
–
–
–
–
(655)
(78)
(70)
(803)
–
–
–
–
44
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2019
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
13. Notes supporting the cash flow statement
The cash collateral figure for the Group is £2 million. This has been provided to Lloyds Bank plc as security for the liabilities of the Group.
The £2 million has been supplied as investor loans by Omnicane Investors Ltd and NB Holdings Ltd (see note 25) and attracts interest. This
amount is not included in the cash flow.
Group
Real Good Food plc (Group)
At 31 March 2018
Cash Flows
Non-cash flows
– Loans renegotiated to move from current at March 2018
to non-current at March 2019
– Interest accruing on loans
– Accrued interest added to principal loan at the point of issue of convertible
loan notes
– Transaction costs of issuance of convertible loan notes included in liability
– Fair value measurement of convertible loan notes
– Hire purchase disposed of as part of discontinued entity
– Loans and borrowings classified as non-current at March 2018
becoming current before March 2019
At 31 March 2019
Company
Real Good Food (Company)
At 31 March 2018
Cash Flows
Non-cash flows
– Loans renegotiated to move from current at March 2018
to non-current at March 2019
– Interest accruing on loans
– Accrued interest added to principal loan at the point of issue of convertible
loan notes
– Transaction costs of issuance of convertible loan notes included in liability
– Fair value measurement of convertible loan notes
At 31 March 2019
Non-current Loans
and Borrowings
£’000s
(Note 23)
Current Loans
and Borrowings
£’000s
(Note 23)
16,390
6,214
12,144
4,317
261
(317)
(345)
(36)
(667)
37,961
24,160
(12,015)
(12,144)
–
–
–
–
–
667
668
Non-current Loans
and Borrowings
£’000s
(Note 23)
Current Loans
and Borrowings
£’000s
(Note 23)
11,254
9,401
12,144
4,317
261
(317)
(345)
36,715
13,894
(1,750)
(12,144)
–
–
–
–
–
Total
£’000s
40,550
(5,801)
–
4,317
261
(317)
(345)
(36)
–
38,629
Total
£’000s
25,148
7,651
–
4,317
261
(317)
(345)
36,715
www.realgoodfoodplc.com Stock Code: RGD
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
14. Taxation
Group
Current tax
UK current tax on profit of the period
UK current tax on significant items
Adjustments to tax in respect of prior years
Total current tax
Origination and reversal of timing differences
Adjustments in respect of prior years
Total deferred tax
Tax – continuing operations
Tax – discontinued operations
Total tax
Tax on loss
31 March 2019
£’000s
31 March 2018
£’000s
–
–
(43)
(43)
589
(197)
392
349
–
349
349
(58)
–
196
138
(213)
22
(191)
(53)
–
(53)
(53)
Factors affecting tax charge for the period:
The tax assessed for the period differs from the standard rate of corporation tax in the UK of 19% (2018 : 19%).
The differences are explained below:
Tax reconciliation
Loss per accounts before taxation
Tax on loss on ordinary activities at standard corporation tax rate of 19%
Expenses not deductible for tax purposes
Movement on unrecognised deferred tax
Adjustments in respect of change in deferred tax rate
Adjustments to tax in respect of prior years
Total tax
Tax on continuing operations
Tax on discontinued operations
Tax charge for the period
Details of the deferred tax asset is shown in note 20.
31 March 2019
£’000s
31 March 2018
£’000s
(32,333)
(26,512)
6,143
(3,355)
(2,134)
(65)
(240)
349
349
–
349
5,037
(2,191)
(3,202)
85
218
(53)
(53)
–
(53)
The Finance (No. 2) Act 2015 introduced a reduction in the main rate of corporation tax from 20% to 19% from 1 April 2017 and from 19% to
18% from 1 April 2020. These reductions were substantively enacted on 26 October 2015.
The Finance Act 2016 introduced a further reduction in the main rate of corporation tax to 17% from 1 April 2020. This was substantively
enacted on 6 September 2016. Accordingly, deferred tax balances that are expected to reverse after 1 April 2020 have been valued at the
lower rate of 17%.
46
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
15. Earnings per share
Basic earnings per share
Basic earnings per share is calculated on the basis of dividing the profit/(loss) attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares in issue during the year.
Loss after tax attributable to ordinary shareholders
(£’000s)
Weighted average number of shares in issue for
basic EPS (’000s)
Employee share options (’000s)
Convertible loan notes (’000s)
Weighted average number of shares in issue for
diluted EPS (’000s)
Basic and diluted loss per share
12 months ended
31 March 2019
Continuing
Operations
£’000s
12 months ended
31 March 2019
Discontinued
Operations
£’000s
12 months ended
31 March 2018
(restated)*
Continuing
Operations
£’000s
12 months ended
31 March 2018
(restated)*
Discontinued
Operations
£’000s
(26,078)
(6,243)
(8,998)
(18,101)
91,032
364
91,032
364
144,554
144,554
235,950
(28.64)p
235,950
(6.85)p
76,179
1,790
–
77,969
(11.82)p
76,179
1,790
–
77,969
(23.76)p
* Earnings per share for the year ended 31 March 2018 has been restated for a prior period adjustment to remove the effect of non-controlling interests, which
were included in the figures to 31 March 2018 in error.
The total loss per share (continuing and discontinued operations) for 2019 is (35.49)p (2018: (35.58)p).
Diluted earnings per share
The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of all
outstanding share options. The potential ordinary shares are considered anti-dilutive as they decrease the loss per share. Therefore, diluted
EPS is the same as basic. If all of the share options had been exercised before the period end, the earnings per share would then have been
a loss per share of 11.05p (2018: loss of 11.54p) on the continuing operations and a loss per share of 2.64p (2018: loss of 23.21p) on the
discontinued operations.
The weighted average number of shares in issue for the year was 91,032,295 and the number of options outstanding was 5,554,550. If
these were all exercised the cash raised would be equivalent to that which would be raised by issuing 364,362 shares at the average share
price during the year. There were also 232,432,078 convertible loan notes outstanding, of which the weighted average number of shares was
144,553,649. Therefore the weighted average number of dilutive potential ordinary shares is 235,950,306.
www.realgoodfoodplc.com Stock Code: RGD
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
16. Goodwill
Goodwill acquired on business combinations is allocated at acquisition to the cash generating units that are expected to benefit from that
business combination. The carrying amount of goodwill has been allocated as follows:
Cost
Carried forward balance 31 March 2018
Impairment
Disposal of Real Good Food Ingredients (note 32)
Carried forward balance 31 March 2019
Real Good Food Ingredients (formerly Garrett Ingredients)
Cake Decoration
Brighter Foods
Carried forward
Group
£’000s
69,955
(18,675)
(905)
50,375
31 March 2019
£’000s
31 March 2018
£’000s
–
45,344
5,031
50,375
905
64,019
5,031
69,955
Assumptions:
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill may be impaired. The recoverable
amount of any cash generating unit is determined based on the higher of fair value less costs of disposal and value-in-use calculations.
The cash flows used in the value-in-use calculation are EBITDA (adjusted) performance less capital expenditure based on the latest Board-
approved forecasts in respect of the following three years.
Long-term growth rate assumptions:
For the purposes of impairment testing, the cash flows are extrapolated over 5 years with a terminal value applied to the fifth year. The
terminal value is calculated using the fifth year forecasted EBITDA (adjusted) performance, and applying a 2% growth rate.
Discount rate assumptions:
The discount rate applied to the cash flows is 10% (2018: 11%). This rate is in line with the Company’s actual weighted average cost
of capital of 9.67% which takes account of the increased risk of being listed on AIM rather than the main market. It is representative of
businesses operating within the food sector.
