FONDANT ICING
THE ALL ROUNDER
Stock code: RGD
Annual Report and Accounts
For the year ended 31 March 2022
Annual Report and Accounts for the year ended 31 March 2022
STRATEGIC REPORT
The Group’s current objective:
To deliver a return on investment for all our stakeholders.
The Group’s current strategy:
To improve our profitability by focusing on and investing in our areas of
competitive advantage, whilst partnering with our customers to
enhance the consumer experience.
Contents
STRATEGIC REPORT
Overview
01
The Group in Summary
02
Chairman’s Statement and Business Review
04
Finance Review
06
Key Performance Indicators
08
Corporate Social Responsibility
09
Risk Management
10
GOVERNANCE
Board of Directors
11
Report of the Directors
12
Audit Committee Report
19
Remuneration Committee Report
21
FINANCIALS
Independent Auditor’s Report
22
Consolidated Statement of
Comprehensive Income
27
Consolidated Statement of Changes in Equity
28
Company Statement of Changes in Equity
29
Consolidated Statement of Financial Position
30
Company Statement of Financial Position
31
Consolidated Cash Flow Statement
32
Notes to the Financial Statements
33
OTHER INFORMATION
Advisors and Company Information
70
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
www.realgoodfoodplc.com
STRATEGIC REPORT
www.realgoodfoodplc.com Stock Code: RGD
01
Overview
Financial information presented
relates to continuing operations.
2021
£37.3m
GROUP
REVENUE
£40.4m
2021
£0.2m
GROUP EBITDA
(adjusted)
£0.7m
2021
£15.2m
GROSS
PROFIT
£16.1m
Financial highlights
{
Revenue from continuing businesses increased by 8.3% to £40.4 million
(2021: £37.3 million).
{
Adjusted underlying EBITDA* from continuing activities for the Group was
£0.7 million (2021: £0.2 million), despite the impact of covid on the
continuing business.
{
Brighter Foods sold to The Hut Group (THG) in May 2021 generating £36.4 million
cash for the Group.
{
Net debt significantly reduced to £25.5 million (2021: £48.8 million).
Operational highlights
{
Cake Decoration launched 69 new products in the year with in-year revenues of
c. £1.8 million.
{
Initiated a rebranding, range rationalisation and recipe improvement programme.
{
Unprecedented increases in the cost of raw materials and energy in recent months
continue unabated and pose significant challenges.
{
In response, the Group has hunkered down, controlled costs and protected revenues
where possible.
Current trading
{
Post year end programme to reduce costs saving £1.4 million per year from the
end of Q3.
{
FY23 expected to be a very challenging and loss-making year but the business is
being strengthened and is ready to benefit from a more favourable trading
environment.
{
The Group has the support of its Loan Holders and major shareholders to navigate
this difficult time.
{
The Board remains open to divesting the continuing businesses for the right value
at the right time.
* see note 5 underlying adjusted EBITDA
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Annual Report and Accounts for the year ended 31 March 2022
02
STRATEGIC REPORT
The Group in Summary
Following the sale of Brighter Foods in May
Following the sale of Brighter Foods in May
2021, Real Good Food now has one division,
2021, Real Good Food now has one division,
Cake Decoration, comprising two businesses.
Cake Decoration, comprising two businesses.
The businesses
The businesses
Cake Decoration comprising Renshaw and Rainbow Dust, has its own infrastructure and
Cake Decoration comprising Renshaw and Rainbow Dust, has its own infrastructure and
management teams and generally has the resources to operate as a stand-alone unit.
management teams and generally has the resources to operate as a stand-alone unit.
Discontinued Operation
Discontinued Operation
Food Ingredients is classed as a discontinued operation in the accounts for FY22 and FY21
owing to the sale on 11 May 2021 of Brighter Foods Limited.
Head Office
Head Office
Central functions comprise Finance and the plc Board.
Read more on page 41
Read more on page 41
EMPLOYEES
314
2021: 323
EMPLOYEES
4
2021: 4
EBITDA Profit
(adjusted)*
£1.0m
2021: £0.8m
EBITDA (Loss)
(adjusted)*
£(0.4)m
2021: £(0.6)m
REVENUE
£40.4m
2021: £37.3m
HEAD
OFFICE
OPERATING Loss
£(0.5)m
2021: £(1.7)m
OPERATING (Loss)/Profit
£(46.2)m
2021: £0.4m
*See note 5 for reconciliation
STRATEGIC REPORT
www.realgoodfoodplc.com Stock Code: RGD
03
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 was sold on the 11 May 2021.
Brighter Foods: Tywyn, Wales, 216 employees
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, 286 employees
Rainbow Dust Colours: Preston, 26 employees
Renshaw Europe: Europe, 2 employees
(Discontinued operations)
Annual Report and Accounts for the year ended 31 March 2022
04
STRATEGIC REPORT
Chairman’s Statement and Business Review
Overview
With the easing of covid restrictions
and post-Brexit uncertainty, the Group
started the year well. For the first six months
to 30 September 2021, revenue and EBITDA
were well ahead of last year. Underlying
adjusted EBITDA was £0.7 million compared
to a (covid-impacted) loss of £0.8 million
in the prior year and an EBITDA profit of
£0.2 million for the first half of FY20 (our
pre-covid benchmark).
Further progress was expected in our
seasonally busier second half of the year,
but revenue was much lower than had been
anticipated (particularly during our peak Q3
period) due to severe shortages and erratic
deliveries of certain key ingredients and
services, compounded by high absence rates
because of the Omicron variant of covid,
which affected our ability to fulfil customer
orders. Significant input cost increases
during Q4 also impacted profitability due to
the inevitable lag effect on cost-to-price pass
through to customers. These are sector-wide
issues but their effect on us was more
pronounced due to our seasonality.
Underlying adjusted EBITDA was marginally
positive for the six months to 31 March
2022, compared to a £1.1 million profit in
the prior year and £1.9 million loss in FY20
(our pre-covid benchmark). International
sales, which had been expected to show
double digit growth, were 35% lower in the
second half of the year and 14% lower for
the full year; due to a combination of supply
chain shortfalls and the loss of some USA
business to local supply.
For the year as a whole the Group improved
on its FY21 performance but not FY20, with
a £0.7 million underlying adjusted EBITDA on
continuing activities. Whilst disappointing
and frustrating, the results mask
improvements that did add value in the year
and will add future value once prevailing
market conditions normalise. New product
revenues from the launch of 69 new
products, accounted for 4.5% (£1.8 million)
of sales, this includes the introduction of
bakers’ caramel for the retail market and
other luxury products, which make stylish
and quality cake decorating at home easier
and more accessible. Work also started on
reformulating product recipes to reduce the
cost and complexity of product manufacture
and this rather than new product launches
will be a key focus area for the new
financial year.
Brighter Foods
In May 2021, we sold our majority stake in
Brighter Foods Limited to The Hut Group for
£35.6 million which valued the business at
£43.0 million. The timing of the sale
coincided with the end of the lock-in period
of Brighter’s Chief Executive and Founder. At
£43.0 million, the sale represented 8.6
times annualised FY20 EBITDA and 11.7
times 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
on an “on-going basis” (by the injection of
£8.5 million into the Scheme’s assets).
Renshaw Rebranding
In 2021, Renshaw conducted research on
the Cake Decorations Market1. Qualitative
insights were gathered from a consumer
consulting board of 40 bakers and these
were then tested with a group of 1000 UK
bakers of various skill levels from beginners
to professionals1. A study into the beliefs
and behaviours of lapsed and declining
consumers of RTR (ready to roll) icing2 was
also undertaken; last year, 1.6 million new
shoppers entered the category but
1.5million exited3, so addressing their key
concerns, the greatest being a lack of
confidence, could make a transformational
difference to the category.
The results have led to a more inclusive brand
proposition. The new improved recipe will
continue to provide the functionality that
regular users love, whilst also making it easier
to knead, roll and correct slight imperfections
which anyone can make, to ensure a positive
experience even for the first-time user. The
vanilla flavour has been increased to enhance
the eating experience whilst for consumer
packs there’s also a fun and approachable
new look and name change. From September,
consumer packs will encourage cake
decorators to “just roll with it” if things take a
direction they hadn’t originally planned, to
celebrate the perfectly imperfect creations
that make a handmade product so special. In
response to consumer feedback the product
will be renamed Fondant Icing (after all it’s not
strictly “ready to roll” as a quick knead wakes
up the gum system and makes the product
easier to use).
STRATEGIC REPORT
www.realgoodfoodplc.com Stock Code: RGD
05
There has also been a range rationalisation,
as even professionals were confused at times
with which product to use. Each product in the
more focused portfolio has a clear description
front of pack to help guide the consumer, and
on the back, there are simple step by step
instructions and top tips plus a QR code with
content to educate and inspire.
The objective of the rebrand, supported by
ongoing communications throughout the year
will be to stem, (and potentially reverse over
time) the decline we have seen in fondant
icing, retaining more of the new and existing
shoppers and encourage greater frequency
of purchase.
Wavertree Property
Shortly after the year end, we sold our
Wavertree property to Tutum Property
Limited. The property was purchased in
2015 and housed the Renshaw Academy
until August 2019. Since then, it had been
used as the New Product Development
Centre and by Renshaw’s marketing team.
These were relocated onto Renshaw’s main
manufacturing site at Crown Street, Liverpool
bringing the Renshaw business together on
one site. The sale made a small loss but
generated net cash proceeds of £0.9 million
of which, £0.3 million has been spent on
creating an Innovation Centre adjacent to
the factory at Crown Street.
Dividend
Consistent with previous years, the Board is
not recommending the payment of a dividend
for the year. The Board’s 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
Following the sale of Brighter Foods, the
Group now has two trading units focused on
the design and manufacture of products for
decorating cakes, biscuits and desserts; JF
Renshaw and Rainbow Dust Colours. The
Group sells branded and private label
products across multiple channels.
Within the UK, the main markets are retail
products for home bakers, and ingredients
for manufacturers of cakes, biscuits, and
desserts, along with bakery shops and
foodservice outlets serviced via a
wholesaler network.
Internationally, CDD, (Cake Decoration
Division) operate in retail, and the specialist
home bakery market. Here customers are
now spending less than they did during covid
lock-downs. Although new customers to the
category are still baking, they are doing so
less often.
In UK retail, CDD has moved with the
consumer who is becoming increasingly
price conscious. Therefore CDD has focused
on delivery of appropriate products to not
just the major multiples but also specialist
retailers and bargain stores. Although the
Home Baking market has declined since the
growth seen during lockdowns, at £1.5
billion RSP3 (retail sales prices) it remains
ahead of pre-covid levels. The prediction for
the year ahead is that sales across retail will
see a further decline as recessionary
spending habits kick in, whilst many will
continue to bake as a way of relaxing, for
others it may be more economical to switch
to a bought in product.
Meanwhile, the UK sales of ready-made
bakery goods have grown by 1.3%/£185
million over the last year to £14.6 billion
RSP. CDD has enhanced its relationship with
customers through innovation and cross
selling Renshaw and Rainbow Dust products
into this channel.
Predictions for the year ahead are more
difficult; on the plus side we have seen in
previous recessionary environments a strong
demand for affordable indulgences, and as
mentioned above a potential trade off with
home baking. But with unprecedented cost
increases across fuel, energy and food,
disposable income will be reduced which
could lead to a drop in consumption.
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.
Outlook
The unprecedented increases in the cost of
raw materials and energy in recent months
continue unabated and pose significant
challenges to the whole sector. Since 1 January
2022, the cost of sugar has doubled and
glycerine and butter have increased by 87%
and 82% respectively. It is anticipated that for
the current financial year (to 31 March 2023),
the increased cost of raw materials and other
costs of production will exceed £5 million given
current cost levels. These increases are being
passed through to customers but, in an
environment of spiralling cost inflation, the lag
effect is more prominent. Price increases have
been secured but they have become incessant.
They are also likely to depress demand with
household incomes being under pressure from
rising energy pricing and other costs. Volumes
for the first five months of the new financial
year are 29% down on the same period of
last year and 16% lower than our pre-covid
benchmark (FY20). Assuming the current
hyper-cost inflation and its impact on
demand continues, the Group will be
loss-making at EBITDA level.
The Group is determined to hunker down,
control costs, maximise savings opportunities
and protect revenues. Wage inflation has been
held at 3% and a voluntary redundancy
programme was agreed in May 22 which will
reduce 51 jobs during Q3 saving £1.4 million
per year. Given the pressure on the business,
a more radical reform of the Group has just
been signed off by the Board and Loan Note
Holders to significantly reduce overhead
costs, re-set pricing and achieve further
manufacturing efficiencies in order to return
the business to profitable growth. Successful
implementation of the recovery plan is
expected to return between £2 million and £4
million in EBITDA under current market
conditions. Negotiations with customers have
already begun to address the widening gap
caused by cost inflation and market
distortions that have arisen in recent years.
The Board is confident that the right actions
are being taken and has secured the support
of Loan Note Holders, including the pledge of
additional funding of £1.0 million, Loan
documentation is under dicussion). The Group
is also, with the support from advisors, in
discussions to secure an additional £1.5
million of new funding as part of a refinancing
of the asset backed facility with a new funder,
currently provided by Leumi ABL.
Mike Holt
Executive Chairman
30 September 2022
1. Axis Consulting Quantitative Research of 1000 home bakers
2. Kantar. How do we revolutionise the icing category? 7 Sept 2021
3. Kantar, Market Data Update May 2022.
Annual Report and Accounts for the year ended 31 March 2022
06
STRATEGIC REPORT
Finance Review
Revenue
Group revenue of the continuing businesses
for the 12 months ended 31 March 2022
was £40.4 million (2021: £37.3 million), an
increase of 8.3% on revenue to 31 March
2021. With the relaxation of covid
restrictions, sales in the Wholesale and
Manufacturing sectors began to return to pre
covid levels. The first half of the year saw
strong sales of £20.0 million up 29.9%
versus H1 in FY21, however sales in Q3
(October to December), and January were
much lower than expected due to severe
shortages and erratic deliveries of certain
raw materials, compounded by high absence
rates in the factory due to the Omicron
variant, which affected our ability to fulfil
customer orders. Sales in the second half
were therefore flat year on year.
Profit measure on operations
Gross profit on the continuing businesses for
the overall Group was £16.1 million (2021:
£15.2 million). At 39.9%, the gross profit
margin was below the prior year by 0.8%,
owing to significant increases in key material
costs and higher distribution costs for
overseas deliveries. The lag effect on
passing through cost increases onto
customers is on average two to three
months, but the impact is more pronounced
during our seasonally busier second half.
The operating loss in the year of £17.1
million is reported after depreciation and
amortisation charges of £1.4 million,
impairment of £16.1 million and significant
items of £0.3 million. The significant costs
arise from further restructuring in the Cake
Decoration business and the closure of the
Wavertree site.
The adjusted EBITDA profit of the underlying
continuing business is £0.7 million.
The items adjusted for are:
Impairment charge:
£16.1m
Significant Items:
£0.3m
The impairment charge relates to
purchased goodwill and aligns the
£41.3 million carrying value to what the
Board considers recoverable, based on
current trading forecasts and only the cost
saving measures underway at the balance
sheet date. Had the full benefits of the
recently launched radical reform programme
been taken into account the impairment
would have only been £0.6 million.
After finance costs of £1.9 million (FY21:
£4.7 million), a significant reduction on
FY21 owing to the repayment of some
investor loans in FY22, the loss before tax
for the year was £19.0 million (2021: loss
of £6.1 million) for continuing businesses.
This equates to a loss per share of
21.46 pence on continuing operations
(loss of 6.50 pence in 2021), (see note 15).
Cash flow and net debt
Conserving cash is a key objective for the
Group. Following the sale of Brighter Foods
in May 2021 the Group netted cash
proceeds of £35.4 million. The proceeds
were utilised as follows:
The Group made a payment of £8.5 million
to the Group’s pension scheme (the Napier
Brown Retirement Plan) (the “Plan”), 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,
until a new schedule of contributions is
agreed based on the valuation as at 31
March 2022 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.
The Group paid £23.1 million to the Loan
Note Holders, reducing the amount repayable
from £45.6 million to £22.5 million, with a
further £0.5 million waiver from the loan
note holders reducing the debt to £22.0
million in respect of the loan notes.
Approximately £3.0 million of net proceeds
was retained to provide working capital to
support the financing needs of Renshaw
and Rainbow Dust Colours.
The net debt at the end of FY22 stood
at £25.5 million versus £48.8 million in
FY21. This predominantly comprises
shareholder loans of which £16.3 million is
in the form of convertible loan notes.
