A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
F
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
1
S
t
o
c
k
c
o
d
e
:
R
G
D
Annual Report and Accounts
For the year ended 31 March 2021
Stock code: RGD
30678 Real Good Food AR2021.indd 3
30678 Real Good Food AR2021.indd 3
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:15
20/09/2021 21:02:15
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
31
32
33
34
35
36
37
38
77
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
STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 3
30678 Real Good Food AR2021.indd 3
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:16
20/09/2021 21:02:16
STRATEGIC REPORT
Overview
Financial highlights
{ Revenue from continuing businesses decreased by 9.5% to £37.3 million (2020:
£41.2 million), in a year affected by covid-19.
{ The Group delivered an adjusted underlying EBITDA* on continuing businesses of
£0.2 million (2020: loss of £1.6 million), despite the impact of covid-19 on the
continuing business.
{ Cake Decoration, the Group’s continuing business, was profitable (before
depreciation, amortisation and significant items) and generated an adjusted EBITDA*
of £0.8 million (2020: £1.8m).
{ Central costs reduced significantly by £2.9 million to £0.6m (2020: £3.5 million).
{ Net debt significantly reduced post year end, following the sale of Brighter Foods in
May 2021:
− Year-end net debt of £48.8 million (2020: £45.4 million).
− Following the sale of Brighter Foods, net debt was reduced by £26.4m.
{ The Board renegotiated interest rates on convertible loan notes to a simple 12%
per annum with effect from 1 January 2021, and in September 2021 extended the
redemption dates to 2023.
{ The shareholder loans were extended in September 2021 to be repayable in
May 2023.
Operational highlights
{ Brighter Foods was sold to The Hut Group (THG) on 11 May 2021 for a cash
consideration of £43 million. The sale price broadly equated to 8.6 times
FY20 EBITDA and 11.7 times (unaudited) EBITDA for the 12 months ended
31 March 2021.
{ Cake Decoration (trading under the brand names of Renshaw and Rainbow Dust
Colours) demonstrated an ability to win new business from its streamlined cost base:
− Launched 66 new products in the year with in-year revenues of c. £1.6 million
and secured an important new blue-chip customer.
− Improved year-on-year frosting revenues by 17%, following investment in its soft
icing plant in this growing market.
Current trading
{ Group revenues and profit are in line with Board expectations, and ahead of
pre-pandemic levels (FY20), for the first five months of the new financial year, with
good retail and international sales.
{ Performance (underlying increased margins and increased revenues) achieved
despite the recent logistics challenges seen across the UK economy.
{ Cake Decoration has a solid foundation to launch more innovative products whilst
working with customers to maximise its sales opportunities.
{ Renshaw continues to win industry recognition, having been shortlisted in The
Grocer, New Product Awards 2021, for its Luxury Bakers Caramel and Silver Shimmer
Icing Kit.
{ The Board remains focussed on reviewing all initiatives to continue to improve the
capital structure of the Group; including the intention to delist the Group from AIM to
save costs and provide greater agility and flexibility to maximise shareholder value.
* Underlying adjusted EBITDA (see note 5)
1 Kantar 52-week YOY to March 21st, 2021
GROUP
REVENUE
£37.3m
2020
£41.2m
GROSS
PROFIT
£15.2m
2020
£17.6m
GROUP EBITDA
(adjusted)
£0.2m
2020
£(1.6)m
Financial information presented
relates to continuing operations.
www.realgoodfoodplc.com Stock Code: RGD
01
30678 Real Good Food AR2021.indd 1
30678 Real Good Food AR2021.indd 1
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:16
20/09/2021 21:02:16
The Group in Summary
Real Good Food now has one division, Cake
Real Good Food now has one division, Cake
Decoration, comprising two businesses, following
Decoration, comprising two businesses, following
the sale of Brighter Foods in May 2021.
the sale of Brighter Foods in May 2021.
The businesses
The businesses
Cake Decoration, Renshaw and Rainbow Dust, has its own infrastructure and management
Cake Decoration, Renshaw and Rainbow Dust, has its own infrastructure and management
teams. The business generally has the resources to operate as a stand-alone unit, but
teams. The business generally has the resources to operate as a stand-alone unit, but
is able to call upon the centre as required.
is able to call upon the centre as required.
Discontinued Operation
Discontinued Operation
Food Ingredients is classed as a discontinued operation in the accounts for FY21 owing to
the sale on 11 May 2021 of Brighter Foods Limited.
Head Office
Head Office
Central functions comprise only Finance, in addition to the plc Board.
REVENUE
£37.3m
2020: £41.2m
EBITDA Profit
(adjusted)*
£0.8m
2020: £1.8m
OPERATING Profit (LOSS)
£(1.7)m
2020: (£13.4)m
EMPLOYEES
323
2020: 339
HEAD
OFFICE
EBITDA
(adjusted)*
£(0.6)m
2020: (£3.5)m
OPERATING Profit
£0.4m
2020: (£4.0)m
EMPLOYEES
4
2020: 4
Read more on page 07
Read more on page
*See note 5 for reconciliation
02
STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 2
30678 Real Good Food AR2021.indd 2
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:17
20/09/2021 21:02:17
STRATEGIC REPORT
Renshaw manufactures sugarpaste, marzipan, soft icings, mallows, and caramels and sells across a broad range of sales channels: mainstream
and specialist retail, wholesale, and food manufacturing as well as exports, primarily to America. Rainbow Dust Colours produces a range of
edible glitters, dusts, powders, and food paints, brushes, and pens for the specialist sugarcraft sector. Renshaw Europe sells, markets and
distributes both Renshaw and Rainbow Dust products across Continental Europe.
Renshaw: Liverpool, 302 employees
Rainbow Dust Colours: Preston, 18 employees
Renshaw Europe: Europe, 2 employees
Renshaw Americas: New Jersey, 1 employee (now closed)
(Discontinued operations)
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, 216 employees
www.realgoodfoodplc.com Stock Code: RGD
03
30678 Real Good Food AR2021.indd 3
30678 Real Good Food AR2021.indd 3
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:18
20/09/2021 21:02:18
Chairman’s Statement
Overview
As for most companies, the year to
31 March 2021 was a period of
unprecedented uncertainty and challenges
due to covid-19 and Brexit. There were three
national lockdowns and restrictions on public
gatherings impacting revenues and
productivity within both the Group’s
businesses. The priority for the Group during
this period was to conserve cash and to
keep employees safe and healthy, both
physically and mentally. The Group’s
continuing businesses claimed £1.2m
(continuing and discontinued businesses:
£1.7m) under the Government’s Job
Retention Scheme and at its peak 254
employees (48% of staff) were on furlough.
Despite these conditions, it is pleasing to be
able to report that the Group has continued
to progress and to restore shareholder
value.
Our plan for the financial year was to
accelerate operational changes made within
Renshaw and to generate revenue growth
from new products and better customer
service delivery. Whilst not immediately
apparent from our financial results, due to
covid-19 and post Brexit disruption, the
Group has continued to improve and is
moving forward with further operational
improvement initiatives within Renshaw and
Rainbow Dust Colours. In particular, the
management team is leveraging our heritage
brand through new and exciting product
innovation and customer service. New
product launches have been made with
Marks and Spencer, Tesco, Asda, Aldi and
more recently with Lidl.
New product revenues from the launch of
66 new products, accounted for 7.6%
(£1.6 million) of sales last year for Cake
Decoration. Currently there are 413 new
products in various stages of development.
This is important given that the sugar paste
market is in gradual decline and the demand
for marzipan is not growing.
The plan for the year was also to leverage
investments made during FY20 within
Brighter Foods.
Shortly after year end, we sold Brighter
Foods Limited to The Hut Group for
£35.6million which valued the business
at £43million. Given the high value of
indebtedness of the Group, due to some
poor acquisitions in the past, the current
Board had been minded to dispose of
Brighter Foods at the right value. The timing
of the sale coincided with the end of the
lock-in period of the Chief Executive Officer
and Founder of Brighter Foods. At £43 million,
the sale represented 8.6 times annualised
FY20 EBITDA and 11.7 times (unaudited)
FY21 EBITDA.
The sale enabled us to effectively halve
the level of shareholder loans (from
£45.6 million to £22.0 million) and to
eliminate the pension scheme deficit (by the
injection of £8.5 million into the scheme’s
assets).
Dividend
As with previous years, the Board is not
recommending the payment of a dividend for
the year. The focus is on reducing the level
of debt and investing in Renshaw and
Rainbow Dust Colours to deliver the best
possible returns for shareholders.
Corporate Governance
The Group is governed through the Board
and its Audit Committee and Remuneration
Committee. The Board is very conscious of
its related party connections and dealings.
As appropriate, myself, Gail Lumsden (Senior
Independent Non-Executive Director) and
Maribeth Keeling (Chief Financial Officer)
meet independently of the Board to discuss
matters concerning Loan Note Holders and
major Shareholders.
Strategy
The Group’s strategy is set out in more detail
later in the Strategic Review. But in
summary, the aim is to maximise value for
shareholders by leveraging productive
capacity by growing revenue (through product
innovation and new customers) and
improving operational performance. The
Group is open to divesting parts of the
remaining and continuing businesses for the
right value at the right time. The Group has a
valued heritage and the strategy is to
leverage this with new products and class
leading service.
De-listing
As stated at the time of announcing the sale
of Brighter Foods Limited on 22 April 2021,
the Board has been considering all options
to save costs and to return shareholder
value. At the AGM, the Independent
Directors, with the support of the rest of the
Board, will be proposing that the Company
cancels the listing of the Company’s shares
on AIM. This will save approximately
£150,000 a year in costs and provide
greater agility and flexibility to maximise
shareholder value. The volume of shares
traded is very small and an AIM listing adds
a disproportionate expense and burden on
the Company. The Company has arranged for
a matched bargain facility to be in place by
JP Jenkins.
Outlook
Since year-end, the Group has seen a pick-up
in revenues across every sector. After five
months of trading, revenues are 33% up on
the same period last year and, more
importantly, 1.3% ahead of the first five
months of FY20. FY22 year-to-date EBITDA is
a profit, trading ahead of FY21 EBITDA and
FY20 EBITDA; this is particularly pleasing
given the short-term challenges and
increased costs of logistics due to driver
shortages and limited availability of shipping
containers.
Prospects for the remainder of the year are
good and the Board is confident of reporting
further progress. It’s also encouraging to note
that the business is being recognised for its
innovation and quality of new products.
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
20 September 2021
04
STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 4
30678 Real Good Food AR2021.indd 4
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:19
20/09/2021 21:02:19
The turnaround of the Cake Decoration
business continued in FY21, with overhead
restructuring being expedited during the year.
Overheads are now significantly reduced: the
business has restructured the engineering
function to meet the demands of the
business with maintenance being
undertaken outside of production periods.
Additionally, there are a number of initiatives
ongoing within the Cake Decoration business
to improve profitability. The Cake Decoration
business has reviewed the overseas
businesses improving the customer
experience. In America, the warehouse was
closed during the year and the customers
are now serviced directly from the Liverpool
site. Cake Decoration is working with a
distributor in Europe for its smaller
customers, thereby improving the customer
experience. There are also a range of other
options being evaluated to enhance returns
from this business. One key opportunity for
sales growth has been in new product
development and customers: indeed
a review was undertaken of the current
products leading to the delisting of c.110
and introducing c.66 new products to
market, and a new blue-chip retailer was
also secured. Cake Decoration will continue
to evolve and look for opportunities to add
value to the business. Importantly, the Cake
Decoration infrastructure and operational
facilities are able to deliver the sales growth
and improved profitability that the Board
believe achievable.
The Group’s central resources are now
limited to finance and the plc board.
Opportunities are continually sought to
reduce these further, consistent with good
governance. The Group shareholder debt
remains significant; the debt, however, was
reduced by £23.6m following the sale of
Brighter Foods, and the interest rates on the
loans were reduced from 1 January 2021.
The interest burden, almost all of which is
rolled-up, will remain for the foreseeable
future.
31 March
2021
£’000s
31 March
2020
£’000s
Loss before taxation of continuing businesses
(6,108)
(23,060)
Depreciation of property, plant, and equipment
Impairment charge
Amortisation of intangibles
Significant items
Finance costs
Other finance costs
EBITDA (adjusted) Profit
1,639
–
52
(203)
4,665
182
227
1,708
12,909
159
1,022
5,445
169
(1,648)
STRATEGIC REPORT
Strategic Review
2020/21 performance
The report includes Cake
Decoration as the continuing
business.
Overall revenue from continuing businesses
decreased from £41.2 million to £37.3
million, a decrease of £3.9 million (9.5%)
within Cake Decoration. The business was
impacted by covid-19 with overall revenues
down in the first half of the year by 23%
versus FY20 and recovering in the second
half of the year by 3% versus FY20.
The majority of the revenue decline was in
the Group’s first quarter (which coincided
with the first UK lockdown) and
predominantly in the Wholesale and
Manufacturing sectors which were down by
£2.5m (-9%), International revenues were up
year on year with Europe broadly in line, and
the US with a year-on-year increase of £1.1m
(+18%). The International sector also had
challenges with its export logistics including
the global shortage of containers and the
impact of border controls owing to Brexit.
The UK came under pressure owing to the
declining market for sugarpaste (-8.4%),
however, UK Cake Decoration sales of
sugarpaste outperformed the market by
2.4% in the year. Frostings revenues rose by
17% versus FY20, which is a growing market
where Renshaw is developing and selling
premium products.
Retail, despite covid-19, saw revenues
increase by 7% year-on-year.
Brighter Foods business was sold in May
2021 for a consideration of £43m. Brighter
Foods is included as a discontinued
operation in the FY21 accounts. The
decrease in revenues of 21.9% versus prior
year within Brighter Foods reflects the impact
of covid-19 and the closure of the ‘food on
the go’ and health food market. Brighter
Foods’ largest customer had to close its
doors in March 2021 in line with the
government covid-19 guidance and had
limited sales in the year.
Both businesses used the government job
retention scheme claiming £1.7m in total
(£1.2m in Cake Decoration). Food
Ingredients maintained operating profit as a
result of reduced operating costs. In Cake
Decoration, underlying adjusted EBITDA
decreased from £1.8 million in 2020 to £0.8
million in 2021, due to the covid-19 impact
which reduced revenues, partly offset by the
lower overhead costs and the furlough
income of £1.2m.
www.realgoodfoodplc.com Stock Code: RGD
05
30678 Real Good Food AR2021.indd 5
30678 Real Good Food AR2021.indd 5
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:19
20/09/2021 21:02:19
Summary and Outlook
We believe we have the leadership, the
senior management, and the resources
capable of delivering a further uplift in
performance in the Cake Decoration
business, and a central cost base that is
more fit for purpose. The Board continues to
evaluate a range of options, to maximise
shareholder returns.
The country came out of the lockdown period
in July 2021, and the business was and
continues to be positioned to take
advantage of the sales opportunities in new
sectors and new innovations with a
refocussed sales and marketing team. The
Board continues actions to generate and
conserve cash. The Group remains focused
on continuing to improve its performance,
reduce net debt further 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 evident in
the underlying business. The Board is
confident in the future prospects of the
Group.
Strategic Review (continued)
Capital structure
The Group manages the capital
structure and reviews the
requirements in response to
economic conditions.
The Group has a total credit facility of £8.87
million with Leumi ABL Limited. The facilities
comprise of a £5.45m revolving credit facility
and a £1.3m term loan both on 60 months
ending August 2024. There is also a
£2.12m plant and machinery facility on 36
months ending August 2022. During the
year, the business increased the credit
facility by £2.0 million secured on the
Brighter Foods’ sales. On the disposal of
Brighter Foods, this facility was cancelled.
The maximum draw down value during FY21
occurred in December 2020, being £2.3m
(FY20 occurred in September 2019, being
£2.0m). The lowest month in FY21 was July
2020, being £0.4m (in FY20 it 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 and the presence
of bank debt, the Group was restricted to
asset-backed finance held by J F Renshaw
and its revolving credit facility. As at 31
March 2021 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.
Operating performance
and outlook
Given the impact of covid-19 on the FY21
results, the business has set budgets for
FY22 based on FY20.
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. To date, the sales
performance of the continuing business is in
line 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 Group is working to ensure that both
businesses have a strong sustainable base
to capitalise on opportunities that may arise
from the current environment. Brexit and
covid-19 caused some uncertainties in FY21,
however the expectation is that logistics of
moving goods to Europe will ease during
FY22.