Impairment charge:
The impairment review resulted in an impairment of the goodwill held for Cake Decoration of £18.7 million (2018: impairment of £4.5 million
in relation to Garrett Ingredients and Chantilly Patisserie). Cake Decoration is a core division for the Group and is currently in turnaround. The
investments made in manufacturing capability in the last couple of years have not yet started to deliver the returns that could be expected,
for example, and the Board believes that the current valuation, reflected here, necessarily and materially underplays the potential value of
this division. Plans to improve the strategic positioning, service delivery and commercial performance of this business are also in progress.
Following the sale of the trade and assets of Garrett Ingredients Ltd, the £0.9 million goodwill held in relation to this cash generating unit has
been written off, as the renamed entity Real Good Food Ingredients Ltd, is no longer a cash generating unit.
Sensitivity analysis:
An illustration of the sensitivity to reasonable possible changes in the discount rate assumption or the long-term growth rate are shown
below:
{ An increase of 0.5% in the Group’s weighted average cost of capital of 10% to 10.5% would cause a further impairment of £3.6 million on
the carrying value of goodwill on Cake Decoration.
{ A reduction of 0.5% to the growth rate from 2.0% to 1.5% would cause an impairment of £2.8 million on the carrying value of goodwill on
Cake Decoration.
The Board has considered these sensitivities and believe that, owing to trading expectations and a strong brand, the recoverable amount
would support the value.
Cake Decoration
Brighter Foods
Book value of
cash generating
unit
£’000s
Estimated recoverable
amount/value
in use
£’000s
60,334
15,443
60,334
63,358
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
17. Other intangible assets
Cost
At 1 April 2018
Additions
Disposals from sale of subsidiary
Disposals
At 31 March 2019
Amortisation
At 1 April 2018
Charge
Disposals from sale of subsidiary
Disposals
At 31 March 2019
Net Book Value at 31 March 2019
Cost
At 1 April 2017
Reclassification
Acquired through business
combinations
Additions
Disposals
At 31 March 2018
Amortisation
At 1 April 2017
Reclassification
Charge
Disposals
At 31 March 2018
Net Book Value at 31 March 2018
Customer
Relationships
£’000s
Computer
Software
£’000s
Development
Costs
£’000s
Group
£’000s
Company
£’000s
4,575
1,372
–
(405)
–
4,170
1,823
1,376
(405)
–
2,794
1,376
473
(32)
4,128
25
(19)
10
(898)
(152)
332
950
59
(827)
(29)
153
179
1,181
99
–
98
(6)
4,575
1,372
264
(2)
1,573
(12)
1,823
2,752
497
22
433
(2)
950
422
350
–
–
(239)
111
277
29
–
(239)
67
44
291
(67)
–
126
–
350
29
(20)
268
–
277
73
6,297
10
(1,303)
(391)
4,613
3,050
1,464
(1,232)
(268)
3,014
1,599
1,945
–
4,128
249
(25)
6,297
790
–
2,274
(14)
3,050
3,247
296
–
–
–
296
79
67
–
146
150
249
–
–
47
–
296
22
–
57
–
79
217
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.
The intangible assets held by the Company at 31 March 2019 consist of £132k computer software and £18k development costs.
There is no indication of any impairment of these intangible assets.
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
18. Property, plant and equipment
Group
Cost
At 1 April 2018
Transfer from assets under construction
Reclassified to non-current assets held for sale
Additions
Disposals from sale of subsidiary
Disposals
At 31 March 2019
Depreciation
At 1 April 2018
Reclassified to non-current assets held for sale
Charge
Disposals from sale of subsidiary
Disposals
At 31 March 2019
Net Book Value at 31 March 2019
Cost
At 1 April 2017
Transfer from assets under construction
Acquired through business combinations
Additions
Disposals
At 31 March 2018
Depreciation
At 1 April 2017
Reclassifications
Acquired through business combinations
Charge
Disposals
Impairment Charge*
At 31 March 2018
Net Book Value at 31 March 2018
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
Assets in the
course of
construction
£’000s
16,248
44,874
467
(287)
791
(13,860)
(4)
3,355
5,534
(139)
378
(5,039)
–
734
2,621
9,825
1,251
197
5,089
(114)
16,248
302
–
2,929
(22,923)
(2,262)
22,920
26,356
–
2,278
(17,046)
(2,131)
9,457
13,463
33,716
2,456
2,053
7,466
(817)
44,874
4,829
18,487
309
14
395
(13)
–
5,534
10,714
(309)
337
2,534
(695)
6,002
26,356
18,518
866
(769)
–
754
(357)
–
494
–
–
–
–
–
–
494
3,707
(3,707)
–
866
–
866
–
–
–
–
–
_
–
866
Total
£’000s
61,988
–
(287)
4,474
(37,140)
(2,266)
26,769
31,890
(139)
2,656
(22,085)
(2,131)
10,191
16,578
47,248
–
2,250
13,421
(931)
61,988
23,316
–
351
2,929
(708)
6,002
31,890
30,098
* An impairment review conducted in accordance with IAS36 ‘Impairment of assets’ resulted in an impairment of fixed assets of £6.0 million for Haydens Bakery.
There is no indication of an impairment of fixed assets in 2019.
The net book value of assets held under finance leases or hire purchase contracts, included above, is as follows:
Plant and equipment
Capital commitments in relation to property, plant and equipment are disclosed in note 29.
Details of assets which are secured against borrowings are detailed in note 23.
31 March 2019
£’000s
31 March 2018
£’000s
1,632
7,661
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
18. Property, plant and equipment (continued)
Company
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
OUR FINANCIALS
Total
£’000s
4,170
–
(1,993)
2,177
2,238
313
(1,991)
560
1,617
3,672
–
(1,993)
1,679
2,217
303
(1,991)
529
1,150
3,629
4,182
68
(25)
68
(80)
3,672
4,170
1,802
418
(3)
2,217
1,455
1,813
428
(3)
2,238
1,932
Cost
At 1 April 2018
Additions
Disposals
At 31 March 2019
Depreciation
At 1 April 2018
Charge
Disposals
At 31 March 2019
Net Book Value at 31 March 2019
Cost
At 1 April 2017
Additions
Disposals
At 31 March 2018
Depreciation
At 1 April 2017
Charge
Disposals
At 31 March 2018
Net Book Value at 31 March 2018
498
–
–
498
21
10
–
31
467
553
–
(55)
498
11
10
–
21
477
The net book value of assets held under finance leases or hire purchase contracts, included above, is as follows:
Plant and equipment
31 March 2019
£’000s
31 March 2018
£’000s
–
–
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
19. Investments
Company
Investments in shares of subsidiary undertakings:
At 31 March 2018
Impairment
At 31 March 2019
N Brown
Foods Limited
£’000s
Real Good Food
Ingredients Limited
£’000s
Renshaw
Europe NV
£’000s
53,900
–
53,900
905
(905)
–
770
–
770
Total
Investments
£’000s
55,575
(905)
54,670
A review of the investments held by the Company was undertaken in the year. This resulted in an impairment charge of £0.9 million (2018:
£9.0 million).
The methodology and assumptions used in reviewing the investments were the same as that used in the Goodwill review. See note 16 for
full details.
The Group, through Brighter Foods Limited, holds a 15% investment in Boka Foods Limited (2019 and 2018 £81k). Boka Foods is not a subsidiary
of Real Good Food plc.