Net debt is a key performance indicator for
the Group and is explained in note 13.
12 months to March
2022
£’000s
2021
£’000s
Revenue
40,431
37,292
Gross profit
16,130
15,164
Delivered margin
12,170
11,549
Delivered margin %
30.0%
31.0%
Underlying EBITDA
(adjusted)*
659
227
Operating (loss)
before impairment
and significant items
(676)
(1,464)
Operating loss after
impairment and
significant items
(17,089)
(1,261)
Operating loss %
(42.3%)
(3.4%)
Loss before tax
(18,978)
(6,108)
All figures refer to continuing businesses.
*See note 5 for reconciliation
Going Concern and Post
Balance Sheet Events
The financial statements are prepared
on a going concern basis, which the
Directors believe to be appropriate for
the following reasons.
The forecasts are prepared on a Group basis
and therefore include underlying forecasts
and assumptions for the subsidiaries and
the Parent Company. For this reason, the
Group is referred to in the following
paragraphs when discussing forecasting
and events as all are interdependent on
one another.
The Group incurred a loss on continuing
operations before tax and impairment of
£2.9m in the year to 31 March 2022 (2021:
£6.1m loss) and at 31 March 2022 had net
current assets of £5.1m (2021: £15.0m)
and net assets of £5.1m (2021: £3.3m).
The Group manages its day-to-day working
capital requirement using various facilities
with Leumi ABL. At the year end the available
Group finance facilities, provided by Leumi
ABL, totalled £6.6m, of which £5.0m was
utilised. The Group shareholder loan notes
and convertible loan notes, totalled £23.6m
and are classified as creditors due after one
year, and are repayable on 19 May 2023.
The Directors have prepared financial
forecasts for the Group, comprising income
statements, balance sheets and cash flows
through to March 2024 which have been
approved by the Board. In assessing the
appropriateness of the Group’s accounts
being prepared on a going concern basis,
the Directors have considered factors likely
to affect its planned future performance
and reasonably possible downside
sensitivity scenarios.
STRATEGIC REPORT
www.realgoodfoodplc.com Stock Code: RGD
07
As noted in the Strategic Report and
Business Review on page 5, the
macroeconomic headwinds are very
challenging and are expected to continue for
the immediate future given the wider
economic outlook. A radical reform of the
business has commenced, which requires
the support of new funding, in order to return
the Group to profitability and to position it for
sustainable growth once economic
conditions improve. The new funding
requirement is £2.5m of which £1.0m has
been pledged, but not yet formally
committed, by existing Loan Note Holders.
Due to the current (and severe) inflationary
cost pressures impacting consumer demand,
and the ongoing difficulty in sourcing key
ingredients and services, sales volumes are
forecast to be 20% lower than FY22. New
customers and product launches during
FY22 and FY23, the unwinding of inventory
on hand, actions from the restructuring plan
including re-setting sales pricing particularly
within UK Retail, together with overhead
savings and manufacturing operational
efficiencies have been factored into FY23
and FY24 projections.
The cash flow forecasts reflect the
introduction of a new finance facility of
£7.5 million, of which £1.5 million would be
incremental to the Group’s current facilities,
and an additional £1.0 million of shareholder
loans. Discussions are underway with
asset-backed lenders to provide the new
asset-backed facility of circa £7.5 million,
comprising a term loan of £2.3 million and
circa £5.0 million invoice discount facility,
underpinned by asset security and the
recovery plan to replace the current ABL
Leumi facility. The additional £1.0 million
of shareholder loans has been pledged and
discussions are ongoing as to the pricing
of this and the ranking of shareholder loans
between Loan Note Holders. No new funding
agreements have been formally signed as of
the date of signing the financial statements
as the two funding arrangements are
mutually conditional.
The Board has reviewed the sensitivity of
the sales and the effects of these have
been modelled.
The Directors considered the potential
impact of a reduction in the volume of
revenue by 5% throughout the year.
Without any mitigating action, Group
cash would reduce to £nil in March 2023.
However, were there to be this level of
lower sales, mitigating action would be
taken quickly with an immediate cessation
of discretionary spend. The short-term plan
would be a reduction in the number of
factory and overhead staff, and general
overheads. Although there could be a
3-month time lag on implementing any
people changes, these changes would create
liquidity headroom with the low point of cash
availability then being June 2023 when
cash would reduce to £0.2 million as a
result of the stock build for Quarter 3
(October to December).
The current banking covenants that are in
place for FY23 remain the same as FY22.
The covenants are a rolling 3-month EBITDA
being within 80% of the forecast and greater
than £5 million tangible net worth. The
covenants are not breached on the stressed
scenarios including mitigating action,
referred to above. However, a new finance
provider may require different covenants to
the above.
The principal shareholders of the Group
continue to show considerable support.
Based on the Directors review of the above,
there are three key areas which indicate the
existence of a material uncertainty which
may cast significant doubt on the Group and
Parent Company’s ability to continue as a
going concern, which are as follows:
{
The cash flow forecasts to be achieved
by the Group over the next 12 months
require several significant actions to be
delivered successfully in the short-term,
including the Group negotiating customer
price uplifts as part of an overall price
reset (in addition to the ability to pass
on increased inflationary cost pressures
to customers), making overhead cost
reductions and making improvements in
working capital management (specifically
inventory reductions). The achievability
of the cash flow forecasts based on the
restructuring of the business has some
execution risk, as well as the impact of
wider economic headwinds, particularly
in relation to duration and the effect on
consumer demand for our products.
However, with support from customers
and employees, the Directors consider
these actions to be achievable.
{
The cash flow forecasts are based upon
the approval of new loans totalling £2.5
million being obtained including an
additional £1.0m of shareholder loans.
In order to secure the incremental £1.5
million asset-backed loan, requires a
re-financing of the facilities currently
provided by Leumi ABL, to an alternative
provider. Discussions have already
commenced with asset-backed lenders
but are yet to be agreed.
{
The cash flow forecasts are based upon
the extension of the maturity of the
shareholder loan notes and convertible
loan notes from May 2023 to at least
May 2024, which are pledged, however
the documentation is not yet formally
committed.
If these targeted actions and forecasts are
not able to be delivered, or the new bank
and shareholder loans identified above are
not secured, the Group may not be able to
operate within its existing cash and financing
facilities and would therefore need
alternative and/or additional funding in
excess of those noted above.
In light of the above, the Directors believe
that it remains appropriate to prepare the
financial statements on a going concern
basis. However, the factors described above
indicate the existence of a material
uncertainty which may cast significant doubt
on the Group and Parent Company’s ability to
continue as a going concern and to continue
realising its assets and discharging its
liabilities in the normal course of business.
The financial statements do not include any
adjustments that would result from the basis
of preparation being inappropriate.
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 net surplus at 27 March 2022 of
£1.5 million (2021: deficit £7.5 million). The
Plan assets increased by £6.9 million to
£21.4 million (2021: £14.5 million) and the
Plan liabilities are £19.9 million compared to
£21.9 million at 31 March 2021. 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. This
included a pre-payment of £1.8 million,
through to 1 January 2023, in relation to the
deficit recovery schedule agreed as part of
the 31 March 2018 valuation. The Trustee
and Company have agreed the 31 March
2021 valuation, and are finalising the deficit
recovery and security provisions within the
pension funding agreement.
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 2022 (2021: nil).
Annual Report and Accounts for the year ended 31 March 2022
08
STRATEGIC REPORT
Key Performance Indicators
The Board monitors a range of financial and non-financial key
performance indicators, reported on a regular basis, to measure the
Group’s performance. The key performance indicators, all based on
continuing operations, are set out below. The Board has reviewed these
key performance indicators and considers they remain appropriate.
COMMENT
REVENUE GROWTH
Revenue is calculated for continuing
business and is from external
sources only.
2022
2021
2020
2019
£46.4m
£41.2m
£37.3m
£40.4m
Revenue in the year increased by 8.3% (FY21
decreased by 9.5%) This was primarily driven by
the covid restrictions on business being lifted
during the year. 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.
2022
2021
2020
2019
£(0.9)m
£(1.6)m
£0.2m
£0.7m
The EBITDA (adjusted) profit is £0.7 million
(2021: £0.2 million).
EBITDA measurement is to evidence improvement
in line with the increase in revenue and/or
reduced costs. During the second half of FY22,
there was unprecedented increases in costs in a
short period of time owing to external factors,
including the Ukraine/Russia conflict. The
blockage in the Suez Canal causing disruption to
delivery of raw materials and the shortage of
labour worldwide. There has been a lag between
increased costs and the recovery of the costs
from customers.
NET DEBT
Net debt is the total Group borrowings
less cash at bank.
2022
2021
2020
2019
£45.4m
£35.7m
£48.8m
£25.5m
Net debt in the year has decreased to £25.5
million (FY21 £48.8 million), following the
repayment of £23.1 million from the sale of the
Brighter Foods business; net debt is
predominantly shareholder loans.
DEBT COVER
Debt cover is calculated by dividing total
net debt by continuing EBITDA (adjusted).
2022
2021
2020
2019
(37.82)
(27.38)
214.98
37.61
As a result of increased EBITDA (adjusted) profits
in the year net debt cover stood at 37.61 at the
end of FY22. The Group measures the changes
on debt cover year on year.
ACCIDENT FREQUENCY RATE
The accident frequency rate is the
number of RIDDOR accidents per 100,000
hours worked.
2022
2021
2020
2019
1.00
1.00
1.16
1.34
A higher number denotes a higher risk. The
number of RIDDOR accidents in FY22 is 3, lower
than FY21. The RIDDOR accidents in FY21 and
FY22 are all recorded against Cake Decorations,
therefore a real year on year reduction. The
accident frequency rate is higher owing to the
reduction in hours worked as Brighter Foods are
no longer included following the sale. 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.
STRATEGIC REPORT
www.realgoodfoodplc.com Stock Code: RGD
09
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.
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 continued to be difficult to
engage with the community owing to
ongoing covid restrictions. The majority of
employees returned to the office in the first
half of the year, however the number of
customers and visitors to the site remained
below pre covid levels. Management
engaged with the workforce and took action
to ensure all employees felt safe, with
screens remaining in place and additional
hand sanitisers on site.
CDD donated £500 to the Clatterbridge
Cancer Charity.
Health and safety
Commentary 2021/22
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 undertaken 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.
As covid rules were relaxed during the year,
the business consulted with employees on
the relaxing of restrictions in line with
Government legislation The covid group that
was formed during the early days of the
pandemic has been disbanded and any
updates on covid are included in the
H&S meetings.
{
Renshaw has a 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. This was also
noted by the company’s insurers.
2022/23 Priorities
{
We continue to maintain and improve our
legal compliance and health and safety
performance. The audit process
implemented in FY22 will continue to be
enhanced in FY23.
{
Targeting a further year on year reduction
in the number of incidents.
{
Continue to work and support the
local communities.
Annual Report and Accounts for the year ended 31 March 2022
10
STRATEGIC REPORT
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 continues to implement improvements
in the Group’s governance, where required.
The risk register is reviewed at least half
yearly 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. During FY22 there have been
unprecedented cost increases (sugar, palm
oil, energy, packaging and transport), and
also challenges with availability. Following
covid labour shortages have been
experienced by many suppliers both abroad
and in the UK, and the transportation of
products into America has been challenging,
with delays at ports. 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£1.5
million 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 £1.5 million. Although
the Group currently expects to be able to
meet its obligations under the pension
scheme, the funding of the scheme exposes
the Group to further risks.
Working capital
In order for the Group to have sufficient
working capital for its needs, the Board
regularly monitors the Group’s cash position.
The Directors, after due consideration, have
a reasonable expectation that the company
and the Group have adequate resources to
continue in operational existence for the
next 12 months.
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
30 September 2022 and is signed on its
behalf by:
Mike Holt
Executive Chairman
Board of Directors
Mike Holt Executive Chairman
Judith A MacKenzie Non-Executive Director
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. Mike qualified as a Chartered
Accountant with Arthur Andersen and is a fellow of The Institute of
Chartered Accountants in England and Wales. 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. In
addition, Mike is a Trustee and Director of Hollybank Trust Limited
and Derby Diocesan Academy Trust Limited.
Judith joined Downing LLP in October 2009 and is Partner and
Head of Downing Fund Managers. 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.
Maribeth Keeling Chief Financial Officer and Company Secretary
Anthony Ridgwell Non-Executive Director
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.
Maribeth is leaving the business on the 30 September 2022.
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.
Anthony resigned from the Board on the 22 August 2022.
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.
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, is Non-Executive Chair of
Vocation Group Limited, the BGF backed craft brewing group, and
is a member of the Industrial Development Advisory Board, a
statutory body sponsored by BEIS.
www.realgoodfoodplc.com Stock Code: RGD
11
GOVERNANCE REPORT
Report of the Directors
The Directors present their report and the audited financial statements for the
year ended 31 March 2022. Owing to covid in the past couple of years, there
have been restrictions on meetings, including the AGM held in January 2022.
The directors look forward to holding an in-person AGM in October 2022.
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 12 to 14.
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 Board meets once per month and
reviews the performance of the business at
each meeting. The Board has delegated
certain responsibilities to the Audit and
Remuneration Committees, details of which
can be found on pages 19 and 21.
Below shows each principle, and how the Group complies:
Principle
How Real Good Food plc complies
1. Establish a strategy
and business model
which creates
long-term value for
shareholders.
The objective and strategy of 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 Group supports and guides the Cake Decoration business in its daily operation through clear objectives
and articulated strategies, such strategies being updated as necessary on a regular basis.
2. Seek to understand and
meet shareholder needs
and expectations.
The Board has representation of a large proportion of its shareholder base – they can, and do,
communicate the thoughts and requirements of the shareholders regularly.
Contact details of Executive Directors are made available to other shareholders who wish to make contact.
This is actively encouraged.
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. Following all covid restrictions being lifted, the AGM in September 2022
will be in person.
3. Take into account wider
stakeholder and social
responsibilities and
their implications for
long-term success.
The Group regards its shareholders, employees, customers, suppliers, and advisors as all being important
parts of the wider stakeholder group.
Management regard our employees as our greatest asset, engaging with them on a regular basis as
referred to in the directors’ report.
Management clearly places particular importance on its day-to-day relationships with customers, with
significant effort directed to ensuring these are managed appropriately. The businesses work with many
customers and suppliers and have developed a collaborative way of working to ensure the successful and
sustainable trading relationships.
Shareholders are important to the business and continue to support the businesses and its strategy.
The Group records customer service levels – OTIF (on time in full), for example and customer
communication including complaints. OTIF has been a challenge during the second half of FY22 owing to
delayed deliveries of raw materials and availability of labour. This is a key focus of the management team in
FY23 to ensure a return to expected performance levels. The Group had a reduction in complaints year on
year and continues to strive to reduce this further. There is a feedback system in place for service levels
and issues raised can be addressed.
Annual Report and Accounts for the year ended 31 March 2022
12
GOVERNANCE
www.realgoodfoodplc.com Stock Code: RGD
13
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 half yearly, whichever is the shorter period.
5. Maintain the Board as
a well-functioning,
balanced team led by
the Chair.
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. During the year, there were 15 Board meetings held.
6. Ensure that between
them the Directors have
all the appropriate
experience, skills, and
capabilities.
The descriptions on page 11 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.
7. Evaluate Board
performance based
on clear and relevant
objectives, seeking
continuous
improvement.
Against the background of the articulated objective for the Group, the performance of the Board as a whole
may be judged, through the eventual attainment of financial measures, including adjusted EBITDA, operating
cash flow and net debt.
The Board has opted for annual re-election at the AGM. The Board is planning to undertake a formal
assessment during FY23. Owing to challenges with covid, there has not been the opportunity to arrange
this earlier, following the lifting of the covid restrictions, this will be put in place.
8. Promote a corporate
culture that is based
on ethical values and
behaviours.
The Board recognises that the values it espouses provide the framework which influences all parts of the
Group. The Executive Officer takes the lead in developing the corporate culture and looks to encourage all
employees to contribute to the enjoyment and success of the business, the formulation of the tactics to
deliver the objective and strategy and to the promulgation of the core values. The Human Resources team
have long promoted the Group’s values which underpin conditions of employment.
9. Maintain governance
structures and
processes that are fit
for purpose and
support good decision
making by the Board.
The Executive Board members generally have clear overall responsibility for managing the day-to-day
operations of the Group and the Board as a whole is responsible for monitoring performance against the
Group’s goals and objectives.