After a particularly challenging year in the
period to 31 March 2021, where employees
and all stakeholders have experienced
situations never seen before, the Board
wishes to thank all the Group’s and
businesses’ stakeholders for their
understanding and continued support.
Although covid-19 did impact FY21, the
Group sales performance in quarter 4 FY21
was ahead of the pre covid-19 sales.
Group strategy
The Board’s strategy is to have a profitable
cash generative business. Cake Decoration
has a new invigorated strategy for the
business. The outturn from FY21 has shown
a year-on-year increase in revenues for the
fourth quarter and this has continued into
FY22. The changes made by Cake
Decoration in the last couple of years have
provided the business with a platform to
concentrate on what it is good at. The
outsourcing of the warehousing and
distribution to a third-party provider
continues to result in improvements in
customer service. The New Product
Development (NPD) and Marketing teams
continue to drive focus on innovation and
sales growth, and secured a new blue chip
customer and delisted c. 110 and brought to
market c. 66 new products in the year.
Central resources are now limited to finance
and general management.
06
STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 6
30678 Real Good Food AR2021.indd 6
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:19
20/09/2021 21:02:19
STRATEGIC REPORT
Marketplace Review
The Group operated in two main divisions: Cake Decoration and Food
Ingredients, in FY21. However Brighter Foods, the Food Ingredients
business was sold in May 2021 and is classed as a discontinued operation
in FY21 accounts. Our brief perspective on the major trends in the
continuing business follows.
The Group’s Cake Decoration division
comprises, Renshaw in the UK, Europe and
Rainbow Dust Colours.
The home baking category is worth £1,136
million at RSP (Retail Selling Price). The
category is in growth by 22%, with 94% of all
households purchasing home baking in the
last year. The baking category in which Cake
Decoration trades is worth £587 million* at
RSP (Retail Selling Price). The category is in
growth by 23%, with 86% of all households
having purchased home baking products in
the last year*.
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 several million people tuned
in to 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 are
investing in bringing innovation to the
market, leading new trends in the cake
decorating sector and engaging the home
baker with new ideas through digital
channels to educate and inspire new and
experienced cake decorators of all levels.
Cake Decoration are working with a
well-known cake decorator on their own label
range for Rainbow Dust Colours to be
launched in FY22.
* 52 week ending Kantar data 21 March 2021
www.realgoodfoodplc.com Stock Code: RGD
07
30678 Real Good Food AR2021.indd 7
30678 Real Good Food AR2021.indd 7
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:19
20/09/2021 21:02:19
Divisional Business Review
During the year, further changes have been
made to the overhead structure to reduce
costs and focus on customer service.
Renshaw remains a strong brand in the
sector.
Further work and efforts will continue
throughout FY22 to refresh existing
products, develop new products, bring new
customers on board and streamline our
sales and operational processes.
Forward plans
The business continues to pursue a growth
strategy focused on increased supply of
everyday convenience products under its
own and customers’ brands. The investment
in the soft icings plant saw frostings grow
year on year in FY21, and all indications
including customer feedback suggest this is
expected to continue in FY22. Export growth
continues to be focused on North America
where the company has identified the
greatest potential to grow sales. Following
the successful closure of the US based
warehouse in FY21, with sales now being
shipped directly from the factory in Liverpool
to the US, this has streamlined the process
and improved customer service. The
business continues to implement
operational changes including the
restructure of the engineering function to
carry out planned maintenance outside of
production hours and improvements to the
factory planning system. These changes 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
remained open during the lockdown period.
Our priority is the safety of our staff whilst
supplying our customers with the quality
product. All required changes to meet
covid-19 requirements have been carried out
at the sites. Going forward the expectation is
that there will be no further lockdown
periods and no covid-19 restrictions such as
social distancing, that impacted the financial
performance of the Group in FY21.
12 months to March
Revenue
EBITDA (adjusted)*
Impairment charge
Operating (loss)
Operating (loss)%
2021
£’m
37.3
0.8
–
(1.7)
(4.6%)
2020
£’m
41.2
1.8
(12.6)
(13.4)
(32.5%)
* See note 5 for reconciliation
2 Kantar 52-week YOY to March 21st, 2021
REVENUE
37.3m
EBITDA Profit
(adjusted)*
£0.8 m
OPERATING
LOSS
£(1.7)m
2020/21 Performance
FY20/21 was due to be a transitional year
for the Cake Decoration division, with a
significant restructure taking place in FY20
and the benefits expected to be seen in
FY21. However, with three lockdown periods
in the financial year, significantly impacting
sales and EBITDA versus FY20. The FY21
result for Cake Decoration showed revenue
progress in new product launches and a new
blue-chip customer, however this was
overshadowed by the shortfall in the
wholesale and manufacturing sectors, both
of which saw their customers having to close
during the lockdown period. The second half
of the year saw total revenues increase by
3% versus FY20. This is significant because
even though the UK sugarpaste market
declined by 8.4%2, the UK sugarpaste
revenues only declined by 6% and sales of
sugarpaste in the second half of the year
were up on the previous year by 12%.
Renshaw’s performance outperformed the
underlying market decline. Retail despite
covid-19 saw revenues increase by 7% year
on year. The investment in the soft icing
plant has resulted in year-on-year improved
revenues of 17%, and this is expected to
continue to grow in FY22 as frostings and
other soft icing products are becoming
increasingly popular due to their ease of use
for the novice baker and decorator. Although
still slightly behind, sales in the wholesale
and manufacturing sectors had growing
momentum in the final quarter. The
International market is an important market
for Cake Decoration; in FY20 we signed an
exclusive agreement with the largest
distributor of cake supplies in the US,
Decopac, to help the Cake Decoration
business grow market share in the US
market. Despite covid-19, the revenues from
Decopac increased by 25% year-on-year with
further growth expected in FY22. Renshaw
Europe recovered from the lockdown period
with a good sales performance in the second
half of the year. As part of the Cake
Decoration strategy, Renshaw Europe
appointed a distributor to service the smaller
customers in Europe improving the customer
service.
08
STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 8
30678 Real Good Food AR2021.indd 8
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:20
20/09/2021 21:02:20
STRATEGIC REPORT
12 months to March
Revenue
EBITDA (adjusted)*
Operating profit
Operating profit %
*See note 5 for reconciliation
2021
£’m
19.8
3.6
2.6
2020
£’m
25.3
5.0
2.9
13.1%
11.5%
REVENUE
£19.8m
EBITDA Profit
(adjusted)*
£3.6m
OPERATING
profit
£2.6m
2020/21 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,
and even before recent expansion was 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 is classed as a discontinued
operation in the FY21 accounts owing to the
sale to The Hut Group plc in May 2021.
Forward plans
Brighter Foods was sold to The Hut Group
(THG) on 11 May 2021 for a consideration
of £43m.
www.realgoodfoodplc.com Stock Code: RGD
09
30678 Real Good Food AR2021.indd 9
30678 Real Good Food AR2021.indd 9
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:20
20/09/2021 21:02:20
12 months to March
2021
£’000s
2020
£’000s
Revenue
37,292
41,243
Gross profit
15,164
17,628
Delivered margin
11,549
14,633
Delivered margin %
31.0%
35.5%
Underlying EBITDA
(adjusted)*
Operating (loss)
before impairment
and significant items
Operating loss after
impairment and
significant items
227
(1,648)
(1,464)
(3,515)
(1,261) (17,446)
Operating loss %
(3.4%)
(42.3%)
Loss before tax
(6,108) (23,060)
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 2021 is
£37.3 million (2020: £41.2 million), a
decrease of 9.5% on revenue to
31 March 2021. Cake Decoration sales were
impacted by covid-19, particularly in quarter
1, the initial lockdown period. Wholesale and
manufacturing sectors were most affected
with many of their customers having to close
their operations. The sales recovered in the
second half of the year with revenues ahead
of H2 FY20 by 2.5%, retail revenues were 7%
ahead of the previous year and the Wholesale
and Manufacturing sectors gained momentum
in the fourth quarter, although both sectors
revenues were down on the prior year.
Profit measure on operations
Gross profit on the continuing businesses for
the overall Group was £15.2 million (2020:
£17.6 million). At 40.7%, the gross profit in
the year, was adverse to the prior year by
2%, owing to the sales mix and the effect of
covid-19 including the costs associated with
social distancing in the factory. Delivered
margin is defined as gross profit less costs
of delivery.
The operating loss in the year of £1.3 million
is reported after depreciation and
amortisation charges of £1.7m, significant
items benefit of £0.2m and a furlough
payment received of £1.2m. The benefit in
the significant costs arises from the
revaluation of the Brighter Foods put option
of £1.3m; the other significant costs are
£1.1m which relate to the restructuring in
the Cake Decoration business.
The adjusted EBITDA of the underlying
continuing business is £0.2m.
The items adjusted for are:
Significant Items:
£(1.1)m
Revaluation of Brighter Put Option
£1.3m
There has been no requirement for an
impairment charge on goodwill or fixed
assets in FY21. The Board, having
considered the trading forecasts, have
reasonable expectations that the recoverable
amount would support the value in the
accounts.
After finance costs of £4.8 million, this
resulted in a loss before tax for the year of
£6.1 million (2020: loss of £23.1 million)
for continuing businesses. This equates to a
basic loss per share of 6.50 pence on
continuing operations (loss of 22.14 pence
in 2020), (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 and European lockdown in
March 2021. The business modelling
included looking at varying levels of
revenues and the effect of movements on
cash planning to ensure appropriate action
was taken if required.
As part of the cash planning, the Group
increased the revolving credit facility by £2m,
to include Brighter Foods. This additional
facility was completed in August 2020, and
following the disposal of Brighter Foods in
May 2021, the additional facility was
removed.
The Group used the Government job
retention scheme (£1.2m in Cake
Decoration), and deferred PAYE payments
(£0.6m) to conserve cash during the
lockdown period. Repayments of the PAYE
have been made in line with the government
‘time to pay’ plan.
The net debt at the end of FY21 stood
at £48.8m versus £45.4m in FY20. This is
predominantly shareholder loans of
which £15.2m is in the form of convertible
loan notes.
Total
£0.2m
Net debt is a key performance indicator for
the Group and is explained in note 13.
The significant costs incurred relate to the
restructuring costs in the Cake Decoration
business and head office costs, and are for
redundancy costs, project costs and closure
costs associated with the warehouse in the
US. In Head Office, the costs are for legal
and financial costs associated with the
disposal of Brighter Foods and benefit from
a significant reduction in the provision for
the minority shareholders’ put option. The
number of indirect employees reduced year
on year by 17 across the business.
10
STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 10
30678 Real Good Food AR2021.indd 10
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:20
20/09/2021 21:02:20
STRATEGIC REPORT
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. The forecasts, agreed with the
business consider reasonable possible
changes in trading performance.
The forecast for FY22 for the continuing
businesses, is based on the national
lockdown restrictions being removed in July
2021. Some of the sectors we serve have
experienced growth during the covid-19
pandemic, namely retail and international.
The sectors most affected by the pandemic
owing to their customers having to close
their own businesses are wholesale and
manufacturing, these sectors are now
returning to pre covid sales. The new
customers and product launches during
FY21 will have a full year impact in FY22.
The overhead savings and operational
efficiencies made in FY21 will have a full
year impact in FY22.
The Board consider the forecasts to be
reasonable and these assumptions have
been projected.
The Board reviewed the sensitivity of the
sales and have modelled the effects of
these.
The Directors considered the following
scenarios:
Scenario 1:
Reduction in revenue of 5% all year; and
Scenario 2:
Reduction in revenue of 5% and the gross
margin reduced by 10% all year.
In Scenario 1 without any mitigating action
the Group will not run out of cash and will
have sufficient liquidity headroom with the
low point for cash being September 2022
when cash would reduce to £2.1million as a
result of the stock build for quarter 3,
(October to December).
In Scenario 2 without any mitigating action
the Group would run out of cash in May
2022, some 14 months from the monthly
reduction in revenue and gross margin from
the start of FY22. If there was a reduction in
gross margin of 10%, this would be as a
result of commodity price increases that
would be passed onto customers. The
mitigating action would be taken quickly and
would result in a price increase to
customers, with a time lag factored in as
negotiations took place with customers. A
prudent approach of a 75% recovery in FY22
would result in the business not running out
of cash with the low point for cash being
September 2022 when cash would be
£1.3million, owing to the stock build.
The Group has various levers that it can use
to mitigate the shortfall including:
{ Cessation of non-essential spend
{ Review of overhead costs
The banking covenants that are in place for
FY22 have been amended taking into
account the seasonality of the Cake
Decoration business.
The covenants for FY22 are EBITDA being
within 75% of the forecast and greater than
£5 million tangible net worth. These
covenants are not breached on the stressed
scenarios referred to above.
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 19 May 2022 to 19 May
2023.
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.
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 2021 of
£7.5 million (2020: £7.9 million). The Plan
assets increased by £0.8 million to
£14.5 million (2020: £13.7 million) and the
Plan liabilities are £21.9 million compared
to £20.8 million at 31 March 2020.
Following the sale of Brighter Foods on the
11 May 2021, a payment of £8.5 million was
made to the Napier Brown Retirement Plan
eliminating the current pension scheme
deficit liability.
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 2021
(2020: nil).
www.realgoodfoodplc.com Stock Code: RGD
11
30678 Real Good Food AR2021.indd 11
30678 Real Good Food AR2021.indd 11
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:20
20/09/2021 21:02:20
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.
£37.3m
£41.2m
£46.4m
£47.7m
2021
2020
2019
2018
COMMENT
Revenue in the year decreased by 9.5% (FY20
decreased by 11.2%) This was primarily driven
by covid-19 and the underlying decline in the
sugarpaste market. Cake Decoration
outperfromed the sugarpaste market. 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.
£0.2m
£(0.9)m
£(1.6)m
2021
2020
2019
2018
£(4.0)m
The EBITDA (adjusted) profit was £0.2 million
as against a loss in the prior year of
£1.6 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.
£48.8m
£45.4m
£35.7m
£37.8m
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.
2021
2020
2019
2018
214.98
(27.38)
2021
2020
(37.82)
2019
(9.48)
2018
1.16
1.00
1.00
1.74
2021
2020
2019
2018
Net debt in the year has increased to
£48.8 million (FY20 £45.4m); net debt is
predominantly shareholder loans. Following the
sale of Brighter Foods shareholder loans were
reduced by £23.6m to £22.0m
As a result of increased EBITDA (adjusted)
profits in the year net debt cover stood at
214.98 at the end of FY21 and 85.67 following
the sale of Brighter Foods. Covid-19 had a
significant impact on EBITDA The Group
measures the changes on debt cover year on
year.
A higher number denotes a higher risk. The
number of RIDDOR accidents in FY21 was 5, on
par with FY20. The target for RIDDOR accidents
is nil. This has not been achieved; however, the
Group continues to invest in training to further
reduce accidents and will continue to support
the businesses to achieve the target.
12
STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 12
30678 Real Good Food AR2021.indd 12
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:21
20/09/2021 21:02:21
STRATEGIC 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. Embracing
its corporate social responsibility to its stakeholders and within its
communities is therefore an important part of building long term
sustainable businesses in the Group.
2021/22 Priorities
{ We continue to maintain and improve our
legal compliance and health and safety
performance. An appropriate periodic
audit process is being implemented to
help ensure improving standards in this
important area.
{ Targeting a further year on year reduction
in the number of incidents.
{ Continue to work and support the local
communities.
Each business has a Corporate Social
Responsibility Plan that is built around the
Group’s Responsible Business Framework
and is actively engaged in its fulfilment.
The Responsible Business Framework in
place 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.
During the year it has been more difficult to
engage with the community owing to
covid-19 and employees having to work
from home. However, J F Renshaw and
Rainbow Dust donated £1,250 to the local
foodbanks in Preston and Liverpool.
As a small recognition of the work carried
out by the NHS, Cake Decoration made
cup-cakes for the NHS workers at the
Liverpool Women’s Hospital.
Health and safety
Commentary 2020/21
The Board reviews the Health & Safety
reports of both businesses 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.