A full list of subsidiary undertakings (showing registered address and shares held) as at 31 March 2019 is disclosed below:
Principal Activities
Number of Shares Held
Description and
Proportion of Nominal
Value of Shares Held
RGF Devizes Ltd*
Eurofoods Ltd*
N Brown Foods Ltd*
Renshaw US Incorporated*
JF Renshaw Ltd
RGFC Dust Ltd*
Rainbow Dust Colours Ltd
Dormant
Dormant
4,052,659 Ordinary £1
260,000 Ordinary £1
50,000 Preference £1
Holding Company
28,248,096 Ordinary 50p
Cake Decoration Supplier
200 Ordinary $1
Cake Decoration Supplier
15,685,164 Ordinary £1
Holding Company
Cake Decoration Supplier
1 Ordinary £1
500 Ordinary £1
Real Good Food Ingredients Ltd*
Food Ingredients Supplier
2,500,000 Ordinary £1
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Whitworths Sugars Ltd
Renshaw Europe NV*
Brighter Foods Ltd
*Held directly by Real Good Food plc.
Dormant
2 Ordinary £1
Cake Decoration Supplier
461,500 Ordinary €1
Food Ingredients Supplier
506,000 Ordinary £1
84.33%
All entities have their registered office at 61 Stephenson Way, Wavertree, Liverpool L13 1HN (changed on 12 July 2018),
except for the following:
Renshaw Europe NV registered office at Rue Scailquin 60 Boite 29 – 1210 Bruxelles (Sait-Josse-Ten-Noode)
Renshaw US Incorporated registered office at 400 Commons Way, Rockaway, New Jersey, USA
Brighter Foods Ltd registered office at 17–18 2nd Floor, Agincourt Square, Monmouth NP25 3DY
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
20. Deferred taxation liability/(asset)
The gross movements on the deferred tax account are as follows:
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
31 March 2018
Group
£’000s
31 March 2018
Company
£’000s
Opening position
Arising on business combinations
(Credit)/charge to income statement
Charge/(credit) to other comprehensive income –
defined benefit pension scheme movement
Charge to equity – deferred tax on share based payments
Closing position
Shown as follows:
Liabilities
Assets
906
–
(393)
75
34
(1,176)
–
(192)
75
34
622
(1,259)
(157)
872
191
(100)
100
906
1,881
(1,259)
622
–
(1,259)
(1,259)
2,035
(1,129)
906
Group
Deferred tax assets
The deferred tax balances arise from temporary differences in respect of the following:
At 31 March 2018
(Credit) to income
Charge to other comprehensive income
Charge to equity
At 31 March 2019
Within 12 months
Greater than 12 months
Deferred tax liabilities
At 31 March 2018
(Credit) to income statement
At 31 March 2019
Share Options
£’000s
Pension Scheme
£’000s
(35)
–
–
34
(1)
–
(1)
(1,094)
(239)
75
–
(1,258)
–
(1,258)
Intangible Assets
£’000s
Tangible Assets
£’000s
1,597
(151)
1,446
438
(3)
435
(1,274)
–
98
(100)
100
(1,176)
–
(1,176)
(1,176)
Total
£’000s
(1,129)
(239)
75
34
(1,259)
–
(1,259)
Total
£’000s
2,035
(154)
1,881
There were £12.3 million of unused tax losses (2018: £13.2 million) on which deferred tax of £2.3 million (2018: £2.3 million) is not
recognised owing to uncertainty over when those losses will be utilised. The losses have no expiration date.
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
20. Deferred taxation liability/(asset) (continued)
Company
The deferred tax balances arise from temporary differences in respect of the following:
At 31 March 2018
Charge/(credit) to income statement
Charge to other comprehensive income
Charge to equity
At 31 March 2019
Within 12 months
Greater than 12 months
21. Inventories
Materials
Work In Progress
Finished Goods
Continuing Business
Discontinued Business
Provisions
£’000s
Pension Scheme
£’000s
Share Options
£’000s
(47)
47
_
_
–
_
_
(1,094)
(239)
75
–
(1,258)
–
(1,258)
(35)
–
–
34
(1)
–
(1)
Total
£’000s
(1,176)
(192)
75
34
(1,259)
–
(1,259)
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
31 March 2018
Group
£’000s
31 March 2018
Company
£’000s
4,322
194
2,324
6,840
6,840
–
–
–
–
–
–
–
5,738
364
4,480
10,582
6,388
4,194
–
–
–
–
–
–
Inventories totalling £6,840k (2018: £10,582k) 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.
22. 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
Deferred consideration for disposals (note 32)
Prepayments
Total
Amount due within 12 months
Amount due after 12 months
Total
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
31 March 2018
Group
£’000s
31 March 2018
Company
£’000s
6,755
(108)
6,647
534
–
600
833
8,614
8,614
–
8,614
7
–
7
–
69,550
600
284
70,441
5,265
65,176
70,441
14,556
(135)
14,421
408
–
–
467
15,296
15,296
–
15,296
3
–
3
150
76,692
–
63
76,908
3,370
73,538
76,908
At 31 March 2019, the Group did not have an outstanding balance on the invoice discounting facility with Lloyds Banking Group, so none
(2018: £13.2 million) of the trade receivables were pledged as security. The facility is available in relation to J F Renshaw and Rainbow Dust
Colours GBP, USD and EUR receivables.
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
22. Trade and other receivables (continued)
Provision for impairment of receivables
At 31 March 2018
Amount written off through disposal of subsidiary
Charge for period (note 8)
Uncollectable amount written off
At 31 March 2019
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
31 March 2018
Group
£’000s
31 March 2018
Company
£’000s
(135)
116
(100)
11
(108)
–
–
–
–
–
(68)
–
(146)
79
(135)
–
–
–
–
–
The Group applies the IFRS 9 simplified approach to calculating its expected credit loss, using a lifetime expected loss provision for trade
receivables. To measure expected credit loss, trade receivables are grouped based upon their ageing. The expected losses are based on the
Group’s historical credit losses for the prior year, and are then adjusted by 50% to account for the current economic climate.
At 31 March 2019 the lifetime expected credit loss for trade receivables in the Group is as follows:
Expected loss rate
Gross carrying amount
Loss provision
Less than
30 days old
£’000s
1%
3,876
39
30-60
days old
£’000s
2%
2,046
41
60-90
days old
£’000s
3%
312
9
90-365
days old
£’000s
6%
248
15
Over 365
days old
£’000s
100%
4
4
Total
£’000s
6,486
108
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 creation and release of the provision for impaired receivables has been included in the income statement within administration costs.
The Group recognised a charge of £100k (2018: charge of £146k) for impairment of its trade receivables during the period, to reflect debts
significantly past their due dates.
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. This risk is mitigated by the
Group’s credit insurance policies.
Trade receivables of £1.3 million were past due but not impaired. 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
31 March 2019
Group
£’000s
31 March 2018
Group
£’000s
1,008
205
127
1,340
2,967
555
216
3,738
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
23. Borrowings and capital management
Secured borrowings at amortised cost
Bank term loans
Revolving credit facilities
Hire purchase
Investor loans*
Investor loans – Cash Collateral
Convertible loan notes**
Government grants
Amount due for settlement within 12 months
Amount due for settlement after 12 months
Total
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
31 March 2018
Group
£’000s
31 March 2018
Company
£’000s
–
–
1,636
25,165
2,000
9,550
278
38,629
668
37,961
38,629
–
–
–
25,165
2,000
9,550
–
36,715
–
36,715
36,715
1,750
8,669
6,406
21,398
2,000
–
327
40,550
24,160
16,390
40,550
1,750
–
–
21,398
2,000
–
–
25,148
13,894
11,254
25,148
* Accrued interest of £0.7 million at 31 March 2018 is not shown in the above Investor loans, this is shown within accruals in payables. Accrued interest of
£2.9m is shown within the number at 31 March 2019.