The roles of the Audit Committee, the Remuneration Committee and the Board of Directors are clearly
defined within this report.
10. Communicate how the
Group is governed and
is performing by
maintaining a dialogue
with shareholders and
other relevant
stakeholders.
The Group strives to maintain a regular dialogue with stakeholders including shareholders to enable any
interested party to make informed decisions about the Group and its performance.
The Board believes that greater transparency in its dealings offers a level of comfort to stakeholders and
an understanding that their views will be heard and considered appropriately.
GOVERNANCE REPORT
Section 172 Statement
Annual Report and Accounts for the year ended 31 March 2022
14
GOVERNANCE
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 2021 to 31 March 2022 are set
out below.
Significant
Events/decisions
Stakeholders
Affected
Considerations
Extension of
shareholder loans
Employees
Shareholders
Minority
shareholders
{
Legacy issues/events have caused the Group to be very highly geared which inhibits its ability to
refinance investor loans with third party commercial loans.
{
The Board has been able to significantly reduce the shareholder loans following the sale of
Brighter Foods.
{
The Loan Note Holders have pledged to extend the loans from 19 May 2023 to 19 May 2024, although
the formal documentation is not yet in place.
Cash management
Employees
Shareholders
Communities
HMRC
{
The company following the sale of Brighter Foods retained £3m from the sale for working capital.
{
The unprecedented increases in cost of raw materials and the lag in the price increases being passed
through to customers has resulted in a lower than expected cash inflow.
{
The Group following the covid restrictions encouraged workers to return to the office. Under the job
retention scheme the business claimed £24k in FY22.
Disposal of
Brighter Foods
Shareholders
Employees
{
The Board agreed to sell Brighter Foods for £43m, debt free/cash free. The Board reduced the
shareholder loans by £23.6m and made a payment to the pension fund of £8.5m.
Board interaction
with businesses
Shareholders
Employees
{
The Board meetings are held once a month and the MD of the Cake Decoration Division (CD) presents
the business and discusses both strategic and operational matters. On occasions other members of
the senior management team from the CDD join the Board meeting. 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, with restrictions now lifted, this will resume in FY23.
Investor relations
Shareholders
Minority
shareholders
{
Increased interaction with our shareholders with direct access to the Board; the Chairman makes
himself available to minority shareholders.
{
The quality, frequency and relevance of investor communications is improving.
Cake Decorations
Restructure
Employees
Shareholders
Customers
Communities
{
Cake Decorations continues to review the structure as a result of the unprecedented challenges seen
in the second half of the FY22 year.
{
Factory operational changes have started and further initiatives to improve efficiency and ways of
working are underway.
{
The New Product Development (NPD) team have been focusing on formulations that will ease pressure
on scarce raw materials, this is not a short-term fix, but will be beneficial in the long term.
{
Sales and Marketing teams are putting the customer at the forefront of what we do by actively engaging
in long term partnerships. FY22 has been challenging to deliver orders on time in full (OTIF) as a result
of logistic challenges, labour skill shortages and erratic raw material deliveries which have either been
short or late. These challenges have arisen from many factors including the conflict in Ukraine, delays in
shipping (Suez Canal blocked) and some form of covid restrictions in many countries.
Board Changes
Minority
shareholders
Employees
Shareholders
{
There have been no changes to the Board during FY22.
{
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
Employees
{
Working with supply chain partners to have more recyclable packaging. There is a project that is being
undertaken in FY22. The plastic tax is effective from FY23.
{
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. The work undertaken by the NPD team to review the formulation
of products will also focus on changing products that meet the sustainability and ethical requirements of
the Group and our customers.
www.realgoodfoodplc.com Stock Code: RGD
15
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 15 meetings in the year,
details of attendance are below.
Eligible to
attend
Meetings
attended
Mike Holt
15
15
Maribeth Keeling
15
15
Jacques d’Unienville
15
14
Judith MacKenzie
15
15
Anthony Ridgwell
15
13
Gail Lumsden
15
15
The above table sets out the number of
Directors’ meetings held during the year and
the eligibility and attendance by members of
the Board.
Going concern
The financial statements are prepared on a
going concern basis, which the Directors
believe to be appropriate for the following
reasons.
The forecasts are prepared on a Group basis
and therefore include underlying forecasts
and assumptions for the subsidiaries and the
Parent Company. For this reason, the Group is
referred to in the following paragraphs when
discussing forecasting and events as all are
interdependent on one another.
The Group incurred a loss on continuing
operations before tax and impairment of £2.9
million in the year to 31 March 2022 (2021:
£6.1m loss) and at 31 March 2022 had net
current assets of £4.4m (2021: £15.0m) and
net assets of £5.1m (2021: £3.3m). The
Group manages its day-to-day working capital
requirement using various facilities with
Leumi ABL. At the year end the available
Group finance facilities, provided by Leumi
ABL, totalled £6.6m, of which £5.0m was
utilised. The Group shareholder loan notes
and convertible loan notes, totalled £23.6m
and are classified as creditors due after one
year, and are repayable on 19 May 2023.
The Directors have prepared financial forecasts
for the Group, comprising income statements,
balance sheets and cash flows through to
March 2024 which have been approved by the
Board. In assessing the appropriateness of the
Group’s accounts being prepared on a going
concern basis, the Directors have considered
factors likely to affect its planned future
performance and reasonably possible
downside sensitivity scenarios.
As noted in the Strategic Report and
Business Review on page 5, the
macroeconomic headwinds are very
challenging and are expected to continue for
the immediate future given the wider
economic outlook. A radical reform of the
business has commenced, which requires
the support of new funding, in order to return
the Group to profitability and to position it for
sustainable growth once economic
conditions improve. The new funding
requirement is £2.5m of which £1.0m has
been pledged but not yet formally committed
by existing Loan Note Holders.
Due to the current (and severe) inflationary
cost pressures impacting consumer demand,
and the ongoing difficulty in sourcing key
ingredients and services, sales volumes are
forecast to be 20% lower than FY22. New
customers and product launches during
FY22 and FY23, the unwinding of inventory
on hand, actions from the restructuring plan
including re-setting sales pricing particularly
within UK Retail, together with overhead
savings and manufacturing operational
efficiencies have been factored into FY23
and FY24 projections.
The cash flow forecasts reflect the
introduction of a new finance facility of £7.5
million, of which £1.5 million would be
incremental to the Group’s current facilities,
and an additional £1.0 million of shareholder
loans. Discussions are underway with
asset-backed lenders to provide the new
asset-backed facility of circa £7.5 million,
comprising a term loan of £2.3 million and
circa £5.0 million invoice discount facility,
underpinned by asset security and the
recovery plan to replace the current ABL
Leumi facility. The additional £1.0 million of
shareholder loans has been pledged and
discussions are ongoing as to the pricing of
this and the ranking of shareholder loans
between Loan Note Holders. No new funding
agreements have been formally signed as of
the date of signing the financial statements
as the two funding arrangements are
mutually conditional.
The Board has reviewed the sensitivity of the
sales and the effects of these have been
modelled.
Report of the Directors (continued)
GOVERNANCE REPORT
Annual Report and Accounts for the year ended 31 March 2022
16
GOVERNANCE
Report of the Directors (continued)
The Directors considered the potential
impact of a reduction in the volume of
revenue by 5% throughout the year. Without
any mitigating action, Group cash would
reduce to £nil in March 2023. However,
were there to be this level of lower sales,
mitigating action would be taken quickly
with an immediate cessation of
discretionary spend. The short-term plan
would be a reduction in the number of
factory and overhead staff, and general
overheads. Although there could be a
3-month time lag on implementing any
people changes, these changes would
create liquidity headroom with the low point
of cash availability then being June 2023
when cash would reduce to £0.2 million as
a result of the stock build for Quarter 3
(October to December).
The current banking covenants that are in
place for FY23 remain the same as FY22.
The covenants are a rolling 3-month EBITDA
being within 80% of the forecast and greater
than £5 million tangible net worth. The
covenants are not breached on the stressed
scenarios including mitigating action,
referred to above. However, a new finance
provider may require different covenants to
the above.
The principal shareholders of the Group
continue to show considerable support.
Based on the Directors review of the above,
there are three key areas which indicate the
existence of a material uncertainty which
may cast significant doubt on the Group and
Parent Company’s ability to continue as a
going concern, which are as follows:
{
The cash flow forecasts to be achieved
by the Group over the next 12 months
require several significant actions to be
delivered successfully in the short-term,
including the Group negotiating customer
price uplifts as part of an overall price
reset (in addition to the ability to pass
on increased inflationary cost pressures
to customers), making overhead cost
reductions and making improvements in
working capital management (specifically
inventory reductions). The achievability
of the cash flow forecasts based on the
restructuring of the business has some
execution risk, as well as the impact of
wider economic headwinds, particularly
in relation to duration and the effect on
consumer demand for our products.
However, with support from customers
and employees, the Directors consider
these actions to be achievable.
{
The cash flow forecasts are based upon
the approval of new loans totalling £2.5
million including an additional £1.0m of
shareholder loans. In order to secure the
incremental £1.5 million asset-backed
loan, requires a refinancing of the
existing facilities currently funded by
Leumi ABL, with an alternative provider.
Discussions have already commenced
with asset-backed lenders but are yet to
be agreed.
{
The cash flow forecasts are based upon
the extension of the maturity of the
shareholder loan notes and convertible
loan notes from May 2023 to at least
May 2024, which are pledged , however
the documentation is not yet formally
committed.
If these targeted actions and forecasts are
not able to be delivered, or the new bank
and shareholder loans identified above are
not secured, the Group may not be able to
operate within its existing cash and financing
facilities and would therefore need
alternative and/or additional funding in
excess of those noted above.
In light of the above, the Directors believe
that it remains appropriate to prepare the
financial statements on a going concern
basis. However, the factors described above
indicate the existence of a material
uncertainty which may cast significant doubt
on the Group and Parent Company’s ability to
continue as a going concern and to continue
realising its assets and discharging its
liabilities in the normal course of business.
The financial statements do not include any
adjustments that would result from the basis
of preparation being inappropriate.
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 4 and 5.
Non-current assets
Details of changes in non-current assets
are given in notes 12–16 to the
financial statements.
Directors
Details of the Directors are given on
page 11.
Substantial interests
There were the following substantial
interests (3% or more) in the Company’s
ordinary share capital:
31 March 2022
% Holding
in ordinary
share capital
NB Ingredients Limited
22.3%
Omnicane International
Investors Limited
20.8%
Downing LLP
7.9%
Mr J & Mrs S O’Driscoll
10.1%
Philip J Milton &
Company PLC
6.4%
Directors’ indemnities
The Company has paid £32.8k (2021:
£95.0k) in respect of Directors’ and
Officers’ Indemnity Insurance.
www.realgoodfoodplc.com Stock Code: RGD
17
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
business has introduced an employee forum
during FY22, whereby all employees are
given the opportunity to be part of the
forum and contribute.
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.
During FY22 the business has been
returning to work from the office with more
face-to-face meetings taking place. The
Board meetings are now a mixture of face to
face and virtual with the same format being
used for both. The MD of the Cake
Decoration division attends the meetings
and key messages from the Board taken
back to the business. During FY22 the Cake
Decoration business put in place an online
office communication system where people
could post and comment on posts. All staff
are invited to sign on and interact. The
management team post monthly bulletins,
this has replaced the written briefs that had
been sent previously. The employees have
the opportunity to raise questions, that are
fed back and responded to by the
Management. The business has started an
employee forum with all areas of the
business being encouraged to participate.
With the lifting of covid restrictions the sales
team have been able to travel to customers
again and customers are able
to visit the factory.
Equal opportunities
The Group continues to embrace and
champion the principles of equality of
opportunity and diversity in all aspects of
employment. Our employment policies and
procedures are reviewed regularly 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 Group continues through our Leadership
Framework to create 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 as required holds regular
meetings with minority shareholders to
discuss the business and reports the
discussions back to the Board.
Charitable and
political donations
During the current financial period, the
Group made charitable donations of £500
(2021: £1,250). No political donations
were made during the current or previous
financial period.
This report was approved by the Board on
30 September 2022 and is signed on its
behalf by:
Mike Holt
Executive Chairman
GOVERNANCE REPORT
Annual Report and Accounts for the year ended 31 March 2022
18
GOVERNANCE
Report of the Directors (continued)
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 1 April
2021 to 31 March 2022.
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.
Information
31 March 2022
31 March 21
Energy consumption used to calculate
emissions: kWh
Gas – 6,077,919 kWh
LPG – 0.54 kWh
Petrol company cars – 17,104 kWh
Diesel company cars – 15,931 kWh
Electricity – 3,034.137 kWh
Petrol private cars – n/a
Diesel private cars – n/a
Total – 9,145,093 kwh
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)
1,113.2 tCO2e
1,100.5 tCO2e
Emissions from LPG (Scope 1)
1.6 tCO2e
6.2 tCO2e
Emissions from business travel in company
owned vehicles (Scope 1)
8.1 tCO2e
N/A
Emissions from purchased electricity
(Scope 2, location-based)
644.2 tCO2e
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
N/A
Total gross tCO2e based on above
1,767.2 tCO2e
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 0.1 tCO2e per
Tonne of output produced
Tonnes of output produced 0.17 per Tonne
of output produced
Methodology
Monthly energy consumption data based on
utility invoices, and vehicle mileage claims,
converted to carbon emissions using DEFRA
published Conversion factors for Company
Reporting 2021 version 1.0
Data from Joe Castille DEFRA published
Conversion Factors for Company Reporting
2020 version 1.0
Energy Efficient Actions being taken
To continue with the replacement of
inefficient lighting with LED equivalent.
Continuous replacement of inefficient lighting
with LED equivalent.
www.realgoodfoodplc.com Stock Code: RGD
19
Audit Committee Report
The Audit Committee comprises Judith
MacKenzie, as Chair and Gail Lumsden. The
Committee is scheduled to meet formally
three times 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.
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 four meetings in
the year, the following table sets out
attendance during the year.
Director
Meetings
attended
Members
Judith MacKenzie
4
Gail Lumsden
3
Anthony Ridgwell
(nominated to attend
when G Lumsden was
unavailable)
1
By Invitation
Mike Holt
4
Maribeth Keeling
4
GOVERNANCE REPORT
Annual Report and Accounts for the year ended 31 March 2022
20
GOVERNANCE
Table showing key risks in the business
Description of Risk
Overview of Risk
Company response
Asset Impairment
The Group has £16.6 million of
goodwill, relating to excess of
consideration paid to the fair value of
acquisitions, and £9.1 million of
property, plant and equipment, and
intangible assets. The carrying value
of goodwill is reviewed at least
annually to check that it is not in
excess of its recoverable amount.
The value of property, plant and
equipment and intangible assets are
stated at cost less accumulated
depreciation or amortisation and
impairment losses.
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
division. A sensitivity analysis was also applied to stress test the
assumptions and future economic value of assets. These resulted in
an impairment of £16.1 million being required for the Cake Decoration
division. 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
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 appropriate. For the full going
concern scenario considerations please see the Finance Review and
Note 2 (a), which identifies material uncertainties in relation to going
concern.
Risk Register
The Group is encouraged to identify
business risks. The CFO presents the
Risk Register to the Board on a
bi-annual basis.
Significant business risks are identified and recorded on the Risk
Register that is presented to the Group Board half yearly, or sooner if
appropriate. The key areas at present are the increased costs and
availability of raw material and the time lag on recovering the increases
from our customers. The covid weekly Board calls have ceased as the
business returned to normality following the covid changes; 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 the Cake
Decoration division.
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 invites members of the company
management team to Board meetings to discuss their functions.
The Board also plan to visit the Liverpool site now that all restrictions
have been lifted post covid.
Auditors
Audit Rotation.
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).
As part of the Audit rotation, this will be the final year that the current
partner will be in charge of the RGF plc audit.
The Commitment and Authorities schedule within the business is
reviewed annually by the Group Board.
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.
Audit Committee Report (continued)
www.realgoodfoodplc.com Stock Code: RGD
21
Remuneration Committee Report
The Remuneration Committee comprises
Gail Lumsden, as Chair, Judith MacKenzie
and Anthony Ridgwell.
The Committee’s 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 and review the remuneration for the
plc Directors, selected senior
management and the Company
Chairman.
{
oversee the implementation and
operation of short and long-term
incentive arrangements for senior
management, and
{
agree the policy for authorising claims
for expenses from the Chairman and plc
Directors.
The Directors’ remuneration policy aims to
align the interests of management with all
shareholders and recognises the need to
recruit, retain and appropriately incentivise
high-calibre individuals to deliver the strategy
set by the Board.