{ Renshaw hasa full-time Health & Safety
Manager. There has been a reduction in
the number of accidents and incidents
during the year reflecting the ongoing
training and improved processes taking
place in the business.
www.realgoodfoodplc.com Stock Code: RGD
13
30678 Real Good Food AR2021.indd 13
30678 Real Good Food AR2021.indd 13
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:21
20/09/2021 21:02:21
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.
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
20 September 2021 and is signed on its
behalf by:
Mike Holt
Executive Chairman
Risk Management
The risks facing the Group 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,
and over the past year has continued to
implement improvements in the Group’s
governance. 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.
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 as
a result of 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. Following Brexit, there has been
a period of uncertainty with logistics and the
transportation of goods through customs,
this has started to settle down as the
customs officials become more acquainted
with the documentation. 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.
Following the disposal of Brighter Foods, the
Group agreed a one-off payment with the
pension trustee of £8.5 million, effectively
settling the current deficit and having
c£1.5m on account. The pension fund is
undergoing the 3-year valuation and a new
payment plan will be agreed in due course
taking account of the £1.5m. 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.
14
STRATEGIC REPORT
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 14
30678 Real Good Food AR2021.indd 14
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:22
20/09/2021 21:02:22
GOVERNANCE REPORT
Board of Directors
Mike Holt Executive Chairman
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.
Appointed Non-Executive Chairman on 30 May 2019, having been
Non-Executive Director since joining the Board on 7 August 2018,
and appointed 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
Anthony Ridgwell Non-Executive Director
Appointed 15 July 2019
Appointed 30 May 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.
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.
Jacques d’Unienville Non-Executive Director
Gail Lumsden Non-Executive Director
Jacques has nearly 20 years’ experience of sugar and related
industries (independent power production, waste and environment
management and renewable energy) in France, the Seychelles and
Mauritius. He is the CEO of Omnicane and the chairperson of
Omnicane Thermal Energy Operations (La Baraque) Ltd and
Omnicane Thermal Energy Operations (St. Aubin) Ltd. He has
served as president of the Mauritius Sugar Syndicate and as
president of the Mauritius Sugar Producers’ Association.
Appointed 24 October 2019
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
commercial 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.
www.realgoodfoodplc.com Stock Code: RGD
30678 Real Good Food AR2021.indd 15
30678 Real Good Food AR2021.indd 15
15
20/09/2021 21:02:22
20/09/2021 21:02:22
Report of the Directors
The Directors present their report and the audited financial statements
for the year ended 31 March 2021. Owing to covid-19 there have been
restrictions on meetings and this impacted the AGM held in January 21
and the general meeting held in May 21.
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 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.
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.
2. Seek to understand
and meet shareholder
needs and
expectations.
3. Take into account wider
stakeholder and social
responsibilities and
their implications for
long-term success.
The objective and strategy of the Group is to deliver a return on investment for all our shareholders,
providing a stable financial platform through improving the profitability of the Group as a whole and its
constituent businesses.
The execution of the strategy is to support and guide the Cake Decoration business in their daily operation
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. The Chairman also did
a separate presentation and question and answer session during the year for the benefit of shareholders.
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 businesses 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 businesses 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. 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 2021
30678 Real Good Food AR2021.indd 16
30678 Real Good Food AR2021.indd 16
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:22
20/09/2021 21:02:22
GOVERNANCE REPORT
Principle
How Real Good Food plc complies
4. Embed effective risk
management,
considering both
opportunities and
threats, throughout the
organisation.
A risk register is compiled by the Audit Committee, detailing the risks identified within the businesses, 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.
5. Maintain the Board as
a well-functioning,
balanced team led by
the Chair.
Following further changes to the Board since the year end, the Board, chaired by Mike Holt, currently
comprises two Executive and four Non-Executive Directors. As executive 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. During the year, there were 29 Board meetings held primarily due to the sale of Brighter
Foods.
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.
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 2022. Owing to challenges with covid-19, there has not been the opportunity to
arrange this, once covid restrictions are lifted, this will be put in place.
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.
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.
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.
6. Ensure that between
them the Directors
have all the
appropriate experience,
skills, and capabilities.
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.
9. Maintain governance
structures and
processes that are fit
for purpose and
support good decision
making by the Board.
10. Communicate how the
Group is governed and
is performing by
maintaining a dialogue
with shareholders and
other relevant
stakeholders.
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
30678 Real Good Food AR2021.indd 17
30678 Real Good Food AR2021.indd 17
26627 20 September 2021 9:01 pm Proof 1
20/09/2021 21:02:22
20/09/2021 21:02:22
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 2020 to 31 March 2021 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 ability to
Shareholders
Minority
shareholders
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)
Disposal of
Brighter Foods
Employees
{ The company was unable to take advantage of CLBILs due to its leveraged position.
Shareholders
Communities
HMRC
{ The Board have renegotiated the terms of the loan notes, with a reduction in interest rates from 1
January 2021.
{ In total, the Group has claimed £1.2m, for the continuing business, under the Government’s job
retention scheme in order to preserve jobs and protect the communities in which our factories are
situated.
Shareholders
{ The Board undertook a process to review the Group businesses. An offer was received for Brighter
Employees
Foods of £43m, debt free/cash free, this equated to an 8.6 multiple of FY20 EBITDA and 11.7 multiple
of (unaudited) EBITDA for FY21. The Board recommended this offer to the shareholders and it was
subsequently approved at the general meeting on the 10 May 2021. This enabled the Board to reduce
the shareholder loans by £23.6m and make a payment to the pension fund of £8.5m.
Board interaction
with businesses
(April 2020)
Shareholders
{ The Board meetings are held once a month and the MD of the Cake Decoration Division presents the
Employees
business and discusses both strategic and operational matters. This has strengthened the communication
between the Board and the business unit and the quality and timeliness of decision making.
{ The Board had planned to visit the operational sites during the year; however, this has been curtailed
pro tem owing to covid-19 but will resume when restrictions are lifted.
Investor relations
Shareholders
{ Increased interaction with our shareholders with direct access to the Board; the Chairman makes
Minority
shareholders
himself available to minority shareholders and has maintained an ongoing dialogue with the principal
minority shareholders.
{ The quality, frequency and relevance of investor communications is improving.
Cake Decorations
Employees
{ Cake Decorations expediated the planned overhead restructure during the year to reduce costs.
Restructure
Shareholders
{ Factory operational changes have started with the engineers carrying out the majority of planned
preventative maintenance work in the evenings or at weekends to reduce the downtime of the lines.
Board Changes
Customers
Communities
Minority
shareholders
Employees
Shareholders
{ Investment in New Product Development (NPD) has continued with 66 skus launched during the year
and c.110 delisted.
{ Sales and Marketing teams are putting the customer at the forefront of what we do by actively engaging
in long term partnerships evidenced by securing a new blue-chip customer through the innovation of new
products, which meet their needs and objectives.
{ Chairman appointed as the part-time executive Chairman 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 directors are not party to these meetings or minutes
thereof.
Environmental and
sustainability
Customers
{ Working with supply chain partners to have more recyclable packaging. Owing to covid-19 restrictions
Employees
this activity was curtailed in FY21, but will recommence in FY22.
{ Continue working with suppliers to source and use ethical products, such as palm oil. The palm oil used
by the business is sustainable palm oil.
18
GOVERNANCE
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 18
30678 Real Good Food AR2021.indd 18
26627 20 September 2021 9:01 pm Proof 1
20/09/2021 21:02:23
20/09/2021 21:02:23
Section 172 Statement
Report of the Directors (continued)
GOVERNANCE REPORT
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
accounting standards 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.
Board Meetings
There has been a substantial increase in the
number of Board meetings in the year, the
main reason for the increase is the meetings
required to consider the disposal of Brighter
Foods.
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.
The forecast for FY22 for the continuing
businesses, is based on the national
lockdowns being removed in July 2021.
Some of the sectors we serve have
experienced growth during the covid-19
pandemic, namely retail and international.
The wholesale and manufacturing sectors
most affected by the pandemic owing to their
customers having to close have returned to
pre covid sales. The new customers and
product launches during FY21 will have a full
year impact in FY22. Overhead savings and
operational efficiencies are also included in
the forecast.
The Board consider the forecasts to be
reasonable and these assumptions have
been projected and shared with the Group’s
auditors.
The Board reviewed the sensitivity of the
sales and have modelled the effects of
these.
The Directors considered the following
scenarios:
Scenario 1: Reduction in revenue of 5% all
year and
Scenario 2: Reduction in revenue of 5% and
the gross margin reduced by 10% all year
In Scenario 1 without any mitigating action
the Group does not run out of cash and has
sufficient liquidity headroom post March
2023 with the low point for cash being
September 2022 when cash would reduce to
£2.1million as a result of the stock build for
quarter 3, (October to December).
In Scenario 2 without any mitigating action
the Group would run out of cash in May
2022, some 14 months from the monthly
reduction in revenue and gross margin from
the start of FY22. If there was a reduction in
gross margin of 10%, this would be as a
result of commodity price increases that
would be passed onto customers. The
mitigating action would be taken quickly and
would result in a price increase to
customers, with a time lag factored in as
negotiation took place with customers. A
prudent approach of a 75% recovery in FY22
would result in the business not running out
of cash with the low point for cash being
September 2022 when cash would be
£1.3million, owing to the stock build.
The Group has various levers that it can use
to mitigate the shortfall including:
{ Cessation of non-essential spend
{ Review of overhead costs
The banking covenants that are in place for
FY22 have been amended taking into
account the seasonality of the Cake
Decoration business.
The covenants for FY22 are plus or minus
20% of the forecast EBITDA and greater than
£5 million tangible net worth. These
covenants are not breached on the stressed
scenarios referred to above.
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 19 May 2022 to 19 May
2023.
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.
www.realgoodfoodplc.com Stock Code: RGD
19
30678 Real Good Food AR2021.indd 19
30678 Real Good Food AR2021.indd 19
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:23
20/09/2021 21:02:23
Report of the Directors (continued)
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, Mike Holt Non-
Executive Chairman of the Company agreed
to become the Executive Chairman of the
Group. Details of the Directors are given on
page 15.
Substantial interests
There were the following substantial
interests (3% or more) in the Company’s
ordinary share capital:
31 March 2021
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%
5.9%
Directors’ indemnities
The Company has paid £95.0k (2020:
£32.1k) 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.
Meeting up during FY21 has been more
difficult owing to covid-19 and the
requirement to work from home, however
regular briefings have been carried out using
virtual meetings. The majority of the Board
meetings in FY21 have been virtual
meetings, however the meetings have
continued in the same format with the MDs
attending and the messages from the Board
taken back to the businesses. 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.
20
GOVERNANCE
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 20
30678 Real Good Food AR2021.indd 20
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:24
20/09/2021 21:02:24
GOVERNANCE REPORT
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 have been
unable to hold ‘Town Halls’ owing to
covid-19, however the virtual team briefs
have continued and all staff are encouraged
to raise questions and feedback.
Covid-19 has been a challenge, with
uncertainty and three lockdowns in the year.
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 working from home and full risk
assessments have been completed in terms
of social distancing at our manufacturing
sites. There is a covid-19 working party,
made up of employees across all areas and
levels within the business, the meetings
were weekly during the height of the
pandemic. In July 2021, legal restrictions
were lifted relating to covid-19. The Board,
however, continue to meet on a bi-weekly
basis to review government updates and any
changes required to current working
practices.
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.
The government, owing to covid-19, deferred
the gender pay reporting until October 2021.
The Group continues through our Leadership
Framework 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.
Streamlined Energy and Carbon
Reporting
SECR (Streamlined Energy and Carbon
Reporting) was introduced by the government
on 1 April 2019. The table below shows the
information for RGF plc from the
1st of April 2020 to 31 March 2021.
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.
The assumptions made are:
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.
www.realgoodfoodplc.com Stock Code: RGD
21
30678 Real Good Food AR2021.indd 21
30678 Real Good Food AR2021.indd 21
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:24
20/09/2021 21:02:24
Report of the Directors (continued)
Streamlined Energy and Carbon Reporting (continued)
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 – 5,984,990 kWh
LPG – 26.95 kWh
Petrol company cars – n/a
Diesel company cars – n/a
Electricity – 9,217,506 kWh
Petrol private cars – n/a
Diesel private cars – n/a
Total - 15,202,523 kwh
Emissions from combustion of gas tCO2e (Scope 1)
1,100.5 tCO2e
Emissions from LPG (Scope 1)
Emissions from business travel in company owned vehicles
(Scope 1)
6.2 tCO2e
N/A
Emissions from purchased electricity (Scope 2, location-based)
2,149 tCO2e
Emissions from business travel in rental cars or employee-owned
vehicles where company is responsible for purchasing the fuel (Scope 3)
N/A
Total gross CO2e based on above
3,256 tCO2e
Intensity ratio: tCO2e gross figure based on mandatory fields
above/e.g. £100,000 revenue (taken from 5 Results)
Tonnes of output produced 0.17 tCO2e per Tonne of output
produced
Methodology
Data from Joe Castille DEFRA published Conversion Factors for
Company Reporting 2020 version 1.0
Energy Efficient Actions taken
(taken from 5.1 Energy Efficiency Actions)
Replacement of inefficient lighting with LED equivalent.
No longer the use of company cars.
Charitable and political donations
During the current financial period, the Group made charitable donations of £1,250 (2020: £3,160). No political donations were made during
the current or previous financial period.
This report was approved by the Board on 20 September 2021 and is signed on its behalf by:
Mike Holt
Executive Chairman
Director
Mike Holt
Maribeth Keeling
Jacques d’Unienville
Judith MacKenzie
Anthony Ridgwell
Gail Lumsden
Eligible to
attend
Meetings
attended
29
29
29
29
29
29
29
28
28
29
28
29
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
GOVERNANCE
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 22
30678 Real Good Food AR2021.indd 22
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:24
20/09/2021 21:02:24
GOVERNANCE REPORT
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 4 meetings in the
year, the following table sets out attendance
during the year.
Director
Members
Judith MacKenzie
Gail Lumsden
By Invitation
Mike Holt
Maribeth Keeling
Meetings
attended
4
4
4
4
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 Chairperson 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 four 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.
www.realgoodfoodplc.com Stock Code: RGD
23
30678 Real Good Food AR2021.indd 23
30678 Real Good Food AR2021.indd 23
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:25
20/09/2021 21:02:25
Audit Committee Report (continued)
Description of Risk
Overview of Risk
Company response
Asset Impairment
The Group now has £32.7 million of
goodwill, relating to excess of
consideration paid to the fair value of
acquisitions, and £8.6 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.
Cash flow projections 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 Cake Decoration. A
sensitivity analysis was also applied to stress test the assumptions
and future economic value of assets. These resulted in no impairment
required. 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 the carrying values are appropriate.
Going Concern
Risk Register
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.
The Board has critically reviewed the planned future performance of
the Group and its cash flows and funding. Following the sale of Brighter
Food, the reduction in the Net debt, the reduction in the interest rates
for the loan notes, 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 had weekly
update calls to monitor the impact on the business; the Board meets
outside of the planned monthly Board meetings as required.
Senior Managers
The MD is invited to each Board
meeting to present on their division.
Auditors
Audit Rotation.
The Board have the opportunity to talk directly with the MD of the
division on a monthly basis and understand the business behind the
numbers.
The Board also plan to visit the Liverpool site in FY22 where they will
be able to meet the Leadership team for the business and hold a
meeting with them, this was not possible in FY21 owing to covid-19.
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.
Stock count at
Brighter Foods
for year ended 31
March 2020
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.
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. For the year ended 31 March 2021, the auditors
attended the counts at Brighter Foods. Brighter Foods has been
classified as a discontinued operation and the value of the stock is
shown in assets held for sale.
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
GOVERNANCE
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 24
30678 Real Good Food AR2021.indd 24
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:25
20/09/2021 21:02:25
GOVERNANCE REPORT
Remuneration Committee Report
The Remuneration Committee comprises
Gail Lumsden, as Chair, Judith MacKenzie
and Anthony Ridgwell.
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
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.
for expenses from the Chairman and plc
Directors.
Current Directors’ base salaries and fees
are disclosed in note 11.
The table below shows the FY21 attendance:
Director
Members
Gail Lumsden
Anthony Ridgwell
Judith Mackenzie
Meetings
attended
2
2
2
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.
www.realgoodfoodplc.com Stock Code: RGD
25
30678 Real Good Food AR2021.indd 25
30678 Real Good Food AR2021.indd 25
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:25
20/09/2021 21:02:25
Independent Auditor’s Report
to the members of Real Good Food plc
Qualified Opinion on the financial statements
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
2021 and of the Group’s loss for the year then ended;
{ the Group financial statements have been properly prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006;
{ the Parent Company financial statements have been properly
prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006
and 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.
