61 Stephenson Way, Wavertree,
Liverpool L13 1HN
T: 0151 706 8200
enquiries@realgoodfoodplc.com
www.realgoodfoodplc.com
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Annual Report and Accounts
For the year ended 31 March 2020
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Stock code: RGD
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
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
Notes to the Financial Statements
OTHER INFORMATION
Advisors and Company Information
01
02
04
05
07
08
10
12
13
14
15
16
23
25
26
30
31
32
33
34
35
36
37
76
The Group’s current objective:
The Group’s current objective:
To deliver a return on investment for all our stakeholders.
To deliver a return on investment for all our stakeholders.
The Group’s current strategy:
The Group’s current strategy:
To improve our profitability by focusing on and investing in our areas of
To improve our profitability by focusing on and investing in our areas of
competitive advantage, whilst partnering with our customers to
competitive advantage, whilst partnering with our customers to
enhance the consumer experience.
enhance the consumer experience.
www.realgoodfoodplc.com
Navigating the Report
For further information within this
For further information within this
document and relevant page numbers
document and relevant page numbers
Additional information online
Additional information online
IFC STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2020
Overview
Financial highlights
{ Revenue from continuing businesses increased by 8.1% from £61.6 million to
£66.6 million.
{ During a period of transition, the Group delivered an adjusted EBITDA*
on continuing businesses of £3.3 million against £1.9 million in the prior year.
{ Following disposals in the prior year, the two remaining divisions, Cake Decoration
and Food Ingredients are profitable (before impairment, depreciation, amortisation
and significant items) and generated an adjusted EBITDA* of £6.8 million before
central costs.
{ Central costs have reduced by £0.4 million from £3.9 million to £3.5 million.
{ Goodwill has been impaired this year by £12.6 million (2019: £18.7million), to
reflect the value today of the continuing businesses; covid-19 impact has been
reflected in the impairment.
{ Net debt stood at £45.4 million (2019: £35.7 million), being predominantly
shareholder loans, of which £12.3 million is in the form of convertible loan notes.
The loan interest in the year is £5.0m, of which £0.5m has been paid.
Operational highlights
{ The Group now constitutes two main divisions, Cake Decoration (trading under the
brand names of Renshaw and Rainbow Dust Colours) and Food Ingredients (trading
as Brighter Foods). Brighter Foods has made significant progress in earnings and
revenue since March 2019 outperforming the Board’s expectations. Meanwhile,
Cake Decorations is still in the last phases of turnaround, demonstrating an ability
to win new business from a streamlined cost base.
{ Overall, the underlying adjusted EBITDA on continuing activities of the Group
improved by £1.4 million, from £1.9 million to £3.3 million due to the headway gains
in Brighter Foods and lower central costs more than offsetting the lower (short term)
profits in Cake Decorations.
{ Brighter Foods yielded significant benefits during the year to 31 March 2020.
Revenue increased by £10.1 million (66%) to £25.3 million and operating profit more
than doubled to £2.9 million during the year. More importantly this growth continued
despite the set-back of covid-19 at the start of the current year.
{ Cake Decoration had come under pressure owing to the UK declining market for
sugar paste (-14.7%) and marzipan (-2.1%). However, Renshaw’s sales outperformed
the underlying market decline. Frostings are a growing market, and the business is
well placed in this segment following recent investment. Renshaw also signed a new
exclusive distribution agreement with Decopac, the largest distributor of cake
supplies in the US to assist in growing their share of the US market.
Current Trading
{ The impact of covid-19 was seen in the first quarter, as many customers felt the
impact of lockdown. However, with lockdown restrictions easing, trading has
improved in both divisions with quarter 3 (October 2020 to December 2020) sales in
line with FY20 and in-line with Board expectations.
{ Within Cake Decorations, where the operating structure has been significantly
improved, the focus is on strengthening customer relationships, enhancing customer
service and growing sales through new product launches and category expansion.
There have been new client wins since the year end both in the Retail and B2B
markets; overseas markets have recovered well. Since the start of the financial
year, the business has successfully launched over 40 new products which generated
over £2 million of sales on an annualised basis.
{ Brighter Foods, after the initial impact of the lockdown, has continued to grow its
earnings from a wider customer base than this time last year. Q3 earnings are on
target to be ahead of FY20
{ The Board is reviewing all initiatives to improve the capital structure of the Group.
*adjusted EBITDA
GROUP
REVENUE
£66.6m
2019
£61.6m
GROSS
PROFIT
£27.0m
2019
£18.0m
GROUP EBITDA
(adjusted)
£3.3m
2019
£1.9m
Financial information presented
relates to continuing operations.
01
STRATEGIC REPORTwww.realgoodfoodplc.com Stock Code: RGD The Group in Summary
Real Good Food now operates in two areas or
Real Good Food now operates in two areas or
divisions – Cake Decoration and Food Ingredients.
divisions – Cake Decoration and Food Ingredients.
The divisions
The divisions
Cake Decoration: Renshaw and Rainbow Dust, and Food Ingredients: Brighter Foods operate as
Cake Decoration: Renshaw and Rainbow Dust, and Food Ingredients: Brighter Foods operate as
stand-alone businesses, with their own infrastructures and management teams. Given the two
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. Each business generally
businesses operate in discrete market sectors, the areas of overlap are few. Each business generally
has the resources to operate as a stand-alone unit, but clearly, each is able to call upon the centre or
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.
the other businesses as required.
Head Office
Head Office
Central functions have further been reduced, and now comprise only Finance, in addition to the plc Board.
Central functions have further been reduced, and now comprise only Finance, in addition to the plc Board.
REVENUE
£41.2m
2019 £46.4m
EBITDA Profit
(adjusted)*
£1.8m
2019 £3.0m
OPERATING Profit (LOSS)
£(13.4)m
2019 (£17.3)m
EMPLOYEES
339
2019: 376
REVENUE
£25.3m
2019 £15.2m
EBITDA Profit
(adjusted)*
£5.0m
2019 £2.8m
OPERATING Profit
£2.9m
2019 £1.2m
EMPLOYEES
281
2019: 194
HEAD
OFFICE
EBITDA
(adjusted)*
£(3.5)m
2019 (£3.9) m
OPERATING (LOSS)
£(4.0)m
2019 (£5.4)m
EMPLOYEES
4
2019: 15
Read more on page 08
Read more on page
Read more on page 09
Read more on page
*See note 5 for reconciliation
02
Annual Report and Accounts for the year ended 31 March 2020STRATEGIC 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, 300 employees
Rainbow Dust Colours: Preston, 32 employees
Renshaw Europe: Liverpool & Europe, 5 employees
Renshaw Americas: New Jersey, 2 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, 281 employees
03
STRATEGIC REPORTwww.realgoodfoodplc.com Stock Code: RGD Chairman’s Statement
Overview
I am pleased to report that Real Good Food
has continued to make further progress in its
journey of rebuilding shareholder value, with
ongoing support from its principal investors.
The Group has faced a number of
challenges. JF Renshaw, the main
component of the Cake Decorations
business unit, sells into mature markets
with increasing competition, particularly
within the retail sector, and operates out of
an aged site in Liverpool with a higher than
sector average wage bill. Despite this a
re-vitalised management team led by Steve
Moon is making good progress with tangible
improvements being delivered in relation to
customer service, product quality and
product innovation. Some cost
improvements have been achieved but more
is needed to generate acceptable returns
whilst remaining competitive. In summary,
the Cake Decoration business is now more
customer focused and is beginning to
recreate and leverage the value of the
Renshaw brand, albeit the progression is
steady rather than transformational at this
stage. Progress is being accelerated. For
the year to 31 March 2020, results were
impacted by declining sugar paste demand,
but the business unit managed to make a
modest profit at adjusted EBITDA level.
Clearly, as noted in our AGM trading update
on 23 September 2020, revenues and
profits have been impacted by covid-19
during the current year due to the
restrictions on social gatherings impacting
the UK Wholesale market but progress is
continuing to be made to make this
business less dependent on the maturing
sugar paste and marzipan markets through
product innovation; new product launches
having been made with Tesco, Waitrose and
Marks & Spencer.
In contrast, recent investments to increase
the production capacity of Brighter Foods
yielded significant benefits during the year to
31 March 2020. Revenue increased by
£10.1 million (66%) to £25.3m and profits
more than doubled to £2.9 million during the
year. More importantly this growth has
continued despite the set-back of covid-19 at
the start of the current year. The business
has continued to gain traction with several
new blue-chip customers leveraging its
reputation and ability to introduce top quality
new products quickly and effectively.
We have made an impairment charge of
£12.6m in respect of the carrying value of
Cake Decoration given lower profits in the
year, the impact of covid-19 and improvement
challenges at the Liverpool site. However, it is
our belief that further impairments can be
avoided given the current initiatives within JF
Renshaw and the opportunity and need to
accelerate progress.
Overall, the underlying adjusted EBITDA on
continuing activities of the Group improved
by £1.4 million, from £1.9 million to £3.3
million (see note 5) due to the headway
gains in Brighter Foods and lower central
costs more than offsetting the lower
(short-term) profits in Cake Decorations. A
lot of work is underway to build on this
upward momentum.
The level of total indebtedness remains a
matter of concern, net debt having risen
from £35.7 million to £45.4 million largely
as a result of the accrued redemption
premium on investor loans and convertible
loan notes which totalled £5.0 million. I am
pleased to report that an agreement has
been reached with the investors to extend
the repayment date of these loans from 17
May 2021 to 19 May 2022 with no change
to the interest rate payable on the loans.
The convertible loan notes (CLNs) will reduce
from 30% per annum to 12% per annum
effective from 31 December 2020. The
Independent Directors believe this to be
appropriate given limited alternative forms of
funding and finance at the present time.
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 in the
composition of the Board since April of last
year. Anthony Ridgwell joined the Board in
May 2019 as a Non-Executive Director
replacing his father, Pat Ridgwell. Steve
Dawson stepped down as a Non-Executive
Director in August 2019, due to executive
commitments elsewhere, and was replaced
by Gail Lumsden who joined the Board in
October 2019. After leading the divestment
of a number of non-core businesses, Hugh
Cawley stepped down from his role as Chief
Executive Officer in September 2019. From
October 2019, Paul Richardson served as a
part-time Executive Director with
responsibilities for Corporate Affairs and
Governance until stepping down in March
2020 to pursue a full-time position in
another company. I became Non-Executive
Chairman in June 2019 after Pat Ridgwell
stepped down. Following Paul Richardson’s
move, I effectively became Executive
Chairman, and this was confirmed by the
Board last month. The Managing Directors of
the two business units report to me and are
responsible for the delivery and execution of
their respective business unit strategies.
Following these changes, the Board is now
stable and, in my opinion, more aligned,
effective, and focused on sorting things out
to rebuild shareholder value and simplify the
capital structure. I am also keen to engage
with minority shareholders to ensure their
voices are heard and that, notwithstanding
the unusual composition of the Board, that
the right decisions are made for all
stakeholders.
Corporate Governance
The Board is very mindful of the issues and
problems in relation to corporate governance
during the period 2016 to early 2018 and is
fully aligned with the importance of sound
corporate governance. The Group is
governed through the Board and its
Committees, namely Audit Committee and
the Remuneration Committee. Further
details of the work carried out by these
committees is in the Reports on pages 23
and 25.
Strategy
The Group’s strategy is set out in more detail
later in the Strategic Review, but, in
summary, the Group has two autonomous
business units which are leaders in their
chosen markets and have the potential to
deliver better quality profits and net cash
inflows for the Group. Management actions
have been taken within Cake Decoration to
continue to work with customers on
innovation and to build long term customer
relationships, improving operational
efficiencies further and growing sales in the
UK and internationally. Food Ingredients has
successfully scaled up its production
capacity and will continue to broaden its
customer base and seek profitable ways to
grow its business further.
Outlook
We are fully committed to improving the
Group’s financial performance, reducing its
debt burden, and normalising its capital
structure. The Board is actively pursuing a
range of options to restructure the Group
and simplify its capital structure. Clearly,
covid-19 has impacted financial
performance, and some options, but both
businesses have been reasonably resilient,
albeit aided by the Government’s Job
Retention Scheme. The uncertainties of
covid-19 remain, but they are expected to
ease during 2021. Brexit ought to be more
positive than negative for the Group as a
whole.
Finally, I would like to thank our employees
who have worked hard to overcome various
challenges, during the covid-19 crisis, to
ensure that products and customer service
continued (and continue) to be delivered.
Mike Holt
Executive Chairman
18 December 2020
04
Annual Report and Accounts for the year ended 31 March 2020STRATEGIC REPORT Strategic Review
2019/20 performance
Overall revenue from continuing businesses
increased from £61.6 million to £66.6
million, with an increase of £10.1 million
(66%) within Food Ingredients and Cake
Decoration’s sales being down by £5.2
million (11%). The increase within Food
Ingredients reflects the increase in capacity
from an additional production line installed
during the year and sales to a new blue-chip
customer gained in January 2020. Although
Cake Decorations outperformed the sector,
market demand for marzipan and sugar
paste declined during the year. The delay in
the launch of frostings also impacted FY20.
However, with the new plant in Liverpool now
fully operational, we will see the benefit of
this growing market in FY21. The increase in
sales by Food Ingredients was the main
driver for the step-change in profitability,
buoyed by improved operational efficiencies
particularly in relation to waste levels;
underlying adjusted EBITDA for Food
Ingredients increased from £2.8 million to
£5.0 million. In Cake Decoration, underlying
adjusted EBITDA decreased from £3.0
million in 2019 to £1.8 million in 2020,
owing to the reduced sales partly offset by
the lower overhead costs; savings in
overhead costs were £0.9 million.
Over the last two accounting periods,
significant costs (both cash costs and
non-cash costs) have been recognised in the
turnaround of the Cake Decoration business;
restructuring costs necessary to align
overheads, 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. There are a
number of initiatives ongoing within the Cake
Decorations business to make it stronger
and more profitable. There are also a range
of other options being evaluated to enhance
returns from this business. The onset of the
covid-19 crisis, forcing many countries into
lockdown, impacted sales and profitability
during the final quarter of FY20, and has
continued throughout FY21. There will be
further costs incurred in FY21 within the
Cake Decorations business to ensure the
infrastructure and operational facilities are
able to deliver the sales growth and
improved profitability that the Board believe
is achievable.
The Group’s central resources have been
pared back and opportunities are continually
sought to reduce these further, consistent
with good governance. The Group retains
higher levels of shareholder debt than is
ideal, the coupon on which was determined
in less profitable times. This interest burden,
almost all of which is rolled-up, will remain
for the foreseeable future.
Loss before taxation of continuing businesses
(20,147)
(26,090)
31 March
2020
£’000s
31 March
2019
£’000s
Depreciation of property, plant, and equipment
Impairment charge
Amortisation of intangibles
Significant items
Finance costs
Other finance costs
EBITDA (adjusted) Profit
Capital structure
The Group manages the capital structure
and reviews the requirements in response to
economic conditions.
During the course of the financial year, the
Group secured a total credit facility of £8.87
million from Leumi ABL Limited, enabling
RGF to repay certain debt facilities provided
by the Company’s three major shareholders,
NB. Ingredients Limited, Omnicane
International Investors Limited, and certain
funds managed by Downing LLP. The facilities
consisted of a £5.45m revolving credit
facility, a £1.3m term loan both on 60
months ending August 2024, and a £2.12m
plant and machinery facility on 36 months
ending August 2022.
The maximum draw down value during FY20
occurred in September 2019, being £2.0m.
This was used to build stock for the
Christmas sales in Cake Decorations. The
lowest month was August 2019, when no
draw down was required, as there was a
credit balance in the revolving credit facility
of £0.4m.
The Board recognises that the Group’s level
of debt is higher than expected for a
business like Real Good Food. However,
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 revolving credit facility. As at 31
March 2020 there was no bank overdraft. 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.
2,375
12,909
1,538
1,031
5,432
169
3,307
1,573
18,675
1,454
1,717
4,406
166
1,901
Operating performance
and outlook
Having agreed budgets for the year, these
quickly became obsolete before the start of
FY21 owing to covid-19. The business set a
new budget taking into account the impact of
the lockdown in the UK and worldwide. The
revised budget reduced sales by c.£9m from
the original budget, as a result of our
customer’s clients having to close during
lockdown. Brighter Foods’ largest customer
was required to close as part of the
lockdown.