This report outlines the base salary, pension,
benefits, and incentive plans, where
appropriate, of all Board Executives.
Executive Director and Senior
Management Remuneration
The Remuneration Committee ensures an
appropriate balance between fixed and
variable remuneration which meets the
company’s needs with targets being
appropriately stretching, verifiable and
relevant. This is achieved through a market
related base salary (benchmarked against
other AIM listed businesses of similiar size
and complexity), plus a range of benefits and
an annual bonus scheme set to reward
achievement of EBITDA targets and/or
personal and strategic objectives.
Non-Executive Director
remuneration
Subject to annual re-election by
shareholders, Non-Executive Directors are
appointed for an initial term of three years.
Subsequent terms of three years may be
granted. The appointment and the
remuneration of the Non-Executive Directors
are matters reserved for the full Board. The
appointments are generally terminable by
either party with three months’ written
notice.
The Non-Executive Directors are not eligible
to participate in the Company’s performance
related bonus plan, long term incentive plans
or pension arrangements. Full terms and
conditions for each of the Non-Executive
Directors are available at the Company’s
registered office during normal business
hours.
Current Directors’ base salaries and fees
are disclosed in note 11.
The table below shows the FY22 attendance:
Director
Meetings
attended
Members
Gail Lumsden
3
Anthony Ridgwell
3
Judith Mackenzie
3
GOVERNANCE REPORT
Annual Report and Accounts for the year ended 31 March 2022
22
OUR FINANCIALS
Independent Auditor’s Report
to the members of Real Good Food plc
Opinion on the financial statements
In our opinion:
{
The financial statements give a true and fair view of the state of
the Group’s and of the Parent Company’s affairs as at 31 March
2022 and of the Group’s loss for the period then ended;
{
the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
{
the Parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; 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
period ended 31 March 2022 which comprise the consolidated
statement of comprehensive income, the consolidated statement of
changes in equity, the company statement of changes in equity, the
consolidated statement of financial position, the company
statement of financial position, the consolidated cash flow
statement and notes to the financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and
UK adopted international accounting standards. The financial
reporting framework that has been applied in the preparation of the
Parent Company financial statements is applicable law and United
Kingdom Accounting Standards, including Financial Reporting
Standard 101 Reduced Disclosure Framework (United Kingdom
Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of
our report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our 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.
Material uncertainty related to going concern
We draw attention to note 2(a) to the financial statements, which
indicates that:
{
The cash flow forecasts to be achieved over the next 12 months
require several significant actions to be delivered successfully in
the short term, including negotiating revenue price increases,
making overhead cost reductions and making improvements in
working capital management (specifically inventory reductions);
{
The cash flow forecasts are based upon the approval of new
loans totalling £2.5 million being obtained, which includes an
additional £1.0 million of shareholder loans, and an incremental
£1.5 million asset-backed loan. Securing the incremental
asset-backed loan requires a re-financing of the existing facilities
to an alternative provider. While discussions have commenced
with asset-backed lenders and shareholders, these are not yet
agreed; and
{
The cash flow forecasts are based upon the extension of the
maturity of the shareholder loan notes and convertible loan notes
from May 2023 to at least May 2024, which is not yet formally
committed.
As stated in note 2(a), these events or conditions, along with other
matters as set out in note 2(a), indicate that a material uncertainty
exists that may cast significant doubt on the Group and Parent
Company’s ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
In light of the material uncertainty related to going concern and the
fact that the Directors exercise significant judgement in determining
the forecasted future cash flows and the underlying business plan
required in both a base case and in reverse’ stress scenarios, we
considered the audit of the Group and Parent Company’s ability to
continue to adopt the going concern basis of accounting to be a key
audit matter. Our response to the key audit matter, and our
evaluation of the Directors assessment, included:
We have challenged the business plan approved by the Directors,
including the forecasts, sensitised stressed forecasts and reverse
stress tests by performing the following procedures:
{
We have checked that the forecasts used in the going concern
assessment were consistent with those used in the impairment
assessment;
{
We tested the arithmetic accuracy of the forecasts and the
consistency and accuracy of the formulas applied;
{
We challenged the assumptions used in the forecast period by
considering available evidence, including recent performance
post year end, 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; and
{
We reviewed the going concern disclosures, and assessed its
consistency with the directors assessment.
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.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
this report.
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
23
Overview
Coverage
90% (2021: 89%) of Group revenue
97% (2021: 90%) of Group total assets
Key audit matters
Going Concern
Asset Impairment
Materiality
Group financial statements as a whole
£407,000 (2021:£428,000) based on 1% (2021: 0.75%) of total revenue including discontinued operations
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 two (2021: three) significant components for the purposes of
the Group audit. The audit of all of the significant components was performed by the Group audit team and a full scope audit was performed
in each case.
The Group audit team performed analytical procedures on the non-significant components.
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) that 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 Material
uncertainty in relation to going concern section of our report, we have determined the matter described below to be a key audit matter.
2022
2021
✓
✓
✓
✓
Key audit matter
How the scope of our audit addressed the key audit matter
Asset impairment
Impairments are
discussed in Note 2(j),
Note 2(r) (significant
accounting policies),
Note 3(a) (critical
accounting estimates
and judgements), Note
16 (Goodwill) and Note
19 (Investments).
Following the impact of Covid-19 on
the Group, 2022 saw additional
challenges posed by rising raw
material and energy costs.
This has created challenging trading
conditions and caused subsidiary
results to fluctuate which highlight
potential indicators of impairment.
Specifically, this relates to the
Group’s goodwill in the Cake
Decoration cash generating unit
(CGU) and the Parent Company’s
investment in subsidiaries.
The Directors assessment showed
an impairment was required, both of
the goodwill arising on consolidation,
and the investment in subsidiaries
held in the parent company.
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 and
therefore considered this to be a
key audit matter.
We challenged the assumptions and forecasts made by the Directors
to assess the recoverability of the carrying amount of the Group’s
goodwill and the Parent Company’s investments, by performing the
following procedures:
{
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 for key decision
making regarding the use of the going concern assumption;
{
We challenged the cash flow forecasts and the growth rates for the
2022/23 and 2023/24 financial years and beyond by gathering
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; and
{
With assistance of our internal valuation experts;
–
We assessed the appropriateness of the discount rates applied
in the model through independent recalculation using market
data for comparable companies; and
–
We assessed the reasonability of long-term growth rates with
reference to external market data.
Key observations
Based on the audit procedures above we considered the judgements
made in relation to the impairment of assets to be appropriate.
Annual Report and Accounts for the year ended 31 March 2022
24
OUR FINANCIALS
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
2022
2021
2022
2021
Materiality
£407,000
£428,000
£203,000
£79,600
Basis for
determining
materiality
1% of total revenue,
including discontinued
operations
0.75% of total revenue,
including discontinued
operations
Materiality was restricted to
50% of Group materiality
2% of net assets excluding
intercompany balances
Rationale for
the benchmark
applied
As the group fluctuates between profit making and loss
making, we consider that total revenue is the most
appropriate benchmark for determining materiality as
it is both stable and a key measure of performance of
the Group.
We have capped materiality
for the Parent Company at
50% of group materiality.
We consider this basis is
most appropriate for a
holding company.
Performance
materiality
£284,900
£299,000
£142,100
£55,700
Basis for
determining
performance
materiality
The performance materiality threshold was chosen as 70% to reflect some areas subject to estimation uncertainty.
This is in line with the prior year.
Component materiality
We set materiality for each component of the Group based on a percentage of between 30% and 90% of Group materiality (2021: 19% and
90%) dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from
£122,100 to £366,300 (2021: £79,600 to £385,000). In the audit of each component, we further applied performance materiality levels of
70% of the component materiality (2021: 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 £16,280 (2021: £17,000). We
also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
25
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.
We have nothing to report in this regard.
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
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.
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.
Matters on
which we
are required
to report by
exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
{
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
{
the Parent Company financial statements are not in agreement with the accounting records and returns; or
{
certain disclosures of Directors’ remuneration specified by law are not made; or
{
we have not received all the information and explanations we require for our audit.
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.
Annual Report and Accounts for the year ended 31 March 2022
26
OUR FINANCIALS
Independent Auditor’s Report (continued)
to the members of Real Good Food plc
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.
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, our 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, the
financial reporting framework, 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 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 their knowledge of any matters pertaining to
compliance with laws and regulations during the year, and reviewed
legal correspondence to assess 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, the recording of
revenue 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 in significant
accounting estimates, in particular in relation to the Group’s
defined benefit pension scheme and impairment of goodwill to
identify any potential bias;
{
Testing of a sample of items of revenue for significant
components around the year end to supporting documentation to
determine if they have been recorded in the correct period.
{
Identifying and testing journal entries, in particular any journal
entries posted with unusual account combinations or including
specific keywords;
{
Holding 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.
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, UK
30 September 2022
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
27
Consolidated Statement of Comprehensive Income
Year ended 31 March 2022
Notes
12 months
ended
31 March 2022
£’000s
12 months
ended
31 March 2021
£’000s
Revenue
4, 5
40,431
37,292
Cost of sales
(24,301)
(22,128)
Gross profit
16,130
15,164
Income from Government Furlough Scheme
–
1,205
Other operating income
56
48
Distribution expenses
(3,960)
(3,615)
Administrative expenses
(12,902)
(14,266)
Operating loss before impairment and significant items
(676)
(1,464)
Impairment charge on goodwill
16
(16,103)
–
Significant items
6
(310)
203
Operating loss after impairment and significant items
8
(17,089)
(1,261)
Finance costs
9
(1,891)
(4,665)
Other finance costs
10
2
(182)
Loss before tax
(18,978)
(6,108)
Income tax (charge)/credit
14
(2,384)
27
Loss from continuing operations
(21,362)
(6,081)
Profit from discontinued operations (assets held for sale)
35
19,986
2,617
Net loss
(1,376)
(3,464)
Attributable to:
Owners of the parent
(1,376)
(3,856)
Non-controlling interests
–
392
Net loss
(1,376)
(3,464)
Items that will or may be reclassified to profit or loss
Foreign exchange differences on translation of subsidiaries
(25)
65
Items that will not be reclassified to profit or loss
Actuarial profit/(loss) on defined benefit plan
32
501
(107)
Tax relating to items which will not be reclassified
20
527
(102)
Other comprehensive profit/(loss)
1,003
(144)
Total comprehensive loss for the year
(373)
(3,608)
Attributable to:
Owners of the parent
(373)
(4,000)
Non-controlling interests
–
392
Total comprehensive loss for the year
(373)
(3,608)
Notes
12 months
ended
31 March 2022
£’000s
12 months
ended
31 March 2021
£’000s
Basic and diluted loss per share – continuing operations
15
(21.46)p
(6.50)p
Basic earnings per share – discontinued operations
15
20.07p
2.63p
Diluted earnings per share – discontinued operations
15
6.23p
0.82p
The notes on pages 33 to 69 form part of these financial statements.
Annual Report and Accounts for the year ended 31 March 2022
28
OUR FINANCIALS
Consolidated Statement of Changes in Equity
Year ended 31 March 2022
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 2020
1,991
3,294
(4,796)
203
(125)
3,783
4,350
2,806
7,156
Loss for the year
–
–
–
–
–
(3,856)
(3,856)
392
(3,464)
Other comprehensive (loss)/gain for
the year
–
–
–
–
65
(210)
(145)
–
(145)
Total comprehensive (loss)/gain
for the year
–
–
–
–
65
(4,065)
(4,000)
392
(3,608)
Transactions with owners of the
Group, recognised directly in equity
Share options lapsed in year
–
–
–
(200)
–
–
(200)
–
(200)
Total contributions by and
distributions to owners of
the Group
–
–
–
(200)
–
–
(200)
–
(200)
Balance as at 31 March 2021
1,991
3,294
(4,796)
3
(60)
(282)
150
3,198
3,348
Total comprehensive loss
for the year
Loss for the year
–
–
–
–
–
(1,376)
(1,376)
(3,198)
(4,574)
Other comprehensive (loss)/gain
for the year
–
–
–
–
(25)
1,028
1,003
–
1,003
Total comprehensive (loss)/gain
for the year
–
–
–
–
(25)
(348)
(373)
(3,198)
(3,571)
Transactions with owners of the
Group, recognised directly in equity
Release of put option reserve
–
–
4,796
–
–
–
4,796
–
4,796
Share options lapsed in year
–
–
–
(3)
–
–
(3)
–
(3)
Waiver of debt by loan note holders
–
–
540
–
–
–
540
–
540
Total contributions by and
distributions to owners of the Group
–
–
5,336
(3)
–
(348)
5,333
–
5,333
Balance as at 31 March 2022
1,991
3,294
540
–
(85)
(630)
5,110
–
5,110
The notes on pages 33 to 69 form part of these financial statements.
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
29
Company Statement of Changes in Equity
Year ended 31 March 2022
Issued
Share
Capital
£’000s
Share
Premium
Account
£’000s
Share
Option
Reserve
£’000s
Retained
Earnings
£’000s
Total
Equity
£’000s
Balance as at 31 March 2020
1,991
3,294
203
(7,712)
(2,224)
Loss for the year
–
–
–
(6,174)
(6,174)
Other comprehensive loss for the year
–
–
–
93
93
Total comprehensive loss for the year
–
–
–
(6,081)
(6,081)
Transactions with owners of the Group, recognised
directly in equity
Share options lapsed in year
–
–
(200)
–
(200)
Total contributions by and distributions to owners
of the Group
–
–
(200)
–
(200)
Balance as at 31 March 2021
1,991
3,294
3
(13,793)
(8,505)
Total comprehensive loss for the year
Loss for the year
–
–
–
(44,884)
(44,884)
Other comprehensive loss for the year
–
–
–
(634)
(634)
Total comprehensive loss for the year
–
–
–
(45,518)
(45,518)
Transactions with owners of the Group, recognised
directly in equity
Shares options lapsed in the year
–
–
(3)
–
(3)
Total contributions by and distributions to owners
of the Group
–
–
–
–
–
Balance as at 31 March 2022
1,991
3,294
–
(59,311)
(54,026)
The notes on pages 33 to 69 form part of these financial statements.
Annual Report and Accounts for the year ended 31 March 2022
30
OUR FINANCIALS
Consolidated Statement of Financial Position
Year ended 31 March 2022
Notes
31 March
2022
£’000s
31 March
2021
£’000s
NON-CURRENT ASSETS
Goodwill
16
16,619
32,722
Other intangible assets
17
–
9
Tangible fixed assets
18
8,066
8,548
Investments
19
–
–
Deferred tax asset
20
–
1,426
24,685
42,705
CURRENT ASSETS
Inventories
21
4,024
3,597
Trade and other receivables
22
6,572
7,248
Retirement benefit asset
32
1,497
–
Cash collateral
13
50
215
Cash and cash equivalents
2,734
622
14,877
11,682
Assets classed as held for sale
33
1,078
20,157
TOTAL ASSETS
40,640
74,544
CURRENT LIABILITIES
Trade and other payables
25
6,665
8,087
Current tax liability
4
–
Borrowings
23
3,718
2,659
Lease liabilities
24
48
93
NCI put option
26
–
1,553
10,435
12,392
Liabilities classed as held for sale
33
–
4,442
NON-CURRENT LIABILITIES
Borrowings
23
24,293
46,624
Lease liabilities
24
155
–
Derivative liability – convertible loan notes
26
–
17
Deferred tax liabilities
20
647
216
Retirement benefit obligation
32
–
7,505
25,095
54,362
TOTAL LIABILITIES
35,530
71,196
NET ASSETS
5,110
3,348
EQUITY
Share capital
27
1,991
1,991
Share premium account
3,294
3,294
Other reserves
540
(4,796)
Share option reserve
–
3
Foreign exchange translation reserve
(85)
(60)
Retained earnings
(630)
(282)
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
5,110
150
Non-controlling Interest
–
3,198
TOTAL EQUITY
5,110
3,348
These financial statements were approved by the Board of Directors and authorised for issue on 30 September 2022.
They were signed on its behalf by:
Mike Holt
Maribeth Keeling
Executive Chairman
Chief Financial Officer
The notes on pages 33 to 69 form part of these financial statements.