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 2021 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 their
preparation is applicable law and international accounting standards
in conformity with the requirements of the Companies Act 2006 and,
as regards the Parent Company financial statements, as applied in
accordance with the provisions 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 previous year ended 31 March 2020 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 the company and third party
premises, specifically as a result of Covid-19. We were unable to
satisfy ourselves by alternative means concerning the inventory
balance of £2,574,000 held by that component and included in the
consolidated statement of financial position as at 31 March 2020.
We were therefore unable to determine whether any adjustment to
that 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 for the year ended 31 March 2021. Any adjustment
to the inventory balance at 31 March 2020 would also have an
impact on the comparative figure shown in the consolidated
statement of comprehensive income for profit from discontinued
operations and on the comparative consolidated cash flow statement
for the period then ended. In addition, were any adjustment to the
inventory balance at 31 March 2020 to be required, the strategic
report would also need to be amended.
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 believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our qualified opinion.
Independence
We remain 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Going concern was considered a key audit matter. See also the
disclosures in Notes 2 and 3.
Our evaluation of the Directors’ assessment of the Group and the
Parent Company’s ability to continue to adopt the going concern
basis of accounting and our response to the key audit matter
included:
{ Obtaining and examining management’s business plan for at
least the next 12 months, which is also used as a basis for the
discounted cash flow model in the impairment assessment of
goodwill and other non-current assets. These forecasts were
based on the continuing operations of the group, following the
disposal of Brighter Foods Limited post year end. 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 for at
least the next 12 months, 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 2022
have now been extended to May 2023; and
{ We reviewed the wording of the going concern disclosures, and
assessed its consistency with management’s forecasts.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group
and the Parent Company’s ability to continue as a going concern for
a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
this report.
26
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 26
30678 Real Good Food AR2021.indd 26
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:26
20/09/2021 21:02:26
OUR FINANCIALS
Overview
Coverage of areas subject
to a full scope audit
Key audit matters
89% (2020: 78%) of total group revenue
90% (2020: 94%) of group net assets
Going Concern
Asset Impairment
Pension Scheme Assumptions
2021
✓
2020
✓
✓
–
✓
✓
Materiality
Pension Scheme Assumptions are no longer considered to be a key audit matter because the
suitability of these assumptions is no longer considered one of the most significant assessed
risks of material misstatement.
Group financial statements as a whole
£428,000 (2020: £486,000) based on 0.75% of total revenue including discontinued
operations (2020: 0.75% of total revenue)
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control,
and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal
controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
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 (2020: three) 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.
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.
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
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. Management’s assessment showed that
no impairment was required. This impairment review is also
considered in Note 2 (significant accounting policies) and
Note 3 (critical accounting estimates and judgements).
Management’s impairment review focussed on the Cake
Decoration operating segment, given that Brighter Foods
Limited (the Food Ingredients operating segment) was
disposed of for a profit shortly after the year end.
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 in relation to the Cake
Decoration operating segment:
{ 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, and reviewed the
components of the cash flow forecasts.
{ We challenged management on their cash flow forecasts and the growth
rates for 2021/22 and beyond by considering evidence available to
support these assumptions including sales plans and cost forecasts,
their consistency with findings from other areas of our audit and analysis
against forecasting and results in previous periods, 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.
www.realgoodfoodplc.com Stock Code: RGD
27
30678 Real Good Food AR2021.indd 27
30678 Real Good Food AR2021.indd 27
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:26
20/09/2021 21:02:26
Independent Auditor’s Report (continued)
to the members of Real Good Food plc
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users
that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as
follows:
Group financial statements
Parent company financial statements
2021
£428,000
2020
£486,000
2021
£79,600
2020
£57,700
0.75% of total revenue,
including discontinued
operations
0.75% of total revenue
2% of net assets excluding
intercompany balances
2% of net assets excluding
intercompany balances
We consider that using this basis for determining
materiality is most appropriate as this provides a
consistent year on year basis for determining materiality
based on the underlying trading performance of the
Group.
We consider this basis is most appropriate for a holding
company.
£299,000
£315,000
£55,700
£37,500
The performance materiality threshold was chosen as 70% to reflect some areas subject to estimation uncertainty.
This has been increased from 65% in the prior year given there have been few changes to the key areas of the
financial statements in the current year.
Materiality
Basis for
determining
materiality
Rationale for
the benchmark
applied
Performance
materiality
Basis for
determining
performance
materiality
Component materiality
We set materiality for each component of the Group based on a percentage of between 19% and 90% of Group materiality dependent on the
size and our assessment of the risk of material misstatement of that component. Component materiality ranged from £79,600 to £385,000.
In the audit of each component, we further applied performance materiality levels of 70% of the component materiality to our testing to
ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £17,000 (2020: £19,000).
We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
28
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 28
30678 Real Good Food AR2021.indd 28
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:26
20/09/2021 21:02:26
OUR FINANCIALS
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report and
Accounts 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. 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 course of 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 this gives rise to a material
misstatement in the financial statements themselves. 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 inventory quantities of
£2,574,000 held at the prior year ended 31 March 2020 by Brighter Foods Limited. We have concluded that where the other information
refers to the inventory balance or related balances such as cost of sales or profit for the year relating to discontinued operations, it may be
materially misstated for the same reason.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act
2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report
and Directors’
report
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.
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 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 at the prior year end, referred to above:
{ we have not obtained all the information and explanations that we considered necessary for the purpose of our
audit.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
{ adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
{ the Parent Company financial statements are not in agreement with the accounting records and returns; or
{ certain disclosures of Directors’ remuneration specified by law are not made.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, 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.
www.realgoodfoodplc.com Stock Code: RGD
29
30678 Real Good Food AR2021.indd 29
30678 Real Good Food AR2021.indd 29
30678
21 September 2021 9:31 am
V12
21/09/2021 09:32:39
21/09/2021 09:32:39
Independent Auditor’s Report (continued)
to the members of Real Good Food plc
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the
events and transactions reflected in the financial statements, the
less likely we are to become aware of it.
A further description of our responsibilities is available on the
Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Gary Harding (Senior Statutory Auditor)
For and on behalf of BDO LLP
Statutory Auditor
Manchester, United Kingdom
20 September 2021
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
Extent to which the audit was capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with
laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in
respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is
detailed below:
Based on our understanding of the laws and regulations applicable
to the Group and accumulated knowledge of the Group and the
sectors in which it operates we considered the risk of acts by the
Group which were contrary to applicable laws and regulations,
including fraud and whether such actions or non-compliance might
have a material effect on the financial statements. These included
but were not limited to those that relate to the form and content of
the financial statements, such as the Group accounting policies,
international accounting standards, the UK Companies Act 2006 and
the AIM Rules; and industry related such as compliance with health
and safety legislation, employment law and taxation legislation. All
team members were briefed, including component audit teams, to
ensure they were aware of any relevant regulations in relation to their
work. We obtained an understanding of the control environment in
monitoring compliance with laws and regulations, enquired with
management regarding matters pertaining to laws and regulations
during the year, and reviewed any relevant correspondence arising to
ensure these had been considered appropriately.
We evaluated management’s incentives and opportunities for
fraudulent manipulation of the financial statements (including the
risk of override of controls), and determined that the principal risks
were related to posting inappropriate journal entries, revenue cut off
around the year end and management bias in accounting estimates.
Our audit procedures included, but were not limited to:
{ Agreement of the financial statement disclosures to underlying
supporting documentation;
{ Challenging assumptions and judgements made by management
in their significant accounting estimates, in particular in relation
to the Group’s defined benefit pension scheme and impairment
of goodwill to identify any potential bias;
{ Detailed testing of a sample of items for revenue cut off around
the year end for all significant components to ensure they were
accounted for in the correct period;
{ Identifying and testing journal entries, in particular any journal
entries posted with unusual account combinations or including
specific keywords to identify potential irregularities;
{ Discussions with management and those charged with
governance, including consideration of known or suspected
instances of non-compliance with laws and regulation and fraud;
and
{ Review of minutes of Board meetings throughout the period, to
identify any inconsistencies with our audit work or matters of
which we needed to be aware.
30
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 30
30678 Real Good Food AR2021.indd 30
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:27
20/09/2021 21:02:27
Consolidated Statement of Comprehensive Income
Year ended 31 March 2021
OUR FINANCIALS
Revenue
Cost of sales
Gross profit
Income from Government Furlough Scheme
Other operating income
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
Profit from discontinued operations (assets held for sale)
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 on defined benefit plan
Tax relating to items which will not be reclassified
Other comprehensive loss
Total comprehensive loss for the year
Attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive loss for the year
Notes
4, 5
16
18
6
8
9
10
14
32
20
12 months
ended
31 March 2021
£’000s
12 months
ended
31 March 2020
(restated*)
£’000s
37,292
41,243
(22,128)
(23,615)
15,164
1,205
48
17,628
–
10
(3,615)
(2,995)
(14,266)
(18,158)
(1,464)
–
–
203
(1,261)
(4,665)
(182)
(3,515)
(12,622)
(287)
(1,022)
(17,446)
(5,445)
(169)
(6,108)
(23,060)
27
1,692
(6,081)
(21,368)
2,617
2,913
(3,464)
(18,455)
(3,856)
(19,121)
392
666
(3,464)
(18,455)
65
(106)
(107)
(102)
(144)
(1,097)
215
(988)
(3,608)
(19,443)
(4,000)
(20,109)
392
666
(3,608)
(19,443)
*The result for the year ended 31 March 2020 has been restated to reflect the change in continuing and discontinued operations.
Basic and diluted loss per share – continuing operations
Basic earnings per share – discontinued operations
Diluted earnings per share – discontinued operations
The notes on pages 38 to 76 form part of these financial statements.
12 months
ended
31 March 2021
£’000s
12 months
ended
31 March 2020
(restated*)
£’000s
(6.50)p
(22.14)p
2.63p
0.82p
2.92p
0.96p
Notes
15
15
15
www.realgoodfoodplc.com Stock Code: RGD
31
30678 Real Good Food AR2021.indd 31
30678 Real Good Food AR2021.indd 31
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:27
20/09/2021 21:02:27
Consolidated Statement of Changes in Equity
Year ended 31 March 2021
Issued
Share
Capital
£’000s
Share
Premium
Account
£’000s
Other
Reserves
£’000s
Share
Option
Reserve
£’000s
Foreign
Exchange
Translation
Reserve
£’000s
Retained
Earnings
£’000s
Total
£’000s
Non–
Controlling
Interest
£’000s
Total
Equity
£’000s
Balance as at 31 March 2019
1,987
3,286
(4,796)
238
(19)
23,786
24,482
2,140
26,622
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)
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 options lapsed in year
Total contributions by and
distributions to owners of the Group
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(35)
–
(35)
203
–
–
–
–
(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
–
(3,856)
(3,856)
392
(3,464)
65
(209)
(144)
–
(144)
65
(4,065)
(4,000)
392
(3,608)
(200)
(200)
–
–
–
–
(200)
(200)
–
–
(200)
(200)
Balance as at 31 March 2021
1,991
3,294
(4,796)
3
(60)
(282)
150
3,198
3,348
The notes on pages 38 to 76 form part of these financial statements.
32
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 32
30678 Real Good Food AR2021.indd 32
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:28
20/09/2021 21:02:28
Company Statement of Changes in Equity
Year ended 31 March 2021
OUR FINANCIALS
Balance as at 31 March 2019
Loss for the year
Other comprehensive loss for the year
Total comprehensive loss for the year
Transactions with owners of the Group, recognised
directly in equity
Shares issued in the year
Share-based payments
Deferred tax on share-based payments
Total contributions by and distributions to owners
of the Group
Issued
Share
Capital
£’000s
1,987
Share Premium
Account
£’000s
3,286
–
–
–
4
–
–
4
–
–
–
8
–
–
8
Balance as at 31 March 2020
1,991
3,294
Total comprehensive Loss for the year
Loss for the year
Other comprehensive loss for the year
Total comprehensive Loss for the year
Transactions with owners of the Group, recognised
directly in equity
Shares options lapsed in the year
Total contributions by and distributions to owners
of the Group
–
–
–
–
–
–
–
–
–
–
Share
Option
Reserve
£’000s
238
–
–
–
–
(35)
–
(35)
203
–
–
–
(200)
(200)
Retained
Earnings
£’000s
2,990
(9,819)
(883)
Total
Equity
£’000s
8,501
(9,819)
(883)
(10,702)
(10,702)
–
–
–
–
12
(35)
–
(23)
(7,712)
(2,224)
(6,174)
(6,174)
93
93
(6,081)
(6,081)
–
–
(200)
(200)
(8,505)
Balance as at 31 March 2021
1,991
3,294
3
(13,793)
The notes on pages 38 to 76 form part of these financial statements.
www.realgoodfoodplc.com Stock Code: RGD
33
30678 Real Good Food AR2021.indd 33
30678 Real Good Food AR2021.indd 33
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:28
20/09/2021 21:02:28
Consolidated Statement of Financial Position
Year ended 31 March 2021
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
Liabilities classed as held for sale
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 reserves
Share option reserve
Foreign exchange translation reserve
Retained earnings
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
Non-controlling Interest
TOTAL EQUITY
31 March
2021
£’000s
31 March
2020
£’000s
Notes
16
17
18
19
20
21
22
13
33
25
23
24
26
33
23
24
26
26
20
32
27
32,722
9
8,548
–
1,426
42,705
3,597
7,248
–
215
622
11,682
20,157
74,544
8,087
2,659
93
1,553
12,392
4,442
46,624
–
–
17
216
7,505
54,362
71,196
3,348
1,991
3,294
(4,796)
3
(60)
(282)
150
3,198
3,348
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
15,104
–
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
These financial statements were approved by the Board of Directors and authorised for issue on 20 September 2021.
They were signed on its behalf by:
Mike Holt
Executive Chairman
Maribeth Keeling
Chief Financial Officer
The notes on pages 38 to 76 form part of these financial statements.
34
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 34
30678 Real Good Food AR2021.indd 34
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:29
20/09/2021 21:02:29
Company Statement of Financial Position
Year ended 31 March 2021
Registered Company Number: 04666282
OUR FINANCIALS
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
EQUITY
Share capital
Share premium account
Share option reserve
Retained earnings
TOTAL EQUITY
31 March
2021
£’000s
31 March
2020
£’000s
Notes
19
17
18
20
22
13
33
25
23
26
32
27
54,670
54,670
–
118
1,426
56,214
18
143
1,508
56,339
7,855
71,125
–
215
17
8,087
1,000
(4)
215
8
71,344
1,000
65,301
128,683
20,845
20,845
82,294
82,294
45,439
40,677
17
7,505
52,961
73,806
–
7,936
48,613
130,907
(8,505)
(2,224)
1,991
3,294
3
(13,793)
(8,505)
1,991
3,294
203
(7,712)
(2,224)
Real Good Food plc (the Company) reported a total comprehensive loss for the year ended 31 March 2021 of £6,081k (2020: loss of
£10,702k). 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 20 September 2021.