Both businesses being food manufacturers
have remained open during the lockdown
period. However, sales have been lower than
would normally be the case. In common with
other companies, RGF is reviewing all
options to mitigate the impact of the
reduced sales. Both businesses have taken
advantage of the government job retention
scheme and have deferred the repayment of
the VAT to conserve cash. We prepare the
business forecast on varying levels of
revenues and have modelled the effect of
these to ensure appropriate action can be
taken if required. So far, the performance of
each of the businesses is aligned with the
Board’s expectations and central costs are
as expected. The Cake Decoration market in
the UK, particularly in the retail sector, is
proving increasingly competitive, but we are
confident that we can leverage experience
and expertise to deliver what our customers
need and want. The Food Ingredients
division’s growth plans are well-established,
with a focus on innovative bars that exceed
customer expectations. The future for both
businesses is positive. However, the
recovery from covid-19 is impacting the
Group for the FY21 financial year. The Group
is working to ensure that both divisions have
a strong sustainable base to capitalise on
opportunities that may arise from the current
situation. There are also the uncertainties of
Brexit and we are mindful that both
businesses serve Europe with the Cake
Decoration business having a European
operation which may be impacted and
05
STRATEGIC REPORTwww.realgoodfoodplc.com Stock Code: RGD Strategic Review (continued)
Summary and Outlook
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 that is
more fit for purpose. The Board is also
actively evaluating a range of options, for
both businesses, to maximise shareholder
returns.
The lockdowns since late March 2020 in the
UK and elsewhere have had a significant
impact on our sales in FY21. The
businesses have continued to operate and
work with customers to deliver products. The
Group sales are ahead of the covid-19
budget prepared in March and we continue
to see sales returning to pre covid-19 times.
However, with the possibility of new lockdown
restrictions, this is under constant review.
The Board have taken actions to conserve
cash and have also used the government
furlough scheme. The Group remains
focused on continuing to improve its
performance, reduce net debt and thereby
increase shareholder value and returns.
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.
Brighter Foods having key customers in
Europe. The Group is preparing for Brexit as
best it can given the uncertainty around the
government negotiations for a trade deal
with Europe.
After another challenging year in the period
to 31 March 2020, the Board wishes to
thank all the Group’s and businesses’
stakeholders for their understanding and
continued support. Although covid-19 will
impact FY21, the expectation is that the
Group sales performance in quarter 4 FY21
will be in line with pre Covid 19 sales; this is
dependent on no further lockdown measures
being imposed.
Group strategy
The Board’s strategy is to have two profitable
cash generative businesses. The turnaround
plan in Cake Decorations continues to build
on the work undertaken last year and setting
a refreshed and invigorated strategy for the
business. There have been some key
changes in the Cake Decoration business
following an in-depth review to identify
functions that would be better carried out by
a specialist provider. Consequently, a
decision was taken to outsource
warehousing and distribution to a first-class
third-party provider and as a result the
business is already seeing the
improvements in customer service. The
business has also strengthened its senior
team in New Product Development (NPD)
and Marketing to drive greater focus on
innovation and sales growth. The strategy for
the Food Ingredients division continues to be
focused on delivering great products for our
customers, as evidenced by the significant
growth in that business. The investment in a
new production plant of £3.2 million has
resulted in an increase in sales of £10.1m
this year.
The Group central resources have reduced
significantly. Central resources are now
limited to functions that relate to finance
and general management.
06
Annual Report and Accounts for the year ended 31 March 2020STRATEGIC 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 Food Ingredients division comprises Brighter Foods.
One of the key trends in the food ingredients sector is a greater
emphasis on healthy eating. Health considerations are now
prevalent throughout the food chain 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 which is now estimated to be worth over £360 million at RSP.
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, it
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 bringing innovation to the market,
leading to new trends in the cake decorating sector and investing in
communication through digital channels to educate and inspire new
and experienced cake decorators of all levels.
07
STRATEGIC REPORTwww.realgoodfoodplc.com Stock Code: RGD Divisional Business Review
Forward plans
The business continues a growth strategy
focused on increased supply of everyday
convenience products under its own and
customers’ brands. The investment in the
soft icings plant will benefit from the growing
frostings market which is expected to grow
by c5%1. Export growth is focused on North
America where the company has identified
the greatest potential to grow sales.
Following the successful closure of the
Brussels warehouse in FY19 and fulfilling
European sales from the UK, the closure of
the US based warehouse will be undertaken
in FY21 with sales being shipped directly
from the factory in Liverpool to the US. The
business continues to implement
organisational changes that will result in a
more streamlined business which is focused
on growth opportunities, efficiency savings
and an improvement in overall performance.
Covid-19
As a food manufacturer, the business has
remained open during the lockdown period.
Our priority is the safety of our staff whilst
supplying our customers with the highest
quality product. All required changes to meet
covid-19 requirements have been carried out
at the sites.
The impact in FY20 has been limited with a
reduction in sales in the final few weeks of
FY20, across all sectors. Some specialist
retailers closed, and the major retailers were
focussed on getting core commodities into
the stores whilst the Wholesale Sector saw
many of their own clients having to close. An
updated forecast has been prepared in light
of the lockdown restrictions. The business is
currently operating in line with this forecast.
12 months to March
Revenue
EBITDA (adjusted)*
Impairment charge
Operating (loss)
Operating (loss)%
*See note 5 for reconciliation
2020
£’m
41.2
1.8
(12.6)
(13.4)
2019
£’m
46.4
3.0
(18.7)
(17.3)
(32.5%)
(37.3%)
REVENUE
£41.2m
EBITDA Profit
(adjusted)*
£1.8m
OPERATING
LOSS
£(13.4)m
2019/20 Performance
In a transitional year, the result for Cake
Decoration was disappointing with an
adjusted EBITDA lower than the previous
year. This was driven by a slower than
expected completion of the investment in
the soft icing plant which went into
production in quarter three. This production
line gives additional, large scale,
manufacturing capability for frostings and
other soft icing products which are becoming
increasingly popular due to their ease of use
for the novice baker and decorator.
UK sales came under pressure owing to the
declining market for sugarpaste (-14.7%) and
marzipan (-2.1%)1. Although Renshaw’s sales
outperformed the underlying market decline,
there were reduced sales in the Retail and
Wholesale sectors. The manufacturing
sector, although slightly behind, was showing
a growing momentum in the final quarter.
The International market decline was owing
to one customer who reduced volumes in
FY20 owing to uncertainty with Brexit. Sales
to the US are down year on year owing to a
change in stocking policy with a major
customer.
In line with the company strategy, an
agreement was signed in October 19 with
Decopac, the largest distributor of cake
supplies in the US, for the sole distribution
rights for the US market. The Board
understand that the agreement implies
significant sales targets in what we consider
an important market for Renshaw in the
future.
During the year, changes have been made to
the Senior Management structure as well as
strengthening the Marketing function to
ensure the customer is at the heart of the
business. Although there remain further
opportunities for improvement, Renshaw
remains a strong brand in the sector.
Further work and efforts will continue
throughout FY21 to enhance products,
develop new products which delight our
customers and streamline our sales and
operational processes.
1. Kantar data to Dec 19
08
Annual Report and Accounts for the year ended 31 March 2020STRATEGIC REPORT 2019/20 Performance
Brighter Foods 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 sales by 66% in the
year ended 31 March 2020 owing to the new
B3 plant that started production in March
2019. The investment of £3.2 million to
increase the capacity resulted in an increase
in sales of c£10 million. There were some
challenges during the early period of
production that had a negative impact on
the EBITDA of c£0.5 million owing to levels
of excess waste, however the waste is
now in line with expectations. The new
equipment gave Brighter Foods the capacity
to bring on board a new blue-chip customer
in January 2020.
Forward plans
Following the covid-19 government lockdown,
some of the areas that Brighter Food
customers trade in have been impacted,
such as the travel industry and the ‘food on
the go’ culture. This has resulted in new
product launches being delayed until later in
the year, this will impact sales in FY21,
however the customers will remain, albeit
with lower sales owing to covid-19 impact in
the first quarter. The business is known for
its innovation and this is continuing in FY21.
Once the lockdown position is eased in
Wales, Brighter Foods is well-positioned as it
is in the health and wellness market, to
continue the growth in revenue which has
characterised every other year of the
business since its formation in 2014.
Covid-19
As a food manufacturer, the business has
remained open during the lockdown period.
Our priority is the safety of our staff whilst
supplying our customers with the highest
quality product. The business has made the
required changes to comply with all covid-19
restrictions. The impact in FY20 has been
minimal owing to the communications with
customers and production planning, however
there will be an impact on sales in FY21.
The business has used the government
furlough scheme to offset the lower sales
and retain staff. A new forecast was
prepared following the covid-19 impact, and
the business is currently ahead of the plan.
12 months to March
Revenue
EBITDA (adjusted)*
Operating profit
Operating profit %
*See note 5 for reconciliation
2020
£’m
25.3
5.0
2.9
11.5%
2019
£’m
15.2
2.8
1.2
7.8%
REVENUE
£25.3m
EBITDA Profit
(adjusted)*
£5.0m
OPERATING
profit
£2.9m
09
STRATEGIC REPORTwww.realgoodfoodplc.com Stock Code: RGD 12 months to March
2020
£’000s
2019
£’000s
Revenue
66,576
61,560
Gross profit
26,981
18,027
Delivered margin
23,542
14,612
Delivered margin %
35.4%
23.7%
EBITDA (adjusted)*
3,307
1,901
Operating (loss)
before impairment
and significant items
Operating loss after
impairment and
significant items
(590)
(1,126)
(14,530) (21,518)
Operating loss %
(21.8%)
(35.0%)
Loss before tax
(20,147) (26,090)
All figures refer to continuing businesses.
*See note 5 for reconciliation
Finance Review
Revenue
Group revenue of the continuing businesses
for the 12 months ending 31 March 2020 is
£66.6 million (2019: £61.6 million), an
increase of 8.1% on the revenue to
31 March 2019. This results from an
increase in Brighter Foods of £10.1m (66%)
and a decline in Cake Decoration of £5.2m
(11%). The decrease in Cake Decoration is a
result of the declining market in sugarpaste
and marzipan, and the delay in the
production of frostings that is a growing
market in the cake decorations business.
The Brighter Foods increase was driven from
securing a new Blue-Chip customer in
January 2020 and sales were generated in
the final quarter of the financial year as well
as organic growth from existing customers.
Profit measure on operations
Gross profit on the continuing businesses for
the overall Group was £27.0 million (2019:
£18.0 million). At 35.4%, the delivered
margin in the year, was significantly above
the prior year of 23.7%, 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 £14.5
million is reported after an impairment
charge on goodwill of £12.6 million (see
note 16), depreciation and amortisation
charge of £3.9 million and significant costs
of £1.0 million.
The EBITDA for the Group is a loss of
£10.6m. The adjusted EBITDA is the
underlying continuing business profitability of
£3.3m.
The two items that are adjusted for are :
Impairment charge: £12.9m
Significant Items:
£1.0m
The significant costs incurred relate to the
Cake Decoration business and are
predominantly for redundancy costs as part
of the turnaround. The number of indirect
employees reduced year on year is 17
across the business.
The impairment charge is against JF
Renshaw. The Board, having considered the
trading expectations, are happy that the
recoverable amount would support the
revised value in the accounts.
After finance costs of £5.6 million, this
resulted in a loss before tax for the year of
£20.1 million (2019: loss of £26.1 million)
for continuing businesses. This equates to a
basic loss per share of 19.22 pence on
continuing operations (28.64 pence in
2019).
(see note 15).
Cash flow and net debt
Conserving cash is a key measure for the
Group. Covid-19 of course heightened the
focus with the UK lockdown in March 2020.
The business modelling includes looking at
varying levels of revenues and the effect of
movements on cash planning to ensure
appropriate action can be taken if required.
As part of the cash planning, the Group
increased the current revolving credit facility
by £2m, this was completed in August 2020.
The Group board increased the meetings to
a weekly call in the immediate term, moving
to bi-weekly after the initial lockdown ended.
The main purpose was to review cash and
trading for the following months.
The Group has used the Government
furlough scheme, (£1.3m), deferred VAT
(£1.0m) and PAYE payments (£0.9m) to
conserve cash during the lockdown period.
Repayments of the VAT and PAYE are being
made in line with the government ‘time to
pay’ plan.
Shares issued in the year and additional
loans to 31 March 2020 amounted to £35k.
The net debt at the end of FY20 stood at
£45.4m versus £35.7m in FY19, this is
predominantly shareholder loans of which
£12.3m is in the form of convertible loan
notes.
The Group extended the revolving credit
facility in the early part of FY21 to include
Brighter Foods debtors and the US debtor in
response to covid-19.
Net debt is a key performance indicator for
the Group and is explained in note 13.
10
Annual Report and Accounts for the year ended 31 March 2020STRATEGIC REPORT 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 scheme valuation
reported a gross deficit at 31 March 2020 of
£7.9 million (2019: restated to £7.4
million). The Plan assets decreased by
£0.1 million to £13.7 million (2019: £13.8
million) and the Plan liabilities are
£20.8 million compared to £21.2 million at
31 March 2019.
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 2020 (2019: nil).
Going Concern and Post Balance
Sheet Events
The Directors have considered the Group’s
business activities together with the factors
likely to affect its planned future
performance including covid-19 and Brexit
and are taking appropriate action. RGF has a
robust crisis management plan that is being
implemented, including taking action to
mitigate risks and conserve cash.
The sectors we serve have and will continue
to be impacted whilst the country is in a
state of lockdown, particularly the wholesale
market and ‘food on the go’. The Board
consider the revised covid-19 budget to be
reasonable and these assumptions have
been projected and shared with the Group’s
auditors.
The forecasts agreed with the businesses
have been adjusted for the covid-19 impact.
The Board reviewed the sensitivity of the
sales and have modelled the effects of
these, whilst reviewing all the measures to
have a sustainable business model post
covid-19. RGF is using all options to mitigate
the impact of reduced sales, including the
job retention programme and has furloughed
staff at both businesses.
The Directors considered the following
scenarios:
Scenario 1: Reduction in revenue of 12%
and
Scenario 2: Reduction in EBITDA of 35%
In both stressed scenarios the Group has
sufficient liquidity headroom until August
2021, when cash becomes tighter coinciding
with the stock build for Christmas and the
expected PUT option payment.
The Group has various levers that it can use
to mitigate the shortfall including:
Additional asset backed funding
Cessation of non-essential spend
The Group will take action as appropriate,
should sales not be in line with
expectations.
The banking covenants being in place are
positive 3 month rolling EBITDA and positive
tangible net worth are not breached on the
stressed scenarios referred to above.
In June 20, the Directors approved the
increase in funding with ABL Leumi,
increasing the facility by £2m. This was a
result of covid-19 to ensure that the Group
had adequate facilities in place should the
lockdown last longer than expected.
The principal shareholders of the Group have
shown considerable support for the working
capital requirements and as a result have
extended the repayment period of the
current loans from 17 May 2021 to 19 May
2022.
A further deed of amendment was entered
into with the Brighter Foods minority
shareholders to amend the terms of the Put
option. The Board of RGF believe that the
Deed is in the best interest of all
stakeholders as it reduces the immediate
cash outflow of the Group and aligns the
interests of the Minority Shareholders (who
form part of the core management team of
Brighter Foods) with RGF in improving
earnings and ultimately maximising the value
of the business to RGF.
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.
New Standards
New standards and amendments which are
effective from 1 January 2019 and have
been adopted within the Group’s accounting
policies are:
IFRS 16 Leases (effective for periods
beginning after 1 January 2019) replacing
IAS 17 Leases and IFRIC 4 determining
whether an arrangement contains a Lease.
The Group has adopted IFRS 16 applying the
modified retrospective method with no
changes to the comparative accounting
periods.
Amendments to IFRS 9 Prepayment Features
with negative Compensation (effective 1
January 2019); and
Amendments to IAS 28: Long term interests
in Associates and Joint ventures (effective 1
January 2019).
11
STRATEGIC REPORTwww.realgoodfoodplc.com Stock Code: RGD 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.
£66.6m
£61.6m
£63.8m
£46.9m
2020
2019
2018
2017
COMMENT
Revenue in the year increased by 8.1% (FY19
decreased by 3.5%) This arises from the full
year effect of the Brighter Foods plant and
equipment investment in FY20 and additional
sales in the year, less the sales decline in the
Cake Decoration division. The sustainable
quality of the revenue is regarded as important.
EBITDA (ADJUSTED)ON
CONTINUING ACTIVITIES
EBITDA (adjusted) is defined as earnings
before significant items, interest, tax
depreciation, amortisation, and impairment
charges.