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
31
Company Statement of Financial Position
Year ended 31 March 2022
Registered Company Number: 04666282
Notes
31 March
2022
£’000s
31 March
2021
£’000s
NON-CURRENT ASSETS
Investments
19
8,980
54,670
Property, plant, and equipment
18
94
118
Deferred tax asset
20
–
1,426
9,074
56,214
CURRENT ASSETS
Trade and other receivables
22
8,668
7,855
Retirement benefit asset
32
1,497
–
Cash collateral
13
50
215
Cash and cash equivalents
1,636
17
11,851
8,087
Assets classed as held for sale
33
930
1,000
TOTAL ASSETS
21,855
65,301
CURRENT LIABILITIES
Trade and other payables
25
51,948
20,845
51,948
20,845
NON-CURRENT LIABILITIES
Borrowings
23
23,559
45,439
Derivative liability – Convertible loan notes
26
–
17
Deferred tax liability
20
374
–
Retirement benefit obligation
32
–
7,505
23,933
52,961
TOTAL LIABILITIES
75,881
73,806
NET LIABILITIES
(54,026)
(8,505)
EQUITY
Share capital
27
1,991
1,991
Share premium account
3,294
3,294
Share option reserve
–
3
Retained earnings
(59,311)
(13,793)
TOTAL EQUITY
(54,026)
(8,505)
Real Good Food plc (the Company) reported a total comprehensive loss for the year ended 31 March 2022 of £45.5 million (2021: loss of
£6.1 million). 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 30 September 2022.
They were signed on its behalf by:
Mike Holt
Maribeth Keeling
Executive Chairman
Chief Financial Officer
The notes on pages 33 to 69 form part of these financial statements.
Annual Report and Accounts for the year ended 31 March 2022
32
OUR FINANCIALS
Consolidated Cash Flow Statement
Year ended 31 March 2022
Notes
31 March
2022
£’000s
31 March
2021
£’000s
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
Profit/(loss) before taxation
1,008
(3,491)
Finance and other finance costs
9, 10
1,889
4,856
Share options reserve credit
(3)
(200)
Foreign exchange movement
(3)
308
Goodwill impairment charge
16
16,103
–
Impairment charge on assets held for sale
33
70
–
Profit on disposal of subsidiary
(19,986)
31
Loss on disposal of property, plant and equipment
–
7
Fair value of derivative liability
–
17
Fair value of NCI put option
–
(1,302)
Depreciation of property, plant, and equipment
18
1,326
2,435
Amortisation of intangibles
17
9
52
Operating Cash Flow
413
2,713
(Increase)/decrease in inventories
(915)
676
Decrease in receivables
2,606
23
Pension contributions
32
(8,500)
(720)
Decrease in cash collateral
165
–
(Decrease)/increase in payables
(2,518)
953
Cash (used by)/from operations
(8,749)
3,645
Interest paid
(139)
(86)
Interest on leases
–
(26)
Net cash (outflow)/inflow from operating activities
(8,888)
3,533
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment
(844)
(567)
Disposal of subsidiary, net of cash disposed of
35
33,153
–
Cost of disposal of subsidiary
(1,138)
50
Net cash inflow/(outflow) from investing activities
31,171
(517)
CASH FLOW USED IN FINANCING ACTIVITIES
Repayment of lease liabilities
24
(113)
(402)
Outflow of term loans
13
(865)
(865)
Interest paid on investor loans
13
(5,310)
–
Inflow of other loans
23
–
(35)
Repayment of investor loans
23
(17,790)
–
Drawdowns on revolving credit facilities
36,045
42,816
Repayments on revolving credit facilities
(34,571)
(42,876)
Net cash outflow from financing activities
(22,604)
(1,362)
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS
(321)
1,654
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
3,080
1,363
Effects of currency translations on cash and cash equivalents
(25)
63
Net movement in cash and cash equivalents
(321)
1,654
Cash and cash equivalents at end of period
2,734
3,080
Continuing operations
2,734
622
Discontinued operations
33
–
2,458
Cash and cash equivalents at end of period
2,734
3,080
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
33
Notes to the Financial Statements
Year ended 31 March 2022
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 229 Crown Street, Liverpool L8 7RF.
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, and in
accordance with UK adopted international accounting standards.
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 2022, the Group sold
Brighter Foods Limited to THG plc on the 11 May 2021.
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 2022, and have been adopted within the Group’s
accounting policies are:
{
Amendments to IFRS 3 Business combinations;
{
Amendments to IAS 16 Property, Plant and Equipment;
{
Amendments to IAS 37, Provisions, Contingent Liabilities and
Contingent Assets;
The adoption of the amendments to IFRS 1, IFRS 9 and IAS 41,
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 financial statements are prepared on a going concern basis, which
the Directors believe to be appropriate for the following reasons.
The forecasts are prepared on a Group basis and therefore include
underlying forecasts and assumptions for the subsidiaries and the
Parent Company. For this reason, the Group is referred to in the
following paragraphs when discussing forecasting and events as all
are interdependent on one another.
The Group incurred a loss on continuing operations before tax and
impairment of £2.9 million in the year to 31 March 2022 (2021:
£6.1m loss) and at 31 March 2022 had net current assets of £5.1m
(2021: £15.0m) and net assets of £5.1m (2021: £3.3m). The Group
manages its day-to-day working capital requirement using various
facilities with Leumi ABL. At the year end the available Group finance
facilities, provided by Leumi ABL, totalled £6.6m, of which £5.0m
was utilised. The Group shareholder loan notes and convertible loan
notes, totalled £23.6m and are classified as creditors due after one
year, and are repayable on 19 May 2023.
The Directors have prepared financial forecasts for the Group,
comprising income statements, balance sheets and cash flows
through to March 2024 which have been approved by the Board. In
assessing the appropriateness of the Group’s accounts being
prepared on a going concern basis, the Directors have considered
factors likely to affect its planned future performance and reasonably
possible downside sensitivity scenarios.
As noted in the Strategic Report and Business Review on page 5, the
macroeconomic headwinds are very challenging and are expected to
continue for the immediate future given the wider economic outlook.
A radical reform of the business has commenced, which requires the
support of new funding, in order to return the Group to profitability
and to position it for sustainable growth once economic conditions
improve. The new funding requirement is £2.5m of which £1.0m
has been pledged but not yet formally committed by existing Loan
Note Holders.
Due to the current (and severe) inflationary cost pressures
impacting consumer demand, and the ongoing difficulty in sourcing
key ingredients and services, sales volumes are forecast to be
20% lower than FY22. New customers and product launches during
FY22 and FY23, the unwinding of inventory on hand, actions from
the restructuring plan including re-setting sales pricing particularly
within UK retail, together with overhead savings and manufacturing
operational efficiencies have been factored into FY23 and FY24
projections.
Annual Report and Accounts for the year ended 31 March 2022
34
OUR FINANCIALS
2. Significant accounting policies continued
The cash flow forecasts reflect the introduction of a new finance
facility of £7.5 million, of which £1.5 million would be incremental to
the Group’s current facilities, and an additional £1.0 million of
shareholder loans. Discussions are underway with asset-backed
lenders to provide the new asset-backed facility of circa £7.5 million,
comprising a term loan of £2.3 million and circa £5.0 million invoice
discount facility, underpinned by asset security and the recovery plan
to replace the current Leumi ABL facility. The additional £1.0 million
of shareholder loans has been pledged and discussions are ongoing
as to the pricing of this and the ranking of shareholder loans
between Loan Note Holders. No new funding agreements have been
formally signed as of the date of signing the financial statements as
the two funding arrangements are mutually conditional.
The Board has reviewed the sensitivity of the sales and the effects
of these have been modelled.
The Directors considered the potential impact of a reduction in the
volume of revenue by 5% throughout the year. Without any mitigating
action, Group cash would reduce to £nil in March 2023. However,
were there to be this level of lower sales, mitigating action would be
taken quickly with an immediate cessation of discretionary spend.
The short-term plan would be a reduction in the number of factory
and overhead staff, and general overheads. Although there could be
a 3-month time lag on implementing any people changes, these
changes would create liquidity headroom with the low point of cash
availability then being June 2023 when cash would reduce to £0.2
million as a result of the stock build for Quarter 3 (October to
December).
The current banking covenants that are in place for FY23 remain the
same as FY22.
The covenants are a rolling 3-month EBITDA being within 80% of the
forecast and greater than £5 million tangible net worth. The
covenants are not breached on the stressed scenarios including
mitigating action, referred to above. However, a new finance provider
may require different covenants to the above.
The principal shareholders of the Group continue to show
considerable support.
Based on the Directors review of the above, there are three key
areas which indicate the existence of a material uncertainty which
may cast significant doubt on the Group and Parent Company’s ability
to continue as a going concern, which are as follows:
{
The cash flow forecasts to be achieved by the Group over the
next 12 months require several significant actions to be
delivered successfully in the short-term, including the Group
negotiating customer price uplifts as part of an overall price
reset (in addition to the ability to pass on increased inflationary
cost pressures to customers), making overhead cost reductions
and making improvements in working capital management
(specifically inventory reductions). The achievability of the cash
flow forecasts based on the restructuring of the business has
some execution risk, as well as the impact of wider economic
headwinds, particularly in relation to duration and the effect on
consumer demand for our products. However, with support from
customers and employees, the Directors consider these actions
to be achievable.
{
The cash flow forecasts are based upon the approval of new loans
totalling £2.5 million being obtained, including an additional £1.0
million of shareholder loans. In order to secure the incremental
£1.5 million asset-backed loan,the business requires a re-
financing of the existing facilities currently funded by Leumi ABL to
an alternative provider. Discussions have already commenced
with asset-backed lenders but are yet to be agreed.
{
The cash flow forecasts are based upon the extension of the
maturity of the shareholder loan notes and convertible loan
notes from May 2023 to at least May 2024, which are pledged,
however the documentation is not yet formally committed.
If these targeted actions and forecasts are not able to be delivered,
or the new bank and shareholder loans identified above are not
secured, the Group may not be able to operate within its existing
cash and financing facilities and would therefore need alternative
and/or additional funding in excess of those noted above.
In light of the above, the Directors believe that it remains appropriate
to prepare the financial statements on a going concern basis.
However, the factors described above indicate the existence of a
material uncertainty which may cast significant doubt on the Group
and Parent Company’s ability to continue as a going concern and to
continue realising its assets and discharging its liabilities in the
normal course of business. The financial statements do not include
any adjustments that would result from the basis of preparation
being inappropriate.
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.
Sale of goods to international customers where the sale includes
delivery, the revenue is not recognised in the accounts until the
sale has been delivered to our 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.
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.
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
35
2. Significant accounting policies continued
d) Income tax
The charge for taxation is based on the results for the year
and takes into account taxation deferred because of timing
differences between the treatment of certain items for taxation
and accounting purposes.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and is reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all
or part of the assets to be recovered.
Deferred tax is calculated at the tax rates that have been enacted or
substantially enacted by the balance sheet date. Deferred tax is
charged or credited to the Statement of Comprehensive Income,
except where it relates to items charged or credited directly to equity,
in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities, and when they relate to income taxes levied by the same
taxation authority, and the Group intends to settle its current tax
assets and liabilities on a net basis.
e) Significant items
It is the Group’s policy to show separately on the face of the
Statement of Comprehensive Income, items that it considers to be
significant, to assist the reader’s understanding of the accounts. The
Group defines the term ‘significant’ as items that are material in
respect of their size and/or nature, at a segment reporting level, for
example, a major restructuring of the management of that segment.
The Group believes that by identifying these items separately as
significant it enhances the understanding of the true performance of
the segment trading position. Summary details of significant items
are shown in note 6 to these accounts.
f) Pension costs
The Group operates a defined contribution and a defined benefit
pension scheme. Payments to the defined contribution scheme are
charged as an expense as they fall due. For the defined benefit
scheme, the cost of providing benefits is determined using the
Projected Unit Credit Method, with full actuarial valuations being
carried out every three years. Actuarial gains and losses are
recognised in full in the period in which they occur. Further details
are given in note 32 to the financial statements.
g) Property, plant and equipment
Property, plant and equipment are stated at historical cost or fair
value at the date of acquisition, less accumulated depreciation, and
impairment provisions.
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
Length of lease
Land and buildings
Freehold buildings
40 to 50 years
Plant and equipment
Plant and equipment
2 to 13 years
Motor vehicles
4 years
Fixtures and fittings
4 to 13 years
Computer equipment
4 years
Impairment reviews of property, plant and equipment are undertaken
if there are indications that the carrying values may not be
recoverable or that the recoverable amounts may be less than the
assets’ carrying value.
Assets in the course of construction relate to plant and equipment in
the process of construction, which were not complete, and hence
were not in use at the year end. Assets in the course of construction
are not depreciated until they are completed and available for use.
h) Intangible assets
Intangible assets include computer software, development costs and
business relationships. The following assets are amortised on a
straight-line basis over the following periods:
Computer software
5 years
Development costs, and business relationships
3 years
The charge for the year is included in administration expenses within
the Statement of Comprehensive Income.
Impairment reviews of intangible assets are undertaken if there are
indications that the carrying values may not be recoverable or that the
recoverable amounts may be less than the assets’ carrying value.
i) Leases
The Group leases manufacturing facilities, company cars and other
plant and machinery.
Upon inception of a contract, an assessment is performed to
determine whether the contract is or contains a lease. A right of use
asset and a corresponding lease liability is recognised on the
statement of financial position for all lease arrangements where the
Group is a lessee, except for those which are short-term or low
value. Short-term and low value leases are accounted for by
recognising the lease payment within administrative expenses on a
straight-line basis over the lease term.
The lease liability is initially measured at the present value of the
future lease payments at the commencement date, discounted using
the rate implicit in the lease if this is readily determined, or
otherwise using the incremental borrowing rate. The incremental
borrowing rate is the rate of interest that the Group would have to
pay to borrow, over a similar term and with similar security, the funds
necessary to obtain an asset of a similar value to the right of use
asset in a similar economic environment.
The lease payments included in the measurement of the lease
liability comprise lease payments in addition to any other payments
reasonably certain to be made such as termination penalties upon
early termination of the lease.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease using the effective
interest rate method and reducing the carrying amount to reflect the
lease payments made.
The lease liability is remeasured if:
{
The lease term has changed; in which case the lease liability is
remeasured by discounting the revised lease payments using a
revised discount rate;
{
The lease payments change due to changes in an index or rate,
in which case the lease liability is remeasured using the initial
discount rate; or
{
The lease contract is modified, and the modification is not
accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments
using a revised discount rate.
Annual Report and Accounts for the year ended 31 March 2022
36
OUR FINANCIALS
2. Significant accounting policies continued
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.
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 Sterling Overnight Index Average for Sterling Advances
(SOIASA). 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 2023 on which the repayment
date has been agreed to move to 19 May 2024, the documentation is
not yet finalised. 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.
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
37
2. Significant accounting policies continued
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 Corona-virus job
retention scheme have been accounted for and presented separately
on the face of the Statement of Comprehensive Income, rather than
by reducing the related expense.
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 1%.
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 financial statements are prepared on a going concern basis, which
the Directors believe to be appropriate for the following reasons.
The forecasts are prepared on a Group basis and therefore include
underlying forecasts and assumptions for the subsidiaries and the
Parent Company.
Annual Report and Accounts for the year ended 31 March 2022
38
OUR FINANCIALS
3. Critical accounting estimates and judgements
continued
For this reason, the Group is referred to in the following paragraphs
when discussing forecasting and events as all are interdependent on
one another.
The Group incurred a loss on continuing operations before tax and
impairment of £2.9 million in the year to 31 March 2022 (2021:
£6.1m loss) and at 31 March 2022 had net current assets of £5.1m
(2021: £15.0m) and net assets of £5.1m (2021: £3.3m). The Group
manages its day-to-day working capital requirement using various
facilities with Leumi ABL. At the year end the available Group finance
facilities, provided by Leumi ABL, totalled £6.6m, of which £5.0m
was utilised. The Group shareholder loan notes and convertible loan
notes, totalled £23.6m and are classified as creditors due after one
year, and are repayable on 19 May 2023.
The Directors have prepared financial forecasts for the Group,
comprising income statements, balance sheets and cash flows
through to March 2024 which have been approved by the Board.
In assessing the appropriateness of the Group’s accounts being
prepared on a going concern basis, the Directors have considered
factors likely to affect its planned future performance and
reasonably possible downside sensitivity scenarios.
As noted in the Strategic Report and Business Review on page 5, the
macroeconomic headwinds are very challenging and are expected to
continue for the immediate future given the wider economic outlook.
A radical reform of the business has commenced, which requires the
support of new funding, in order to return the Group to profitability
and to position it for sustainable growth once economic conditions
improve. The new funding requirement is £2.5m of which £1.0m
has been pledged but not yet formally committed, by existing Loan
Note Holders.