They were signed on its behalf by:
Mike Holt
Executive Chairman
Maribeth Keeling
Chief Financial Officer
The notes on pages 38 to 76 form part of these financial statements.
www.realgoodfoodplc.com Stock Code: RGD
35
30678 Real Good Food AR2021.indd 35
30678 Real Good Food AR2021.indd 35
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:29
20/09/2021 21:02:29
Consolidated Cash Flow Statement
Year ended 31 March 2021
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss) before taxation
Finance and other finance costs
Share options reserve credit
Foreign Exchange movement
Goodwill impairment charge
Impairment charge on fixed assets
Share based payment expense
Loss on disposal of investment
Loss on disposal of property, plant and equipment
Past service cost on pension
Fair value of derivative liability
Fair value of NCI put option
Depreciation of property, plant, and equipment
Amortisation of intangibles
Operating Cash Flow
Decrease in inventories
Decrease/(increase) in receivables
Pension contributions
Decrease in cash collateral
Increase in payables
Cash from operations
Income taxes received
Interest paid
Interest on leases
Net cash inflow from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment
Proceeds from sale of investment
Disposal of discontinued business, net of cash disposed of
Net cash outflow from investing activities
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in year
Repayment of lease liabilities
Repayment / (Inflow) of term loans
Repayment of other loans
Repayment of investor loans
Drawdowns on revolving credit facilities
Repayments on revolving credit facilities
Net cash outflow from financing activities
NET INCREASE / (DECREASE) 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
Continuing operations
Discontinued operations
Cash and cash equivalents at end of period
Notes
9, 10
16
18
32
18
17
32
27
23
23
23
23
33
31 March
2021
£’000s
31 March
2020
£’000s
(3,491)
4,856
(200)
308
–
–
–
31
7
–
17
(1,302)
2,435
52
2,713
676
23
(720)
–
953
3,645
–
(86)
(26)
3,533
(20,147)
5,617
–
(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
(567)
(1,819)
50
–
–
550
(517)
(1,269)
–
(402)
(865)
(35)
–
42,816
(42,876)
(1,362)
1,654
1,363
63
1,654
3,080
622
2,458
3,080
4
(504)
3,420
(1,636)
(4,519)
28,261
(26,409)
(1,383)
(1,508)
2,909
(38)
(1,508)
1,363
1,363
–
1,363
36
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 36
30678 Real Good Food AR2021.indd 36
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:30
20/09/2021 21:02:30
Company Cash Flow Statement
Year ended 31 March 2021
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Loss before taxation
Finance and other finance costs
Impairment charge fixed asset
Share based payment expense
Past service cost on pension
Fair value of derivative liability
Depreciation of property, plant and equipment
Amortisation of intangibles
Operating Cash Flow
Decrease / (Increase) in receivables
Pension contributions
(Decrease) / Increase in payables
Decrease in cash collateral
Cash from operations
Interest paid
Net cash inflow from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Net cash /(outflow) from investing activities
CASH FLOW USED IN FINANCING ACTIVITIES
Shares issued in year
(Repayment) of investor loans
Net cash outflow from financing activities
NET INCREASE / (DECREASE) 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
OUR FINANCIALS
31 March
2021
£’000s
31 March
2020
£’000s
Notes
33
32
18
17
32
27
23
(6,194)
(9,819)
4,921
5,448
–
–
–
17
25
18
(1,213)
63,353
(720)
287
(35)
16
(294)
187
132
(4,078)
(910)
(733)
(61,402)
7,318
–
18
(9)
9
–
–
–
–
9
8
9
17
1,786
3,383
–
3,383
–
4
(4,519)
(4,515)
(1,132)
1,140
(1,132)
8
www.realgoodfoodplc.com Stock Code: RGD
37
30678 Real Good Food AR2021.indd 37
30678 Real Good Food AR2021.indd 37
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:30
20/09/2021 21:02:30
Notes to the Financial Statements
Year ended 31 March 2021
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 accounting standards 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
notes 2 and 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 2021, the Group did not
dispose of any major lines or businesses. However, the Group sold
Brighter Foods Limited in May 2021 and this has been classified as
held for sale in the accounts. At 31 March 2021, some remaining
assets in relation to the previously disposed businesses are classed
as held for sale, in addition to the net assets of Brighter Foods
Limited. For further details please refer to note 33.
Any references to discontinued operations throughout this report
refers to Brighter Foods Limited.
IFRS standards and interpretations adopted
New standards and amendments which are effective from 1 January
2020, and have been adopted within the Group’s accounting
policies are:
{ Amendments to IFRS 3 Business combinations - definition of a
business (effective for periods beginning after 1 January 2020);
{ Amendments to IAS 1 Presentation of financial statements and
IAS 8 Accounting policy changes in accounting estimates and
errors - definition of material (effective for periods beginning after
1 January 2020);
{ Amendments to IFRS 9, Financial Instruments, IAS 39 Financial
Instruments and IFRS 17 Financial Instruments: disclosures
- interest rate benchmark reform (effective for periods beginning
after 1 January 2020); and
{ Amendments to the conceptual framework.
The adoption of the amendments to IFRS 3, IAS 1, IAS 8, IFRS 9, IAS
39, IFRS 17 and the conceptual framework 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. The forecasts, agreed with the businesses, consider
reasonable possible changes in trading performance.
The forecast for FY22 for the continuing businesses, is based on the
national lockdowns being removed in July 2021. Some of the sectors
we serve have experienced growth during the covid-19 pandemic,
namely retail and international. The sectors most affected by the
pandemic owing to their customers having to close, wholesale and
manufacturing, have returned to pre covid sales. The new customers
and product launches during FY21 will have a full year impact in
FY22. The overhead savings and operational efficiencies are also
included in the forecast.
The Board consider the forecasts to be reasonable and these
assumptions have been projected.
The Board reviewed the sensitivity of the sales and have modelled
the effects of these.
The Directors considered the following scenarios:
Scenario 1: Reduction in revenue of 5% all year; and
Scenario 2: Reduction in revenue of 5% and the gross margin
reduced by 10% all year.
In Scenario 1 without any mitigating action the Group does not run
out of cash and has sufficient liquidity headroom with the low point
for cash being September 2022 when cash would reduce to £2.1
million as a result of the stock build for quarter 3, (October to
December).
In Scenario 2 without any mitigating action the Group would run out
of cash in May 2022, some 14 months from the monthly reduction in
revenue and gross margin from the start of FY22. If there was a
reduction in gross margin of 10%, this would be as a result of
commodity price increases that would be passed onto customers.
The mitigating action would be taken quickly and would result in a
price increase to customers, with a time lag factored in as
negotiation took place with customers. A prudent approach of a 75%
recovery in FY22 would result in the business not running out of
cash with the low point for cash being September 2022 when cash
would be £1.3million, owing to the stock build.
38
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 38
30678 Real Good Food AR2021.indd 38
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:30
20/09/2021 21:02:30
OUR FINANCIALS
c. Rebates and discounts: All discounts, rebates etc. are
accounted for in line with contractual commitments and netted
off gross sales to reflect the net income earned and any costs
incurred in marketing activity are expensed within commercial
overheads. In all cases, these accounts will reflect the net
position after any contractual discounts and rebates along with
any promotional costs. Full accruals are made for any unpaid
elements.
d. Refunds: Refunds are issued to customers when product is
damaged or not fit for purpose upon receipt. Refunds are
recorded net of discounts, Value Added Tax (VAT) and other
sales-related taxes.
d) Income tax
The charge for taxation is based on the results for the year and
takes into account taxation deferred because of timing differences
between the treatment of certain items for taxation and accounting
purposes.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and is reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or
part of the assets to be recovered.
Deferred tax is calculated at the tax rates that have been enacted or
substantially enacted by the balance sheet date. Deferred tax is
charged or credited to the Statement of Comprehensive Income,
except where it relates to items charged or credited directly to equity,
in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities, and when they relate to income taxes levied by the same
taxation authority, and the Group intends to settle its current tax
assets and liabilities on a net basis.
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.
2. Significant accounting policies continued
The Group has various levers that it can use to mitigate the shortfall
including:
{ Cessation of non-essential spend
{ Review of overhead costs
The banking covenants that are in place for FY22 have been
amended taking into account the seasonality of the Cake
Decorations business.
The covenants for FY22 are plus or minus 25% of the forecast EBITDA
and greater than £5 million tangible net worth. These covenants are
not breached on the stressed scenarios referred to above.
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 19 May
2022 to 19 May 2023.
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.
Following the post year end sale of Brighter Foods Limited and the
subsequent repayment of Shareholder Loans, the Board has agreed
with Investors to continue to roll up interest on the loans and would
expect to make further Investor loan repayments on any future
divestment of a business.
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.
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.
www.realgoodfoodplc.com Stock Code: RGD
39
30678 Real Good Food AR2021.indd 39
30678 Real Good Food AR2021.indd 39
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:30
20/09/2021 21:02:30
Notes to the Financial Statements (continued)
Year ended 31 March 2021
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 is charged to the income
statement in the period in which it is incurred. Development
expenditure is capitalised when the criteria for recognising an asset
are met. When the recognition criteria have been met, expenditure is
capitalised as an intangible asset. Property, plant and equipment
used for research and development are capitalised and depreciated
in accordance with the Group’s policy.
2. Significant accounting policies continued
g) Property, plant and equipment
Property, plant and equipment are stated at historical cost or fair
value at the date of acquisition, less accumulated depreciation, and
impairment provisions.
Depreciation is provided to write off the cost, less the estimated
residual value, of property, plant and equipment by equal instalments
over their estimated useful economic lives as follows:
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
Development costs, and business relationships
5 years
3 years
The charge for the year is included in administration expenses within
the Statement of Comprehensive Income.
Impairment reviews of intangible assets are undertaken if there are
indications that the carrying values may not be recoverable or that
the recoverable amounts may be less than the assets’ carrying value.
i) Leases
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.
40
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 40
30678 Real Good Food AR2021.indd 40
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:31
20/09/2021 21:02:31
OUR FINANCIALS
2. Significant accounting policies continued
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.
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 Limited and
Rainbow Dust Colours Limited, 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 2022 on which the
repayment date has been agreed to move to 19 May 2023. 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.
Grants which have been received in respect of the Coronavirus job
retention scheme has been accounted for and presented separately
on the face of the Statement of Comprehensive Income, rather than
by reducing the related expense. The Group has used the
Government deferred PAYE payment scheme. The costs were
accounted for as incurred. All deferred PAYE has been fully repaid.
t) Non-controlling Interest (NCI) put option
Upon acquisition of Brighter Foods Limited, 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. The put option for 2020 was
not called.
www.realgoodfoodplc.com Stock Code: RGD
41
30678 Real Good Food AR2021.indd 41
30678 Real Good Food AR2021.indd 41
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:31
20/09/2021 21:02:31
Notes to the Financial Statements (continued)
Year ended 31 March 2021
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.
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.
The Directors considered the following scenarios:
Scenario 1: Reduction in revenue of 5%; and
Scenario 2: Reduction in EBITDA of 5% and the gross margin
reduced by 10% all year.
In Scenario 1 without any mitigating action the Group does not run
out of cash and has sufficient liquidity headroom post March 2023
with the low point for cash being September 2022 when cash would
reduce to £2.1 million as a result of the stock build for quarter 3,
(October to December).
In Scenario 2 without any mitigating action the Group would run out
of cash in May 2022, some 8 months from the monthly reduction in
revenue and gross margin. If there was a reduction in gross margin
of 10%, this would be as a result of commodity price increases that
would be passed onto customers. The mitigating action would be
taken quickly and would result in a price increase to customers, with
a time lag factored in as negotiation took place with customers. A
prudent approach of a 75% recovery in FY22 would result in the
business not running out of cash with the low point for cash being
September 2022 when cash would be £1.3million, owing to the
stock build.
The Group has various levers that it can use to mitigate the shortfall
including:
{ Cessation of non-essential spend
{ Review of overhead costs
The banking covenants that are in place for FY22 have been
amended taking into account the seasonality of the Cake
Decorations business.
Following the post year end sale of Brighter Foods Limited and the
subsequent repayment of Shareholder Loans, the Board has agreed
with Investors to roll up interest on the loans and would expect to
make further Investor loan repayments on any future divestment of
a business.
42
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 42
30678 Real Good Food AR2021.indd 42
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:31
20/09/2021 21:02:31
OUR FINANCIALS
3. Critical accounting estimates and judgements continued
The covenants for FY22 are plus or minus 25% of the forecast EBITDA and greater than £5 million tangible net worth. These covenants are
not breached on the stressed scenarios referred to above. 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 19 May 2022 to 19 May 2023.
The banking covenants in place are positive 3 month rolling EBITDA and positive tangible net worth and have not been breached on the
stressed scenarios referred to above. The maximum draw down value during FY21 of the facility was in December 2020. This was £2.3m.
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.
Long term funding
The Board has reviewed the forecasts for FY23, and the group has agreed with the Investors to continue to roll up interest on the loans. The
Board would expect to make Investor loan repayments on a divestment of a business.
4. Revenue
The revenue for the Group for the current year arose from the sale of goods in the following areas:
Cake Decoration
Held for sale (Food
Ingredients)
£37.3 million
(2020 £41.2m)
£19.8 million
(2020 £25.3m)
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 one main division: Cake Decoration. The Head Office has a finance function that supports the subsidiary as required.
12 months ended 31 March 2021
Total revenue
Intercompany sales
External revenue
Cost of sales
Gross profit
Income from Furlough Scheme
Other operating income
Distribution expenses
Administrative expenses
Operating (loss) / profit before impairment
and significant items
Significant Items
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
Cake
Decoration
£’000s
Head Office
and non-trading
subsidiaries
£’000s
40,206
(2,914)
37,292
(22,128)
15,164
1,205
–
(3,615)
(13,657)
(903)
(763)
(1,666)
(95)
–
(1,761)
–
–
–
–
–
–
–
48
–
(609)
(561)
966
405
(4,570)
(182)
(4,347)
27
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
40,206
(2,914)
37,292
19,788
–
19,788
Total
Group
£’000s
59,994
(2,914)
57,080
(22,128)
(12,992)
(35,120)
15,164
1,205
48
(3,615)
(14,266)
(1,464)
203
(1,261)
(4,665)
(182)
(6,108)
27
6,796
461
49
(411)
(4,100)
2,795
(169)
2,626
(9)
–
2,617
–
21,960
1,666
97
(4,026)
(18,366)
1,331
34
1,365
(4,674)
(182)
(3,491)
27
(1,761)
(4,320)
(6,081)
2,617
(3,464)
www.realgoodfoodplc.com Stock Code: RGD
43
30678 Real Good Food AR2021.indd 43
30678 Real Good Food AR2021.indd 43
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:32
20/09/2021 21:02:32
Notes to the Financial Statements (continued)
Year ended 31 March 2021
5. Segment reporting continued
12 months ended 31 March 2020
Total revenue
Intercompany sales
External revenue
Cost of sales
Gross profit/(loss)
Other operating income
Distribution expenses
Administrative expenses
Cake
Decoration
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
48,621
(7,378)
41,243
25,323
–
25,323
Total
Group
£’000s
73,944
(7,378)
66,566
(23,615)
(15,980)
(39,595)
17,628
9,343
26,971
10
(2,995)
–
(444)
10
(3,439)
–
–
–
–
–
10
–
(3,805)
(18,158)
(5,974)
(24,132)
48,621
(7,378)
41,243
(23,615)
17,628
_
(2,995)
(14,353)
Operating profit/(loss) before impairment
and significant items
280
(3,795)
(3,515)
2,925
(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)
(13,423)
(198)
–
(13,621)
–
59
(287)
(1,022)
(12,909)
(9)
–
(1,031)
(12,909)
(4,023)
(5,247)
(169)
(9,439)
1,692
(17,446)
2,916
(14,530)
(5,445)
(169)
(3)
–
(5,448)
(169)
(23,060)
2,913
(20,147)
1,692
–
1,692
(13,621)
(7,747)
(21,368)
2,913
(18,455)
Geographical segments
The Group earns revenue from countries outside the United Kingdom, as shown below:
12 months ended 31 March 2020
UK
Europe
USA
Rest of World
Total
Cake
Decoration
£’000s
28,266
4,631
7,293
1,053
Discontinued
Operations
£’000s
22,309
3,014
–
–
41,243
25,323
The Group has two customers which constitute over 10% of revenue: one providing 21% of revenue, and the other 13%.
12 months ended 31 March 2021
UK
Europe
USA
Rest of World
Total
The Group has one customer which constitutes over 18% of revenue in the Cake Decoration division.