£3.3m
£1.9m
£0.8m
£(0.3)m
2020
2019
2018
2017
The EBITDA (adjusted) profit was £3.3 million
as against a profit in the prior year of £1.9
million.
EBITDA measurement is to evidence
improvement in line with the increase in
revenue and/or reduced costs.
NET DEBT
Net debt is the total Group borrowings less
cash at bank.
£45.4m
£35.7m
£37.8m
Net debt in the year has increased to £45.4
million (FY19 £35.7m); these funds are
predominantly shareholder loans.
DEBT COVER
Debt cover is calculated by dividing total
net debt by continuing EBITDA (adjusted).
ACCIDENT FREQUENCY RATE
The accident frequency rate is the number
of RIDDOR accidents per 100,000 hours
worked.
£16.2m
2020
2019
2018
2017
13.76
18.79
20.25
2020
2019
(126)
2018
2017
1.12
0.90
0.79
0.66
2020
2019
2018
2017
As a result of increased EBITDA (adjusted)
profits in the year net debt cover stands at
13.76. The Group measures the improvement
on debt cover year on year.
A higher number denotes a higher risk. The
number of RIDDOR accidents in FY20 was 7,
versus 9 in FY19. The target for RIDDOR
accidents is nil. This has not been achieved,
however the Group has seen a further reduction
in RIDDOR accidents and will continue to
support the businesses to achieve the target.
the reduction in RIDDORs continues.
12
Annual Report and Accounts for the year ended 31 March 2020STRATEGIC REPORT 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. The Group continued to
play our part with its stakeholders and in its communities.
2020/21 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 Foods and
Renshaw’s operational HSE
performance.
{ Continue to work and support the local
communities.
Health and safety
Commentary 2019/20
The Board reviews the Health & Safety
reports of both divisions at the monthly
Board meetings. The Board, along with local
management, fully support the H&S
initiatives that have been taken in the
business in the last year.
Employees are encouraged to report all
accidents and near misses to ensure that
preventative training and actions can be
undertaken.
Covid-19 raised further challenges with
health and safety in the factories, and it was
a challenge that the whole workforce
embraced and observed. The Group have
fully complied with all Government
legislation. A covid-19 group was formed in
Cake Decorations including personnel from
across the different functions.
{ Brighter Foods have a full-time
professional Health and Safety Manager.
Reporting of health and safety issues
continues to improve within the business
and details of the Health and Safety
performance are now reported to the
Group plc board each month.
{ Renshaw have a full-time Health &
Safety Manager. There was a reduction
in the number of accidents and incidents
during the year reflecting the ongoing
training taking place in the business.
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 its
communities and to build a reputation
for social responsibility.
{ To continue to strengthen its 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 2019/20, Renshaw raised £1,500
for our local foodbank, Micah Liverpool,
100% of the money went into their foodbank,
which serves the local area and the city
centre. The money was raised during the
Christmas period with raffles. The business
also raised funds for MacMillan supporting
the coffee morning initiative. 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.
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 2019/20, Brighter
Foods donated to Ysgol Craig Y Deryn, a
local primary school, and a local theatre
group. Brighter Foods continues to sponsor
Monmouth RFC and Tywyn/Bryncrug FC.
Brighter Foods donated £3,160 to the above
causes in the period.
13
STRATEGIC REPORTwww.realgoodfoodplc.com Stock Code: RGD Regulatory and legal
The Board monitors and considers corporate
governance changes and makes the
appropriate changes in the business.
This report was approved by the Board on 18
December 2020 and is signed on its behalf
by
Mike Holt
Executive Chairman
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 continues to implement
improvements within the Group’s
governance, and, with the appointment of an
independent Chair of the Audit Committee,
and the development of a risk management
framework became an area of focus. The
risk register is reviewed at least quarterly at
the Group Board. 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 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, 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.
14
Annual Report and Accounts for the year ended 31 March 2020STRATEGIC REPORT GOVERNANCE REPORT
Board of Directors
Mike Holt Executive Chairman
Anthony Ridgwell Non-Executive Director
Appointed 30 May 2019
Anthony Ridgwell, 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.
Appointed Non-Executive Chairman on 30 May 2019, having been
Non-Executive Director since joining the Board on 7 August 2018,
and Executive Chairman on 21 October 2020.
Mike has significant public company board, general management,
financial management and M&A 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, and chair of the Audit Committee, at
nmcn plc. In addition, Mike is a Trustee and Director of Hollybank
Trust Ltd. and The Nottinghamshire Hospice Ltd.
Maribeth Keeling Chief Financial Officer and Company Secretary
Gail Lumsden Non-Executive Director
Appointed 15 July 2019
Appointed 24 October 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.
Gail has significant experience in driving profitable growth and
leading major change in both large, global corporates and SMEs.
Having held senior executive roles in strategy, finance, and
business development at Diageo Plc and SABMiller Plc for over 20
years, Gail now runs her own advisory business and serves as a
non-executive director on the Industrial Development Advisory
Board.
Jacques d’Unienville Non-Executive Director
Other Directors who Served During the Year
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.
Judith A MacKenzie Non-Executive Director
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.
Paul Richardson Executive Director
Paul joined the Board on 15 October 2019, however he resigned
on 6 April 2020 to pursue a full-time opportunity elsewhere.
Patrick Ridgwell Interim Non-Executive Chairman
Pat had served as the Non-Exec Chairman of RGF plc, resigning
on 30 May 2019.
Christopher Thomas Non-Executive Deputy Chairman
Chris had served as the Non-Exec Deputy Chairman of RGF plc,
resigning on 31 July 2019.
Steve Dawson Non-Executive Director
Resigned 31 October 2019.
Hugh C L Cawley Chief Executive Officer and
Company Secretary
Resigned 2 September 2019.
www.realgoodfoodplc.com Stock Code: RGD
15
Report of the Directors
The Directors present their report and the audited financial statements for
the year ended 31 March 2020
Corporate governance
The Board recognises and understands the importance of good corporate governance. 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.
Section 172 of the Companies Act 2016 requires Directors to take into consideration the interests of stakeholders and other matters in their
decision making. The Directors continue to have regard to the interests of the Company’s employees and other stakeholders, the impact of
our business in the communities we operate, the environment and the Company’s reputation for good business conduct, when making
decisions. In this context, acting in good faith and fairly, the Directors consider what is most likely to promote the success of the Company for
its stakeholders in the long term. We explain this in the report and below:
Relationships with key stakeholders such as our customers, colleagues, suppliers, investors are explained in more detail on pages 16 to 18.
The Directors are fully aware of their responsibilities to promote the success of the company in accordance with section 172 of the
Companies Act 2006 and that sufficient consideration is given to issues relating to the matters set out un S172 (1) (a)-(f).
The Board regularly reviews the Company’s principal stakeholders and how it engages with them. This is achieved through information
provided by management and by direct engagement with stakeholders themselves.
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.
2. Seek to understand and meet
shareholder needs and
expectations.
The execution of the strategy is to support and guide the two remaining businesses in their daily
operations by clear objectives and articulated strategies, such strategies being updated as
necessary on a regular basis.
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.
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. However, due to the covid situation in 2020 this was not
possible. Shareholders were given the opportunity to send questions to be raised at the AGM.
3. Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success.
The Group regards its shareholders, employees, customers, suppliers, and advisors as all being
important parts of the wider stakeholder group.
Management regard our employees as our greatest asset, engaging with them on a regular basis
as referred to in the directors’ report.
Management clearly places particular importance on its day-to-day relationships with customers,
with significant effort directed to ensuring these are managed appropriately. The divisions work with
many customers and suppliers and have developed a partnership way of working to continue the
successful trading relationships. During the covid-19 pandemic, this became more prevalent. The
business supported customers who continued to trade during the pandemic with regular
communication on availability of stock.
Shareholders are important to the business and continue to support the division and the strategy
in place.
The Group records customer service levels – OTIF (on time in full), for example and customer
communication including complaints. The Group had a reduction in complaints year on year and
continues to strive to reduce this as far as possible. There is a feedback system in place for
service levels and issues raised can be addressed.
16
STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2020
GOVERNANCE REPORT
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 is 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 quarterly, whichever is the shorter period.
Following further changes to the Board since the year end, the Board, chaired by Mike Holt,
currently comprises one Executive and five 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. Gail Lumsden is the Group’s independent Director.
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. At the start of the Covid pandemic, the
Board met virtually on a weekly basis.
6. Ensure that between them the
Directors have all the
appropriate experience, skills,
and capabilities.
The descriptions on page 15 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.
7. Evaluate Board performance
based on clear and relevant
objectives, seeking continuous
improvement.
8. Promote a corporate culture
that is based on ethical values
and behaviours.
The Board is currently comprised of two Executive Directors and four Non-Executive Directors, one
of whom is independent and comprises three men and three women, ranging in age from their
mid-40s to early 60s. Updates to members of the Board on regulatory matters are given by Board
members themselves where appropriate and/or by Group’s professional advisors.
Against the background of the articulated objective for the Group, the performance of the Board as
a whole may be judged, through the eventual attainment of financial measures, including adjusted
EBITDA, operating cash flow and net debt.
The Board has opted for annual reselection at the AGM. The Board, is planning to undertake a
formal assessment in quarter 3 of 2021. Owing to challenges with covid-19 there has not been an
opportunity to arrange this sooner.
The Board recognises that the values it espouses provide the framework which influences all parts
of the Group. The 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.
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.
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 23 and 25.
www.realgoodfoodplc.com Stock Code: RGD
17
Section 172 Statement
Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of stakeholders and other matters in their
decision making. The Directors continue to have regard to the interests of the Company’s employees and other stakeholders, the impact of our
activities on the community, the environment and the Company’s reputation for good business conduct, when making decisions. In this context,
acting in good faith and fairly, the Directors consider what is most likely to promote the success of the Company for its members in the long
term. We explain in this annual report, and below, how the Board engages with stakeholders, customers, colleagues, suppliers and investors.
The Directors are fully aware of their responsibilities to promote the success of the Company in accordance with section 172 of the Companies
Act 2006 and that sufficient consideration is given to issues relating to the matters set out in s172(1)(a)–(f).
The Board regularly reviews the Company’s principal stakeholders and how it engages with them. This is achieved through information provided
by management and by direct engagement with stakeholders themselves. The key Board decisions made from 1 April 2019 to 08 December
2020 are set out below.
Significant
Events/decisions
Stakeholders
Affected
Considerations
Extension of shareholder
loans (December 2020)
Employees
{ Legacy issues/events have caused the Group to be very highly geared which inhibits its
Shareholders
Minority
shareholders
ability to refinance investor loans with third party commercial loans.
{ The Board is aware that a simpler and less costly capital structure will only be realised by
either a significant equity issue or the sale of a business unit.
{ The independent directors consulted and sought advice from the Company’s lawyers to
ensure that the terms of extension complied with the Whitewash process in 2018 and
sought advice from our NOMAD as to whether it was fair and reasonable in so far as
independent shareholders are concerned.
Covid-19 cash
management (March 2020
onwards)
Employees
{ The company was unable to take advantage of CLBILs due to its leveraged position.
Shareholders
Communities
HMRC
{ Additional asset-backed lending was secured to ease the impact of lower sales as a result
of the first national lockdown.
{ In total the Group has claimed £1.3m under the Government’s covid job retention scheme
in order to preserve jobs and protect the communities in which our factories are situated.
Deed of Variation for
shareholders of Brighter
Foods (October 2020)
Shareholders
{ Changes made to align minority shareholder interests with the Company’s and to preserve
cash during the covid-19 pandemic.
Board interaction with
businesses (September
2019 onwards)
Shareholders
Employees
Investor relations (June
2019 onwards)
Shareholders
Minority
shareholders
Shareholders
{ The Board changed the format of Board meetings to hold the business unit MD’s more
directly accountable to the Board. The MD’s present their businesses at each meeting
and discuss both strategic and operational matters. This has strengthened the
communication between the Board and each business unit and the quality and timeliness
of decision making.
{ The Board also visited the operational sites during the year, however this has been
curtailed pro tem owing to covid-19 but will resume when restrictions are lifted.
{ Increased interaction with our shareholders with direct access to the Board; the Chairman
makes himself available to minority shareholders and has maintained an ongoing dialogue
with the two principal minority shareholders.
{ The quality, frequency and relevance of investor communications is improving.
Cake Decorations
Employees
{ There are 15 initiatives underway to develop a business that is more profitable and
Restructure
Board Changes (June
2019, September 2019,
October 2019 and March
2020)
Shareholders
Customers
Communities
Minority
shareholders
Employees
Shareholders
sustainable.
{ Investment in New Product Development (NPD) has increased to mitigate the mature and
declining sugarpaste market.
{ Sales and Marketing teams have been restructured putting the customer at the forefront
of what we do by actively engaging in long term partnerships.
{ New Chairman appointed to manage potential conflicts on the Board and to accelerate the
rate of progress in rebuilding shareholder value.
{ The non shareholder directors meet independently of the loan note holders to discuss any
issues that would give rise to conflict. The non-independent holders are not party to
these meetings or minutes thereof.
{ A new independent non-executive director appointed to support the new Chairman.
Environmental and
sustainability
Customers
Employees
{ Working with supply chain partners to have more recyclable packaging.
{ Continue working with suppliers to source and use ethical products, such as palm oil.
18
GOVERNANCE
Annual Report and Accounts for the year ended 31 March 2020
Report of the Directors (continued)
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.
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 including Covid 19 and Brexit
and are taking appropriate action. RGF has a
robust crisis management plan that is being
implemented, including taking action to
mitigate risks and conserve cash. The
sectors we serve have and will continue to
be impacted whilst the country continues to
experience local lockdowns, particularly the
wholesale market and ‘food on the go’. The
Board consider the revised covid-19 budget
to be reasonable and these assumptions
have been projected and shared with the
Group’s advisors. The forecasts agreed with
the businesses have been adjusted for the
covid -19 impact.
The Board reviewed the sensitivity of the
sales and have modelled the effects of
these, whilst reviewing all the measures to
have a sustainable business model post
covid-19. RGF is using all options to mitigate
the impact of reduced sales, including the
job retention programme and has furloughed
staff at both businesses. The businesses
are working closely with our customers on
forecasting going forward.
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.
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, a number of
changes took place to the Board. 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. Following Steve
Dawson’s resignation, Gail Lumsden
assumed the role. 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. Maribeth
Keeling was appointed as CFO in July 2019.
Details of the Directors are given on page
15.
19
www.realgoodfoodplc.com Stock Code: RGDGOVERNANCE REPORT 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 2020
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 £32.1k (2019:
£20.4k) in respect of Directors’ and Officers’
Indemnity Insurance.
Financial instruments
The Group’s financial instruments comprised
bank term loans and a revolving credit
facility, 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 26 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.
The employees are integral to achieving the
business objectives of the Group. The Group
is committed to creating an environment
where all individuals feel respected and
supported. RGF plc has established policies
for recruitment, training and development
and is committed to achieving excellence in
health and safety welfare.
RGF plc is an equal opportunities employer
and will continue to ensure that it offers
opportunities without discrimination. Full
consideration is given to applications for
employment from disabled persons, having
regard for their particular aptitudes and
abilities and in accordance with relevant
legislation. The Group continues the
employment wherever possible of any person
who becomes disabled during their
employment, providing assistance and
modifications where possible. Opportunities
for training and career development do not
operate to the detriment of disabled
employees.
Employee engagement
The employees are integral to achieving the
business objectives of the Group. The Group
is committed to creating an environment
where all individuals feel respected and
supported. RGF plc ensure that employees
are kept informed of performance and
strategy through regular updates from the
management teams in the businesses. The
messages from the Board are taken back to
the businesses through the MD’s, who
attend the monthly Board meetings. Within
the individual businesses there are team
briefings for all staff with updates on the
business and how it is performing. The
employees have the opportunity to raise
questions, that are fed back to the
Management and responded to. This allows
the views of employees to be taken into
account in making decisions which are likely
to affect their interests. The divisional
Management Teams hold regular ‘Town
Halls’ talking with all staff in small groups
and encouraging questions and feedback.
RGF plc support employee recognition for
going above and beyond, the business has a
Made a Difference (MAD) scheme in place,
where a member of staff is recognised on a
monthly basis. The scheme allows people to
nominate a member of staff for the award, it
can be from another team, your own team
and is open to all staff.