Due to the current (and severe) inflationary cost pressures impacting
consumer demand, and the ongoing difficulty in sourcing key ingredients
and services, sales volumes are forecast to be 20% lower than FY22.
New customers and product launches during FY22 and FY23, the
unwinding of inventory on hand, actions from the restructuring plan
including re-setting sales pricing particularly within UK Retail, together
with overhead savings and manufacturing operational efficiencies have
been factored into FY23 and FY24 projections.
The cash flow forecasts reflect the introduction of a new finance facility
of £7.5 million, of which £1.5 million would be incremental to the
Group’s current facilities, and an additional £1.0 million of shareholder
loans. Discussions are underway with asset-backed lenders to provide
the new asset-backed facility of circa £7.5 million, comprising a term
loan of £2.3 million and circa £5.0 million invoice discount facility,
underpinned by asset security and the recovery plan to replace the
current Leumi ABL facility. The additional £1.0 million of shareholder
loans has been pledged and discussions are ongoing as to the pricing
of this and the ranking of shareholder loans between Loan Note
Holders. No new funding agreements have been formally signed as of
the date of signing the financial statements as the two funding
arrangements are mutually conditional.
The Board has reviewed the sensitivity of the sales and the effects of
these have beem modelled.
The Directors considered the potential impact of a reduction in the
volume of revenue by 5% throughout the year. Without any mitigating
action, Group cash would reduce to £nil in March 2023. However,
were there to be this level of lower sales, mitigating action would be
taken quickly with an immediate cessation of discretionary spend.
The short-term plan would be a reduction in the number of factory
and overhead staff, and general overheads. Although there could be
a 3-month time lag on implementing any people changes, these
changes would create liquidity headroom with the low point of cash
availability then being June 2023 when cash would reduce to £0.2
million as a result of the stock build for Quarter 3 (October to
December).
The current banking covenants that are in place for FY23 remain the
same as FY22.
The covenants are a rolling 3-month EBITDA being within 80% of the
forecast and greater than £5 million tangible net worth. The
covenants are not breached on the stressed scenarios including
mitigating action, referred to above. However, a new finance provider
may require different covennats to the above.
The principal shareholders of the Group continue to show
considerable support.
Based on the Directors review of the above, there are three key
areas which indicate the existence of a material uncertainty which
may cast significant doubt on the Group and Parent Company’s ability
to continue as a going concern, which are as follows:
{
The cash flow forecasts to be achieved by the Group over the next
12 months require several significant actions to be delivered
successfully in the short-term, including the Group negotiating
customer price uplifts as part of an overall price reset (in addition to
the ability to pass on increased inflationary cost pressures to
customers), making overhead cost reductions and making
improvements in working capital management (specifically inventory
reductions). The achievability of the cash flow forecasts based on
the restructuring of the business has some execution risk, as well
as the impact of wider economic headwinds, particularly in relation
to duration and the effect on consumer demand for our products.
However, with support from customers and employees, the Directors
consider these actions to be achievable.
{
The cash flow forecasts are based upon the approval of new loans
totalling £2.5 million being obtained including an additional £1.0
million of shareholder loans. In order to secure the incremental
£1.5 million asset-backed loan, the business requires a re-
financing of the existing facilities currently funded by Leumi ABL to
an alternative provider. Discussions have already commenced with
asset-backed lenders but are yet to be agreed.
{
The cash flow forecasts are based upon the extension of the
maturity of the shareholder loan notes and convertible loan
notes from May 2023 to at least May 2024, which are agreed,
however the documentation is not yet formally committed.
If these targeted actions and forecasts are not able to be delivered,
or the new bank and shareholder loans identified above are not
secured, the Group may not be able to operate within its existing
cash and financing facilities and would therefore need alternative
and/or additional funding in excess of those noted above.
In light of the above, the Directors believe that it remains appropriate
to prepare the financial statements on a going concern basis.
However, the factors described above indicate the existence of a
material uncertainty which may cast significant doubt on the Group
and Parent Company’s ability to continue as a going concern and to
continue realising its assets and discharging its liabilities in the
normal course of business. The financial statements do not include
any adjustments that would result from the basis of preparation
being inappropriate.
Long term funding
The Board has agreed with the investors to continue to roll up interest
on the loans to conserve cash. The Board would expect to make
Investor loan repayments on a divestment of a business
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
39
4. Revenue
The revenue for the Group for the current year arose from the sale of goods in the following areas:
Cake Decoration
£40.4 million
(2021 £37.3m)
Manufactures, sells, and supplies cake decorating products and ingredients
for the baking sector.
Discontinued Operations
(Food Ingredients)
£1.3 million
(2021 £19.8m)
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 2022
Cake
Decoration
£’000s
Head Office and
non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
Total revenue
42,545
–
42,545
1,275
43,820
Intercompany sales
(2,114)
–
(2,114)
–
(2,114)
External revenue
40,431
–
40,431
1,275
41,706
Cost of sales
(24,301)
–
(24,301)
(1,063)
(25,364)
Gross profit
16,130
–
16,130
212
16,342
Income from Furlough Scheme
–
–
–
137
137
Other operating income
25
31
56
–
56
Distribution expenses
(3,960)
–
(3,960)
(47)
(4,007)
Administrative expenses
(12,396)
(506)
(12,902)
(403)
(13,305)
Operating (loss) / profit before impairment and significant
items
(201)
(475)
(676)
(101)
(777)
Impairment charge
–
(16,103)
(16,103)
–
(16,103)
Significant Items
(254)
(56)
(310)
(229)
(539)
Operating (loss)/profit after impairment and significant
items
(455)
(16,634)
(17,089)
(330)
(17,419)
Finance costs
(138)
(1,752)
(1,891)
–
(1,891)
Other finance costs
–
2
2
–
2
(Loss)/profit before tax
(593)
(18,384)
(18,978)
(330)
(19,308)
Income tax credit/(expense)
–
(2,384)
(2,384)
–
(2,384)
Profit on disposal
–
–
20,316
–
20,316
(Loss)/profit after tax as per comprehensive statement
of income
(593)
(20,768)
(1,046)
(330)
(1,376)
Annual Report and Accounts for the year ended 31 March 2022
40
OUR FINANCIALS
5. Segment reporting continued
12 months ended 31 March 2021
Cake
Decoration
£’000s
Head Office and
non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
Total revenue
40,206
–
40,206
19,788
59,994
Intercompany sales
(2,914)
–
(2,914)
–
(2,914)
External revenue
37,292
–
37,292
19,788
57,080
Cost of sales
(22,128)
–
(22,128)
(12,992)
(35,120)
Gross profit
15,164
–
15,164
6,796
21,960
Income from Furlough Scheme
1,205
–
1,205
461
1,666
Other operating income
–
48
48
49
97
Distribution expenses
(3,615)
–
(3,615)
(411)
(4,026)
Administrative expenses
(13,657)
(609)
(14,266)
(4,100)
(18,366)
Operating (loss) / profit before impairment
and significant items
(903)
(561)
(1,464)
2,795
1,331
Significant Items
(763)
966
203
(169)
34
Operating (loss)/profit after impairment
and significant items
(1,666)
405
(1,261)
2,626
1,365
Finance costs
(95)
(4,570)
(4,665)
(9)
(4,674)
Other finance costs
–
(182)
(182)
–
(182)
(Loss)/profit before tax
(1,761)
(4,347)
(6,108)
2,617
(3,491)
Income tax credit/(expense)
–
27
27
–
27
(Loss)/profit after tax as per
comprehensive statement of income
(1,761)
(4,320)
(6,081)
2,617
(3,464)
Geographical segments
The Group earns revenue from countries outside the United Kingdom, as shown below:
12 months ended 31 March 2022
Cake
Decoration
£’000s
Discontinued
Operations
£’000s
UK
26,992
1,275
Europe
5,722
–
USA
6,892
–
Rest of World
825
–
Total
40,431
1,275
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
Cake
Decoration
£’000s
Discontinued
Operations
£’000s
UK
25,795
19,788
Europe
4,465
–
USA
6,191
–
Rest of World
841
–
Total
37,292
19,788
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
41
5. Segment reporting continued
The Group has two customers which constitute over 10% of revenue: one providing 17% of revenue, and the other 10%.
Reconciliation of operating (loss)/profit to underlying adjusted
EBITDA to 31 March 2022
Cake
Decoration
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
Operating loss
(455)
(16,634)
(17,089)
(330)
(17,419)
Significant items
254
56
310
229
539
Impairment charge
–
16,103
16,103
–
16,103
Depreciation
1,209
117
1,326
–
1,326
Amortisation
9
–
9
–
9
Underlying adjusted EBITDA
1,017
(358)
659
(101)
558
Reconciliation of operating (loss)/profit to underlying adjusted
EBITDA to 31 March 2021
Cake
Decoration
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
Operating (loss)/profit
(1,666)
405
(1,261)
2,626
1,365
Significant items
763
(966)
(203)
169
(34)
Depreciation
1,614
25
1,639
796
2,435
Amortisation
87
(35)
52
–
52
Underlying adjusted EBITDA
798
(571)
227
3,591
3,818
31 March 2022
Cake
Decoration
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
Segment assets
36,017
4,623
40,640
–
40,640
Segment liabilities
10,606
24,924
35,530
–
35,530
Net operating assets / (liabilities)
25,411
(20,301)
5,110
–
5,110
Non–current asset additions
844
–
844
–
844
Depreciation
(1,209)
(117)
(1,326)
–
(1,326)
Amortisation
(9)
–
(9)
–
(9)
31 March 2021
Cake
Decoration
£’000s
Head Office
and non-trading
subsidiaries
£’000s
Continuing
Operations
£’000s
Discontinued
Operations
£’000s
Total
Group
£’000s
Segment assets
52,180
3,355
55,535
19,009
74,544
Segment liabilities
11,305
55,449
66,754
4,442
71,196
Net operating assets / (liabilities)
40,875
(52,094)
(11,219)
14,567
3,348
Non–current asset additions
444
–
444
185
629
Depreciation
(1,614)
(25)
(1,639)
(796)
(2,435)
Amortisation
(87)
35
(52)
–
(52)
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 2022, Head Office costs of £1.2 million (2021: £0.8m) have been re-allocated to the Cake Decoration division.
Annual Report and Accounts for the year ended 31 March 2022
42
OUR FINANCIALS
6. Significant items
12 months
ended
31 March
2022
£’000s
12 months
ended
31 March
2021
£’000s
Costs relating to disposal of Brighter Foods
–
(269)
Professional fees in relation to refinancing costs
(62)
(38)
Movement in provisions relating to the non-controlling interest put option
–
1,302
Professional fees in relation to Liverpool factory/Wavertree closure
(90)
(113)
Closure of Renshaw US warehouse
(15)
(171)
Management restructuring
(143)
(508)
Significant items – Continuing business
(310)
203
Continuing business
(310)
203
Discontinued business
(229)
(169)
Total significant items
(539)
34
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 2022 had the following significant costs:
1. Professional fees in relation to the refinancing of the Investor Loan Notes and CLNs.
2. Professional fees in relation to the closure of the Wavertree property and relocation to Crown Street Liverpool.
3. Professional fees in relation to the closure of the Renshaw US warehouse.
4. Redundancy costs associated with the restructuring of the Cake Decoration business.
The year to 31 March 2021 had the following significant costs:
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.
7. Auditor’s remuneration
12 months
ended
31 March
2022
£’000s
12 months
ended
31 March
2021
£’000s
Fees payable to the Company’s auditor for the audit of the Group’s annual accounts
(190)
(215)
Fees payable to the Company’s auditor for other services:
Audit related assurance services
(27)
(27)
Tax compliance services
(18)
(25)
Tax advisory services
(1)
(1)
Other assurance services
(7)
(6)
Total fees paid to auditor
(243)
(274)
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
43
7. Auditor’s remuneration continued
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:
12 months
ended
31 March
2022
£’000s
12 months
ended
31 March
2021
£’000s
Annual Accounts audit fee apportioned by division
Real Good Food plc
(100)
(105)
Brighter Foods Ltd
–
(20)
J F Renshaw Ltd
(70)
(70)
Rainbow Dust Colours Ltd
(20)
(20)
(190)
(215)
8. Operating loss
Operating loss for continuing operations
Notes
12 months
ended
31 March
2022
£’000s
12 months
ended
31 March
2021
£’000s
External Sales
40,431
37,292
Staff Costs
12
(11,696)
(12,276)
Inventories:
– cost of inventories as an expense (included in cost of sales)
(18,577)
(16,294)
Depreciation of property, plant, and equipment
5, 18
(1,326)
(1,639)
Amortisation of intangible assets
5, 17
(9)
(52)
Significant items
6
(310)
203
Impairment charges
16
(16,103)
–
Research and development expenditure
(646)
(626)
Impairment of trade receivables
22
(53)
(230)
Foreign exchange gains/(losses)
3
(308)
Other net operating expenses
(8,803)
(7,523)
Total
(57,520)
(38,553)
Operating loss
(17,089)
(1,261)
9. Finance costs
12 months
ended
31 March
2022
£’000s
12 months
ended
31 March
2021
£’000s
Interest on bank loans, overdrafts, and investor loans
(1,896)
(4,600)
Interest on lease liabilities
(12)
(26)
Interest on non-controlling interest put option
–
43
Finance cost on substantial modification of convertible loan notes
17
(91)
(1,891)
(4,674)
Continuing business
(1,891)
(4,665)
Discontinued business
–
(9)
Annual Report and Accounts for the year ended 31 March 2022
44
OUR FINANCIALS
10. Other finance (income)/costs
12 months
ended
31 March
2022
£’000s
12 months
ended
31 March
2021
£’000s
Interest on pension scheme liabilities (note 32)
(429)
(465)
Interest on pension scheme assets (note 32)
431
312
Interest on effect of asset ceiling/IFRIC 14
–
(29)
2
(182)
11. Directors’ remuneration
12 months
ended
31 March
2022
£’000s
12 months
ended
31 March
2021
£’000s
Directors’ salaries, benefits, and fees
(650)
(482)
(650)
(482)
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
12 months
ended
31 March
2022
£’000s
12 months
ended
31 March
2021
£’000s
M J Holt
175
–
106
–
281
160
J M d’Unienville
25
–
–
–
25
25
M Keeling
178
10
62
–
250
203
J A Mackenzie
25
–
–
–
25
25
A Ridgwell
27
–
–
–
27
27
G Lumsden
42
–
–
–
42
42
472
10
168
–
650
482
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.
M Keeling’s salary above represents 100%, however 50% of the salary costs are recharged from J F Renshaw to Group.
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 bonus paid to M J Holt relates to the sale of Brighter Foods Limited and was fully funded by the Loan Note Holders via a debt waiver.
The current Company Directors disclosed are considered as key management personnel.
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
45
11. Directors’ remuneration continued
The current base annual salaries and fees paid to the Directors are as follows:
Base Salary
£’000s
M J Holt
135
J M d’Unienville
25
J A MacKenzie
25
A Ridgwell
25
G Lumsden
38
M Keeling
144
392
There were no options for directors at 31 March 2022 or 31 March 2021.
No new options were granted to Directors during the year (2021: 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 2022 was 2.75p and the range during the year was 1.55p to 3.45p.
No Director exercised share options during the year.
During the period, no director had retirement benefits, (2021: 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:
31 March
2022
Group
31 March
2022
Company
31 March
2021
Group
31 March
2021
Company
Continuing operations
Production
248
–
258
–
Selling and distribution
43
–
40
–
Directors and administrative
27
4
30
5
318
4
328
5
Discontinued operations
Production
170
–
170
–
Directors and administrative
46
–
46
–
216
–
216
–
Total no. of staff
534
4
544
5
The aggregate payroll costs were as follows:
31 March
2022
Group
£’000s
31 March
2022
Company
£’000s
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
Continuing operations
Wages, salaries, and fees
9,989
439
10,575
338
Social security costs
1,056
67
1,066
44
Other pension costs
651
5
635
20
11,696
511
12,276
402
Discontinued operations
Wages, salaries, and fees
388
–
4,473
–
Social security costs
41
–
379
–
Other pension costs
8
–
115
–
437
–
4,967
–
Total payroll costs
12,133
511
17,243
402
Annual Report and Accounts for the year ended 31 March 2022
46
OUR FINANCIALS
12. Staff numbers and costs continued
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the
Group, other than those already listed in the Directors remuneration in note 11.
31 March
2022
Group
£’000s
31 March
2022
Company
£’000s
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
Wages, salaries, and fees
256
–
484
–
Social security costs
35
–
67
–
Other pension costs
26
–
33
–
Total payroll costs
317
–
584
–
The cash collateral figure for the Group is £0.05 million (FY21: £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.