** Convertible loan notes shown at 31 March 2019 consists of £8.8 million investment, £1.4 million accrued interest, £(0.3 million) fair value adjustment and
£(0.3 million) of transaction costs to be spread over the life of the liability.
Government grants represents the amount of grants received for which the criterion to ensure that repayment is not required has not yet
been met. Grant monies in respect of which the criteria have been met are included in operating income.
All existing shareholder loans were renegotiated in June 2018 to require repayment in June 2020, and then renegotiated again to defer
payment until 17 May 2021. The investor loans shown consists of £22.3 million principal amount and £2.9 million accrued interest up to
31 March 2019.
Convertible loan notes
In May 2018 the Company secured further funding from each of its major shareholders totalling £8.5 million. NB Holdings Ltd and Omnicane
Investors Ltd each providing £3.3 million and Downing LLP provided £1.9 million. This instrument has since, with shareholder approval, been
replaced with convertible loan notes of £8.8 million with a conversion price of 5 pence. The loan is repayable in 3 years from the date of
issue or can be converted at any time into shares at the holder’s option.
The instrument accrues interest at a rate of 12 percent per annum accruing daily and will mature and be due for repayment in full on 17 May
2021, unless they are redeemed before that date. On that date, unless the convertible loan notes are converted into ordinary shares on the
conversion date, a redemption premium fee will be payable. The redemption fee will be an amount which, when added to the interest accrued
on the relevant notes, provides a total return equal to the amount which would have accrued in respect of such notes from the date of the
convertible loan note instrument until and including the date the notes are redeemed in full had the interest rate been 30 percent per annum.
A host loan at amortised cost and an embedded derivative liability, being measured at fair value with changes in value being recorded in
profit or loss, have been recognised. At 31 March 2019, the derivative liability was valued at £0.3 million.
The convertible loan notes shown consist of a host loan at amortised costs of £8.1 million and £1.4 million accrued interest up to
31 March 2019.
Features of the Group’s borrowings are as follows:
The Group’s financial instruments comprised cash, hire purchase and finance leases, a revolving credit facility, an overdraft, investor
loans 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. The government grant is specific to Brighter Foods.
The main risks from the Group’s financial instruments are interest rate risk and liquidity risk. Liquidity risk arises from the Group’s
management of working capital and the finance charges and principal repayments on its debt instruments. The Group’s policy is to ensure
that it will always have sufficient cash to allow it to meet its liabilities when they become due.
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.
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
23. Borrowings and capital management (continued)
During the year ended 31 March 2019 the Group continued with the borrowing facilities in place and secured loans from investors.
As at 31 March 2019, the borrowings comprised:
{ Invoice discounting facility of £8 million with Lloyds Bank plc on a revolving basis with a minimum term of 12 months and a six-month
notice period. This facility is secured against the debtors of JF Renshaw Ltd and Rainbow Dust Colours Ltd with an interest rate of 1.5%
above Base Rate.
{ An overdraft facility with Lloyds Bank plc of up to £2.0 million with two major shareholders (NB Holdings Ltd and Omnicane Investors Ltd)
each putting £1.0 million into an account as security (cash collateral). The interest rate on the overdraft is at 3.5% above Base Rate.
{ The Group also secured facilities against specific plant and machinery with Lloyds Bank plc and ABN Amro Lease NV totalling £6.3
million. The facilities interest payable is varied per specific agreement, but is generally between 3.5% and 4.0%.
The three major shareholders, NB Holdings Ltd, Omnicane Investors Ltd and certain funds managed by Downing LLP, supported the business
and provided significant funding to the Group by way of loans.
The loans at 31 March 2019 were as follows:
Date
May 2018
Amount
£8.8m
Method of Funding
Major Shareholder(s)
Loan notes – transferred to convertible loan notes in
Aug 18 with accrued interest to date added (original
investment was £8.5m)
March 2018
£4.0m*
Unsecured loan notes
January 2018
£3.0m
Unsecured loan notes
September 2017
£4.0m
Loan Facility and loan notes
Secured on specific chattel assets
August 2017
£2.0m
Loan facility (applied as collateral for bank overdraft)
June 2017
£4.0m
Investor loans
NB Holdings Ltd (£3.4m), Omnicane
Investors Ltd (£3.4m), Downing LLP
(2.0m)
NB Holdings Ltd (£1.7m), Omnicane
Investors Ltd (£1.7m), Downing LLP
(£0.6m)
NB Holdings Ltd (£1.3m), Omnicane
Investors Ltd (£1.3m), Downing LLP
(£0.4m)
NB Holdings Ltd (£1.33m), Omnicane
Investors Ltd £1.33m), Downing LLP
(£1.33m)
NB Holdings Ltd (£1.0m), Omnicane
Investors Ltd (£1.0m)
NB Holdings Ltd (£2.0m), Omnicane
Investors Ltd (£2.0m)
June 2017
£7.3m**
Loan notes
Downing LLP
Total
£33.1m
* £0.9 million of the funding agreed in March 2018 was received in April 2018.
** Interest is payable on a quarterly basis to the MI Downing Monthly Income Fund up to a principal amount of £0.9 million.
At 31 March 2019 Lloyds Bank plc had 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, the
banking arrangements with Lloyds Bank plc contain certain cross-guarantees.
www.realgoodfoodplc.com Stock Code: RGD
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
23. Borrowings and capital management (continued)
Liquidity risk management
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt
instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
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.
The following table details the Group’s maturity profile of its financial liabilities:
Less than
1 month
£’000s
1-3 months
£’000s
3 months to
1 year
£’000s
1-5 years
£’000s
5+ years
£’000s
Total
£’000s
2019
Trade and other payables
6,122
3,719
Investor loans
Convertible loan notes
Government grants
Hire purchase
NCI put option liability
Interest
Total
2018
Trade and other payables
Bank term loans
Revolving credit facilities
Investor loans
Government grants
Hire purchase
NCI put option liability
Interest
Total
–
–
5
53
–
6,180
5
6,185
–
–
12
101
–
3,832
10
3,842
665
–
–
32
465
–
1,162
38
1,200
123
24,254
8,807
197
1,017
4,997
39,395
10,234
49,629
–
–
–
31
–
–
31
–
31
10,629
24,254
8,807
277
1,636
4,997
50,600
10,287
60,887
Less than
1 month
£’000s
1-3 months
£’000s
3 months to
1 year
£’000s
1-5 years
£’000s
5+ years
£’000s
Total
£’000s
13,346
250
–
–
5
152
–
6,008
–
–
10,144
12
267
–
2,864
1,500
8,669
2,000
32
1,129
–
13,753
16,431
16,194
35
640
684
13,788
17,071
16,878
267
–
–
11,254
198
4,858
4,796
21,373
1,671
23,044
1
–
–
–
80
–
–
81
–
81
22,486
1,750
8,669
23,398
327
6,406
4,796
67,832
3,030
70,862
The profile of the trade payables has been taken as being consistent with the Group’s payment terms to suppliers.
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
23. Borrowings and capital management (continued)
Analysis of market risk sensitivity
Currency risks:
The Group is exposed to currency risks on purchases of commodities 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 $ assets to $ liabilities, a 10% strengthening of the US dollar would result in an increase in pre-tax profits of £62k.
A 10% weakening of the US dollar would result in a decrease of pre-tax profits of £51k.
{ With an excess of € assets to € liabilities a 10% strengthening of the Euro would result in an increase in pre-tax profits of £35k.
A 10% weakening of the Euro would result in a decrease of pre-tax profits of £29k.
Interest rate risks:
The Group has an exposure to interest rate risk arising from borrowings based upon the Bank of England base rate. However, at the balance
sheet date, the Group did not have any outstanding balance on these borrowing facilities, and so the impact of an increase in the applicable
interest rates would, all other factors remaining unchanged, not have impacted profits.