Covid-19 has been a challenge, starting in
February when shortages from Chinese
suppliers were being forecast. Our priority is
the safety of our staff whilst still supplying
our customers with the highest quality
product. RGF has a robust crisis
management plan that we have been
implementing including taking actions to
mitigate risks. We are following all
government guidelines, with most back-office
staff now working from home and full risk
assessments have been completed in terms
of social distancing at our manufacturing
sites. In light of lower demand, production
planning is being reviewed in consultation
with customers to rationalise the products
we are making. There is a covid-19 working
party, made up of employees across all
areas and levels within the business, that
meets on a weekly basis to review
government updates and any changes
required to current working practises.
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.
Stakeholder engagement
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. The
Chairman holds regular meetings with
minority shareholders to discuss the
business and reports the discussions back
to the Board.
20
Annual Report and Accounts for the year ended 31 March 2020GOVERNANCE Streamlined Energy and Carbon Reporting
SECR (Streamlined Energy and Carbon Reporting) is a new government reporting programme that came into force on 1 April 2019. The table
below shows the information for RGF plc from the 1st April 2019 to 31 March 2020.
The Group collated the data using the billing data.
Scope 1 – All Direct Emissions from the activities of Real Good Food PLC or under their control. Including fuel combustion on site such as
gas boilers, fleet vehicles and air conditioning leaks.
Scope 2 – Indirect Emissions from electricity purchased and used by Real Good Food PLC. Also included are the generation or consumption
of heat or steam. Emissions are created during the production of the energy and eventually used by Real Good Food PLC.
Scope 3 – Transport-related activities in vehicles not owned or controlled by the reporting entity.
The assumptions made are:
Transport data conversions assume a 50/50 split for petrol and diesel for all conversions.
All conversion data was taken from the most up to date supplied data at the time of delivery of this report. The government website for
Greenhouse gas reporting: conversion factors 2020 was used to calculate the data.
Information Required
Current Reporting Year UK and offshore [mandatory]
Energy consumption used to calculate emissions: kWh [mandatory]–
optional to provide separate figures for gas, electricity, transport fuel
and other energy sources
Gas – 6,028,432 kWh
LPG – 31 kWh
Petrol company cars – 79969 kWh
Diesel company cars – 73106 kWh
Electricity – 4,895,407 kWh
Petrol private cars – 30201 kWh
Diesel private cars – 27609 kWh
Total - 11,134,757 kwh
Emissions from combustion of gas tCO2e (Scope 1)
Emissions from LPG (Scope 1)
Emissions from business travel in company owned vehicles
(Scope 1)
1108.4 tCO2e
7.1 tCO2e
37.9 tCO2e
Emissions from purchased electricity (Scope 2, location-based)
1141.3 tCO2e
Emissions from business travel in rental cars or employee-owned
vehicles where company is responsible for purchasing the fuel (Scope 3)
14.3 tCO2e
Total gross CO2e based on above
2309.1 tCO2e
Intensity ratio: tCO2e gross figure based on mandatory fields
above/e.g. £100,000 revenue (taken from 5 Results)
Tonnes of output produced 0.11 tCO2e per Tonne of output
produced
Methodology
Energy Efficient Actions taken
(taken from 5.1 Energy Efficiency Actions)
Data from Joe Castille DEFRA published Conversion Factors for
Company Reporting 2020 version 1.0
Replacement of inefficient lighting with LED equivalent
21
www.realgoodfoodplc.com Stock Code: RGDGOVERNANCE REPORT Report of the Directors (continued)
Charitable and political donations
During the current financial period, the Group made charitable donations of £3,160 (2019: £2,697). No political donations were made during
the current or previous financial period.
This report was approved by the Board on 18 December 2020 and is signed on its behalf by
Mike Holt
Executive Chairman
Director
Mike Holt
Hugh Cawley
Maribeth Keeling
Christopher Thomas
Patrick Ridgwell
Jacques d’Unienville
Judith MacKenzie
Steve Dawson
Anthony Ridgwell
Gail Lumsden
Paul Richardson
Eligible to
attend
Meetings
attended
11
4
8
4
2
11
11
6
9
5
5
11
4
7
4
2
9
11
6
9
5
5
The above table sets out the number of Directors’ meetings held during the year and the eligibility and attendance by members of the Board.
22
Annual Report and Accounts for the year ended 31 March 2020GOVERNANCE Audit Committee Report
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 Audit Committee held 3 meetings in the
year, the following table sets out attendance
during the year.
Director
Members
Judith MacKenzie
Christopher Thomas
Gail Lumsden
By Invitation
Mike Holt
Paul Richardson
Maribeth Keeling
Meetings
attended
2
3
2
3
1
3
With effect from 30 May 2019 Mike Holt
stood down as Chair and member of the
Committee and Judith MacKenzie was
appointed; as Partner and Head of Public
Equity at Downing LLP, Judith has the
relevant and recent financial experience.
Chris Thomas stood down from the
Committee when he left the Board on
31 July 2019. Gail Lumsden was appointed
to the committee on the 24 October 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. The committee
assesses whether suitable accounting
policies have been adopted and whether
management have made appropriate
estimates and judgements. 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.
23
www.realgoodfoodplc.com Stock Code: RGDGOVERNANCE REPORT Audit Committee Report (continued)
Description of Risk
Overview of Risk
Company response
Asset Impairment
Going Concern
Risk Register
The Group now has £37.8 million of
goodwill, relating to excess of
consideration paid to the fair value of
acquisitions, and £16.2 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. The impact of covid-19 in FY21 has been factored
into the calculation. A sensitivity analysis was also applied to stress
test the assumptions and future economic value of assets. These
resulted in the impairment of £12.6m of goodwill carried forward from
previous years, and £0.3m 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 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.
The Group is encouraged to identify
business risks. The CFO presents the
Risk Register to the Board on a
quarterly basis.
Significant business risks are identified and recorded on the Risk
Register that is presented to the Group Board quarterly, or sooner if
appropriate. As part of the covid-19 pandemic, the Board has weekly
update calls to monitor the impact on the business.
Senior Managers
The MD’s are invited to each Board
meeting to present on their division.
Auditors
Audit Rotation
Stock count at
Brighter Foods
Due to restrictions in relation to
covid-19, the external auditors were
unable to attend the annual stock
take undertaken at Brighter Foods on
28 March 2020. The stock value at
31 March 2020 was £2.6m
The Board have the opportunity to talk directly with the MD’s of the
division on a monthly basis and understand the business behind the
numbers.
The Board also visited the Liverpool and Tywyn sites in FY20 where
they were able to meet the Leadership teams for the businesses and
hold a meeting with them.
The Committee is responsible for recommending to the Board the
appointment, reappointment, and removal of external auditors. The
Committee has discussions on audit planning, plans, fees and audit
findings and controls. The Committee assessed the effectiveness of
the external audit through the review of audit plans, reports, and
conclusions. Also, through discussions with management (with and
without the auditor present) and with the auditors (with and without
management present).
The Commitment and Authorities schedule within the business is
reviewed annually by the Group Board.
Due to restrictions in relation to covid-19 the external auditors were
unable to attend the stock count at Brighter Foods. The stock count
was completed at Tywyn and the details sent to the auditors. The
Company’s stock take identified a physical to book difference of only
£1.4k which is comparable to previous stock counts. The stock at the
third party warehouse In Wrexham was not counted due to access
restrictions to the site owing to covid-19. Brighter checked the booked
stock against the third party report and there were some minor
discrepancies found. There will be a stock take undertaken once
covid-19 restrictions are lifted.
Disclosure of
Related Party
Transactions
To ensure that related party
transactions are transparent and
approved
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.
24
Annual Report and Accounts for the year ended 31 March 2020GOVERNANCE Remuneration Committee Report
Remuneration Committee
Report
The Remuneration Committee initially
comprised Steve Dawson, as Chair,
Judith MacKenzie, Jacques d’Unienville and
Mike Holt. Following Steve’s resignation on
23 October 2019, Gail Lumsden was
appointed Chair, with the committee’s
composition being Gail Lumsden, Judith
MacKenzie, and Mike Holt. Following Mike’s
appointment as Executive Chairman he has
stepped down from the Remuneration
Committee and Anthony Ridgwell has been
appointed.
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 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 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 management with all
shareholders and 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.
Directors’ remuneration
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.
Current Directors’ base salaries and fees
are disclosed in note 11.
There were two meetings held in the year,
the table below shows the attendance:
Director
Members
Gail Lumsden
Anthony Ridgwell
Judith Mackenzie
By Invitation
Mike Holt
Jacques d’Unienville
Steve Dawson
Meetings
attended
1
1
2
1
1
1
25
www.realgoodfoodplc.com Stock Code: RGDGOVERNANCE REPORT Independent Auditor’s Report
to the members of Real Good Food plc
Qualified 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 2020 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, except for the possible effects of the matter
described in the basis for qualified opinion section of our report:
{ 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
2020 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 qualified opinion
We were not able to observe the counting of physical inventories at
the end of the year for inventories held by Brighter Foods Limited, a
subsidiary and significant component of Real Good Food plc, due to
restrictions in the attendance of external visitors at company and
third party premises, specifically as a result of Covid-19. We were,
unable to satisfy ourselves by alternative means concerning the
inventory quantities held by that component at 31 March 2020,
which are included in the consolidated statement of financial
position at £2,574,000. We were therefore unable to determine
whether any adjustment to this amount was necessary, or what the
impact of any such adjustment would be on the consolidated
statement of comprehensive income, consolidated statement of
changes in equity, consolidated statement of financial position or
consolidated cash flow statement.
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 qualified
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. In addition to the matter described in the Basis for qualified
opinion section we have determined the matters described below to be the key audit matters to be communicated in our report.
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 £7.9m
(2019: £7.4m) as shown in Note 32. This is also considered in
Note 2 (significant accounting policies) and Note 3 (critical
accounting estimates and judgements).
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.
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.
Key observations
Based on our audit work, we considered the assumptions used in
the calculation of the pension liability are within an acceptable
range.
26
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS Key Audit Matter
How We Addressed the Key Audit Matter in the Audit
Going Concern
The group incurred a net loss of £16.1m during the year ended
31 March 2020 with a negative operating cash flow of £0.3m.
The group had cash of £1.4m and borrowings of £45.8m as at the
year end, of which £12.3m was due for repayment in May 2021 or
earlier.
Furthermore, as described by the directors in note 2, the impact of
Covid-19 on the business saw certain areas of decreased trade in
the national lockdown period post year end. Trading has improved in
recent months, however there still remains a risk given the
economic uncertainty in the UK and the potential for further stricter
lockdown measures.
The above factors necessitated detailed consideration by
management of the going concern position of the parent company
and the group.
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 2022, which is also used
as a basis for the discounted cash flow model in the impairment
assessment of goodwill and other non-current assets. Management
also performed sensitised stressed forecasts, including a reverse
stress test to identify the point at which available cash facilities
would run out or covenants would be breached. We examined these
cash flow forecasts as well as considered the downside sensitivities
to these.
We challenged management’s assumptions used in the forecast
period by considering available evidence, including recent
performance post the impact of Covid-19, as well as past trading
performance, to support these assumptions.
We evaluated the forecast compliance with covenants over the
period to March 2022, including sensitivities applied on these.
We also reviewed the renegotiated financing arrangements in
relation to borrowings from shareholder loans and convertible loan
notes, of which the amounts previously due in May 2021 have now
been extended to May 2022.
Key observations
Our observations are covered in the conclusions relating to going
concern section of our audit report.
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 (£8.6m in relation to Cake
Decoration). This is also considered in Note 2 (significant
accounting policies) and Note 3 (critical accounting 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 2020/21 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 considered management’s
judgements in relation to the impairment of assets to be
appropriate.
27
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Independent Auditor’s Report
to the members of Real Good Food plc
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.
As a consequence of the audit scope determined, we achieved the
following approximate coverage of:
Full scope audits
and audit of
significant
components
Specific
procedures on
nonsignificant
components
Total
coverage
Based on our professional judgement, we determined materiality for
the financial statements as a whole as follows:
Revenue
Net assets
78%
94%
6%
n/a
84%
94%
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.
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.
As described in the basis for qualified opinion section of our report,
we were unable to satisfy ourselves concerning the inventory
quantities of £2,574,000 held at 31 March 2020. We have
concluded that where the other information refers to the inventory
balance or related balances such as cost of sales, it may be
materially misstated for the same reason.
Opinions on other matters prescribed by the
Companies Act 2006
Except for the possible effects of the matter described in the basis
for qualified opinion section of our report, 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.
Group materiality
£486,000 (2019: £428,000)
Basis for materiality 0.75% of Revenue (2019: 0.6% of Revenue
Rationale for
benchmark adopted
from continuing operations)
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 £315,000 (2019: £257,000),
representing 65% of materiality (2019: 60%). The performance
materiality threshold 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 £57,700 to
£375,000 (2019: £51,000 to £278,000). Parent company
materiality was £57,700 (2019: £107,000).
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 £19,000 (2019: £13,000). 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 three (2019: four) 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 three 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.
28
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 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, United Kingdom
18 December 2020
Matters on which we are required to report
by exception
Except for the possible effects of the matter described in the basis
for qualified opinion section of our report, 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.
Arising solely from the limitation on the scope of our work relating to
inventory, referred to above:
{ we have not obtained all the information and explanations that
we considered necessary for the purpose of our audit; and
{ we were unable to determine whether adequate accounting
records have been kept by the Parent Company
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:
{ 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.
Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement
set out in the Report of the Directors, 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 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: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
29
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Consolidated Statement of Comprehensive Income
Year ended 31 March 2020
Notes
4, 5
16
18
6
8
9
10
14
12 months
ended
31 March 2020
£’000s
12 months
ended
31 March 2019
£’000s
66,576
61,560
(39,595)
(43,533)
26,981
(3,439)
18,027
(3,415)
(24,132)
(15,738)
(590)
(1,126)
(12,622)
(18,675)
(287)
(1,031)
–
(1,717)
(14,530)
(21,518)
(5,448)
(169)
(4,406)
(166)
(20,147)
(26,090)
1,692
349
(18,455)
(25,741)
–
(6,243)
(18,455)
(31,984)
(19,121)
(32,321)
666
337
(18,455)
(31,984)
(106)
(32)
32
20
(1,097)
215
(988)
441
(75)
334
(19,443)
(31,650)
(20,109)
(31,987)
666
337
(19,443)
(31,650)
12 months
ended
31 March 2020
£’000s
12 months
ended
31 March 2019
£’000s
(19.22)p
(28.64)p
nil
(6.85)p
Notes
15
15
Revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses
Operating (loss) before impairment and significant items
Impairment charge on goodwill
Impairment charge on tangible fixed assets
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 (losses)/gains on defined benefit plan
Tax relating to items which will not be reclassified
Other comprehensive (loss)/gain
Total comprehensive (loss) for the year
Attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive (loss) for the year
Basic and diluted loss per share – continuing operations
Basic and diluted loss per share – discontinued operations
The notes on pages 37 to 75 form part of these financial statements.
30
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS Consolidated Statement of Changes in Equity
Year ended 31 March 2020
Issued
Share
Capital
£’000s
Share
Premium
Account
£’000s
Other
Reserves
£’000s
Share
Option
Reserves
£’000s
Foreign
Exchange
Translation
Reserve
£’000s
Retained
Earnings
£’000s
Total
£’000s
Non–
Controlling
Interest
£’000s
Total
Equity
£’000s
1,569
2,720
(4,796)
310
Total comprehensive (loss)/
gain for the year
Loss for the year
Other comprehensive (loss)/
gain for the year
Total comprehensive (loss)/
gain for the year
Transactions with owners of
the Group, recognised directly
in equity
Shares issued in the year
(note 27)
Share based payments
(note 29)
Deferred tax on share-based
payments
Total contributions by and
distributions to owners of
the Group
–
–
–
–
–
–
418
566
–
–
–
–
418
566
–
–
–
–
–
–
–
Balance as at 31 March 2019
1,987
3,286
(4,796)
Total comprehensive (loss)/
gain for the year
Loss for the year
Other comprehensive (loss)/
gain for the year
Total comprehensive (loss)/
gain for the year
Transactions with owners of
the Group, recognised directly
in equity
Shares issued in the year
(note 27)
Share based payments
(note 29)
Deferred tax on share-based
payments
Total contributions by and
distributions to owners of
the Group
–
–
–
4
–
–
4
–
–
–
8
–
–
8
–
–
–
–
–
–
–
Balance as at 31 March 2020
1,991
3,294
(4,796)
The notes on pages 37 to 75 form part of these financial statements.