13. Notes supporting the cash flow statement
Group
Real Good Food plc (Group)
Non-current
Loans and
Borrowings
£’000s
(Note 23)
Current Loans
and Borrowings
£’000s
(Note 23)
Total
£’000s
At 31 March 2020
43,059
2,717
45,776
Cash Flows
(37)
(923)
(960)
Non-cash flows
– Interest accruing on loans
4,376
–
4,376
– Finance loss on change of terms for convertible loan notes
91
_
91
Loans and borrowings classified as non-current at March 2020 becoming current before
March 2021
(865)
865
–
At 31 March 2021
46,624
2,659
49,283
Cash Flows
(23,100)
608
(22,492)
Non-cash flows
– Interest accruing on loans
1,760
–
1,760
– Waiver of shareholder loans
(540)
–
(540)
Loans and borrowings classified as non-current at March 2021 becoming current before
March 2022
(451)
451
–
At 31 March 2022
24,293
3,718
28,011
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
47
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:
Note
31 March
2022
Group
£’000s
31 March
2021
Group
£’000s
Short term borrowings
23
(3,718)
(2,659)
Short term lease liabilities
23
(48)
(93)
Long term borrowings
23
(24,293)
(46,624)
Long term lease liabilities
23
(155)
–
Cash
2,734
622
Total Net Debt
(25,480)
(48,754)
Group
Net cash
and current
borrowings
£’000s
Non-current
borrowings
£’000s
Net debt
£’000s
At 1 April 2020
1,744
43,626
45,370
Cash flow
386
(1,748)
(1,362)
Other non-cash movements
–
4,746
4,746
At 31 March 2021
2,130
46,624
48,754
Cash flow
(1,617)
(23,100)
(24,717)
Other non-cash movements
519
924
1,443
At 31 March 2022
1,032
24,448
25,480
Annual Report and Accounts for the year ended 31 March 2022
48
OUR FINANCIALS
14. Taxation
Group
31 March
2022
£’000s
31 March
2021
£’000s
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
2,384
27
Adjustments in respect of prior years
_
_
Total deferred tax
2,384
27
Tax – continuing operations
2,384
27
Tax – discontinued operations
–
–
Total tax
2,384
27
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% (2021: 19%).The differences are
explained below:
31 March
2022
£’000s
31 March
2021
£’000s
Tax reconciliation
Loss per accounts before taxation – continuing operations
(18,978)
(6,108)
Profit per accounts before taxation – discontinued operations
19,986
2,617
Total profit/(loss) before taxation
1,008
(3,491)
Tax on profit/(loss) on ordinary activities at standard corporation tax rate of 19%
191
663
Expenses not deductible for tax purposes
3,279
(499)
Movement in deferred tax in the year, including the effect of rate changes
(1,086)
(137)
Adjustments to tax in respect of prior years
–
–
Total tax
2,384
27
Tax on continuing operations
2,384
27
Tax on discontinued operations
–
–
Tax charge for the period
2,384
27
Details of the deferred tax asset is shown in note 20.
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 2022 has been calculated based on the
rate of 25% (2021: 19%).
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
49
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.
12 months
ended
31 March
2022
Continuing
Operations
12 months
ended
31 March
2022
Discontinued
Operations
12 months
ended
31 March
2021
Continuing
Operations
12 months
ended
31 March
2021
Discontinued
Operations
(Loss)/profit after tax attributable to ordinary shareholders (£’000s)
(21,362)
19,986
(6,473)
2,617
Weighted average number of shares in issue for basic EPS (’000s)
99,564
99,564
99,564
99,564
Employee share options (’000s)
–
–
340
340
Convertible loan notes (’000s)
220,980
220,980
220,980
220,980
Weighted average number of shares in issue for diluted EPS (’000s)
320,544
320,544
320,884
320,884
Basic (loss)/earnings per share
(21.46)p
20.07p
(6.50)p
2.63p
The total loss per share for 2022 is (1.39)p for continuing and discontinued operations (2021 continuing and discontinued loss per share:
(3.87)p).
Diluted earnings per share
The discontinued operations in the period can be diluted. The impact of this is a diluted earnings per share of 6.23p (2021 0.82p) for
discontinued operations. 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 (21.46)p on the continuing operations and earnings of 6.23p on the discontinued operations. The weighted average number
of shares in issue for the period was 99,564,430 and there are no options outstanding. There were also 8,806,571 convertible loan notes
outstanding, of which the weighted average number of shareswas 220,979,796. Therefore, the weighted average number of dilutive potential
ordinary shares is 320,544,226.
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:
Group
£’000s
Cost
At 1 April 2021
32,722
Impairment
(16,103)
At 31 March 2022
16,619
31 March
2022
£’000s
31 March
2021
£’000s
Cake Decoration
16,619
32,722
Annual Report and Accounts for the year ended 31 March 2022
50
OUR FINANCIALS
16. Goodwill continued
Assumptions:
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill may be impaired. The recoverable
amount of any cash generating unit is determined based on the higher of fair value less costs of disposal and value-in-use calculations. The
cash flows used in the value-in-use calculation are EBITDA (adjusted) performance less capital expenditure based on the latest Board-
approved forecasts in respect of the following three years.
Long-term growth rate assumptions:
For the purposes of impairment testing, the cash flows are extrapolated over 5 years with a terminal value applied to the fifth year. The
terminal value is calculated using the fifth year forecasted EBITDA (adjusted) performance and applying a 2% growth rate.
Discount rate assumptions:
The discount rate applied to the cash flows is 10% (2021: 10%). This rate is in line with the Company’s actual weighted average cost of
capital of 9.67% which takes account of the increased risk of being listed on AIM rather than the main market. It is representative of
businesses operating within the food sector.
Impairment charge:
The impairment review resulted in an impairment of the goodwill held for Cake Decoration of £16.1 million (2021: nil). Cake Decoration is a
core division for the Group and is currently in turnaround. The investments made in manufacturing capability in recent years have not yet
started to deliver the returns that could be expected, for example, and the Board believes that the current valuation, reflected here,
necessarily, and materially underplays the potential value of this division. Plans to improve the strategic positioning, service delivery and
commercial performance of this business are also in progress.
Sensitivity analysis:
An illustration of the sensitivity to reasonable possible changes in the discount rate assumption or the long-term growth rate are
shown below:
{
An increase of 0.5% in the Group’s weighted average cost of capital of 10% to 10.5% would cause a further impairment of £1.6 million on
the carrying value of goodwill on Cake Decoration.
{
A reduction of 0.5% to the growth rate from 2.0% to 1.5% would cause a further impairment of £1.0 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.
Book value of
cash generating
unit
£’000s
Estimated
recoverable
amount/value
in use
£’000s
Cake Decoration
25,249
36,547
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
51
17. Other intangible assets
Customer
Relationships
£’000s
Computer
Software
£’000s
Development
Costs
£’000s
Group
£’000s
Company
£’000s
Cost
At 1 April 2021 and 31 March 2022
4,170
332
111
4,613
296
Amortisation
At 1 April 2021
4,170
326
108
4,604
296
Charge
–
6
3
9
–
At 31 March 2022
4,170
332
111
4,613
296
Net Book Value at 31 March 2022
–
–
–
–
–
Cost
At 31 March 2021 and 1 April 2022
4,170
332
111
4,613
296
Amortisation
At 1 April 2020
4,170
285
97
4,552
278
Charge
–
41
11
52
18
At 31 March 2021
4,170
326
108
4,604
296
Net Book Value at 31 March 2021
–
6
3
9
–
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 2022 are at £nil net book value (2021: nil).
18. Property, plant and equipment
Group
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
Total
£’000s
Cost
At 1 April 2021
3,201
17,148
20,349
Additions
–
844
844
At 31 March 2022
3,201
17,992
21,193
Depreciation
At 1 April 2021
1,308
10,493
11,801
Charge
59
1,267
1,326
Disposals
–
–
–
At 31 March 2022
1,367
11,760
13,127
Net Book Value at 31 March 2022
1,834
6,232
8,066
Annual Report and Accounts for the year ended 31 March 2022
52
OUR FINANCIALS
18. Property, plant and equipment continued
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
Total
£’000s
Cost
At 1 April 2020
4,872
23,302
28,174
Reclassified to non-current assets discontinued operations
(944)
(6,532)
(7,476)
Reclassified to non-current assets discontinued operations IFRS16
(771)
–
(771)
Additions
44
585
629
Disposals
–
(207)
(207)
At 31 March 2021
3,201
17,148
20,349
Depreciation
At 1 April 2020
1,177
10,798
11,975
Reclassified to non-current assets discontinued operations
(130)
(2,075)
(2,205)
Reclassified to non-current assets discontinued operations IFRS16
(208)
–
(208)
Charge
469
1,966
2,435
Disposals
–
(196)
(196)
At 31 March 2021
1,308
10,493
11,801
Net Book Value at 31 March 2021
1,893
6,655
8,548
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:
Land and
Buildings
£’000s
Plant and
Equipment
£’000s
Total
£’000s
Cost
At 1 April 2021
519
233
752
Additions
–
211
211
At 31 March 2022
519
444
963
Depreciation
At 1 April 2021
459
232
691
Charge
20
73
93
At 31 March 2022
479
305
784
Net Book Value at 31 March 2022
40
139
179
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.
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
53
18. Property, plant and equipment continued
Company
Plant and
Equipment
£’000s
Total
£’000s
Cost
At 1 April 2021
299
299
At 31 March 2022
299
299
Depreciation
At 1 April 2021
181
181
Charge
24
24
At 31 March 2022
205
205
Net Book Value at 31 March 2022
94
94
Cost
At 1 April 2020
299
299
At 31 March 2021
299
299
Depreciation
At 1 April 2020
156
156
Charge
25
25
At 31 March 2021
181
181
Net Book Value at 31 March 2021
118
118
The company does not have any right of use assets.
19. Investments
Company
Investments in shares of subsidiary undertakings:
N Brown
Foods Limited
£’000s
Real Good Food
Ingredients
Limited
£’000s
Renshaw
Europe NV
£’000s
Total
Investments
£’000s
At 31 March 2021
53,900
–
770
54,670
Impairment
(45,690)
–
–
(45,690)
At 31 March 2022
8,210
–
770
8,980
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.
Annual Report and Accounts for the year ended 31 March 2022
54
OUR FINANCIALS
19. Investments continued
A full list of subsidiary undertakings (showing registered address and shares held) as at 31 March 2022 is disclosed below:
Principal Activities
Description and
Number of Shares Held
Proportion of
Nominal Value of
Shares Held
RGF Devizes Ltd*
Dormant
4,052,659 Ordinary £1
100%
Eurofoods Ltd*
Dormant
260,000 Ordinary £1
100%
50,000 Preference £1
100%
N Brown Foods Ltd*
Holding Company
28,248,096 Ordinary 50p
100%
Renshaw US Incorporated*
Cake Decoration Supplier
200 Ordinary $1
100%
JF Renshaw Ltd
Cake Decoration Supplier
15,685,164 Ordinary £1
100%
RGFC Dust Ltd*
Holding Company
1 Ordinary £1
100%
Rainbow Dust Colours Ltd
Cake Decoration Supplier
500 Ordinary £1
100%
Real Good Food Ingredients Ltd*
Food Ingredients Supplier
2,500,000 Ordinary £1
100%
Whitworths Sugars Ltd
Dormant
2 Ordinary £1
100%
Renshaw Europe NV*
Cake Decoration Supplier
461,500 Ordinary €1
100%
* Held directly by Real Good Food plc.
All entities have their registered office at 229 Crown Street, Liverpool, L8 7RF, 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
20. Deferred taxation liability/(asset)
The gross movements on the deferred tax account are as follows:
31 March
2022
Group
£’000s
31 March
2022
Company
£’000s
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
Opening position
(1,210)
(1,426)
(1,285)
(1,508)
Charge/(credit) to income statement
2,384
2,327
(27)
(20)
(Credit)/charge to other comprehensive income – defined benefit pension
scheme movement
(527)
(527)
102
102
Charge to equity – deferred tax on share-based payments
–
–
–
–
Closing position
647
374
(1,210)
(1,426)
Shown as follows:
Liabilities
647
374
216
–
Assets
–
–
(1,426)
(1,426)
647
374
(1,210)
(1,426)
Group
Deferred tax assets
The deferred tax balances arise from temporary differences in respect of the following:
Pension
Scheme
£’000s
Total
£’000s
At 31 March 2021
(1,426)
(1,426)
Charge to income statement
1,953
1,953
(Credit) to other comprehensive income
(527)
(527)
At 31 March 2022
–
–
Within 12 months
–
–
Greater than 12 months
–
–
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
55
20. Deferred taxation liability/(asset) continued
Deferred tax liabilities
Pension
Scheme
£’000s
Tangible
Assets
£’000s
Total
£’000s
At 31 March 2021
–
216
216
Charge to income statement
374
57
431
Charge to other comprehensive income
–
–
–
At 31 March 2022
374
273
647
There were £29.9 million of unused tax losses (2021: £20.0 million) on which deferred tax of £5.7 million (2021: £3.8 million) is not
recognised owing to uncertainty over when those losses will be utilised. The losses have no expiration date.
Company
The deferred tax balances arise from temporary differences in respect of the following:
Pension
Scheme
£’000s
Total
£’000s
At 31 March 2021
(1,426)
(1,426)
Charge to income statement
2,327
2,327
Credit to other comprehensive income
(527)
(527)
At 31 March 2022
374
374
Within 12 months
–
–
Greater than 12 months
374
374
21. Inventories
31 March
2022
Group
£’000s
31 March
2022
Company
£’000s
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
Materials
1,589
–
1,225
–
Work in Progress
19
–
112
–
Finished Goods
2,416
–
2,260
–
4,024
–
3,597
–
Continuing Business
4,024
–
3,597
–
Discontinued Business
–
–
2,296
–
Inventories totalling £4,024k (2021: £5,893k) 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.
Annual Report and Accounts for the year ended 31 March 2022
56
OUR FINANCIALS
22. Trade and other receivables
31 March
2022
Group
£’000s
31 March
2022
Company
£’000s
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
Current trade and other receivables
Trade receivables
5,553
18
5,941
–
Less: provision for impairment of receivables
(53)
–
(230)
–
Net trade receivables
5,500
18
5,711
–
Other receivables
502
13
762
120
Amounts owed by Group undertakings
–
8,590
–
7,620
Deferred consideration for disposals
–
–
50
50
Prepayments
570
47
725
65
Total
6,572
8,668
7,248
7,855
Amount due within 12 months
6,572
78
7,248
691
Amount due after 12 months
–
8,590
–
7,164
Total
6,572
8,668
7,248
7,855
At 31 March 2022, the Group had an outstanding balance on the revolving credit facility of £3,267k (2021: £1,794k) for which the trade
receivables were pledged as security. The facility is available in relation to J F Renshaw and Rainbow Dust Colours GBP, USD, and EUR
receivables. Full details are shown under Note 23.
Provision for impairment of receivables
31 March
2022
Group
£’000s
31 March
2022
Company
£’000s
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
At 31 March 2021
(230)
–
(192)
–
Credit/(charge) for period
177
–
(38)
–
At 31 March 2022
(53)
–
(230)
–
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 2022, the lifetime expected credit loss for trade receivables in the Group is as follows:
Less than
30 days old
£’000s
30-60
days old
£’000s
60-90
days old
£’000s
90-365
days old
£’000s
Over 365
days old
£’000s
Total
£’000s
Expected loss rate
–
–
–
10%
2.5%
Gross carrying amount
5,014
236
91
130
82
5,553
Loss provision
–
–
–
32
21
53
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 release of £177k (2021: charge of £38k) of its trade receivables during the period, to reflect debts paid during the year.
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.
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
57
22. Trade and other receivables continued
Trade receivables of £0.5 million were past due but not impaired. The ageing analysis of these receivables is as follows:
31 March
2022
Group
£’000s
31 March
2021
Group
£’000s
Up to 30 days past due
236
582
One to three months past due
91
204
Over three months past due
158
323
485
1,109
23. Borrowings and capital management
31 March 2022
Group
£’000s
31 March 2022
Company
£’000s
31 March 2021
Group
£’000s
31 March 2021
Company
£’000s
Secured borrowings at amortised cost
Bank term loans
1,185
–
2,050
–
Revolving credit facilities
3,267
–
1,794
–
Leases
203
–
93
–
Investor loans*
7,256
7,256
30,240
30,240
Convertible loan notes**
16,303
16,303
15,199
15,199
28,214
23,559
49,376
45,439
Borrowings due for settlement within 12 months
3,718
–
2,659
–
Lease liabilities due for settlement within 12 months
48
–
93
–
Borrowings due for settlement after 12 months
24,293
23,559
46,624
45,439
Lease liabilities due for settlement after 12 months
155
–
--
–
Total
28,214
23,559
49,376
45,439
* The investor loans shown consists of £4.7 million principal amount, £1.8 million accrued interest up to 31 March 2022 and redemption premiums of
£0.7 million.