Cake
Decoration
£’000s
Discontinued
Operations
£’000s
25,795
19,788
4,465
6,191
841
–
–
–
37,292
19,788
44
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 44
30678 Real Good Food AR2021.indd 44
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:32
20/09/2021 21:02:32
OUR FINANCIALS
5. Segment reporting continued
Reconciliation of operating
(loss)/profit to underlying adjusted EBITDA to 31 March 2021
Operating (loss)/profit
Significant items
Depreciation
Amortisation
Underlying adjusted EBITDA
Reconciliation of operating
(loss)/profit to underlying adjusted EBITDA to 31 March 2020
Operating (loss)/profit
Significant items
Impairment charge
Depreciation
Amortisation
Underlying adjusted EBITDA
31 March 2021
Segment assets
Segment liabilities
Net operating assets / (liabilities)
Non–current asset additions
Depreciation
Amortisation
31 March 2020
Segment assets
Segment liabilities
Net operating assets / (liabilities)
Non–current asset additions
Depreciation
Amortisation
Cake
Decoration
£’000s
Head Office
and non-trading
subsidiaries
£’000s
(1,666)
763
1,614
87
798
405
(966)
25
(35)
(571)
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
(1,261)
2,626
(203)
1,639
52
227
169
796
–
3,591
Cake
Decoration
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
1,365
(34)
2,435
52
3,818
Total
Group
£’000s
(13,423)
(4,023)
(17,446)
2,916
(14,530)
1,081
12,622
1,521
34
1,835
(59)
287
187
125
1,022
12,909
1,708
159
(3,483)
(1,648)
9
–
667
1,379
4,971
Cake
Decoration
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
52,180
11,305
40,875
444
(1,614)
(87)
3,355
55,449
55,535
66,754
(52,094)
(11,219)
–
(25)
35
444
(1,639)
(52)
19,009
4,442
14,567
185
(796)
–
Cake
Decoration
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
57,032
13,835
43,197
330
(1,521)
(34)
(1,570)
51,451
(53,021)
–
(187)
(125)
55,462
65,286
(9,824)
330
(1,708)
(159)
20,103
3,123
16,980
1,489
(667)
(1,379)
1,031
12,909
2,375
1,538
3,323
Total
Group
£’000s
74,544
71,196
3,348
629
(2,435)
(52)
Total
Group
£’000s
75,565
68,409
7,156
1,819
(2,375)
(1,538)
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 2021, Head Office costs of £0.8 million (2020: £1.1m) have been re-allocated to the Cake Decoration division.
www.realgoodfoodplc.com Stock Code: RGD
45
30678 Real Good Food AR2021.indd 45
30678 Real Good Food AR2021.indd 45
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:33
20/09/2021 21:02:33
Notes to the Financial Statements (continued)
Year ended 31 March 2021
6. Significant items
Costs relating to disposal of Brighter Foods
Professional fees in relation to refinancing costs
Movement in provisions relating to the non-controlling interest put option
Change in value of convertible loan notes derivative liability
Professional fees in relation to Liverpool factory
Closure of Renshaw US warehouse
Management restructuring
Significant items - Continuing business
Continuing business
Discontinued business
Total significant items
12 months
ended
31 March
2021
£’000s
12 months
ended
31 March
2020
(restated*)
£’000s
(269)
(38)
1,302
–
(113)
(171)
(508)
203
203
(169)
34
–
–
–
294
–
–
(1,316)
(1,022)
(1,022)
(9)
(1,031)
* The significant items for the year ended 31 March 2020 have been restated to reflect the change in continuing and discontinued
operations.
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 2021 significant item expenditure is explained in the note below:
1. The legal and due diligence costs involved in preparing the Brighter Food business for disposal.
2. The legal costs associated with including Brighter Foods in the CID facility with ABL Leumi.
3. Project management costs for projects running in the Crown Street factory.
4. Costs associated with closing the Renshaw US warehouse, the lease terminating in July 2021, with stockholding relocated to Crown
Street Liverpool.
5. Redundancy costs of the restructuring plan started in FY20.
6. Brighter Foods incurred costs in relation to a proposed sale, as the disposal has occurred, Brighter Foods is now shown as a
discontinued operation.
The year to 31 March 2020 had the following significant costs:
1. The fair value of the CLNs was reduced in FY20 from the FY19 estimate. This was a significant item in the accounts.
2. Restructure costs relating to the Cake Decoration business and Head Office infrastructure.
46
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 46
30678 Real Good Food AR2021.indd 46
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:33
20/09/2021 21:02:33
7. Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the Group’s annual accounts
Fees payable to the Company’s auditor for other services:
Audit related assurance services
Tax compliance services
Tax advisory services
Other assurance services
Total fees paid to auditor
OUR FINANCIALS
12 months
ended
31 March
2021
£’000s
12 months
ended
31 March
2020
£’000s
(215)
(208)
(27)
(25)
(1)
(6)
(25)
(25)
(10)
(6)
(274)
(274)
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
2021
£’000s
12 months
ended
31 March
2020
£’000s
(105)
(20)
–
(70)
(20)
(215)
(108)
(20)
–-
(60)
(20)
(208)
www.realgoodfoodplc.com Stock Code: RGD
47
30678 Real Good Food AR2021.indd 47
30678 Real Good Food AR2021.indd 47
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:33
20/09/2021 21:02:33
Notes to the Financial Statements (continued)
Year ended 31 March 2021
8. Operating loss
Operating loss for continuing operations
External Sales
Staff Costs
Inventories:
12 months
ended
31 March
2021
£’000s
12 months
ended
31 March
2020
(restated*)
£’000s
Notes
37,292
41,243
12
(12,276)
(13,239)
– cost of inventories as an expense (included in cost of sales)
(16,294)
(16,889)
Depreciation of property, plant, and equipment
Amortisation of intangible assets
Significant items
Impairment charges
Research and development expenditure
Impairment of trade receivables
Foreign exchange gains/(losses)
Other net operating expenses
Total
Operating loss
5, 18
5, 17
6
16, 18
22
(1,639)
(52)
203
–
(626)
(38)
(308)
(7,523)
(38,553)
(1,261)
(1,708)
(159)
(1,022)
(12,909)
(665)
(27)
138
(12,209)
(58,689)
(17,446)
* The operating profit note for the year ended 31 March 2020 has been restated to reflect the change in continuing and discontinued operations.
9. Finance costs
Interest on bank loans, overdrafts, and investor loans
Interest on lease liabilities
Interest on non-controlling interest put option
Finance cost on substantial modification of convertible loan notes**
Past service cost on pension (note 32)
Continuing business
Discontinued business
12 months
ended
31 March
2021
£’000s
12 months
ended
31 March
2020
£’000s
(4,600)
(5,466)
(26)
43
(91)
–
(4,674)
(4,665)
(9)
(12)
46
–
(16)
(5,448)
(5,445)
(3)
** On 2nd December 2020, a substantial modification to the convertible loan note terms was made requiring derecognition of the existing loans and recognition
of new loans. As a result of this modification, the value of the liability increased leading to a loss in the year.
48
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 48
30678 Real Good Food AR2021.indd 48
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:34
20/09/2021 21:02:34
10. Other finance costs
Interest on pension scheme liabilities (note 32)
Interest on pension scheme assets (note 32)
Interest on effect of asset ceiling/IFRIC 14
11. Directors’ remuneration
Directors’ salaries, benefits, and fees
The emoluments of the Directors for the period were as follows:
Fees/Salaries
inc. Er’s NIC
£’000s
Taxable
Benefits
£’000s
Bonus
£’000s
Pension
Contributions
£’000s
OUR FINANCIALS
12 months
ended
31 March
2021
£’000s
12 months
ended
31 March
2020
£’000s
(465)
312
(29)
(182)
(497)
328
–
(169)
12 months
ended
31 March
2021
£’000s
(482)
(482)
12 months
ended
31 March
2020
£’000s
(786)
(786)
12 months
ended
31 March
2021
£’000s
12 months
ended
31 March
2020
£’000s
M Holt
J M d’Unienville
M Keeling
J A Mackenzie
A Ridgwell
G Lumsden
P G Ridgwell (to May 19)
C O Thomas (to Jul 19)
H C L Cawley (to Feb 20)
S Downing (to Oct 19)
P Richardson (to Apr 20)
160
25
178
25
27
42
–
–
–
–
–
–
–
10
–
–
–
–
–
–
–
–
–
–
15
–
–
–
–
–
–
–
–
457
10
15
–
–
–
–
–
–
–
–
–
–
–
160
25
203
25
27
42
–
–
–
–
–
482
88
25
132
25
23
18
6
10
387
21
51
786
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.
www.realgoodfoodplc.com Stock Code: RGD
49
30678 Real Good Food AR2021.indd 49
30678 Real Good Food AR2021.indd 49
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:34
20/09/2021 21:02:34
Notes to the Financial Statements (continued)
Year ended 31 March 2021
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
A Ridgwell
G Lumsden
M Keeling
Base Salary
£’000s
135
25
25
25
38
142
390
There were no options for directors at 31 March 2021 or 31 March 2020.
No new options were granted to Directors during the year (2020: 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 2021 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 (2020: one).
12. Staff numbers and costs
The average monthly number of people employed by the Group (including Executive Directors) during the year, analysed by category,
were as follows:
Continuing operations
Production
Selling and distribution
Directors and administrative
Discontinued operations
Production
Directors and administrative
Total no. of staff
31 March
2021
Group
31 March
2021
Company
31 March
2020
(restated*)
Group
31 March
2020
Company
258
40
30
328
170
46
216
544
–
–
5
5
–
–
–
5
259
51
33
343
228
53
281
624
–
–
7
7
–
–
–
7
50
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 50
30678 Real Good Food AR2021.indd 50
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:34
20/09/2021 21:02:34
OUR FINANCIALS
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
31 March
2020
Group
(restated*)
£’000s
31 March
2020
Company
£’000s
10,575
1,066
635
12,276
4,473
379
115
4,967
17,243
338
44
20
402
–
–
–
–
402
11,259
1,271
7,009
13,239
5,466
399
104
5,969
19,208
923
197
28
1,148
–
–
–
–
1,148
12. Staff numbers and costs continued
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
Total payroll costs
* Payroll numbers and costs for the year ended 31 March 2020 have been restated to reflect the change in continuing and discontinued operations.
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the
Group, other than those already listed in the Directors remuneration in note 11.
Wages, salaries, and fees
Social security costs
Other pension costs
Total payroll costs
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
31 March
2020
Group
£’000s
31 March
2020
Company
£’000s
484
67
33
584
–
–
–
–
462
63
32
557
–
–
–
–
www.realgoodfoodplc.com Stock Code: RGD
51
30678 Real Good Food AR2021.indd 51
30678 Real Good Food AR2021.indd 51
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:35
20/09/2021 21:02:35
Notes to the Financial Statements (continued)
Year ended 31 March 2021
13. Notes supporting the cash flow statement
The cash collateral figure for the Group is £0.2million (FY20: £0.2m). 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 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
Cash Flows
Non-cash flows
– Interest accruing on loans
– Finance loss on change of terms for convertible loan notes
Loans and borrowings classified as non-current at March 2020 becoming current
before March 2021
At 31 March 2021
Company
Real Good Food plc (Company)
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
Cash Flows
Non-cash flows
– Interest accruing on loans
– Finance cost of change of terms for convertible loan notes
At 31 March 2021
Non-current
Loans and
Borrowings
£’000s
(Note 23)
37,961
(2,661)
Current Loans
and Borrowings
£’000s
(Note 23)
668
1,184
5,425
3,084
115
(865)
43,059
(37)
4,376
91
(865)
46,624
Non-current
Loans and
Borrowings
£’000s
(Note 23)
36,715
(4,248)
5,011
3,084
115
40,677
–
4,671
91
45,439
–
–
–
865
2,717
(923)
–
_
865
2,659
Current Loans
and Borrowings
£’000s
(Note 23)
–
–
–
–
–
–
–
–
_
–
Total
£’000s
38,629
(1,477)
5,425
3,084
115
–
45,776
(960)
4,376
91
–
49,283
Total
£’000s
36,715
(4,248)
5,011
3,084
115
40,677
–
4,671
91
45,439
52
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 52
30678 Real Good Food AR2021.indd 52
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:35
20/09/2021 21:02:35
OUR FINANCIALS
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 2019
Cash flow1
Other non-cash movements2
At 31 March 2020
Cash flow
Other non-cash movements
At 31 March 2021
Company
At 1 April 2019
Cash flow1
Other non-cash movements2
At 31 March 2020
Cash flow
Other non-cash movements
At 31 March 2021
Note
23
23
23
23
31 March
2021
Group
£’000s
(2,659)
(93)
31 March
2021
Company
£’000s
–
–
31 March
2020
Group
£’000s
(2,717)
(390)
31 March
2020
Company
£’000s
–
–
(46,624)
(45,439)
(43,059)
(40,677)
–
622
–
17
(567)
1,363
–
8
(48,754)
(45,422)
(45,370)
(40,669)
Net cash
and current
borrowings
£’000s
Non-current
borrowings
£’000s
(2,241)
37,961
1,882
2,103
1,744
386
–
2,130
Net cash
and current
borrowings
£’000s
(1,140)
1,132
–
(8)
–
(9)
(17)
(1,723)
7,388
43,626
(1,748)
4,746
46,624
Non-current
borrowings
£’000s
36,715
(4,519)
8,481
40,677
–
4,762
45,439
Net debt
£’000s
35,720
159
9,491
45,370
(1,362)
4,746
48,754
Net debt
£’000s
35,575
(3,387)
8,481
40,669
–
4,753
45,422
1 Includes investor loans of £3.7m and accrued interest of £0.5m repaid in 2020 from new borrowings of £3.6m.
2 Includes additional accrued interest of £5.0m on investor loans and convertible loan notes and redemption premiums of £3.1m on shareholder loan.
www.realgoodfoodplc.com Stock Code: RGD
53
30678 Real Good Food AR2021.indd 53
30678 Real Good Food AR2021.indd 53
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:35
20/09/2021 21:02:35
Notes to the Financial Statements (continued)
Year ended 31 March 2021
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
31 March
2021
£’000s
31 March
2020
£’000s
–
–
–
–
27
_
27
27
–
27
–
–
–
–
1,692
–
1,692
1,692
–
1,692
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% (2020: 19%).The differences are
explained below:
Tax reconciliation
Loss per accounts before taxation - continuing operations
Loss per accounts before taxation - discontinued operations
Total loss 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
2021
£’000s
31 March
2020
£’000s
(6,108)
(23,060)
2,617
2,913
(3,491)
(20,147)
663
(499)
(137)
–
–
27
27
–
27
3,828
(2,209)
–
73
–
1,692
1,692
–
1,692
Factors that may affect future tax charges
An increase in the main corporation tax rate to 25% from 1 April 2023, from the previously enacted 19% was announced at the budget on
3 March 2021, and subsequently enacted on 24 May 2021. The deferred tax balance at 31 March 2021 has been calculated based on the
rate as at the reporting date of 19% (2020: 19%)
54
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 54
30678 Real Good Food AR2021.indd 54
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:36
20/09/2021 21:02:36
OUR FINANCIALS
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)/profit 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)
12 months
ended
31 March
2021
Continuing
Operations
(6,473)
99,564
340
220,980
320,884
12 months
ended
31 March
2021
Discontinued
Operations
2,617
99,564
340
220,980
320,884
12 months
ended
31 March
2020
Continuing
Operations
(restated*)
(22,034)
99,505
1,830
200,571
301,906
12 months
ended
31 March
2020
Discontinued
Operations
(restated*)
2,913
99,505
1,830
200,571
301,906
Basic and diluted (loss)/earnings per share
(6.50)p
2.63p
(22.14)p
2.92p
*The loss after tax attributable to ordinary shareholders for the year ended 31 March 2020 has been restated to reflect the change in continuing
and discontinued operations.
The total loss per share for 2021 is (3.87)p for continuing and discontinued operations (2020 continuing and discontinued loss per share:
(19.22)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 for continuing
operations. Therefore, diluted EPS is the same as basic for continuing operations. However, the discontinued operations can be diluted. The
impact of this is a diluted earnings per share of 0.82p for discontinued operations (2020: 0.96p). 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 (6.50)p on the continuing operations and
earnings of 2.63p on the discontinued operations (2020: loss of (22.14)p on the continuing operations and earnings of 2.92p on the
discontinued operations).
The weighted average number of shares in issue for the year was 99,564,430 and the number of options outstanding was 33,333.
If these were all exercised the cash raised would be equivalent to that which would be raised by issuing 339,750 shares at the average
share price during the year. There were also 8,806,571 convertible loan notes outstanding, of which the weighted average number of shares
was 220,979,796. Therefore, the weighted average number of dilutive potential ordinary shares is 320,883,976.
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
At 1 April 2020
Less assets held for sale
At 31 March 2021
Cake Decoration
Brighter Foods (discontinued operations - assets held for sale)
Carried forward
Group
£’000s
37,753
(5,031)
32,722
31 March
2020
£’000s
32,722
5,031
37,753
31 March
2021
£’000s
32,722
–
32,722
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.
www.realgoodfoodplc.com Stock Code: RGD
55
30678 Real Good Food AR2021.indd 55
30678 Real Good Food AR2021.indd 55
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:36
20/09/2021 21:02:36
Notes to the Financial Statements (continued)
Year ended 31 March 2021
16. Goodwill continued
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% (2020: 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 did not result in an impairment of the goodwill held for Cake Decoration (2020: impairment of £12.6 million 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 an impairment of £0.1 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 a reduction in headroom of £1.8 million on the carrying value of
goodwill on Cake Decoration.