–
–
–
–
(38)
(34)
(72)
238
–
–
–
–
(35)
–
(35)
203
13
–
55,741
55,557
1,803
57,360
(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
(19)
23,786
24,482
2,140
26,622
–
(19,121)
(19,121)
666
(18,455)
(106)
(882)
(988)
–
(988)
(106)
(20,003)
(20,109)
666
(19,443)
–
–
–
–
–
–
–
–
12
(35)
–
(23)
–
–
–
–
12
(35)
–
(23)
(125)
3,783
4,350
2,806
7,156
31
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Company Statement of Changes in Equity
Year ended 31 March 2020
Total comprehensive income for the year
Loss for the year
Other comprehensive (loss)/gain 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
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
Issued
Share
Capital
£’000s
1,569
–
–
–
418
–
–
418
1,987
–
–
–
4
–
–
4
Share
Premium
Account
£’000s
2,720
–
–
–
Share
Option
Reserve
£’000s
310
–
–
–
Retained
Earnings
£’000s
24,532
Total
Equity
£’000s
29,131
(21,983)
(21,983)
441
441
(21,542)
(21,542)
566
–
–
566
3,286
–
–
–
8
–
–
8
–
(38)
(34)
(72)
238
–
–
–
–
(35)
–
(35)
203
–
–
–
–
2,990
984
(38)
(34)
912
8,501
(9,819)
(883)
(9,819)
(883)
(10,702)
(10,702)
–
–
–
–
12
(35)
–
(23)
(7,712)
(2,224)
Balance as at 31 March 2020
1,991
3,294
The notes on pages 37 to 75 form part of these financial statements.
32
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS Consolidated Statement of Financial Position
Year ended 31 March 2020
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
Trade and other payables
Borrowings
Lease liabilities
NCI put option
NON-CURRENT LIABILITIES
Borrowings
Lease liabilities
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
31 March
2020
£’000s
31 March
2019
£’000s
Notes
16
17
18
19
20
21
22
13
33
25
23
24
26
23
24
26
26
20
32
27
37,753
61
16,199
81
1,508
55,602
6,823
10,232
182
215
1,363
18,815
1,148
75,565
9,097
2,717
390
2,900
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
–
–
15,104
11,297
43,059
567
1,520
–
223
7,936
53,305
68,409
7,156
1,991
3,294
(4,796)
203
(125)
3,783
4,350
2,806
7,156
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
These financial statements were approved by the Board of Directors and authorised for issue on 18 December 2020.
They were signed on its behalf by:
Mike Holt
Executive Chairman
Maribeth Keeling
Chief Financial Officer
The notes on pages 37 to 75 form part of these financial statements.
33
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Company Statement of Financial Position
Year ended 31 March 2020
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
Assets classed as held for sale
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
NON-CURRENT LIABILITIES
Borrowings
Derivative liability – Convertible loan notes
Retirement benefit obligation
TOTAL LIABILITIES
NET (LIABILITIES)/ASSETS
EQUITY
Share capital
Share premium account
Share option reserve
Retained earnings
TOTAL EQUITY
31 March
2020
£’000s
31 March
2019
£’000s
Notes
19
17
18
20
22
13
33
25
23
26
32
27
54,670
54,670
18
143
1,508
56,339
150
1,617
1,259
57,696
71,125
70,441
(4)
215
8
71,344
1,000
27
2,000
1,140
73,608
–
128,683
131,304
82,294
82,294
40,677
–
7,936
48,613
130,907
(2,224)
1,991
3,294
203
(7,712)
(2,224)
78,391
78,391
36,715
294
7,403
44,412
122,803
8,501
1,987
3,286
238
2,990
8,501
Real Good Food plc (the Company) reported a total comprehensive loss for the year ended 31 March 2020 of £10,829k (2019: £21,542k).
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act and have not presented a statement
of comprehensive income for the Company.
These financial statements were approved by the Board of Directors and authorised for issue on 18 December 2020.
They were signed on its behalf by:
Mike Holt
Executive Chairman
Maribeth Keeling
Chief Financial Officer
The notes on pages 37 to 75 form part of these financial statements.
34
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS Consolidated Cash Flow Statement
Year ended 31 March 2020
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss) before taxation
Finance and other finance costs
FX movement
Goodwill Impairment charge
Impairment charge on fixed assets
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
(Increase)/decrease in receivables
Pension contributions
Decrease in cash collateral
Increase/(decrease) in payables
Cash From/(used in) operations
Income taxes received/(paid)
Interest paid
Interest on finance leases
Net cash inflow/(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
Payment of deferred consideration
Net cash (outflow)/inflow from investing activities
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in year
Repayment of borrowings
Inflow of term loans
Repayment of other loans
(Repayment)/inflow of investor loans
Inflow of funds from convertible loan notes
Drawdowns on revolving credit facilities
Repayments on revolving credit facilities
Capital repayments on finance leases
Net cash (outflow) from financing activities
NET (DECREASE)/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
Notes
9, 10
16
33
32
18
17
32
17
18
27
23
23
23
23
23
31 March
2020
£’000s
31 March
2019
£’000s
(20,147)
5,617
(32,333)
4,572
(115)
12,622
287
(35)
–
–
–
16
(294)
(577)
2,375
1,538
1,287
17
(2,327)
(733)
1,785
1,279
1,308
52
(189)
(27)
1,144
–
(1,819)
550
–
(1,269)
4
(504)
3,420
(1,636)
(4,519)
–
28,261
(26,409)
–
(1,383)
(1,508)
2,909
(38)
(1,508)
1,363
(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
35
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Company Cash Flow Statement
Year ended 31 March 2020
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss) before taxation
Finance and other finance costs
Impairment charge investments
Impairment charge fixed asset
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
(Increase)/(decrease) in receivables
Pension contributions
Increase/(decrease) in payables
Decrease in cash collateral
Cash from/(used in) operations
Income taxes received
Interest paid
Net cash inflow/(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
(Repayment)/inflow of investor loans
Inflow of funds from convertible loan notes
Repayment of borrowings
Net cash (outflow)/inflow from financing activities
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
Net movement in cash and cash equivalents
Cash and cash equivalents at end of period
The notes on pages 37 to 75 form part of these financial statements.
31 March
2020
£’000s
31 March
2019
£’000s
Notes
9
19
33
32
18
17
32
17
18
27
23
23
23
(9,819)
(22,127)
5,448
–
287
(35)
–
16
(294)
187
132
4,236
905
–
(38)
2
106
294
313
67
(4,078)
(16,242)
(910)
(733)
7,318
1,786
3,383
–
–
3,383
–
–
–
4
(4,519)
–
–
(4,515)
(1,132)
1,140
(1,132)
8
6,503
(347)
2,268
-
(7,818)
–
(154)
(7,972)
–
–
–
984
856
8,545
(1,750)
8,635
663
477
663
1,140
36
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS Notes to the Financial Statements
Year ended 31 March 2020
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 2020, the Group did not
dispose of any major lines or businesses. At 31 March 2020, some
remaining assets in relation to the disposed businesses are classed
as held for sale. For further details please refer to note 33.
IFRS standards and interpretations adopted
New standards and amendments which are effective from 1 January
2019, and have been adopted within the Group’s accounting
policies are:
{ IFRS 16 Leases (effective for periods beginning after 1 January
2019) replacing IFRS 17 Leases and IFRIC 4 determining
whether an arrangement contains a Lease.
{ Amendments to IFRS 9 Prepayment Features with Negative
Compensation (effective 1 January 2019); and
{ Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures (effective 1 January 2019).
The Group has adopted IFRS 16 applying the modified retrospective
method with no changes to the comparative accounting periods.
There was no impact on opening reserves.
The Group has applied the following transitional provisions for leases
which were previously classified as operating leases:
{ Lease liabilities have been measured at the present value of the
remaining lease payments on transition, discounted at a
weighted average incremental borrowing rate of 4.41%; and
{ Right of use assets have been measured at an amount equal to
the lease liability at the transition date.
{ Because the adoption of IFRS16 leases has increased EBITDA, it
has had the effect of reducing the loss per share by 0.52p and
the diluted loss per share by 0.17p.
The Group has applied the following recognition exemptions and
practical expedients:
{ Contracts have not been reassessed in relation to whether they
are or contain a lease at the date of initial application;
{ Initial direct costs have been excluded from the measurement of
the right of use asset at the date of initial application;
{ Leases which are short term or low value have not been
accounted for according to IFRS 16, and instead lease payments
have been expensed on a straight-line basis over the lease term;
{ Leases for which the lease term ends within 12 months of initial
application have not been accounted for according to IFRS 16,
and instead lease payments have been expensed on a straight-
line basis over the lease term;
{ Single discount rates are used for portfolios of leases with
reasonably similar characteristics; and
{ Hindsight has been used in the determination of the lease term
where options to extend or terminate the lease exist.
Further detail in relation to the leases accounting policy under IFRS
16 has been included in note 2.
The adoption of the amendments to IFRS 9 and IAS 28 have not had
an impact on the financial statements of the Group.
The Group does not expect any 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, on a going concern basis.
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.
Going Concern
The Directors have considered the Group’s business activities
together with the factors likely to affect its planned future
performance including covid-19 and Brexit and are taking appropriate
action.
RGF has a robust crisis management plan that is being implemented,
including taking action to mitigate risks and conserve cash.
The sectors we serve have and will continue to be impacted whilst
the country is in a state of lockdown, particularly the wholesale
market and ‘food on the go’. The Board consider the revised
covid-19 budget to be reasonable and these assumptions have been
projected and shared with the Group’s auditors. The budget has
considered various scenarios including a significant reduction in
sales with a delay in reducing stockholding.
The banking covenants are not breached in the 12 month forecasts
prepared (for further details see Note 3).
37
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
2. Significant accounting policies (continued)
The new forecast agreed with the businesses has been adjusted for
the covid-19 impact. The Board have reviewed various sensitivity
scenarios, using the forecasted sales and have modelled the effects
of these, whilst reviewing all the measures to have a sustainable
business model post covid-19. The scenarios are shown below:
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 include net
interest costs on the net defined benefit pension scheme
liabilities.
c. Rebates and discounts: All discounts, rebates etc. are
Scenario 1: Reduction in revenue of 12% and
Scenario 2: Reduction in EBITDA of 35%
In both stressed scenarios the Group has sufficient liquidity
headroom until August 2021, when cash becomes tighter coinciding
with the stock build for Christmas and the expected NCI Put option
payment (note 23).
The group has various levers that it can use to mitigate the shortfall
including:
Additional asset backed funding
Cessation of non-essential spend
RGF is using all options to mitigate the impact of reduced sales,
including the job retention programme and has furloughed staff at
both businesses. The businesses are working closely with our
customers on forecasting going forward. The principal shareholders
of the Group have shown considerable support for the Group and
have entered into a Deed of Amendment to defer the repayment of
the loans from May 2021 to May 2022, with a reduced interest
charge. The banking covenants are not breached under the stressed
scenarios above.
The Board have reviewed 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.
Also detailed in note 23 to the financial statements, the Group has a
long-term banking arrangement with ABL Leumi 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.
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. 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
dispatched. Sales are recorded net of discounts, Value Added
Tax (VAT) and other sales-related taxes. Goods are deemed to be
dispatched when the distribution company has collected the
goods from the warehouse and is delivering them to the
customer.
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.
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 32 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.
38
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 2. Significant accounting policies (continued)
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:
Right of use assets
Land and buildings
Freehold buildings
Plant and equipment
Plant and equipment
Motor vehicles
Fixtures and fittings
Computer equipment
Length of lease
40 to 50 years
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.
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
5 years
Development costs, and business relationships
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
The Group leases manufacturing facilities, company cars and other
plant and machinery.
Upon inception of a contract, an assessment is performed to
determine whether the contract is or contains a lease. A right of use
asset and a corresponding lease liability is recognised on the
statement of financial position for all lease arrangements where the
Group is a lessee, except for those which are short-term or low
value. Short-term and low value leases are accounted for by
recognising the lease payment within administrative expenses on a
straight-line basis over the lease term.
The lease liability is initially measured at the present value of the
future lease payments at the commencement date, discounted using
the rate implicit in the lease if this is readily determined, or
otherwise using the incremental borrowing rate. The incremental
borrowing rate is the rate of interest that the Group would have to
pay to borrow, over a similar term and with similar security, the funds
necessary to obtain an asset of a similar value to the right of use
asset in a similar economic environment.
The lease payments included in the measurement of the lease
liability comprise lease payments in addition to any other payments
reasonably certain to be made such as termination penalties upon
early termination of the lease.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease using the effective
interest rate method and reducing the carrying amount to reflect the
lease payments made.
The lease liability is remeasured if:
{ The lease term has changed, in which case the lease liability is
remeasured by discounting the revised lease payments using a
revised discount rate;
{ The lease payments change due to changes in an index or rate,
in which case the lease liability is remeasured using the initial
discount rate; or
{ The lease contract is modified, and the modification is not
accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments
using a revised discount rate.
The right of use asset is measured at an amount equal to the
corresponding lease liability and is subsequently measured at cost
less accumulated depreciation and impairment losses. Right of use
assets are depreciated over the lease term. Right of use assets are
included in the Property, Plant & Equipment.
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 are 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.
39
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
2. Significant accounting policies (continued)
n) Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest rate method, less provision for impairment. 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 occurrence of bad debt has
been rare in the business.
o) Trade payables
Trade payables are recognised initially at fair value and are
subsequently measured at amortised cost using the effective
interest rate 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 a revolving credit facility of £5.45 million with Leumi
ABL Limited secured on the trade debtors on a 60-month term. This
facility is secured against the debtors of JF Renshaw Ltd and
Rainbow Dust Colours Ltd, with an interest rate of 2.25% above
London Inter Bank Offer Rate (LIBOR). Trade debtors remain assets
of the Group and are shown at the total amount collectable.
Liabilities under this arrangement are shown in borrowings.
The Group has shareholder loans including convertible loan notes
previously repayable on or before 19 May 2021 on which the
repayment date has been agreed to move to 19 May 2022. They can
be converted at any time into shares at the holder’s option. The
majority of interest on the shareholder loans is deferred. 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.
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) 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.
40
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 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 4%. 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.
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 32.
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.
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 Directors considered the following scenarios:
Scenario 1: Reduction in revenue of 12% and
Scenario 2: Reduction in EBITDA of 35%
In both stressed scenarios the Group has sufficient liquidity
headroom until August 2021, when cash becomes tighter coinciding
with the stock build for Christmas and the expected NCI Put option
payment, (note 23).
The Group has various levers that it can use to mitigate the shortfall
including:
Additional asset backed funding
Cessation of non-essential spend
The Group will take action as appropriate, should sales not be in line
with expectations.
The principal shareholders of the Group continue to show
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.
As part of the going concern going concern and cash planning, in
June 20, the Directors approved an increase in the revolving credit
facility with ABL Leumi, increasing the facility by £2m. This was a
result of covid-19 to ensure that the Group had adequate facilities in
place should the lockdown last longer than expected.
The banking covenants in place are positive 3 month rolling EBITDA
and positive tangible net worth and are not breached on the
stressed scenarios referred to above. The maximum draw down
value during FY20 of the facility was in September, this was £2.0m
and was to fund the stock build for the Christmas sales.
Long term funding
The Board has reviewed the forecasts for FY22, and although the
group has agreed with the Investors to continue to roll up interest
on the loans to conserve cash, this will continue to be reviewed as
trading returns to pre covid-19 conditions. The Board would expect
to make Investor loan repayments on a divestment of a business.
41
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
4. Revenue
The revenue for the Group for the current year arose from the sale of goods in the following areas:
Cake Decoration £41.2 million
(2019 £46.4m)
Food Ingredients £25.3 million
(2019 £15.2m)
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 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.