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 2019
Group
£’000s
31 March 2018
Group
£’000s
671
1,048
1,719
(83)
1,636
619
1,017
1,636
1,764
5,128
6,892
(486)
6,406
1,548
4,858
6,406
It is the Group’s policy to lease certain property, plant and equipment under finance leases. For the period ended 31 March 2019 the average
effective borrowing rate was 4.0% (2018: 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.
24. Trade and other payables
Amount due within one year
Trade payables
Social security
Deferred consideration
Accruals
Amounts owed to Group undertakings
Other payables
Total
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
31 March 2018
Group
£’000s
31 March 2018
Company
£’000s
5,809
626
–
3,866
–
328
425
54
–
1,892
75,972
48
11,419
849
4,520
5,253
–
445
624
95
–
2,506
72,837
25
10,629
78,391
22,486
76,087
Trade payables and accruals principally comprise amounts outstanding for trade purchases and continuing costs.
The deferred consideration of £4.5 million is in relation to the acquisition of Brighter Foods, and was paid in May 2018.
The Directors consider that the carrying amount of trade payables approximates to their fair value.
www.realgoodfoodplc.com Stock Code: RGD
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
25. Financial instruments
Set out below are the Group’s financial instruments. The Directors consider there to be no difference between the carrying value and fair
value of the Group’s financial instruments.
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
31 March 2018
Group
£’000s
31 March 2018
Company
£’000s
Loans and receivables at amortised cost
Cash and cash equivalents
Cash collateral
Trade receivables
Other debtors
Deferred consideration
Amounts owed by Group undertakings
Financial liabilities at amortised cost
Trade payables
Accruals
Other payables
Bank term loans
Revolving credit facilities
Hire purchase
Investor loans
Convertible loan notes
Deferred consideration
Amounts owed to Group undertakings
Financial liabilities at fair value through profit and loss
NCI put option
Derivative liability
Total
2,909
2,000
6,647
534
600
–
12,690
5,809
3,866
328
–
–
1,636
27,165
9,550
–
–
48,354
4,997
294
5,291
1,140
2,000
7
–
–
69,550
72,697
425
1,892
48
–
–
–
27,165
9,550
–
75,972
115,052
–
294
294
53,645
115,346
2,731
2,000
14,421
408
–
–
19,560
11,419
5,253
445
1,750
8,669
6,406
23,398
–
4,520
–
61,860
4,796
–
4,796
66,656
477
2,000
3
150
–
76,692
79,322
624
2,506
25
1,750
–
–
23,398
–
–
72,837
101,140
–
–
–
101,140
The fair value of the NCI put option and the embedded derivative liability as disclosed in the above table are classified as Level 3 in the fair
value hierarchy. The fair value of the NCI put option has been determined using discounted cash flow pricing models. The significant inputs
include profit, capital expenditure and the discount rate used to reflect the credit risk. The fair value of the embedded derivative liability has
been determined using a Monte-Carlo simulation. The significant inputs include volatility, risk-free rate and the time period under analysis.
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. Capital is defined as the net assets
of the Group, including cash.
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.
The three major shareholders, NB Holdings Ltd, Omnicane Investors Ltd and certain funds managed by Downing LLP, support the business
and have provided significant funding to the Group by way of loans (note 23).
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
26. Share capital
Number of Shares
2019
Number of Shares
2018
31 March 2019
£’000s
31 March 2018
£’000s
Allotted, called up and fully paid equity share capital
At the beginning of the year (1 April)
Issued in the year
At the end of the year (31 March)
78,449,241
70,563,501
20,877,094
7,885,740
99,326,335
78,449,241
1,569
418
1,987
1,411
158
1,569
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 5,554,550 shares reserved for issue under options, with expiry dates beyond 2019, outstanding at the end of the year.
£1.0 million was raised through an Open Offer in August 2018, with 20,115,190 shares admitted on 17 August 2018, at a price of 5 pence
per share. A further 761,904 shares were issued in February 2019 as a result of share options being exercised.
27. Reserves
Share premium: The share premium reserve comprises the premium paid over the nominal value of shares for shares issued.
Share option reserve: The share option reserve represents the cumulative share option charge.
Other reserve: Long-term liability arising from non-controlling interest payable upon exercise of the Brighter Foods Limited put option.
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.
Non-controlling interest: The non-controlling interest represents the 15.67% of Retained Earnings that are owned by the management of
Brighter Foods Limited, rather than Real Good Food plc.
www.realgoodfoodplc.com Stock Code: RGD
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
28. Equity-settled share option scheme
The Company has a share option scheme for certain employees of the Group. Options are exercisable at a price equal to the average quoted
market price of the Company’s shares at the date of grant. The vesting period is three years. If the options remain unexercised after a period
of ten years from the date of grant the options expire. Options are forfeited if the option holder leaves the Group before the options vest.
Details of the share options outstanding during the year are as follows:
31 March 2019
Number of
Share Options
31 March 2019
Weighted Average
Exercise Price (£)
31 March 2018
Number of
Share Options
31 March 2018
Weighted Average
Exercise Price (£)
Outstanding at the beginning of the period
6,930,748
0.23
9,171,350
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
–
(761,904)
(614,294)
5,554,550
5,554,550
–
(0.05)
(0.39)
0.23
0.23
–
(40,816)
(2,199,786)
6,930,748
6,322,757
0.20
–
(0.25)
(0.13)
0.23
0.21
*3,817,726 options granted to P. Totté not exercisable until share price exceeds £1.00.
All of the outstanding options have an exercise price within the range of £0.00–£0.50 in both 2019 and 2018.
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 35%
Expected life
Risk-free rate
Dividend yield
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.
Owing to the number of forfeited options during the year, the impact on the income statement in relation to the share options was a credit of
£37k (2018: a credit of £5k). This is shown in administration expenses in the Company as the majority of the charge relates to employees of
the Company.
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
29. Commitments
Operating lease arrangements
At the balance sheet date the Group had total future minimum lease payments under non-cancellable operating leases for each of the
following periods:
Due within one year
Due between one and five years
31 March 2019
£’000s
31 March 2018
£’000s
244
184
441
672
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
Commitments for the acquisition of property, plant and equipment
546
550
30. Related party transactions
Consultancy fees paid to the following entities in which Directors hold a beneficial interest. Fees payable relate to additional services
provided to the Group by the Directors.
31 March 2019
£’000s
31 March 2018
£’000s
P Totté
P G Ridgwell
The Salter Consultancy LLP
More Hours Ltd
Brandgrowth LLC
Director
P Totté
P G Ridgwell
P Salter
H CL Cawley
S Dawson
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
–
–
–
–
6
6
30
18
31
55
–
134
Steve Dawson’s experience of, and presence in, the US market enables him to provide unique insights into the opportunities in that
geography, considerably over and above his role as a director.