The Board has considered these sensitivities and believe that, owing to trading expectations and a strong brand, the recoverable amount
would support the value.
Cake Decoration
17. Other intangible assets
Cost
At 1 April 2020
At 31 March 2021
Amortisation
At 1 April 2020
Charge
At 31 March 2021
Net Book Value at 31 March 2021
Cost
At 1 April 2019
At 31 March 2020
Amortisation
At 1 April 2019
Charge
At 31 March 2020
Net Book Value at 31 March 2020
Book value of
cash generating
unit
£’000s
Estimated
recoverable
amount/value
in use
£’000s
44,260
46,782
Customer
Relationships
£’000s
Computer
Software
£’000s
Development
Costs
£’000s
Group
£’000s
Company
£’000s
4,170
4,170
4,170
–
4,170
–
4,170
4,170
2,794
1,376
4,170
–
332
332
285
41
326
6
332
332
153
132
285
47
111
111
97
11
108
3
111
111
67
30
97
14
4,613
4,613
4,552
52
4,604
9
4,613
4,613
3,014
1,538
4,552
61
296
296
278
18
296
–
296
296
146
132
278
18
56
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 56
30678 Real Good Food AR2021.indd 56
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:37
20/09/2021 21:02:37
OUR FINANCIALS
17. Other intangible assets continued
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 2021 consist of £nil computer software (2020: £18k). There is no indication of any
impairment of these intangible assets.
18. Property, plant and equipment
Group
Cost
At 1 April 2020
Reclassified to non-current assets discontinued operations
Reclassified to non-current assets discontinued operations IFRS16
Additions
Disposals
At 31 March 2021
Depreciation
At 1 April 2020
Reclassified to non-current assets discontinued operations
Reclassified to non-current assets discontinued operations IFRS16
Charge
Disposals
At 31 March 2021
Net Book Value at 31 March 2021
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
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
Assets in the
course of
construction
£’000s
4,872
(944)
(771)
44
–
23,302
(6,532)
–
585
(207)
3,201
17,148
1,177
(130)
(208)
469
–
1,308
1,893
10,798
(2,075)
–
1,966
(196)
10,493
6,655
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)
–
–
–
–
–
–
–
–
–
–
Total
£’000s
28,174
(7,476)
(771)
629
(207)
20,349
11,975
(2,205)
(208)
2,435
(196)
11,801
8,548
26,769
–
(1,878)
1,464
1,819
28,174
10,191
(878)
2,375
287
11,975
16,199
www.realgoodfoodplc.com Stock Code: RGD
57
30678 Real Good Food AR2021.indd 57
30678 Real Good Food AR2021.indd 57
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:37
20/09/2021 21:02:37
Notes to the Financial Statements (continued)
Year ended 31 March 2021
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 2020
Additions
Leases terminated
Reclassified to non-current assets discontinued operations
At 31 March 2021
Depreciation
At 1 April 2020
Charge
Leases terminated
Reclassified to non-current assets discontinued operations
At 31 March 2021
Net Book Value at 31 March 2021
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
1,256
34
–
(771)
519
(313)
(354)
–
208
(459)
60
208
29
(4)
–
233
(175)
(61)
4
–
(232)
1
Total
£’000s
1,464
63
(4)
(771)
752
(488)
(415)
4
208
(691)
61
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.
Company
Cost
At 1 April 2020
At 31 March 2021
Depreciation
At 1 April 2020
Charge
At 31 March 2021
Net Book Value at 31 March 2021
Cost
At 1 April 2019
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
The company does not have any right of use assets.
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
Total
£’000s
–
–
–
–
–
–
498
(498)
–
31
(41)
10
–
–
–
299
299
156
25
181
118
299
299
156
25
181
118
1,679
(1,380)
299
2,177
(1,878)
299
529
(837)
177
287
156
143
560
(878)
187
287
156
143
58
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 58
30678 Real Good Food AR2021.indd 58
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:37
20/09/2021 21:02:37
OUR FINANCIALS
19. Investments
Company
Investments in shares of subsidiary undertakings:
At 31 March 2020
At 31 March 2021
N Brown
Foods Limited
£’000s
53,900
53,900
Real Good Food
Ingredients
Limited
£’000s
–
–
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 (2020: nil charge).
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, held a 15% investment in Boka Foods Limited until its disposal in March 2021 FY21 (2020:
£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 2021 is disclosed below:
RGF Devizes Ltd*
Eurofoods Ltd*
N Brown Foods Ltd*
Renshaw US Incorporated*
JF Renshaw Ltd
RGFC Dust Ltd*
Rainbow Dust Colours Ltd
Principal Activities
Dormant
Dormant
Description and
Number of Shares Held
4,052,659 Ordinary £1
260,000 Ordinary £1
50,000 Preference £1
Holding Company
28,248,096 Ordinary 50p
Cake Decoration Supplier
200 Ordinary $1
Cake Decoration Supplier
15,685,164 Ordinary £1
Holding Company
Cake Decoration Supplier
1 Ordinary £1
500 Ordinary £1
Real Good Food Ingredients Ltd*
Food Ingredients Supplier
2,500,000 Ordinary £1
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 1348 Ottignies-Louvain-la-Neuve, Chemin du Cyclotron 6, Bruxelles
Renshaw US Incorporated registered office at 400 Commons Way, Rockaway, New Jersey, USA
Brighter Foods Ltd registered office at 5th Floor Voyager House Chicago Avenue, Manchester Airport, Manchester, England, M90 3DQ
www.realgoodfoodplc.com Stock Code: RGD
59
30678 Real Good Food AR2021.indd 59
30678 Real Good Food AR2021.indd 59
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:38
20/09/2021 21:02:38
Notes to the Financial Statements (continued)
Year ended 31 March 2021
20. Deferred taxation liability/(asset)
The gross movements on the deferred tax account are as follows:
Opening position
(Credit) to income statement
Charge / (Credit) to other comprehensive income –
defined benefit pension scheme movement
Charge to equity - deferred tax on share-based payments
Closing position
Shown as follows:
Liabilities
Assets
Group
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
(1,285)
(1,508)
(27)
(20)
102
–
102
–
31 March
2020
Group
£’000s
622
(1,692)
(215)
–
31 March
2020
Company
£’000s
(1,259)
(35)
(215)
1
(1,210)
(1,426)
(1,285)
(1,508)
216
(1,426)
(1,210)
–
(1,426)
(1,426)
223
(1,508)
(1,285)
–
(1,508)
(1,508)
Deferred tax assets
The deferred tax balances arise from temporary differences in respect of the following:
At 31 March 2020
(Credit) to income statement
Charge to other comprehensve income
At 31 March 2021
Within 12 months
Greater than 12 months
Deferred tax liabilities
At 31 March 2020
(Credit) to income statement
At 31 March 2021
Pension
Scheme
£’000s
(1,508)
(20)
102
Total
£’000s
(1,508)
(20)
102
(1,426)
(1,426)
–
–
(1,426)
(1,426)
Tangible
Assets
£’000s
223
(7)
216
Total
£’000s
223
(7)
216
There were £20.0 million of unused tax losses (2020: £16.9 million) on which deferred tax of £3.8 million (2020: £3.2 million) is not
recognised owing to uncertainty over when those losses will be utilised. The losses have no expiration date.
60
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 60
30678 Real Good Food AR2021.indd 60
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:38
20/09/2021 21:02:38
20. Deferred taxation liability/(asset) continued
Company
The deferred tax balances arise from temporary differences in respect of the following:
At 31 March 2020
(Credit) to income statement
Charge to other comprehensive income
At 31 March 2021
Within 12 months
Greater than 12 months
21. Inventories
Materials
Work in Progress
Finished Goods
Continuing Business
Discontinued Business
OUR FINANCIALS
Pension
Scheme
£’000s
(1,508)
(20)
102
Total
£’000s
(1,508)
(20)
102
(1,426)
(1,426)
–
–
(1,426)
(1,426)
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
31 March
2020
Group
£’000s
31 March
2020
Company
£’000s
1,225
112
2,260
3,597
3,597
–
3,597
–
–
–
–
–
–
–
4,227
149
2,447
6,823
4,249
2,574
6,823
–
–
–
–
–
–
–
Inventories totalling £5,893k (2020: £6,823k) 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
2021
Group
£’000s
31 March
2021
Company
£’000s
31 March
2020
Group
£’000s
31 March
2020
Company
£’000s
5,941
(230)
5,711
762
–
50
725
7,248
7,248
–
7,248
–
–
–
120
7,620
50
65
7,855
691
7,164
7,855
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
At 31 March 2021, the Group had an outstanding balance on the revolving credit facility of £1,794k (2020: £1,853k) for which the trade
receivables were pledged as security. The facility is available in relation to Brighter Foods, J F Renshaw and Rainbow Dust Colours GBP, USD,
and EUR receivables.
www.realgoodfoodplc.com Stock Code: RGD
61
30678 Real Good Food AR2021.indd 61
30678 Real Good Food AR2021.indd 61
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:38
20/09/2021 21:02:38
Notes to the Financial Statements (continued)
Year ended 31 March 2021
22. Trade and other receivables continued
Provision for impairment of receivables
At 31 March 2020
Charge for period
At 31 March 2021
31 March
2021
Group
£’000s
(192)
(38)
(230)
31 March
2021
Company
£’000s
–
–
–
31 March
2020
Group
£’000s
(108)
(84)
(192)
31 March
2020
Company
£’000s
–
–
–
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 2021, the lifetime expected credit loss for trade receivables in the Group is as follows:
Expected loss rate
Gross carrying amount
Loss provision
Less than
30 days old
£’000s
1%
3,273
32
30-60
days old
£’000s
2%
1,376
28
60-90
days old
£’000s
3%
365
11
90-365
days old
£’000s
6%
817
49
Over 365
days old
£’000s
100%
110
110
Total
£’000s
5,941
230
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 £38k (2020: charge of £84k) for impairment of its trade receivables during the period, to reflect debts
significantly past their due dates.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. The Directors consider the
maximum credit risk at the balance sheet date is equivalent to the carrying value of trade and other receivables. This risk is mitigated by the
Group’s credit insurance policies.
Trade receivables of £1.1 million were past due but not impaired. The ageing analysis of these receivables is as follows:
Up to 30 days past due
One to three months past due
Over three months past due
31 March
2021
Group
£’000s
582
204
323
31 March
2020
Group
£’000s
2,043
413
106
1,109
2,562
62
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 62
30678 Real Good Food AR2021.indd 62
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:39
20/09/2021 21:02:39
OUR FINANCIALS
23. Borrowings and capital management
Secured borrowings at amortised cost
Bank term loans
Revolving credit facilities
Leases
Other loans
Investor loans*
Convertible loan notes**
Government grants
Borrowings due for settlement within 12 months
Lease liabilities due for settlement within 12 months
31 March 2021
Group
£’000s
31 March 2021
Company
£’000s
31 March 2020
Group
£’000s
31 March 2020
Company
£’000s
2,050
1,794
93
–
30,240
15,199
–
–
–
–
–
30,240
15,199
–
2,916
1,853
957
102
28,336
12,341
228
–
–
–
–
28,336
12,341
–
49,376
45,439
46,733
40,677
2,659
93
–
–
2,717
390
–
–
Borrowings due for settlement after 12 months
46,624
45,439
43,059
40,677
Lease liabilities due for settlement after 12 months
--
–
567
–
Total
49,376
45,439
46,733
40,677
*
The investor loans shown consists of £20.6 million principal amount, £6.5 million accrued interest up to 31 March 2021 and redemption premiums of
£3.1 million.
** Convertible loan notes shown at 31 March 2021 consist of £8.8 million investment (2020: £8.8 million), £6.3 million accrued interest (2020: £3.6 million),
and £nil million of transaction costs (2020: £(0.1) million) being spread over the remaining life of the liability and a finance cost £0.1m resulting from a
substantial modification to the Convertible Loan Note terms requiring derecognition of the existing loans and recognition of new loans.
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, then subsequently extended post year
end to May 2023.
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 (“CLN’s”) 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 19 May 2022, then subsequently extended post year end to
May 2023. 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 2023, 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 12 per cent
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 2021, the derivative liability was valued at £17k (2020: £nil).
The convertible loan notes shown consist of a host loan at amortised cost of £8.8 million, £6.3 million of finance costs and £0.1 million of
costs resulting from substantial modification to the convertible loan notes up to 31 March 2021.
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.
www.realgoodfoodplc.com Stock Code: RGD
63
30678 Real Good Food AR2021.indd 63
30678 Real Good Food AR2021.indd 63
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:39
20/09/2021 21:02:39
Notes to the Financial Statements (continued)
Year ended 31 March 2021
23. Borrowings and capital management continued
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 2021, the Group continued with the borrowing facilities in place and secured loans from investors. As at
31 March 2021, 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 Limited, Rainbow Dust Colours Limited and Brighter Foods Limited 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 for 36 months ending August
2022. 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 2021 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
August 2017
June 2017
June 2017
Total
£0.8m
£2.7m
£6.1m*
£29.4m
Secured loan notes
Secured loan notes
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 (£1.35m), Omnicane Investors Ltd (£1.35m)
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 2021, 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 Wavertree property.
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
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 64
30678 Real Good Food AR2021.indd 64
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:39
20/09/2021 21:02:39
OUR 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
2021
Trade and other payables
7,138
Investor loans
Convertible loan notes
Bank term loans
Revolving credit facilities
Leases
NCI put option liability
Interest
Redemption premiums
Total
2020
Investor loans
Convertible loan notes
Bank term loans
Revolving credit facilities
Leases
Government grants
NCI put option liability
Interest
Redemption premiums
Total
–
–
72
–
8
1,553
8,771
–
–
893
–
–
144
–
15
–
56
–
–
649
1,794
70
–
1,052
2,569
–
–
–
–
8,771
1,052
2,569
–
20,562
8,807
1,185
–
–
–
30,554
13,029
3,084
46,667
–
–
–
–
–
–
–
–
–
–
–
8,087
20,562
8,807
2,050
1,794
93
1,553
42,946
13,029
3,084
59,059
Less than
1 month
£’000s
1–3 months
£’000s
3 months to
1 year
£’000s
1–5 years
£’000s
5+ years
£’000s
Total
£’000s
–
–
72
–
45
5
–
–
–
144
–
59
12
–
6,860
1,925
–
–
–
–
–
–
649
1,853
261
32
2,900
6,115
–
–
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
Trade and other payables
6,738
1,710
420
229
6,860
1,925
6,115
45,538
257
60,695
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 £112k.
A 10% weakening of the US dollar would result in a decrease of pre-tax profits of £92k.
{ With an excess of € liabilities to € assets a 10% strengthening of the Euro would result in a decrease in pre-tax profits of £37k.
A 10% weakening of the Euro would result in an increase of pre-tax profits of £30k.
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.
www.realgoodfoodplc.com Stock Code: RGD
65
30678 Real Good Food AR2021.indd 65
30678 Real Good Food AR2021.indd 65
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:40
20/09/2021 21:02:40
Notes to the Financial Statements (continued)
Year ended 31 March 2021
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
Continuing
Operations
31 March 2021
£’000s
Discontinued
Operations*
31 March 2021
£’000s
31 March
2021
£’000s
31 March
2020
£’000s
93
_
93
91
456
547
184
456
640
390
567
957
The maturity of lease liabilities as at 31 March 2021 is further analysed as set out below:
Due in less than one year
Due between one to five years
Due in over five years
Continuing
Operations
31 March 2021
£’000s
Discontinued
Operations *
31 March 2021
£’000s
31 March
2021
£’000s
31 March
2020
£’000s
93
_
_
93
91
257
199
547
184
257
199
640
390
336
231
957
* The lease liabilities relating to discontinued operations are shown as part of assets held for sale for Brighter Foods Limited in note 33.
Lease liabilities have been discounted using an average annual rate of 4.41% (2020: 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 £49k (2020: £15k).