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
12 months ended 31 March 2020
Total revenue
Intercompany sales
External revenue
Cost of sales
Gross profit
Cake
Decoration
£’000s
48,621
(7,378)
41,243
Food
Ingredients
£’000s
25,333
–
25,333
(23,615)
(15,980)
17,628
9,353
Distribution expenses
Administrative expenses
(2,995)
(14,353)
(444)
(5,974)
–
–
–
–
–
–
73,954
(7,378)
66,576
(39,595)
26,981
(3,439)
(3,805)
(24,132)
Operating profit/(loss) before impairment
and significant items
280
2,935
(3,805)
(590)
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)
(Loss)/profit after tax as per
comprehensive statement of income
(1,081)
(12,622)
(9)
–
(13,423)
2,926
(198)
–
(3)
–
(13,621)
2,923
–
–
59
(287)
(4,033)
(5,247)
(169)
(9,449)
1,692
(1,031)
(12,909)
(14,530)
(5,448
(169)
(20,147)
1,692
(13,621)
2,923
(7,757)
(18,455)
42
Total
Group
£’000s
73,954
(7,378)
66,576
(39,595)
26,981
(3,439)
(24,132)
(590)
(1,031)
(12,909)
(14,530)
(5,448)
(169)
(20,147)
1,692
(18,455)
–
–
–
–
–
–
–
–
–
–
–
––
–
–
–
–
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS
5. Segment reporting (continued)
12 months ended 31 March 2019
Total revenue
Intercompany sales
External revenue
Cost of sales
Gross profit/(loss)
Cake
Decoration
£’000s
56,340
(9,931)
46,409
Food
Ingredients
£’000s
15,151
–
15,151
(31,716)
(11,585)
14,693
3,566
Head Office
and non-trading
subsidiaries
£’000s
–
–
–
(232)
(232)
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
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 credit/(expense)
(Loss)/profit after tax as per
comprehensive statement of income
(141)
–
(17,448)
18
–
–
1,185
(122)
(5,396)
(4,265)
(166)
(21,518)
(6,316)
(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:
12 months ended 31 March 2019
UK
Europe
USA
Rest of World
Total
Cake
Decoration
£’000s
Food
Ingredients
£’000s
30,276
15,149
6,201
8,643
1,289
2
–
–
46,409
15,151
The Group has two customers which constitute over 10% of revenue: one providing 22% of revenue, and the other 13%.
12 months ended 31 March 2020
UK
Europe
USA
Rest of World
Total
Cake
Decoration
£’000s
28,266
4,631
7,293
1,053
Food
Ingredients
£’000s
22,319
3,014
–
–
41,243
25,333
43
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
5. Segment reporting (continued)
The Group has two customers which constitute over 10% of revenue: one providing 21% of revenue, and the other 10%.
Reconciliation of operating
(loss)/profit to underlying adjusted EBITDA
to 31 March 2020
Cake
Decoration
£’000s
Food
Ingredients
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Operating (loss)/profit
(13,423)
2,926
(4,033)
(14,530)
Significant items
Impairment charge
Loss on disposal
Depreciation
Amortisation
Underlying adjusted EBITDA
1,081
12,622
–
1,521
34
1,835
9
–
–
667
1,379
4,981
(59)
287
–
187
125
(3,493)
1,031
12,909
–
2,375
1,538
3,323
–
–
–
–
–
–
–
Total
Group
£’000s
(14,530)
1,031
12,909
–
2,375
1,538
3,323
Reconciliation of operating
(loss)/profit to underlying adjusted EBITDA
to 31 March 2019
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 2020
Segment assets
Segment liabilities
Net operating assets
Non–current asset additions
Depreciation
Amortisation
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
57,032
13,835
43,197
330
(1,521)
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
20,103
3,123
Head Office
and non-trading
subsidiaries
£’000s
(1,570)
51,451
16,980
(53,021)
1,489
(667)
(34)
(1,379)
–
(187)
(125)
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
75,565
68,409
7,156
1,819
(2,375)
(1,538)
–
–
–
–
–
–
Cake
Decoration
£’000s
108,357
23,985
84,372
102
(1,016)
(12)
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
75,565
68,409
7,156
1,819
(2,375)
(1,538)
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 2020, Head Office costs of £1.1 million (2019 £1.4m) have been re-allocated to the Cake Decoration division.
44
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS
6. Significant items
Abnormal costs relating to ongoing capital projects
Investigation work and penalties
Professional fees in relation to refinancing costs
Change in value of convertible loan notes derivative liability
Asset write-offs
Commercial disputes
Management restructuring1
Significant items
Continuing business
Discontinued business
Total significant items
12 months
ended
31 March
2020
£’000s
12 months
ended
31 March
2019
£’000s
–
–
–
294
–
–
(1,325)
(1,031)
(1,031)
–
(38)
(315)
(380)
–
(330)
(118)
(582)
(1,763)
(1,717)
(46)
(1,031)
(1,763)
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 2020 has seen a lower level of significant items that the previous year. They are explained in the note below
1 The fair value of the CLNs was reduced in FY20 from the FY19 estimate. This was shown as a significant item in the acounts
2 Restructure costs relating to the Cake Decorations business and Head Office infrastructure.
The year to 31 March 2019 had the following significant costs
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.
2 Investigation work and penalties relating to corporate governance failings. There were well-publicised failings in the area of corporate
governance. The costs incurred related to external agencies sufficiently experienced and qualified to ensure all failings investigated and
identified and remedial actions highlighted.
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 relate to inventory and intangible asset write-offs in relation to an abandoned product
launch.
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. 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.
45
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
7. Auditor’s remuneration
12 months
ended
31 March
2020
£’000s
12 months
ended
31 March
2019
£’000s
Fees payable to the Company's auditor for the audit of the Group's annual accounts
(208)
(215)
Fees payable to the Company's auditor for other services:
Audit related assurance services
Tax compliance services
Tax advisory services
Other assurance services
Total fees paid to auditor
–
(25)
–
(10)
(243)
(31)
(45)
(23)
(21)
(335)
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
J F Renshaw Ltd
Rainbow Dust Colours Ltd
12 months
ended
31 March
2020
£’000s
12 months
ended
31 March
2019
£’000s
(107)
(107)
(20)
(8)
(60)
(20)
(20)
(8)
(60)
(20)
(215)
(215)
46
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 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 charges
Operating lease payment:
– land and buildings
– other assets
Research and development expenditure
Impairment of trade receivables
Foreign exchange gains/(losses)
Other net operating expenses
Total
Operating loss
9. Finance costs
Interest on bank loans, overdrafts, and investor loans
Interest on obligations under finance leases
Interest on lease liabilities
Interest on non-controlling interest put option
Past service cost on pension (note 32)
Continuing business
Discontinued business
12 months
ended
31 March
2020
£’000s
12 months
ended
31 March
2019
£’000s
Notes
66,576
61,560
12
(19,208)
(20,622)
(29,265)
(25,917)
(2,375)
(1,538)
(1,031)
(1,573)
(1,454)
(1,717)
5
5
6
16/18
(12,909)
(18,675)
22
–
–
(1,516)
(84)
138
(13,318)
(81,106)
(14,530)
12 months
ended
31 March
2020
£’000s
(5,466)
–
(12)
46
(16)
(5,448)
(5,448)
–
(486)
(57)
(803)
(100)
(327)
(11,347)
(83,078)
(21,518)
12 months
ended
31 March
2019
£’000s
(4,164)
(154)
–
(89)
(106)
(4,513)
(4,406)
(107)
47
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
10. Other finance costs
Interest on pension scheme liabilities (note 32)
Interest on pension scheme assets (note 32)
11. Directors’ remuneration
Directors’ salaries, benefits, and fees
Final payments in relation to services rendered
Related party Directors’ fees and consultancy fees (note 31)
The emoluments of the Directors for the period were as follows:
12 months
ended
31 March
2020
£’000s
(497)
328
(169)
12 months
ended
31 March
2020
£’000s
12 months
ended
31 March
2019
£’000s
(516)
350
(166)
12 months
ended
31 March
2019
£’000s
(786)
(1,103)
–
–
(180)
(6)
(786)
(1,289)
P G Ridgwell (to May 19)
J M d’Unienville
C O Thomas (to Jul 19)
H C L Cawley (to Feb 2020)
M Keeling (from Jul 2019)
J A Mackenzie
S Dawson (to Oct 19)
M Holt
Paul Richardson (from Oct 19 to Apr 20)
A Ridgwell (from May 19)
G Lumsden (from Oct 19)
Fees/Salaries
inc. Er’s NIC
£’000s
Taxable
Benefits
£’000s
Bonus
£’000s
Pension
Contributions
£’000s
12 months
ended
31 March 2020
£’000s
12 months
ended
31 March 2019
£’000s
6
25
10
377
113
25
21
88
51
23
18
–
–
–
10
9
–
–
–
–
–
–
–
–
–
10
–
–
–
–
–
–
757
19
10
–
–
–
–
–
–
–
–
–
–
–
6
25
10
387
132
25
21
88
51
23
18
39
25
46
687
25
17
22
–
–
–
786
1,283
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.
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 31.
The current Company Directors disclosed are considered as key management personnel.
48
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 11. Directors’ remuneration (continued)
The current base annual salaries and fees paid to the Directors are as follows:
M Holt
J M d'Unienville
J A MacKenzie
S Dawson
A Ridgwell
G Lumsden
M Keeling
Directors’ interests in share options:
Date of Grant
No. of options
at 31 March
2020
No. of options
at 31 March
2019
P G Ridgwell
Unapproved options
Unapproved options
C O Thomas
Unapproved options
Unapproved options
July 09
May 10
July 09
May 10
–
–
–
–
476,190
61,224
304,762
40,816
Exercise
Price
5.25p
24.50p
5.25p
24.50p
Earliest
Exercise
Date
July 12
May 13
July 12
May 13
Base Salary
£’000s
135
25
25
25
25
38
142
415
Exercise
Expiry
Date
July 19
May 20
July 19
May 20
No new options were granted to Directors during the year (2019: 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 2020 was 2.75p and the range during the year was 2.50p to 8.00p.
No Director exercised share options during the year.
During the period retirement benefits were accruing to one director (2019: one).
49
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
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
2020
Group
31 March
2020
Company
31 March
2019
Group
31 March
2019
Company
Continuing operations
Production
Selling and distribution
Directors and administrative
Discontinued operations
Production
Selling and distribution
Directors and administrative
Total no. of staff
The aggregate payroll costs were as follows:
Continuing operations
Wages, salaries, and fees
Social security costs
Other pension costs
Discontinued operations
Wages, salaries, and fees
Social security costs
Other pension costs
487
51
86
624
–
–
–
–
624
–
–
7
7
–
–
–
–
7
31 March
2020
Group
£’000s
31 March
2020
Company
£’000s
16,725
1,670
813
19,208
923
197
28
452
70
63
585
501
46
84
631
–
–
15
15
–
–
–
–
1,216
15
31 March
2019
Group
£’000s
17,831
1,786
1,005
31 March
2019
Company
£’000s
1,919
239
124
1,148
20,622
2,282
–
–
–
–
–
–
–
–
6,939
590
291
7,820
–
–
–
–
Total payroll costs
19,208
1,148
28,442
2,282
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.
31 March
2020
Group
£’000s
31 March
2020
Company
£’000s
31 March
2019
Group
£’000s
31 March
2019
Company
£’000s
462
63
32
557
–
–
–
–
682
94
53
829
–
–
–
–
Wages, salaries, and fees
Social security costs
Other pension costs
Total payroll costs
50
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 13. Notes supporting the cash flow statement
The cash collateral figure for the Group is £0.2million (FY19 £2.0m). This has been provided to Lloyds Bank plc as security for insurance
claims of the Group. 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 2020
At 31 March 2019
Cash Flows
Non-cash flows
– Interest accruing on loans
– Redemption premiums added to accrued interest cost on shareholder loans
– Transaction costs of issuance of convertible loan notes included in liability
– Loans and borrowings classified as non-current at March 2019 becoming current
before March 2020
At 31 March 2020
Company
Real Good Food plc (Company)
At 31 March 2018
Cash Flows
Non-cash flows
Non-current
Loans and
Borrowings
£’000s
(Note 23)
16,390
6,214
12,144
4,317
261
(317)
(345)
(36)
(667)
37,961
(2,661)
5,425
3,084
115
(865)
43,059
Current Loans
and Borrowings
£’000s
(Note 23)
24,160
(12,015)
(12,144)
–
–
–
–
–
667
668
1,184
–
–
–
865
2,717
Non-current
Loans and
Borrowings
£’000s
(Note 23)
11,254
9,401
Current Loans
and Borrowings
£’000s
(Note 23)
13,894
(1,750)
– Loans renegotiated to move from current at March 2018 to non-current at March 2019
12,144
(12,144)
– 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
Cash Flows
Non-cash flows
– Interest accruing on loans
– Redemption premiums added to accrued interest cost on shareholder loans
– Transaction costs of issuance of convertible loan notes included in liability
At 31 March 2020
4,317
261
(317)
(345)
36,715
(4,248)
5,011
3,084
115
40,677
–
–
–
–
–
–
–
–
–
–
Total
£’000s
40,550
(5,801)
–
4,317
261
(317)
(345)
(36)
–
38,629
(1,477)
5,425
3,084
115
–
45,776
Total
£’000s
25,148
7,651
–
4,317
261
(317)
(345)
36,715
(4,248)
5,011
3,084
115
40,677
51
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
13. Notes supporting the cash flow statement (continued)
Net Debt
Net debt is a key performance indicator for the Group. It is defined as short term and long term borrowings less cash. See table below:
Short term borrowings
Short term lease liabilities
Long term borrowings
Long term lease liabilities
Cash
Total Net Debt
Group
At 1 April 2018
Cash flow
Other non-cash movements1
At 31 March 2019
Cash flow2
Other non-cash movements3
At 31 March 2020
Company
At 1 April 2018
Cash flow
Other non-cash movements1
At 31 March 2019
Cash flow2
Other non-cash movements3
At 31 March 2020
Note
23
23
23
23
31 March 2020
Group
£’000s
31 March 2020
Company
£’000s
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
(2,717)
(390)
–
–
(668)
–
–
–
(43,059)
(40,677)
(37,961)
(36,715)
(567)
1,363
–
8
–
2,909
–
1,140
(45,370)
(40,669)
(35,720)
(35,575)
Net cash
and current
borrowings
£’000s
Non-current
borrowings
£’000s
21,429
(2,719)
(20,951)
(2,241)
1,882
2,103
1,744
16,390
(3,082)
24,653
37,961
(1,723)
7,388
43,626
Net cash
and current
borrowings
£’000s
Non-current
borrowings
£’000s
13,417
(2,413)
(12,144)
(1,140)
1,132
–
(8)
11,254
9,401
16,060
36,715
(4,519)
8,481
Net debt
£’000s
37,819
(5,801)
3,702
35,720
159
9,491
45,370
Net debt
£’000s
24,671
6,988
3,916
35,575
(3,387)
8,481
40,677
40,669
1.
Includes £12.1m of investor loans which were renegotiated from short term to long term borrowings and £8.7m of revolving credit facilities repaid in the year
2.
Includes investor loans of £3.7m and accrued interest of £0.5m repaid in the year from new borrowings of £3.6m
3.
Includes additional accrued interest of £5.0m on investor loans and convertible loan notes and redemption premiums of £3.1m on shareholder loan
52
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 14. Taxation
Group
Current tax
UK current tax on loss 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
2020
£’000s
31 March
2019
£’000s
–
–
–
–
1,692
–
1,692
1,692
–
1,692
–
–
–
(43)
(43)
589
(197)
392
349
–
349
349
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% (2019: 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
2020
£’000s
31 March
2019
£’000s
(20,147)
(32,333)
3,828
(2,209)
–
73
–
1,692
1,692
–
1,692
6,143
(3,355)
(2,134)
(65)
(240)
349
349
–
349
The Finance Act 2016 introduced a proposed 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 were expected to reverse after 1 April 2020 had been valued at the
lower rate of 17%.
The Finance Act 2020 revised the main rate of corporation tax to 19% from 17 March 2020. These changes were substantively enacted on
17 March 2020, and deferred tax provisions at 17% have been revised to take account of the 19% rate in the current period.
53
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
15. Earnings per share
Basic earnings per share
Basic earnings per share is calculated on the basis of dividing the 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 2020
Continuing
Operations
12 months
ended
31 March 2020
Discontinued
Operations
12 months
ended
31 March 2019
Continuing
Operations
12 months
ended
31 March 2019
Discontinued
Operations
(19,121)
99,505
1,830
200,571
301,906
(19.22)p
–
–
–
–
–
–
(26,078)
91,032
364
144,554
235,950
(6,243)
91,032
364
144,554
235,950
(28.64)p
(6.85)p
The total loss per share for 2020 is (19.22)p (2019 continuing and discontinued operations: (35.49)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 6.33p (2019: loss of 11.05p on the continuing operations and a loss per share of 2.64p on the discontinued operations).
The weighted average number of shares in issue for the year was 99,504,581 and the number of options outstanding was 4,060,835.
If these were all exercised the cash raised would be equivalent to that which would be raised by issuing 1,830,303 shares at the average
share price during the year. There were also 211,924,421 convertible loan notes outstanding, of which the weighted average number of
shares was 200,571,327. Therefore, the weighted average number of dilutive potential ordinary shares is 301,906,212.
Because the adoption of IFRS 16 Leases has increased EBITDA, it has had the effect of reducing the loss per share by 0.52p and the diluted
loss per share by 0.17p.