Charges of Group services to related parties
Real Good Food plc charged its subsidiaries management fees for the year as follows:
Brighter Foods Ltd
J F Renshaw Ltd
Haydens Bakery Ltd (prior to disposal)
Rainbow Dust Colours Ltd
R&W Scott Ltd (prior to disposal)
N Brown Foods Ltd
Real Good Food Ingredients Ltd (prior to cessation of trade)
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
240
720
150
60
173
1
30
1,374
–
720
360
60
240
–
120
1,500
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
30. Related party transactions (continued)
Amounts due to subsidiaries
Drawdowns on the revolving invoice discounting facility are paid into the Real Good Food plc bank account, and cash is allocated to the
relevant divisions, as required. These amounts are treated as loans between Real Good Food plc and the subsidiaries, both for the money
Real Good Food plc has taken from the subsidiary, and any money the subsidiary has received from Real Good Food plc. At 31 March the
balances owed by Real Good Food plc to the subsidiaries are as follows:
Brighter Foods Ltd
Eurofoods plc
J F Renshaw Ltd
RGF Devizes Ltd
Rainbow Dust Colours Ltd
Real Good Food Ingredients Ltd (discontinued)
R&W Scott Ltd (discontinued)
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
4,028
69
61,579
1,248
7,222
1,826
–
4,770
69
59,019
1,248
7,729
–
2
75,972
72,837
JF Renshaw Ltd and Brighter Foods Ltd are related parties because they are 100% owned subsidiaries of N Brown Foods Ltd, which is a
100% owned subsidiary of Real Good Food plc.
Amounts due from subsidiaries
Real Good Food plc secures some facilities, such as insurance, on a Group basis and recharges an element to the relevant subsidiaries.
These, along with the management recharges, are due for payment from the subsidiaries to Real Good Food plc. The below balances reflect
these payable trading elements, and the loan payments due from the transfer of funds for use in working capital and capital projects.
Brighter Foods Ltd
J F Renshaw Ltd
N Brown Foods Ltd
Rainbow Dust Colours Ltd
Renshaw Europe SA
Renshaw USA Incorporated
RGFC Dust Ltd
Haydens Bakery Ltd (discontinued)
R&W Scott Ltd (discontinued)
Real Good Food Ingredients Ltd (discontinued)
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
288
3,847
57,659
10
–
–
7,746
–
–
–
–
2,021
53,139
167
1,082
288
6,345
9,433
1,364
2,853
69,550
76,692
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
31. Pensions arrangements
Defined Contribution Scheme. The Group operates a defined contribution scheme for all employees, including provision to comply with auto-
enrolment requirements laid down by law.
In addition, the Company operates one defined benefits scheme which was closed to new members in 2000, and closed to future accrual
with effect from 5 April 2004. The Defined Benefit scheme is a funded arrangement, with assets held in a separate trustee-administered
fund. Members of the Plan are entitled to retirement benefits based on their final salary at date of leaving the Plan (or 5 April 2004 if earlier),
and length of service. From 1 April 2016 the Company annual contributions were agreed at £320k for 11 years and eight months, increasing
at 4% per annum each April. The Company expects to pay £360k to the Plan for the year commencing 1 April 2019 (2019: £347k). The
defined benefit scheme is funded by the Company. The present value of future contributions is currently less than the net liability disclosed
as at 31 March 2019, so no additional liability under IFRIC14 arises. A new arrangement has recently been agreed with the Trustee under
which repayments will increase to £1 million per year with effect from 1 August 2019.
For the purposes of IAS 19 the data provided for the 31 March 2018 actuarial valuation, has been approximately updated to reflect defined
benefit obligations on the accounting basis at 31 March 2019. This has resulted in a deficit in the Plan of £7,403k.
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
Gross amount recognised
Deferred tax **
Net liability
31 March 2019
£’000s
31 March 2018
(restated)*
£’000s
31 March 2017
(restated)*
£’000s
31 March 2016
£’000s
31 March 2015
£’000s
21,177
(13,774)
7,403
7,403
(1,258)
6,145
21,448
(13,529)
7,919
7,919
(1,094)
6,825
21,319
(13,946)
7,373
7,373
(1,120)
6,253
21,094
(15,013)
6,081
6,081
(1,155)
4,926
21,799
(16,111)
5,688
5,688
(1,138)
4,550
* following legal advice taken at the time, the Group posted a past service credit into the accounts in the year ended 31 March 2017 in respect of certain
pension increases being considered discretionary. Fresh legal advice clarifies these payments are mandatory and so £1.5 million has been added to the
defined benefit obligation to cover this requirement. This correction has been adjusted via brought forward reserves from 2017, thus matching the cost and
benefit, rather than taken in the current period accounts.
** Deferred tax rate 2016, 2017 & 2018: 17%, 2015: 20%
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
Past service loss
Benefits paid
31 March 2019
£’000s
31 March 2018
(restated)*
£’000s
21,448
21,319
516
77
106
(970)
553
367
115
(906)
Defined benefit obligation at end of period
21,177
21,448
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
31. Pensions arrangements (continued)
Reconciliation of opening and closing balances of the fair value of Plan assets
Fair value of Plan assets at start of period
Interest income on Plan assets
Return on assets less interest income
Contributions paid by the Group
Benefits paid, death-in-service insurance premiums and expenses
31 March 2019
£’000s
31 March 2018
£’000s
13,529
13,946
350
518
347
(970)
389
(232)
332
(906)
Fair value of Plan assets at end of period
13,774
13,529
The actual return on the Plan assets over the period ended 31 March 2019 was £868k (2018: £157k).
Total expense recognised in the Statement of Comprehensive Income within other finance income
Interest on liabilities
Interest on assets
Net interest cost
Past service cost
Total cost
Statement of recognised income and expenses
Actuarial gain/(loss) on the Plan assets
Experience gains arising on the Plan liabilities
Actuarial gains on the Plan liabilities arising from changes in demographic assumptions
Actuarial (losses) on the Plan liabilities arising from changes in financial assumptions
Total amount recognised in Statement of Other Comprehensive Income
31 March 2019
£’000s
31 March 2018
£’000s
516
(350)
166
106
272
553
(389)
164
115
279
31 March 2019
£’000s
31 March 2018
£’000s
518
427
436
(940)
441
(232)
–
114
(481)
(599)
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
31 March 2019
£’000s
31 March 2018
£’000s
31 March 2017
£’000s
2,667
–
1,013
2,699
3,137
4,055
–
203
–
–
–
1,511
2,952
3,136
1,105
945
–
83
1,122
2,675
–
–
1,907
4,120
3,732
1,139
1,646
–
152
284
2,671
610
(2,315)
13,774
13,529
13,946
31. Pensions arrangements (continued)
Assets
UK equity
Overseas equity
Absolute return fund
Corporate Bonds
Gilts
Multi-Asset Funds
Property
Cash
Alternative assets
Current assets
Current liabilities
Total assets
The investment strategy for the Plan is controlled by the Trustees, in consultation with the Company. None of the fair values of the assets
shown above includes any of the Group’s own financial instruments or any property occupied by, or other assets used by, the Group. Absolute
return funds are invested in a diverse range of assets in order to achieve equity-like returns with reduced volatility. Alternative assets include
infrastructure and derivatives.
Assumptions
Inflation
Salary increases
Rate of discount
Allowance for pension in payment increases
RPI max 5%
RPI min 3% max 5%
Allowance for revaluation of deferred pensions
12 months ended
31 March 2019
%
12 months ended
31 March 2018
%
12 months ended
31 March 2017
%
12 months ended
31 March 2016
%
3.30
–
2.40
3.10
3.50
2.30
3.10
–
2.65
3.00
3.40
2.10
3.20
–
2.85
3.10
3.40
2.20
2.80
–
3.65
2.70
3.30
1.80
Allowance for commutation of pension for cash at
retirement
90% of max
allowance
90% of max
allowance
90% of max
allowance
90% of max
allowance
The obligations of the Plan have been calculated by projecting forwards the figures from the initial results of the latest valuation as at
31 March 2019 and then making appropriate adjustments for known experience and for differences in assumptions.
The mortality assumptions adopted at 31 March 2019 and 31 March 2018 imply the following life expectancies from age 65:
31 March 2019
31 March 2018
Male retiring at age 65 in current year
Female retiring at age 65 in current year
Male retiring at age 65 in 20 years’ time
Female retiring at age 65 in 20 years’ time
21 years
23 years
22 years
24 years
22 years
24 years
23 years
25 years
The weighted–average duration of the defined benefit obligation at 31 March 2019 was 15 years (2018: 15 years).