The movements in the lease liability in the year are set out below:
Lease liability at 1 April 2020
Lease additions
Leases terminated
Repayments of lease liabilities
Interest expense
Less assets classified as discontinued operations
Lease liability at 31 March 2021
31 March
2021
Group
£’000s
957
63
(4)
(402)
26
(547)
93
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
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 66
30678 Real Good Food AR2021.indd 66
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:40
20/09/2021 21:02:40
OUR 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
2021
Group
£’000s
3,837
377
3,400
–
473
31 March
2021
Company
£’000s
186
15
479
20,154
11
31 March
2020
Group
£’000s
4,419
1,326
2,640
–
712
31 March
2020
Company
£’000s
28
22
698
81,546
–
8,087
20,845
9,097
82,294
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.
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
Investor loans
Convertible loan notes
Amounts owed to Group undertakings
Financial liabilities at fair value through profit and loss
NCI put option
Derivative liability - Convertible loan notes
Total financial liabilities
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
31 March
2020
Group
£’000s
31 March
2020
Company
£’000s
622
215
5,711
762
50
–
7,360
3,837
3,400
473
2,050
1,794
93
30,240
15,199
–
57,086
1,553
17
1,570
58,656
17
215
–
120
50
7,620
8,022
186
479
11
–
–
–
30,240
15,199
20,154
66,269
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
698
–
–
–
–
28,336
12,341
81,546
54,997
122,949
–
17
17
4,420
–
4,420
–
–
–
66,286
59,417
122,949
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.
www.realgoodfoodplc.com Stock Code: RGD
67
30678 Real Good Food AR2021.indd 67
30678 Real Good Food AR2021.indd 67
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:41
20/09/2021 21:02:41
Notes to the Financial Statements (continued)
Year ended 31 March 2021
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
2021
Number of
Shares
2020
31 March
2021
£’000s
31 March
2020
£’000s
99,564,430
99,326,335
–
238,095
99,564,430
99,564,430
1,991
–
1,991
1,987
4
1,991
The ordinary shares have a par value of £0.02. 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 2020 relate to employee options being exercised.
There are 33,333 shares reserved for issue under options, with expiry dates beyond 2021, 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
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 68
30678 Real Good Food AR2021.indd 68
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:41
20/09/2021 21:02:41
OUR 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
2021
Number of
Share Options
31 March
2021
Weighted
Average
Exercise Price
(£)
31 March
2020
Number of
Share Options
31 March
2020
Weighted
Average
Exercise Price
(£)
Outstanding at the beginning of the period
4,060,835
0.26
5,554,550
Exercised during the year
Forfeited during the year
Outstanding at the end of the period*
Exercisable at the end of the period
–
–
(238,095)
(4,027,502)
(0.25)
(1,255,620)
33,333
33,333
0.45
4,060,835
0.45
4,060,835
0.23
(0.05)
(0.39)
0.26
0.26
* All of the outstanding options have an exercise price within the range of £0.45 in 2021 (2020: between £0.00 and £0.46). The weighted average remaining
contractual life of share options outstanding at the end of the period is 4.1 years (2020: 1.3 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
£200k (2020: a credit of £35k). 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
2021
£’000s
31 March
2020
£’000s
74
177
www.realgoodfoodplc.com Stock Code: RGD
69
30678 Real Good Food AR2021.indd 69
30678 Real Good Food AR2021.indd 69
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:41
20/09/2021 21:02:41
Notes to the Financial Statements (continued)
Year ended 31 March 2021
31. Related party transactions
There have been no consultancy fees paid to entities in which Directors hold a beneficial interest.
Further to the disposal of Brighter Foods Limited on 11 May 2020 (a post-year end activity), each of NB. Ingredients Limited (“Napier Brown”),
Omnicane International Investors Limited (“Omnicane”), and certain funds managed by Downing LLP (“Downing”) (together the “Major
Shareholders”) each agreed to contribute £0.18 million towards the costs incurred by the Group in relation to the Disposal.
The total contribution of £0.54 million is by way of a waiver of certain of the outstanding loan notes held by each of the Major Shareholders
(the “Loan Note Waivers”) reducing the amount of loan notes outstanding to £22.0 million. This waiver has been agreed in respect of certain
costs related to the Disposal. The £540,000 attributable to waiver is split between c.£0.35 million of capital, £0.1 million relating to
management compensation with the remainder being in respect of interest and redemption premium.
As Napier Brown and Omnicane are substantial shareholders of the Company and Judith MacKenzie, a director of the Company, is also a
Partner of Downing, each of the Loan Note Waivers are deemed to be related party transactions pursuant to the AIM Rules for Companies.
Maribeth Keeling, Mike Holt, and Gail Lumsden, the Independent Directors of the Company for this purpose, having consulted with the
Company’s Nominated Adviser, finnCap Ltd, consider the terms of the Loan Note Waivers to be fair and reasonable insofar as the Company’s
shareholders are concerned.
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
Rainbow Dust Colours Ltd
12 months
ended
31 March
2021
£’000s
240
720
60
12 months
ended
31 March
2020
£’000s
240
720
60
1,020
1,020
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)
N Brown Foods Ltd
12 months
ended
31 March
2021
£’000s
12 months
ended
31 March
2020
£’000s
7,872
4,660
69
7,558
1,248
786
1,803
818
69
66,017
1,248
7,737
1,815
–
20,154
81,546
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
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 70
30678 Real Good Food AR2021.indd 70
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:42
20/09/2021 21:02:42
OUR 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)
12 months
ended
31 March
2021
£’000s
144
5,063
–
312
1,082
230
755
34
12 months
ended
31 March
2020
£’000s
144
5,097
57,659
175
1,103
254
6,345
34
7,620
70,811
32. Pension arrangements
Defined Contribution Scheme. The Group operates a defined contribution scheme for all employees, including provision to comply with
auto-enrolment requirements laid down by law.
In addition, the Company operates one defined benefits scheme which was closed to new members in 2000 and closed to future accrual with
effect from 5 April 2004. The Defined Benefit scheme is a funded arrangement with assets held in a separate trustee-administered fund.
Members of the Plan are entitled to retirement benefits based on their final salary at 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 2021. This has resulted in a deficit in the Plan of £7,505k. 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
Present value of defined benefit obligation
Fair value of Plan assets
Deficit in Plan
Effect of asset ceiling/IFRIC14
Gross amount recognised
Deferred tax*
Net liability
* Deferred tax rate 2020 & 2021: 19%, 2017, 2018 & 2019: 17%
31 March
2021
£’000s
21,885
(14,527)
7,358
147
7,505
(1,426)
6,079
31 March
2020
£’000s
20,750
(13,735)
7,015
921
7,936
(1,508)
6,428
31 March
2019
£’000s
21,177
(13,774)
7,403
–
7,403
(1,258)
6,145
31 March
2018
£’000s
21,448
(13,529)
7,919
–
7,919
(1,094)
6,825
31 March
2017
£’000s
21,319
(13,946)
7,373
–
7,373
(1,120)
6,253
www.realgoodfoodplc.com Stock Code: RGD
71
30678 Real Good Food AR2021.indd 71
30678 Real Good Food AR2021.indd 71
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:42
20/09/2021 21:02:42
Notes to the Financial Statements (continued)
Year ended 31 March 2021
32. Pension arrangements continued
Reconciliation of opening and closing balances of the present value of the defined benefit obligations
Defined benefit obligation at start of period
Interest cost
Actuarial losses / (gains)
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
2021
£’000s
31 March
2020
£’000s
20,750
21,177
465
1,698
–
(1,028)
497
(8)
16
(932)
21,885
20,750
31 March
2021
£’000s
31 March
2020
£’000s
13,735
13,774
312
788
720
(1,028)
328
(168)
733
(932)
14,527
13,735
2,408
12,119
2,210
11,525
14,527
13,735
The actual return on the Plan assets over the period ended 31 March 2021 was £1,100k (2020: £(82)k).
Total expense recognised in the Statement of Comprehensive Income within other finance income
Interest on liabilities
Interest on assets
Interest on effect of asset ceiling / IFRIC 14
Net interest cost
Past service cost
Total cost
Statement of recognised income and expenses
Actuarial gain/(loss) on the Plan assets
Actuarial gain/(loss) on the Plan liabilities arising from changes in demographic assumptions
Actuarial (loss)/gain on the Plan liabilities arising from changes in financial assumptions
Change in the effect of the asset ceiling / IFRIC14
31 March
2021
£’000s
31 March
2020
£’000s
465
(312)
29
182
–
182
31 March
2021
£’000s
788
17
(1,715)
803
497
(328)
–
169
16
185
31 March
2020
£’000s
(168)
(151)
143
(921)
Total amount recognised in Statement of Other Comprehensive Income
(107)
(1,097)
72
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 72
30678 Real Good Food AR2021.indd 72
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:42
20/09/2021 21:02:42
32. Pension arrangements continued
Assets
UK equity
Absolute return fund
Corporate Bonds
Gilts
Multi-Asset Funds
Cash
Total assets
OUR FINANCIALS
31 March
2021
£’000s
2,408
1,412
2,936
2,769
4,827
175
31 March
2020
£’000s
2,210
1,522
2,746
3,112
3,927
218
31 March
2019
£’000s
2,667
1,013
2,699
3,137
4,055
203
14,527
13,735
13,774
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
Allowance for commutation of pension for cash at retirement
31 March
2021
£’000s
31 March
2020
£’000s
31 March
2019
£’000s
31 March
2018
£’000s
3.40
–
2.00
3.30
3.60
2.70
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
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 2018 and then making appropriate adjustments for known experience and for differences in assumptions.
The mortality assumptions adopted at 31 March 2021 and 31 March 2020 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 2021 was 15 years (2020: 15 years).
31 March
2021
21 years
23 years
22 years
25 years
31 March
2020
21 years
23 years
22 years
25 years
www.realgoodfoodplc.com Stock Code: RGD
73
30678 Real Good Food AR2021.indd 73
30678 Real Good Food AR2021.indd 73
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:43
20/09/2021 21:02:43
Notes to the Financial Statements (continued)
Year ended 31 March 2021
32. Pension arrangements continued
Historic funding positions
The funding positions applicable at the start of each period are as follows:
12 months
ended
31 March
2021
£’000s
14,527
(21,885)
(147)
(7,505)
–
–
12 months
ended
31 March
2020
£’000s
13,735
(20,750)
(921)
(7,936)
(168)
–
12 months
ended
31 March
2019
£’000s
13,774
(21,177)
–
(7,403)
518
427
12 months
ended
31 March
2018
£’000s
13,529
(21,448)
–
(7,919)
(232)
–
12 months
ended
31 March
2017
£’000s
13,946
(21,319)
–
(7,373)
652
(103)
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
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
Obligation
Increase
Obligation
Decrease
(+/– 0.5%)
(+/– 0.5%)
(+/–) 1 Year
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
OUR FINANCIALS
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 74
30678 Real Good Food AR2021.indd 74
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:43
20/09/2021 21:02:43
OUR 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 2021.
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 Directors began the process for the sale of Brighter Foods Limited as a going concern and at 31 March 2021, the Group had entered into
an exclusivity contract with The Hut Group. The sale was completed in May 2021.
The assets classified as held for sale within the consolidated statement of financial position at 31 March 2021 are as follows:
Real Good
Food Plc
N Brown
Foods Limited
Brighter
Foods Limited
–
–
–
–
5,031
4,457
31 March
2021
£’000s
5,031
4,457
Real Good
Food Plc
N Brown
Foods Limited
–
–
–
–
31 March
2020
£’000s
–
–
1,000
148
814
1,962
1,000
148
1,148
Goodwill
Plant and equipment
Property (land and
buildings)
Right of use assets
(IFRS 16)
Stock
Trade and other receivables
Cash
_
–
–
–
_
–
–
–
Total assets held for sale
1,000
148
Trade and other payables
Hire purchase
IFRS16 Lease liabilities
Deferred income
Liabilities held for sale
–
–
_
–
–
–
–
_
–
–
563
2,296
3,390
2,458
19,009
3,598
167
547
130
563
2,296
3,390
2,458
20,157
3,598
167
547
130
4,442
4,442
_
–
–
–
_
–
–
–
_
–
–
–
1,000
148
1,148
–
–
_
–
–
–
–
_
–
–
–
–
_
–
–
The statement of cash flows includes the following amounts in relation to Brighter Foods Limited:
Operating activities
Investing activities
Financing activities
Net cash from discontinued operation
12 months
ended 31 March
2021
£’000s
1,224
234
(156)
1,302
www.realgoodfoodplc.com Stock Code: RGD
75
30678 Real Good Food AR2021.indd 75
30678 Real Good Food AR2021.indd 75
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:43
20/09/2021 21:02:43
Notes to the Financial Statements (continued)
Year ended 31 March 2021
34. Contingent liability
The Directors have taken legal advice regarding a communication from the liquidators of Five Star Fish Limited (FSF) regarding a claim for
repayment of an alleged £610k debt owed by RGF to FSH. The Directors have the view, following the legal advice, that th claim is not valid
and accordingly have not made a provision for it within the accounts.
35. Post-year end activities
1. Disposal of Brighter Foods Limited on 11 May 2021 for an aggregate cash consideration of £43.0 million on a cash free/debt free basis
to The Hut Group plc (“THG”). RGF, through its subsidiary NBF, has an interest in 84.334 per cent. of the issued share capital of Brighter
Foods Limited with the balance owned by Brighter’s Managers. The Group received cash proceeds of £35.64 million.
2. In May 2021, the Group made a payment of £8.5m net consideration to the Continuing Group’s pension scheme (the Napier Brown
Retirement Plan) (the “Plan”), which is broadly equivalent to the Plan’s low dependency technical provisions basis. As such, it is expected
that the Group will not have to pay further deficit contributions, which currently amount to £1.0 million per annum, until a new schedule of
contributions is agreed based on the valuation to be agreed as at 31 March 2021 for the Plan; such agreement would take into account
this cash injection, which may result in payments of up to £1.5 million (in aggregate) being paid between 1 January 2023 and 30 June
2025 to close the gap towards a buy-out basis.
3. In May 2021, the Group paid £23.1 million to the Loan Note Holders, reducing the amount repayable from £45.6 million to £22.5 million
in respect of the loan notes, resulting in a significant reduction in the financial liabilities attached to the loan notes. Also, in May 2021
the Loan Note Holders waived £0.5m of certain of the outstanding loan notes held by each of the Major Shareholders (the “Loan Note
Waivers”) reducing the amount of loan notes outstanding to £22.0 million. This waiver has been agreed in respect of certain costs
related to the Disposal. The £540,000 attributable to waiver is split between c.£350,000 of capital, £100,000 relating to certain
management compensation with the remainder being in respect of interest and redemption premium.
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 Amendment Deed amends the final repayment dates of each of the
Agreements, including the convertible loan notes; they have all been extended to 19 May 2023 (the “Final Repayment Date”) with no
further change to the interest rate payable by the Company pursuant to each Agreement.
5. At the forthcoming AGM, the Independent Directors, with the support of the rest of the Board, will be proposing that the Company cancels
the listing of the Company’s shares on AIM. This is expected to save approximately £150,000 a year in costs and provide greater
flexibility and agility to maximise shareholder value.
76
76
76
OUR FINANCIALS
OTHER INFORMATION
OTHER INFORMATION
Annual Report and Accounts for the year ended 31 March 2021
Annual Report and Accounts for the year ended 31 March 2021
Annual Report and Accounts for the year ended 31 March 2021
30678 Real Good Food AR2021.indd 76
30678 Real Good Food AR2021.indd 76
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:44
20/09/2021 21:02:44
Advisors and Company Information
OTHER 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
Banker
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
www.realgoodfoodplc.com Stock Code: RGD
www.realgoodfoodplc.com Stock Code: RGD
77
77
30678 Real Good Food AR2021.indd 77
30678 Real Good Food AR2021.indd 77
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:44
20/09/2021 21:02:44
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
F
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
M
a
r
c
h
2
0
2
1
S
t
o
c
k
c
o
d
e
:
R
G
D
61 Stephenson Way, Wavertree,
Liverpool L13 1HN
T: 0151 706 8200
enquiries@realgoodfoodplc.com
www.realgoodfoodplc.com
30678 Real Good Food AR2021.indd 3
30678 Real Good Food AR2021.indd 3
30678
20 September 2021 9:01 pm
V12
20/09/2021 21:02:14
20/09/2021 21:02:14