54
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 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 2019
Impairment
Carried forward balance 31 March 2020
Cake Decoration
Brighter Foods
Carried forward
Group
£’000s
50,375
(12,622)
37,753
31 March
2019
£’000s
45,344
5,031
50,375
31 March
2020
£’000s
32,722
5,031
37,753
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.
The impairment calculation is based on the covid-19 budget for the financial year FY21.
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% (2019: 10%). 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 £12.6 million (2019: impairment of £18.7 for
Cake Decoration). Cake Decoration is a core division for the Group and is currently in turnaround. The investments made in manufacturing
capability in recent 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.
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 £2.7 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 £1.9 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
45,140
18,846
60,334
63,358
55
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD
Notes to the Financial Statements (continued)
Year ended 31 March 2020
17. Other intangible assets
Cost
At 1 April 2019
Additions
At 31 March 2020
Amortisation
At 1 April 2019
Charge
At 31 March 2020
Net Book Value at 31 March 2020
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
Customer
Relationships
£’000s
Computer
Software
£’000s
Development
Costs
£’000s
Group
£’000s
Company
£’000s
4,170
–
4,170
2,794
1,376
4,170
–
332
–
332
153
132
285
47
4,575
1,372
–
(405)
–
4,170
1,823
1.376
(405)
–
2,794
1,376
10
(898)
(152)
332
950
59
(827)
(29)
153
179
111
–
111
67
30
97
14
350
–
–
(239)
111
277
29
–
(239)
67
44
4,613
–
4,613
3,014
1,538
4,552
61
6.297
10
(1,303)
(391)
4,613
3,050
1,464
(1,232)
(268)
3,014
1,599
296
–
296
146
132
278
18
296
–
–
–
296
79
67
–
–
146
150
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 2020 consist of £18k computer software (2019: £132k) and £Nil development
costs (2019: £18k).
There is no indication of any impairment of these intangible assets.
56
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 18. Property, plant, and equipment
Group
Cost
At 1 April 2019
Transfer from assets under construction
Reclassified to non-current assets held for sale
IFRS 16 adjustments
Additions
At 31 March 2020
Depreciation
At 1 April 2019
Reclassified to non-current assets held for sale
Charge
Impairment
At 31 March 2020
Net Book Value at 31 March 2020
Cost
At 1 April 2018
Transfer from assets under construction
Reclassified to non-current assets held for sale
Disposals from sale of subsidiary
Disposals
Additions
At 31 March 2019
Depreciation
At 1 April 2018
Reclassified to non-current assets held for sale
Charge
Disposals from sale of subsidiary
Impairment
At 31 March 2019
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
Assets in the
course of
construction
£’000s
3,355
22,920
–
–
1,256
261
4,872
734
–
443
–
1,177
3,695
494
(1,878)
208
1,558
23,302
9,457
(878)
1,932
287
10,798
12,504
494
(494)
–
–
–
–
–
–
–
–
–
–
16,248
44,874
467
(287)
302
–
866
(769)
–
Total
£’000s
26,769
–
(1,878)
1,464
1,819
28,174
10,191
(878)
2,375
287
11,975
16,199
61,988
–
(287)
(13,860)
(22,923)
(357)
(37,140)
(4)
791
(2,262)
2,929
3,355
22,920
5,534
26,356
(139)
378
–
2,278
(5,039)
(17,046)
–
734
(2,131)
9,457
–
754
494
–
–
–
–
–
–
(2,266)
4,474
26,769
31,890
(139)
2,656
(22,085)
(2,131)
10,191
16,578
57
Net Book Value at 31 March 2019
2,621
13,463
494
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
18. Property, plant, and equipment (continued)
Right of use assets
From 1 April 2019, the Group has adopted IFRS 16 Leases. Right of use assets recognised upon adoption of the standard are reflected in
the underlying asset classes of property, plant, and equipment. The initial adjustments to cost are reflected in the table above as IFRS 16
adjustments.
Set out below are the carrying amounts of right of use assets recognised and the movements during the year:
Cost
At 1 April 2019
Additions
At 31 March 2020
Depreciation
At 1 April 2019
Charge
At 31 March 2020
Net Book Value at 31 March 2020
Capital commitments in relation to property, plant and equipment are disclosed in note 30.
Details of assets which are secured against borrowings are detailed in note 23.
620
636
1,256
–
(313)
(313)
943
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
Total
£’000s
828
636
1,464
208
–
208
–
–
(175)
(175)
33
(488)
(488)
976
Company
Cost
At 1 April 2019
Reclassified to non-current assets held for sale
Additions
At 31 March 2020
Depreciation
At 1 April 2019
Reclassified to non-current assets held for sale
Charge
Impairment
At 31 March 2020
Net Book Value at 31 March 2020
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
The company does not have any right of use assets.
58
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
498
(498)
–
–
31
(41)
10
–
–
–
1,679
(1,380)
–
299
529
(837)
177
287
156
143
Total
£’000s
2,177
(1,878)
–
299
560
(878)
187
287
156
143
498
3,672
4,170
–
–
498
21
10
–
31
467
–
(1,993)
1,679
2,217
303
(1,991)
529
1,150
–
(1,993)
2,177
2,238
313
(1,991)
560
1,617
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 19. Investments
Company
Investments in shares of subsidiary undertakings:
At 31 March 2019
Impairment
At 31 March 2020
N Brown
Foods Limited
£’000s
Real Good Food
Ingredients
Limited
£’000s
53,900
–
53,900
–
–
–
Renshaw
Europe NV
£’000s
Total
Investments
£’000s
770
54,670
–
–
770
54,670
A review of the investments held by the Company was undertaken in the year. This did not result in an impairment charge (2019: charge of
£0.9 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 (2020 and 2019 £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 2020 is disclosed below:
RGF Devizes Ltd*
Eurofoods Ltd*
Principal Activities
Dormant
Dormant
Description and Number of
Shares Held
4,052,659 Ordinary £1
260,000 Ordinary £1
50,000 Preference £1
N Brown Foods Ltd*
Holding Company
28,248,096 Ordinary 50p
Renshaw US Incorporated*
Cake Decoration Supplier
200 Ordinary $1
JF Renshaw Ltd
RGFC Dust Ltd*
Rainbow Dust Colours Ltd
Cake Decoration Supplier
Real Good Food Ingredients Ltd*
Food Ingredients Supplier
2,500,000 Ordinary £1
Cake Decoration Supplier
15,685,164 Ordinary £1
Holding Company
1 Ordinary £1
500 Ordinary £1
Proportion of Nominal Value of
Shares Held
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, 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
59
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
20. Deferred taxation liability/(asset)
The gross movements on the deferred tax account are as follows:
Opening position
(Credit) to income statement
(Credit)/charge 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
31 March 2020
Group
£’000s
31 March 2020
Company
£’000s
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
622
(1,259)
(1,692)
(35)
(215)
–
(215)
1
(1,285)
(1,508)
906
(393)
75
34
622
(1,176)
(192)
75
34
(1,259)
223
(1,508)
(1,285)
–
(1,508)
(1,508)
1,881
(1,259)
622
–
(1,259)
(1,259)
Group
Deferred tax assets
The deferred tax balances arise from temporary differences in respect of the following:
At 31 March 2019
(Credit) to income
(Credit) to other comprehensive income
Charge to equity
At 31 March 2020
Within 12 months
Greater than 12 months
Deferred tax liabilities
At 31 March 2019
(Credit) to income statement
At 31 March 2020
Share Options
£’000s
(1)
–
–
1
–
–
–
Pension
Scheme
£’000s
(1,258)
(35)
(215)
–
Total
£’000s
(1,259)
(35)
(215)
1
(1,508)
(1,508)
–
–
(1,508)
(1,508)
Intangible
Assets
£’000s
1,446
(1,446)
–
Tangible
Assets
£’000s
435
(212)
223
Total
£’000s
1,881
(1,658)
223
There were £16.9 million of unused tax losses (2019: £12.3 million) on which deferred tax of £3.2 million (2019: £2.3 million) is not
recognised owing to uncertainty over when those losses will be utilised. The losses have no expiration date.
60
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS
20. Deferred taxation liability/(asset) (continued)
Company
The deferred tax balances arise from temporary differences in respect of the following:
At 31 March 2019
(Credit) to income statement
(Credit) to other comprehensive income
(Credit)/charge to equity
At 31 March 2020
Within 12 months
Greater than 12 months
21. Inventories
Materials
Work in Progress
Finished Goods
Continuing Business
Pension
Scheme
£’000s
(1,258)
(35)
(215)
–
(1,508)
–
(1,508)
Share Options
£’000s
(1)
–
–
1
–
–
–
Total
£’000s
(1,259)
(35)
(215)
1
(1,508)
–
(1,508)
31 March 2020
Group
£’000s
31 March 2020
Company
£’000s
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
4,227
149
2,447
6,823
6,823
–
–
–
–
–
4,322
194
2,324
6,840
6,840
–
–
–
–
–
Inventories totalling £6,823k (2019: £6,840k) are valued at the lower of cost and net realisable value. The Directors consider that this value
represents the best estimate of the fair value of those inventories net of costs to sell. The company does not hold inventory.
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
Prepayments
Total
Amount due within 12 months
Amount due after 12 months
Total
31 March 2020
Group
£’000s
31 March 2020
Company
£’000s
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
9,828
(192)
9,636
220
–
50
326
10,232
10,232
–
10,232
15
–
15
215
70,811
50
34
71,125
5,265
65,860
71,125
6,755
(108)
6,647
534
7
–
7
–
–
69,550
600
833
8,614
8,614
–
600
284
70,441
5,265
65,176
8,614
70,441
At 31 March 2020, the Group had an outstanding balance on the revolving credit facility of £1,853k (2019: nil) for which 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.
61
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
22. Trade and other receivables (continued)
Provision for impairment of receivables
At 31 March 2019
Amount written off through disposal of subsidiary
Charge for period (note 8)
Uncollectable amount written off
At 31 March 2020
31 March 2020
Group
£’000s
31 March 2020
Company
£’000s
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
(108)
–
(84)
–
(192)
–
–
–
–
–
(135)
116
(100)
11
(108)
–
–
–
–
–
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 and are then adjusted by 50% to account for the current economic climate.
At 31 March 2020, 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%
5,827
58
30-60
days old
£’000s
2%
2,462
50
60-90
days old
£’000s
3%
484
15
90-365
days old
£’000s
6%
1,049
63
Over 365
days old
£’000s
100%
6
6
Total
£’000s
9,828
192
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 £84k (2019: charge of £100k) 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 £2.6 million were past due but not impaired. The ageing analysis of these receivables is as follows:
31 March
2020
Group
£’000s
31 March
2019
Group
£’000s
2,043
1,008
413
106
205
127
2,562
1,340
Up to 30 days past due
One to three months past due
Over three months past due
62
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 23. Borrowings and capital management
Secured borrowings at amortised cost
Bank term loans
Revolving credit facilities
Leases
Other loans
Investor loans*
Investor loans – Cash Collateral
Convertible loan notes**
Government grants
Borrowings due for settlement within 12 months
Lease liabilities due for settlement within 12 months
Borrowings due for settlement after 12 month
Lease liabilities due for settlement after 12 months
Total
31 March 2020
Group
£’000s
31 March 2020
Company
£’000s
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
2,916
1,853
957
102
–
–
–
–
28,336
28,336
–
–
12,341
12,341
228
–
–
–
–
1,636
25,165
2,000
9,550
278
–
–
–
–
25,165
2,000
9,550
–
46,733
40,677
38,629
36,715
2,717
390
–
–
668
–
–
–
43,059
40,677
37,961
36,715
567
–
–
–
46,733
40,677
38,629
36,715
*
Accrued interest of £2.9 million at 31 March 2019 is not shown in the above Investor loans, this is shown within accruals in payables. The investor loans shown
consists of £20.6 million principal amount, £4.6 million accrued interest up to 31 March 2020 and redemption premiums of £3.1 million.
**
Convertible loan notes shown at 31 March 2020 consist of £8.8 million investment (2019: £8.8 million), £3.6 million accrued interest (2019: £1.4 million), £nil
fair value adjustment (2019: £(0.3) million) and £(0.1 million) of transaction costs (2019: £(0.3) million) being spread over the remaining 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 December 2020 to require repayment in May 2022.
Convertible loan notes
In May 2018, the Company secured further funding from each of its major shareholders totalling £8.8 million. NB Holdings Ltd and Omnicane
Investors Ltd each providing £3.4 million and funds managed by 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. In December 2020, the shareholders agreed
to amend the repayment date of the loans to the 19 May 2022. Also, the Amendment Deed amends the CLNs minimum annual return from
30% per annum to 12% per annum, effective from 31 December 2020
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 19 May
2022, 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 2020, the derivative liability was valued at £nil (2019: £0.3 million)
The convertible loan notes shown consist of a host loan at amortised costs of £8.8 million and £4.3 million accrued interest up to
31 March 2020.
63
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
23. Borrowings and capital management (continued)
Features of the Group’s borrowings are as follows:
The Group’s financial instruments comprised cash, leases, a revolving credit facility, 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.
During the year ended 31 March 2020 the Group continued with the borrowing facilities in place and secured loans from investors. As at
31 March 2020, the borrowings comprised:
{ revolving credit facility of £5.45 million with Leumi ABL Limited on a revolving basis with a term of 60 months. This facility is secured
against the debtors of JF Renshaw Ltd and Rainbow Dust Colours Ltd with an interest rate of 2.25% above 3-month LIBOR. Because the
group retains the risks and rewards of ownership of the underlying debts, these continue to be recognised in these financial statements.
{ The Group secured facilities against specific plant and machinery with Leumi ABL Limited £2.1 million. The facilities interest payable is
2.75% above LIBOR.
{ The Group secured a £1.3m term loan facility with the term being 60 months.
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 2020 were as follows:
Date
May 2018
Amount
£8.8m
Method of Funding
Major Shareholder(s)
Secured convertible loan
notes
March 2018
£4.0m
Secured loan notes
January 2018
£3.0m
Secured loan notes
September 2017
£4.0m
Secured loan notes
NB Holdings Ltd (£3.4m), Omnicane
Investors Ltd (£3.4m),
Funds managed by Downing LLP
(2.0m)
NB Holdings Ltd (£1.7m), Omnicane
Investors Ltd (£1.7m),
Funds managed by Downing LLP
(£0.6m)
NB Holdings Ltd (£1.3m), Omnicane
Investors Ltd (£1.3m),
Funds managed by Downing LLP
(£0.4m)
NB Holdings Ltd (£1.33m), Omnicane
Investors Ltd £1.33m),
Funds managed by Downing LLP
(£1.33m)
NB Holdings Ltd (£0.4m), Omnicane
Investors Ltd (£0.4m)
NB Holdings Ltd (£1.3m), Omnicane
Investors Ltd (£1.3m)
August 2017
June 2017
June 2017
Total
£0.8m
£2.7m
£6.1m*
£29.4m
Secured loan notes
Secured loan notes
Secured loan notes
Funds managed by Downing LLP
* 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 2020 Leumi ABL Limited 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 had a guarantee over the Brighter Foods debtors.
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.
64
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 23. Borrowings and capital management (continued)
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
2020
Trade and other payables
6,738
1,710
420
Investor loans
Convertible loan notes
Bank term loans
Revolving credit facilities
Leases
Government grants
NCI put option liability
Interest
Redemption premiums
Total
2019
Trade and other payables
Convertible loan notes
Revolving credit facilities
Investor loans
Government grants
Hire purchase
NCI put option liability
Interest
Total
–
–
72
–
45
5
–
–
–
144
–
59
12
–
6,860
1,925
–
–
–
–
–
–
649
1,853
261
32
2,900
6,115
–
–
229
20,562
8,807
2,051
–
335
179
1,520
33,683
8,771
3,084
–
–
–
–
–
257
–
–
257
–
–
9,097
20,562
8,807
2,916
1,853
957
228
4,420
48,840
8,771
3,084
6,860
1,925
6,115
45,538
257
60,695
Less than
1 month
£’000s
1-3 months
£’000s
3 months to
1 year
£’000s
1-5 years
£’000s
5+ years
£’000s
Total
£’000s
6,122
3,719
665
–
–
–
5
53
–
6,180
5
6,185
–
–
–
12
101
–
3,832
10
3,842
–
–
–
32
465
–
1,162
38
1,200
123
8,807
–
24,254
197
1,017
4,997
39,395
10,234
49,629
–
–
–
–
31
–
–
31
–
31
10,629
8,807
–
24,254
277
1,636
4,997
50,600
10,287
60,887
The profile of the trade payables has been taken as being consistent with the Group’s payment terms to suppliers.