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
31. Pensions arrangements (continued)
Historic funding positions
The funding positions applicable at the start of each period are as follows:
Fair value of assets
Defined benefit obligation
(Deficit) in scheme
Experience adjustment on
scheme assets
Experience adjustment on
scheme liabilities
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
(restated)*
£’000s
12 months ended
31 March 2017
(restated)*
£’000s
12 months ended
31 March 2016
£’000s
12 months ended
31 March 2015
£’000s
13,774
(21,177)
(7,403)
518
427
13,529
(21,448)
(7,919)
(232)
–
13,946
(21,319)
(7,373)
652
(103)
15,013
(21,094)
(6,081)
(1,122)
–
16,111
(21,799)
(5,688)
885
–
* following legal advice taken at the time, the Group posted a past service credit into the accounts in the year ended 31 March 2017 in respect of certain
pension increases being considered discretionary. Fresh legal advice clarifies these payments are mandatory and so £1.5 million has been added to the
defined benefit obligation to cover this requirement. This correction has been adjusted via brought forward reserves from 2017, thus matching the cost and
benefit, rather than taken in the current period accounts.
Risks
The scheme is exposed to a number of risks, including:
Asset volatility: the Plan’s defined benefit obligation is calculated using a discount rate set with reference to corporate bond yields; however,
the Plan invests significantly in equities. These assets are expected to outperform corporate bonds in the long-term but provide volatility and
risk in the short term.
Changes in bond yields: a decrease in corporate bond yields would increase the Plan’s defined benefit obligation; however, this would be
partially offset by an increase in the value of the Plan’s bond holdings.
Inflation risk: a proportion of the Plan’s defined benefit obligation is linked to inflation; therefore, higher inflation will result in a higher defined
benefit obligation (subject to the appropriate caps in place). The majority of the Plan’s assets are either unaffected by inflation, or only loosely
correlated with inflation, therefore an increase in inflation would also increase the deficit.
Life expectancy: if Plan members live longer than expected, the Plan’s benefits will need to be paid for longer, increasing the Plan’s defined
benefit obligation.
The Trustees and Company manage risks in the Plan through the following strategies:
Diversification: In order to counter asset volatility and changes in bond yields, investments are well diversified, such that the failure of any
single investment would not have a material impact on the overall level of assets.
Investment Strategy: the Trustees are required to review their investment strategy on a regular basis and consult with the Company on any
changes. The Trustees’ investment strategy is set out in the Statement of Investment Principles.
Funding positions: The Trustees are required to assess the funding position annually by means of a formal actuarial report which must be
shared with the Company.
Sensitivity analysis
The impact to the value of the defined benefit obligation of a reasonably possible change to one actuarial assumption, holding all other
assumptions constant, is presented in the table below:
Actuarial Assumption
Discount Rate
RPI Inflation
Assumed Life expectancy
Reasonably
Possible Change
Obligation
Increase
Obligation
Decrease
(+/- 0.5%)
(+/- 0.5%)
(+/-) 1 Year
8%
3%
5%
7%
3%
5%
Small changes to other assumptions, such as the allowance for commutation of pension for cash at retirement, and the proportion of
members assumed to be married at retirement, do not have such a significant effect on the obligations of the Plan.
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
32. Discontinued operations
During the year ended 31 March 2019, the Group disposed of four subsidiaries. This was consistent with the Group’s strategy and allows it
to focus on its remaining businesses.
The post tax loss on disposal is shown on the next page:
Cash consideration received
Cash disposed of
Less deferred consideration
Net cash inflow on disposal of discontinued operations
Net assets disposed of (other than cash)
Property, plant and equipment
Intangibles
Inventories
Trade and other receivables
Trade and other payables
Other
Goodwill Impairment
Net working capital adjustment
Disposal costs
Accrual for deferred consideration
Loss on disposal of four subsidiaries
The result of the discontinued businesses contained within these accounts is:
Total Revenue
Intercompany Sales
External Revenue
Cost of sales
Gross Profit
Distribution expenses
Administrative expenses
Impairment charge
Loss on disposal
Significant items
Operating loss
Finance costs
Loss before tax
Tax
Loss after tax
£’000s
18,014
(745)
(600)
16,669
(15,055)
(69)
(3,825)
(6,982)
6,546
(112)
(19,497)
(905)
(668)
(1,401)
600
(5,202)
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
26,365
(346)
26,019
(21,615)
4,404
(1,227)
(4,065)
–
(5,202)
(46)
(6,136)
(107)
(6,243)
–
(6,243)
71,035
(4,697)
66,338
(59,753)
6,585
(2,287)
(9,287)
(10,494)
(142)
(1,477)
(17,102)
(332)
(17,434)
(666)
(18,100)
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
32. Discontinued operations (continued)
The statement of cash flows includes the following amounts in relation to discontinued operations:
Operating activities
Investing activities
Financing activities
Net cash from discontinued operations
12 months ended
31 March 2019
£’000s
(10,455)
22,150
(10,465)
1,230
The earnings per share from discontinued operations are shown below, and are fully disclosed in note 15.
Basic and diluted loss per share
12 months ended
31 March 2019
12 months ended
31 March 2018
(restated)*
(6.85)p
(23.76)p
* Earnings per share for the year ended 31 March 2018 has been restated for a prior period adjustment to remove the effect of non-controlling interests, which
were included in the figures to 31 March 2018 in error.
The detail of each sale, and the individual result of disposal is provided here.
Garrett Ingredients Ltd
On 23 April 2018, a sale of trade and assets was completed for Garrett Ingredients Ltd. The results of the sale of assets are shown below.
The company name of Garrett Ingredients Ltd was included within the terms of the sale, and subsequently the remaining entity was renamed
Real Good Food Ingredients Ltd. This company is no longer trading, but continues to have movement on the Statement of Comprehensive
Income in relation to remaining assets.
The post-tax profit on sale of assets within the discontinued operation follows:
Cash consideration received
Cash disposed of
Net cash inflow on disposal of discontinued operation
Net assets disposed of (other than cash)
Property, plant and equipment
Intangibles
Inventories
Other
Goodwill Impairment
Disposal costs
Profit on disposal of Garrett Ingredients Ltd
£’000s
1,861
–
1,861
(1)
(18)
(617)
(147)
(783)
(905)
(87)
86
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
32. Discontinued operations (continued)
Garrett Ingredients Ltd (continued)
The result of the discontinued business contained within these accounts is:
Total Revenue
Intercompany Sales
External Revenue
Cost of sales
Gross Profit
Distribution expenses
Administrative expenses
Impairment charge
Profit/(loss) on disposal
Significant items
Operating profit/(loss)
Finance costs
Profit/(loss) before tax
Tax
Profit/(loss) after tax
The statement of cash flows includes the following amounts in relation to Garrett Ingredients Ltd:
Operating activities
Investing activities
Financing activities
Net cash from discontinued operation
OUR FINANCIALS
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
1,263
(180)
1,083
(481)
602
(113)
(206)
–
86
1
370
–
370
–
370
23,868
(3,668)
20,200
(18,153)
2,047
(759)
(1,561)
(3,506)
(142)
(606)
(4,527)
(53)
(4,580)
(211)
(4,791)
12 months ended
31 March 2019
£’000s
568
1,868
(1,973)
463
Haydens Bakery Ltd
On 6 September 2018, the Group sold Haydens Bakery Ltd to Bakkavor Group plc for a cash consideration of £12.0 million. The results
of the sale are shown below. Chantilly Patisserie (a subsidiary of Haydens Bakery Ltd) was not included in the sale, and so the assets and
liabilities of the subsidiary were hived up into a company named RGF Patisserie Ltd, part of the Real Good Food Group, prior to sale.
The post-tax loss on disposal is shown on the next page:
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
32. Discontinued operations (continued)
Haydens Bakery Ltd (continued)
Cash consideration received
Cash disposed of
Net cash inflow on disposal of discontinued operation
Net assets disposed of (other than cash)
Property, plant and equipment
Intangibles
Inventories
Trade and other receivables
Trade and other payables
Net working capital adjustment – completion accounts
Disposal costs
Loss on disposal of Haydens Bakery Ltd
The result of the discontinued business contained within these accounts is:
Total Revenue
Intercompany Sales
External Revenue
Cost of sales
Gross Profit
Distribution expenses
Administrative expenses
Impairment charge
Loss on disposal
Significant items
Operating loss
Finance costs
Loss before tax
Tax
Loss after tax
The statement of cash flows includes the following amounts in relation to Haydens Bakery Ltd:
Operating activities
Investing activities
Financing activities
Net cash from discontinued operations
£’000s
12,000
(519)
11,481
(10,943)
(51)
(1,440)
(4,107)
4,232
(12,309)
(668)
(657)
(2,153)
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
14,602
–
14,602
(12,941)
1,661
(472)
(2,168)
–
(2,153)
(47)
(3,179)
(79)
(3,258)
–
36,206
–
36,206
(32,576)
3,630
(881)
(5,189)
(6,988)
–
(731)
(10,159)
(204)
(10,363)
99
(3,258)
(10,264)
12 months ended
31 March 2019
£’000s
(10,788)
17,108
(5,666)
654
72
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
32. Discontinued operations (continued)
R&W Scott Ltd
On 19 December 2018, R&W Scott Ltd was sold to its management team for a cash consideration of £3.95 million, with £0.5 million
deferred until September 2019. The results of the sale are shown below.
The post-tax loss on disposal follows:
Cash consideration received
Cash disposed of
Less deferred consideration
Net cash inflow on disposal of discontinued operation
Net assets disposed of (other than cash)
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Other liability
Disposal costs
Accrual for deferred consideration
Loss on disposal of R&W Scott Ltd
The result of the discontinued business contained within these accounts is:
Total Revenue
Intercompany Sales
External Revenue
Cost of sales
Gross Profit
Distribution expenses
Administrative expenses
Impairment charge
Loss on disposal
Significant items
Operating loss
Finance costs
Loss before tax
Tax
Loss after tax
The statement of cash flows includes the following amounts in relation to R&W Scott Ltd:
Operating activities
Investing activities
Financing activities
Net cash from discontinued operation
£’000s
3,953
(225)
(500)
3,228
(4,046)
(1,622)
(2,568)
1,883
35
(6,318)
(517)
500
(3,107)
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
9,402
(166)
9,236
(7,316)
1,920
(565)
(1,523)
–
(3,107)
–
(3,275)
(28)
(3,303)
–
(3,303)
10,961
(1,029)
9,932
(9,024)
908
(647)
(2,537)
–
–
(140)
(2,416)
(75)
(2,491)
(554)
(3,045)
12 months ended
31 March 2019
£’000s
(207)
3,146
(2,826)
113
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
32. Discontinued operations (continued)
RGF Patisserie Ltd
On 1 February 2019, the newly formed RGF Patisserie Ltd was sold to its management team for a cash consideration of £0.2 million, with
£0.05 million deferred until the first anniversary of the sale, and a further £0.05 million deferred until the second anniversary of the sale.
The results of the sale are shown below.
The post-tax loss on disposal follows
Cash consideration received
Cash disposed of
Less deferred consideration
Net cash inflow on disposal of discontinued operation
Net assets disposed of (other than cash)
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Disposal costs
Accrual for deferred consideration
Loss on disposal of RGF Patisserie Ltd
The result of the discontinued business contained within these accounts is:
Total Revenue
Intercompany Sales
External Revenue
Cost of sales
Gross Profit
Distribution expenses
Administrative expenses
Loss on disposal
Significant Items
Operating loss
Finance costs
Loss before tax
Tax
Loss after tax
The statement of cash flows includes the following amounts in relation to RGF Patisserie Ltd:
Operating activities
Investing activities
Financing activities
Net cash from discontinued operation
£’000s
200
(1)
(100)
99
(65)
(146)
(307)
431
(87)
(140)
100
(28)
12 months ended
31 March 2019
£’000s
12 months ended
31 March 2018
£’000s
1,098
–
1,098
(877)
221
(77)
(168)
(28)
–
(52)
–
(52)
–
(52)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12 months ended
31 March 2019
£’000s
(28)
28
–
–
74
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Notes to the Financial Statements (continued)
Year ended 31 March 2019
OUR FINANCIALS
33. Assets held for sale
Following the sale of the trade and assets of Garrett Ingredients Ltd, the Group was left with an office building near Bristol, which was no
longer required. The property has been advertised for sale with local estate agents since July 2018, and we hope to find a suitable buyer in
the near future.
As such, the asset is classified as held for sale within the consolidated statement of financial position at 31 March 2019.
34. Post-year end activities
1. On 30 May 2019, London Stock Exchange determined a public censure of the Company and a fine of £450,000, discounted to £300,000
for early settlement. The public censure related to breaches of the AIM Rules for Companies (“AIM Rules”) 10, 13, 17, 19, 21 and 31
which occurred in the period to July 2017. The fine was settled in early June 2019.
2. On the same day, the following Board changes were made:
{ The Interim Non-Executive Chairman, Patrick Ridgwell, retired from the Board, and Mike Holt, Independent Non-Executive Director, was
appointed Non-Executive Chairman, relinquishing his role as Chair of the Audit Committee;
{ Judith MacKenzie, Non-Executive Director, was appointed as Chair of the Audit Committee, relinquishing her role as Chair of the
Remuneration Committee;
{ Steve Dawson, Non-Executive Director, became Chair of the Remuneration Committee; and
{ Anthony Ridgwell, the principal beneficiary of Napier Brown’s holding in the Company, joined the Board as a Non-Executive Director.
3. On 15 July 2019, Maribeth Keeling was appointed as Chief Financial Officer.
4. On 31 July 2019, Christopher Thomas, Non-Executive Deputy Chairman retired from the Board.
5. On 9 August 2019, the Shareholder Loans were extended to 17 May 2021.
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Shareholder Notes
76
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Advisors and Company Information
OTHER INFORMATION
Directors
M J Holt
H C L Cawley
M Keeling
J M d’Unienville
A P Ridgwell
J A Mackenzie
S Dawson
Company Secretary
H C L Cawley
Registered Office
61 Stephenson Way
Wavertee
Liverpool
L13 1HN
Registered Number
04666282
Auditor
BDO LLP
3 Hardman Street
Spinningfields
Manchester
M3 3AT
Solicitors
Walker Morris LLP
Kings Court
12 King Street
Leeds
LS1 2HL
Nominated Advisor and Broker
finnCap Ltd
60 New Broad Street
London
EC2M 1JJ
Bankers
Lloyds Bank plc
5 St Paul’s Square
Old Hall Street
Liverpool
L3 9SJ
www.realgoodfoodplc.com Stock Code: RGD
www.realgoodfoodplc.com Stock Code: RGD
IBC
06
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A
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61 Stephenson Way, Wavertree,
Liverpool L13 1HN
T: 0151 706 8200
enquiries@realgoodfoodplc.com
www.realgoodfoodplc.com
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