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.
65
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
24. Lease liabilities
Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than
12 months from the reporting date, as follows:
Current lease liabilities
Non-current lease liabilities
The maturity of lease liabilities as at 31 March 2020 is further analysed as set out below:
Lease liabilities:
Due in less than one year
Due between one to five years
Due in over 5 years
31 March
2020
£’000s
31 March
2019
£’000s
390
567
957
–
–
–
31 March
2020
£’000s
390
336
231
957
The fair value of the lease liabilities is approximately equal to their carrying amount. The significant differences between the operating lease
liabilities at 31 March 2019 and the opening lease liabilities at 1 April 2019 are set out below:
Operating lease commitments at 31 March 2019
Effect of extension options
Undiscounted lease payments
Effect of discounting using the incremental borrowing rate
Lease liability at 1 April 2019
Group
£’000s
428
1,176
1,604
(140)
1,464
Lease liabilities have been discounted using an average annual rate of 4.41%, which corresponds to the rate at which the Group has
borrowed against assets. If a rate of 10% were applied, then the charge to profit would be increased by £15k.
The movements in the lease liability in the year are set out below:
Lease liability at 1 April 2019
Repayments of lease liabilities
Interest expense
Lease liability at 31 March 2020
Group
£’000s
1,464
(519)
12
957
The total cash outflow in respect of leases is equal to the repayments of lease liabilities.
The Group applies exemptions available under IFRS 16 in relation to leases for assets of a low-value, and short-term leases. These leases
are not reflected in the measurement of lease liabilities. The future cash outflows to which the Group is exposed in respect of these leases
and the expenses charged to the income statement are not considered material.
66
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 25. Trade and other payables
Amount due within one year
Trade payables
Other tax & social security
Accruals
Amounts owed to Group undertakings
Other payables
Total
31 March 2020
Group
£’000s
31 March 2020
Company
£’000s
31 March 2019
Group
£’000s
31 March 2019
Company
£’000s
4,419
1,326
2,640
–
712
28
22
698
5,809
626
3,866
425
54
1,892
81,546
–
75,972
–
328
48
9,097
82,294
10,629
78,391
Trade payables and accruals principally comprise amounts outstanding for trade purchases and continuing costs.
The Directors consider that the carrying amount of trade payables approximates to their fair value.
26. 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 2020
Group
£’000s
31 March 2020
Company
£’000s
31 March 2019
Group
£’000s
31 March 2019
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 Facility
Lease assets
Lease
Investor loans
Convertible loan notes
Amounts owed to Group undertakings
Financial liabilities at fair value through profit and loss
NCI put option
Derivative liability
1,363
215
9,828
220
50
–
11,676
4,419
2,640
1,535
2,916
1,853
957
–
28,336
12,341
8
215
15
215
50
70,811
71,314
28
808
–
–
–
–
–
28,336
12,341
2,909
2,000
6,647
534
600
–
12,690
5,809
3,866
328
–
–
–
1,636
27,165
9,550
–
81,546
–
54,997
123,059
48,354
4,420
–
4,420
–
–
–
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
Total financial liabilities
59,417
123,059
53,645
115,346
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.
67
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD
Notes to the Financial Statements (continued)
Year ended 31 March 2020
26. Financial instruments (continued)
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).
27. Share capital
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)
Number of
Shares
2020
Number of
Shares
2019
31 March
2020
£’000s
31 March
2019
£’000s
99,326,335
78,449,241
238,095
20,877,094
99,564,430
99,326,335
1,987
4
1,991
1,569
418
1,987
Ordinary shares carry the right to participate in dividends and each share entitles the holder to one vote on matters requiring shareholder
approval.
Shares issued in the year are relating to employee options being exercised.
There are 4,060,835 shares reserved for issue under options, with expiry dates beyond 2020, outstanding at the end of the year.
28. 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.
68
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 29. 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 2020
Weighted
Average
Exercise Price
(£)
31 March 2019
Number of
Share Options
31 March 2019
Weighted
Average
Exercise Price
(£)
31 March 2020
Number of
Share Options
Outstanding at the beginning of the period
5,554,550
0.23
6,930,748
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
–
–
–
(238,095)
(0.05)
(761,904)
(1,255,620)
(0.39)
(614,294)
4,060,835
4,060,835
0.26
5,554,550
0.26
5,554,550
0.23
–
(0.05)
(0.39)
0.23
0.23
* All of the outstanding options have an exercise price within the range of £0.00–£0.46 in both 2020 and 2019. The weighted average remaining contractual life
of share options outstanding at the end of the period is 1.3 years (2019: 2.5 years).
No new options have been issued during this current period. At the time of the issue of options the inputs into the Black–Scholes option
pricing model were as follows:
Expected volatility
Expected life
Risk-free rate
Dividend yield
Weighted average exercise price
Weighted average share price
35%
3 years
2.88%
Nil
£0.33
£0.30
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
£35k (2019: a credit of £37k). This is shown in administration expenses in the Company as the charge relates to employees of the Company.
30. Commitments
Capital commitments
Commitments for the acquisition of property, plant, and equipment
31 March
2020
£’000s
31 March
2019
£’000s
177
546
69
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
31. 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.
Brandgrowth LLC
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
2020
£’000s
12 months
ended
31 March 2019
£’000s
–
–
6
6
Director
S Dawson
12 months
ended
31 March
2020
£’000s
12 months
ended
31 March 2019
£’000s
240
720
–
60
–
–
–
240
720
150
60
173
1
30
1,020
1,374
Amounts due to subsidiaries
Drawdowns on the revolving credit 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)
12 months
ended
31 March
2020
£’000s
12 months
ended
31 March 2019
£’000s
4,660
4,028
69
69
66,017
61,579
1,248
7,737
1,815
1,248
7,222
1,826
81,546
75,972
JF Renshaw Ltd and Brighter Foods Ltd are related parties because they are subsidiaries of N Brown Foods Ltd, which is a 100% owned
subsidiary of Real Good Food plc.
70
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 31. Related party transactions (continued)
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
Real Good Food Ingredients Ltd (discontinued)
32. Pensions arrangements
12 months
ended
31 March
2020
£’000s
12 months
ended
31 March 2019
£’000s
144
5,097
288
3,847
57,659
57,659
175
1,103
254
6,345
34
10
–
–
7,746
–
70,811
69,550
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 the date of leaving the Plan (or 5 April 2004 if earlier),
and length of service.
An arrangement was previously agreed with the Trustees under which employer contributions to the scheme are £1 million per year 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 2020. This has resulted in a deficit in the Plan of £7,936k. The
present value of contributions payable exceeds the net liability and, in accordance with IFRIC14, the additional liability has been recognised.
Present values of defined benefit obligations, fair value of assets and deficit
31 March
2020
£’000s
31 March
2019
£’000s
31 March
2018
(restated)*
£’000s
31 March
2017
(restated)*
£’000s
31 March
2016
£’000s
Present value of defined benefit obligation
20,750
21,177
21,448
21,319
21,094
Fair value of Plan assets
Deficit/(surplus) in Plan
Effect of asset ceiling/IFRIC14
Gross amount recognised
Deferred tax **
Net liability
(13,735)
(13,774)
(13,529)
(13,946)
(15,013)
7,015
7,403
7,919
7,373
6,081
921
7,936
(1,508)
6,428
–
7,403
(1,258)
6,145
–
7,919
(1,094)
6,825
–
7,373
(1,120)
6,253
–
6,081
(1,155)
4,926
*
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 2020: 19%, 2016, 2017, 2018 & 2019: 17%
71
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Notes to the Financial Statements (continued)
Year ended 31 March 2020
32. Pensions arrangements (continued)
Reconciliation of opening and closing balances of the present value of the defined benefit obligations
Defined benefit obligation at start of period
Interest cost
Actuarial (gains)/losses
Past service cost
Benefits paid
Defined benefit obligation at end of period
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
Fair value of Plan assets at end of period
UK equities
Other investments
Total plan assets at end of period
31 March
2020
£’000s
31 March
2019
£’000s
21,177
21,448
497
(8)
16
(932)
516
77
106
(970)
20,750
21,177
31 March
2020
£’000s
31 March
2019
£’000s
13,774
13,529
328
(168)
733
(932)
350
518
347
(970)
13,735
13,774
2,210
11,525
2,667
11,107
13,735
13,774
The actual return on the Plan assets over the period ended 31 March 2020 was £(82)k (2019: £868k).
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 (loss)/gain on the Plan assets
Experience gains arising on the Plan liabilities
Actuarial (loss)/gain on the Plan liabilities arising from changes in demographic assumptions
Actuarial gain/(loss) on the Plan liabilities arising from changes in financial assumptions
Change in the effect of the asset ceiling / IFRIC14
Total amount recognised in Statement of Other Comprehensive Income
31 March
2020
£’000s
31 March
2019
£’000s
497
(328)
169
16
185
516
(350)
166
106
272
31 March
2020
£’000s
31 March
2019
£’000s
(168)
–
(151)
143
(921)
(1,097)
518
427
436
(940)
–
441
72
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 32. Pensions arrangements (continued)
Assets
UK equity
Overseas equity
Absolute return fund
Corporate Bonds
Gilts
Multi-Asset Funds
Property
Cash
Alternative assets
Total assets
31 March
2020
£’000s
31 March
2019
£’000s
31 March
2018
£’000s
2,210
2,667
–
1,522
2,746
3,112
3,927
–
218
–
–
1,013
2,699
3,137
4,055
–
203
–
1,511
2,952
3,136
1,105
945
–
83
1,122
2,675
13,735
13,774
13,529
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
31 March
2020
£’000s
31 March
2019
£’000s
31 March
2018
£’000s
31 March
2017
£’000s
2.70
–
2.30
2.70
3.20
2.20
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
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 2020 and then making appropriate adjustments for known experience and for differences in assumptions.
The mortality assumptions adopted at 31 March 2020 and 31 March 2019 imply the following life expectancies from age 65:
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
The weighted–average duration of the defined benefit obligation at 31 March 2020 was 15 years (2019: 15 years).
31 March
2020
21 years
23 years
22 years
25 years
31 March
2019
21 years
23 years
22 years
24 years
73
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD 32. 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
Effect of asset ceiling / IFRIC14
(Deficit) in scheme
Experience adjustment on scheme assets
Experience adjustment on scheme liabilities
12 months
ended
31 March 2020
£’000s
12 months
ended
31 March 2019
£’000s
13,735
(20,750)
(921)
(7,936)
(168)
–
13,774
(21,177)
–
(7,403)
518
427
12 months
ended
31 March 2018
(restated)*
£’000s
13,529
(21,448)
–
(7,919)
(232)
–
12 months
ended
31 March 2017
£’000s
12 months
ended
31 March 2016
£’000s
13,946
(21,319)
–
(7,373)
652
(103)
15,013
(21,094)
–
(6,081)
(1,122)
–
* 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:
Discount Rate
RPI Inflation
Assumed Life expectancy
Reasonably
Possible
Change
(+/- 0.5%)
(+/- 0.5%)
(+/-) 1 Year
Obligation
Increase
Obligation
Decrease
8%
3%
4%
7%
3%
4%
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.
74
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALS 33. Assets held for sale
Following the sale of the trade and assets of Real Good Food 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.
As such, the asset is classified as held for sale within the consolidated statement of financial position at 31 March 2020.
Following the restructure of the RGF Group Head Office, the property at Wavertree, Liverpool is no longer required, with remaining staff
relocating to the Crown Street property. The property is currently advertised for sale. The asset is within the Head Office operating
segment. An impairment has been made in the accounts of £287k on classification of the asset as held for sale, to reduce the carrying
value to the amount at which the property is being marketed.
The asset is classified as held for sale within the consolidated statement of financial position at 31 March 2020
Property in Wavertree, Liverpool
Property near Bristol
Total assets held for sale
31 March
2020
£’000s
1,000
148
1,148
31 March
2019
£’000s
–
148
148
34. Contingent liability
The Group has received communication from the liquidators of Five Star Fish (FSF) claiming repayment of £610k in relation to a debt
allegedly owed by RGF to FSF. Having taken legal advice, the Directors are of the view that this is not a valid claim against the Company and
accordingly no provision has been made within the accounts.
A legal claim has been received by RGF from a third party. Having taken legal advice, the Directors consider the claim to be spurious and
accordingly no provision has been made within the accounts.
35. Post-year end activities
1. An increase in the Leumi revolving credit facility was agreed on the 28 July 2020, increasing the facility by £2m, taking the overall facility
to £10.87m. This action formed part of the covid-19 response to cash management. The funding was against Brighter Foods debtors.
2. Mike Holt, Non-Executive Chairman of the Company agreed to become the Executive Chairman of the Group from the 21 October 2020, a
position he previously held following the departure of Hugh Cawley in September 2019. This change reflects the increased work being
undertaken since the departure of Paul Richardson in 6 April 2020.
3. Amendment to shareholders’ Agreement: on the 19 October 2020 RGF announced that it has entered into a Deed of Amendment
amending the terms of the shareholders’ agreement dated 4 April 2017 (the “SHA”) between, amongst others the Group and the
“Minority Shareholders” that regulates their relationship in relation to Brighter Foods Limited - the Group holds 84.34% and the Minority
Shareholders hold 15.66% of the issued share capital of Brighter Foods. The Board of RGF believe that the Deed is in the best interest of
all stakeholders as it reduces the immediate cash outflow of the Group and aligns the interests of the Minority Shareholders (who form
part of the core management team of Brighter Foods) with RGF in improving earnings and ultimately maximising the value of the business
to RGF. Under the terms of the SHA, a put option pursuant to which the Minority Shareholders can compel the Group to acquire 50% of
the Minority Interest has become exercisable (the “2020 Option”). The price to be paid by the Group based on EBIT and cash flows of
Brighter Foods for the year ended 31 March 2020 is approximately £2.8m. Pursuant to the Deed the Minority Shareholders have agreed,
to forego their right to exercise the 2020 Option, with the SHA being amended such that the Minority Shareholders will now have a put
option over the whole of the Minority Interest exercisable following the agreement of the audited accounts of Brighter Foods for the year
ending 31 March 2021. The Group retains its call option over the whole of the Minority Interest, exercisable should the 2021 Option not
be exercised. In consideration for the changes to the SHA being made by the Deed, the Group has agreed to pay the Minority
Shareholders £1.0m on the date the Deed is entered into and a further £500,000 on 20 November 2020. The outstanding balance of
the 2020 Payment, approximately £1.3m, has been deferred until the exercise of the 2021 Option. Interest becomes payable on the
£1.3m at the rate of 10% from March 2021.
4. The Company’s three major shareholders, NB. Ingredients Limited (“Napier Brown”), Omnicane International Investors Limited
(“Omnicane”), and certain funds managed by Downing LLP (“Downing”) (together the “Major Shareholders”), have finalised an
amendment deed relating to the funding agreements. The Agreements have been amended such that the final repayment dates of each
of the Agreements have been extended to 19 May 2022 (the “Final Repayment Date”) with no change to the interest rate payable by the
Company pursuant to each Agreement. In addition, the Amendment Deed amends the convertible loan notes (“CLNs”) such that the
minimum annual return on the CLNs will reduce from 30% per annum to 12% per annum, effective from 31 December 2020. Amounts
due in respect of the period up to, and including, 31 December 2020 remain unchanged. For avoidance of doubt, the redemption
premium on the Loan Notes instruments remains payable at 15%. As part of entering into the Amendment Deed the Company has
undertaken that it will not enter into any transaction (or transactions in aggregate) that would result in a fundamental change of
business of the Company without the prior consent of each of the Major Shareholders. This obligation would cease in the event of the
repayment of the outstanding facilities with the Major Shareholders.
75
OUR FINANCIALSwww.realgoodfoodplc.com Stock Code: RGD Advisors and Company Information
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
Directors
M J Holt
M Keeling
J M d’Unienville
A P Ridgwell
J A Mackenzie
G Lumsden
Company Secretary
M Keeling
Registered Office
61 Stephenson Way
Wavertree
Liverpool
L13 1HN
Registered Number
04666282
Auditor
BDO LLP
3 Hardman Street
Spinningfields
Manchester
M3 3AT
76
7676
OTHER INFORMATION
Annual Report and Accounts for the year ended 31 March 2020
Annual Report and Accounts for the year ended 31 March 2020OUR FINANCIALSAnnual Report and Accounts for the year ended 31 March 2020OTHER INFORMATION 77IBC
www.realgoodfoodplc.com Stock Code: RGDOTHER INFORMATIONwww.realgoodfoodplc.com Stock Code: RGD