** Convertible loan notes shown at 31 March 2022 consist of £8.8 million investment (2021: £8.8 million), £7.5 million accrued interest (2021: £6.3 million), and
£0.02k of transaction costs (2021: nil) being spread over the remaining life of the liability and a finance cost of £0.7m and a fair value adjustment of (£0.7m),
resulting from a substantial modification to the Convertible Loan Note terms requiring de-recognition of the existing loans and recognition of new loans.
All existing shareholder loans are due to be paid in May 2023, however the Loan note holders have pledged to extend them to May 2024,
however the documentation is not yet in place.
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. The loan note holders agreed
to amend the repayment date of the loans to May 2024, however the documentation is not yet signed.
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. The loan note holders have pledged to amend the repayment date to the 19 May 2024;
however, the documentation is not yet signed. 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, which stopped accruing from 1 January 2021, 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 2022, the derivative liability was valued at £0.1k (2021: £17k).
The convertible loan notes shown consist of a host loan at amortised cost of £8.8 million, £7.5 million of finance costs and £0.7 million of
costs and a fair value adjustment of (£0.7m) resulting from substantial modification to the convertible loan notes up to 31 March 2022.
Annual Report and Accounts for the year ended 31 March 2022
58
OUR FINANCIALS
23. Borrowings and capital management continued
Features of the Group’s borrowings are as follows:
The Group’s financial instruments comprised cash, leases, a revolving credit facility, investor loans and various items arising directly from its
operations, such as trade payables and receivables. The main purpose of these financial instruments is to finance the Group’s operations.
The main risks from the Group’s financial instruments are interest rate risk and liquidity risk. Liquidity risk arises from the Group’s
management of working capital and the finance charges and principal repayments on its debt instruments. The Group’s policy is to ensure
that it will always have sufficient cash to allow it to meet its liabilities when they become due.
The Group also has some currency exposure in relation to its Euro and US Dollar commodity purchases. However, this is mitigated by
matching in part against foreign currency sales. The Board reviews and agrees policies, which have remained substantially unchanged for the
year under review, for managing these risks.
The Group’s policies on the management of interest rate, liquidity and currency exposure risks are set out in the Report of the Directors.
During the year ended 31 March 2022, the Group continued with the borrowing facilities in place and secured loans from investors. As at
31 March 2022, 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 and Rainbow Dust Colours Limited with an interest rate of 2.25% above Sterling Overnight
Index Average for Sterling Advances. 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 Sterling Overnight Index Average for Sterling Advances.
{
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 2022 were as follows:
Date
Amount
Method of Funding
Major Shareholder(s)
May 2018
£8.8m
Secured convertible loan notes
NB Holdings Ltd (£3.4m), Omnicane Investors Ltd (£3.4m),
Funds managed by Downing LLP (2.0m)
March 2018
£2.3m
Secured loan notes
NB Holdings Ltd (£0.9m)), Omnicane Investors Ltd (£0.9m),
Funds managed by Downing LLP (£0.6m)
January 2018
£0.3m
Secured loan notes
Funds managed by Downing LLP (£0.3m)
September 2017
£0.8m
Secured loan notes
Funds managed by Downing LLP (£0.8m)
June 2017
£1.3m
Secured loan notes
Funds managed by Downing LLP (£1.3m)
Total
£13.5m
At 31 March 2022, 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.
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
59
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
2022
Trade and other payables
4,904
1,044
427
195
–
6,570
Investor loans
–
–
–
4,704
–
4,704
Convertible loan notes
–
–
–
8,800
–
8,800
Bank term loans
72
216
163
734
–
1,185
Revolving credit facilities
–
–
3,267
–
–
3,267
Leases
4
8
36
155
–
203
4,980
1,268
3,893
14,588
–
24,729
Interest
–
–
–
9,349
–
9,349
Redemption premiums
–
–
–
706
–
706
Total
4,980
1,268
3,893
24,643
–
34,784
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
893
56
–
–
8,087
Investor loans
–
–
–
20,562
–
20,562
Convertible loan notes
–
–
–
8,807
–
8,807
Bank term loans
72
144
649
1,185
–
2,050
Revolving credit facilities
–
–
1,794
–
–
1,794
Leases
8
15
70
–
–
93
NCI put option liability
1,553
–
–
–
–
1,553
8,771
1,052
2,569
30,554
–
42,946
Interest
–
–
–
13,029
–
13,029
Redemption premiums
–
–
–
3,084
–
3,084
Total
8,771
1,052
2,569
46,667
–
59,059
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 £616k. A
10% weakening of the US dollar would result in a decrease of pre-tax profits of £504k.
{
With an excess of € liabilities to € assets a 10% strengthening of the Euro would result in a decrease in pre-tax profits of £686k. A 10%
weakening of the Euro would result in an increase of pre-tax profits of £561k.
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.
Annual Report and Accounts for the year ended 31 March 2022
60
OUR FINANCIALS
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:
Continuing
Operations
31 March 2022
£’000s
Discontinued
Operations*
31 March 2022
£’000s
31 March
2022
£’000s
Continuing
Operations
31 March 2021
£’000s
Discontinued
Operations*
31 March 2021
£’000s
31 March
2021
£’000s
Current lease liabilities
48
_
48
93
91
184
Non-current lease liabilities
155
_
155
_
456
456
203
_
203
93
547
640
The maturity of lease liabilities as at 31 March 2022 is further analysed as set out below:
Continuing
Operations
31 March 2022
£’000s
Discontinued
Operations*
31 March 2022
£’000s
31 March
2022
£’000s
Continuing
Operations
31 March 2021
£’000s
Discontinued
Operations*
31 March 2021
£’000s
31 March
2021
£’000s
Due in less than one year
48
–
48
93
91
184
Due between one to five years
155
–
155
–
257
257
Due in over five years
–
–
–
–
199
199
203
–
203
93
547
640
* The lease liabilities relating to discontinued operations are shown as part of assets held for sale for Brighter Foods Limited in note 33.
Additions in the year to lease liabilities have been discounted using an average annual rate of 3.75% (2021: 4.41%), which corresponds to
the rate at which the Group has borrowed against assets. Brought forward liabilities continue to be discounted at 4.41% in line with 2021.f a
rate of 10% were applied, then the charge to profit would be increased by £14k (2021: £49k).
The movements in the lease liability in the year are set out below:
31 March
2022
Group
£’000s
31 March
2021
Group
£’000s
Lease liability at 1 April 2021
93
957
Lease additions
211
63
Leases terminated
–
(4)
Repayments of lease liabilities
(113)
(402)
Interest expense
12
26
Less assets classified as discontinued operations
–
(547)
Lease liability at 31 March 2022
203
93
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.
25. Trade and other payables
31 March
2022
Group
£’000s
31 March
2022
Company
£’000s
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
Amount due within one year
Trade payables
2,748
132
3,837
186
Other tax & social security
296
11
377
15
Accruals
3,036
189
3,400
479
Amounts owed to Group undertakings
–
51,465
–
20,154
Other payables
585
151
473
11
Total
6,665
51,948
8,087
20,845
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.
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
61
26. Financial instruments
Set out below are the Group’s financial instruments. The Directors consider there to be no difference between the carrying value and fair
value of the Group’s financial instruments.
31 March
2022
Group
£’000s
31 March
2022
Company
£’000s
31 March
2021
Group
£’000s
31 March
2021
Company
£’000s
Loans and receivables at amortised cost
Cash and cash equivalents
2,734
1,636
622
17
Cash collateral
50
50
215
215
Trade receivables
5,553
18
5,711
–
Other debtors
502
13
762
120
Deferred consideration
–
–
50
50
Amounts owed by Group undertakings
–
8,355
–
7,620
8,839
10,072
7,360
8,022
Financial liabilities at amortised cost
Trade payables
2,748
132
3,837
186
Accruals
3,036
189
3,400
479
Other payables
585
151
473
11
Bank term loans
1,185
–
2,050
–
Revolving Credit Facility
3,267
–
1,794
–
Lease assets
203
–
93
–
Investor loans
7,256
7,256
30,240
30,240
Convertible loan notes
16,303
16,303
15,199
15,199
Amounts owed to Group undertakings
–
51,465
–
20,154
34,583
75,496
57,086
66,269
Financial liabilities at fair value through profit and loss
NCI put option
–
–
1,553
–
Derivative liability – Convertible loan notes
–
–
17
17
–
–
1,570
17
Total financial liabilities
34,583
75,496
58,656
66,286
The fair value of 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 embedded derivative liability has been determined using a Monte-Carlo simulation. The significant inputs include volatility,
risk-free rate, and the time period under analysis.
Capital management
The Group is subject to the risk that its capital structure will not be sufficient to support the growth of the business. The Group’s objectives
when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Capital is defined as the net assets
of the Group, including cash.
The Group’s approach to capital management is to fund its working capital requirements by trading generated cash flows supplemented by
asset-based lending, which is the most favourable source of finance available to the business at this time, to assist in managing its
seasonal requirements.
The three major shareholders, NB Holdings Ltd, Omnicane Investors Ltd, and certain funds managed by Downing LLP, support the business,
and have provided significant funding to the Group by way of loans (note 23).
Annual Report and Accounts for the year ended 31 March 2022
62
OUR FINANCIALS
27. Share capital
Number of
Shares
2022
Number of
Shares
2021
31 March
2022
£’000s
31 March
2021
£’000s
Allotted, called up and fully paid equity share capital
At the beginning of the year (1 April)
99,564,430
99,564,430
1,991
1,987
Issued in the year
–
–
–
4
At the end of the year (31 March)
99,564,430
99,564,430
1,991
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.
There were no outstanding share options at the 31 March 2022.
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 and
capital redemption of £540k in respect of shareholder loan waiver.
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 represented the 15.67% of Retained Earnings that were owned by the management of
Brighter Foods Limited, rather than Real Good Food plc.
29. Equity-settled share option scheme
The Company had 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
2022
Number of
Share Options
31 March
2022
Weighted
Average
Exercise Price
(£)
31 March
2021
Number of
Share Options
31 March
2021
Weighted
Average
Exercise Price
(£)
Outstanding at the beginning of the period
4,060,835
0.26
4,060,835
0.26
Exercised during the year
–
–
–
–
Forfeited during the year
(33,333)
(0.45)
(33,333)
(0.45)
Outstanding at the end of the period*
–
–
–
–
Exercisable at the end of the period
–
–
33,333
(0.45)
* There are no outstanding options in 2022
No new options have been issued during this current period, and there are no plans for options to be granted. At the time of the issue of
options the inputs into the Black–Scholes option pricing model were as follows:
Expected volatility
35%
Expected life
3 years
Risk-free rate
2.88%
Dividend yield
Nil
Weighted average exercise price
£0.33
Weighted average share price
£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 £3k
(2021: a credit of £200k). This is shown in administration expenses in the Company as the charge relates to employees of the Company.
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
63
30. Commitments
Capital commitments
31 March
2022
£’000s
31 March
2021
£’000s
Commitments for the acquisition of property, plant, and equipment
407
74
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 2021 (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 a bonus
paid to M J Holt, with the remainder being in respect of interest and redemption premium.
As Napier Brown (of which Anthony Ridgwell is a director) and Omnicane (of which Jacques D’Unienville is a director) 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. All details of shareholder
loans are shown in note 23.
Charges of Group services to related parties
Real Good Food plc charged its subsidiaries management fees for the year as follows:
12 months
ended
31 March
2022
£’000s
12 months
ended
31 March
2021
£’000s
Brighter Foods Ltd
–
240
J F Renshaw Ltd
1,212
720
Rainbow Dust Colours Ltd
60
60
1,272
1,020
JF Renshaw Ltd and Brighter Foods Ltd (up until disposal) were related parties because they were both subsidiaries of N Brown Foods Ltd,
which is a 100% owned subsidiary of Real Good Food plc. Related party balances with 100% owned subsidiaries have not been disclosed.
Annual Report and Accounts for the year ended 31 March 2022
64
OUR FINANCIALS
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 2022. This has resulted in a surplus in the Plan of £1,497k.
The present value of the fair plan assets is in excess of the contribution’s payable exceeds the net liability.
Present values of defined benefit obligations, fair value of assets and deficit
31 March
2022
£’000s
31 March
2021
£’000s
31 March
2020
£’000s
31 March
2019
£’000s
31 March
2018
£’000s
Present value of defined benefit obligation
19,929
21,885
20,750
21,177
21,448
Fair value of Plan assets
(21,426)
(14,527)
(13,735)
(13,774)
(13,529)
(Surplus)/deficit in plan
(1,497)
7,358
7,015
7,403
7,919
Effect of asset ceiling/IFRIC14
–
147
921
–
–
Gross amount recognised
(1,497)
7,505
7,936
7,403
7,919
Deferred tax*
–
(1,426)
(1,508)
(1,258)
(1,094)
Net (asset)/liability
(1,497)
6,079
6,428
6,145
6,825
* Deferred tax rate 2022 at 25%; 2021 and 2020: 19%, and 2017, 2018 & 2019: 17%
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
65
32. Pension arrangements continued
Reconciliation of opening and closing balances of the present value of the defined benefit obligations
31 March
2022
£’000s
31 March
2021
£’000s
Defined benefit obligation at start of period
21,885
20,750
Interest cost
429
465
Actuarial losses / (gains)
(1,536)
1,698
Past service cost
–
–
Benefits paid
(849)
(1,028)
Defined benefit obligation at end of period
19,929
21,885
Reconciliation of opening and closing balances of the fair value of Plan assets
31 March
2022
£’000s
31 March
2021
£’000s
Fair value of Plan assets at start of period
14,527
13,735
Interest income on Plan assets
431
312
Return on assets less interest income
(1,182)
788
Contributions paid by the Group
8,500
720
Benefits paid, death-in-service insurance premiums and expenses
(850)
(1,028)
Fair value of Plan assets at end of period
21,426
14,527
UK equities
–
2,408
Other investments
21,426
12,119
Total plan assets at end of period
21,426
14,527
The actual return on the Plan assets over the period ended 31 March 2022 was (£1,687k) (2021: £1,100k).
Total expense recognised in the Statement of Comprehensive Income within other finance income
31 March
2022
£’000s
31 March
2021
£’000s
Interest on liabilities
429
465
Interest on assets
(431)
(312)
Interest on effect of asset ceiling / IFRIC 14
–
29
Net interest cost/(gain)
(2)
182
Past service cost
–
–
Total cost
(2)
182
Statement of recognised income and expenses
31 March
2022
£’000s
31 March
2021
£’000s
Actuarial gain/(loss) on the Plan assets
(1,182)
788
Actuarial gain/(loss) on the Plan liabilities arising from changes in demographic assumptions
199
17
Actuarial (loss)/gain on the Plan liabilities arising from changes in financial assumptions
1,620
(1,715)
Actuarial (loss)/gain experience
(283)
Change in the effect of the asset ceiling / IFRIC14
147
803
Total amount recognised in Statement of Other Comprehensive Income
501
(107)
Annual Report and Accounts for the year ended 31 March 2022
66
OUR FINANCIALS
32. Pension arrangements continued
Assets
31 March
2022
£’000s
31 March
2021
£’000s
31 March
2020
£’000s
UK equity
–
2,408
2,210
Absolute return fund
4,113
1,412
1,522
Corporate Bonds
–
2,936
2,746
Gilts
3,427
2,769
3,112
Credit Funds
7,220
175
218
Sterling Liquidity Funds
1,822
–
–
Cash/Net current assets
223
–
–
Multi-Asset Funds
4,621
4,827
3,927
Total assets
21,426
14,527
13,735
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
31 March
2022
£’000s
31 March
2021
£’000s
31 March
2020
£’000s
31 March
2019
£’000s
Inflation
3.80
3.40
2.70
3.30
Salary increases
–
–
–
–
Rate of discount
2.80
2.00
2.30
2.40
Allowance for pension in payment increases
RPI max 5%
3.70
3.30
2.70
3.10
RPI min 3% max 5%
3.90
3.60
3.20
3.50
Allowance for revaluation of deferred pensions
3.30
2.70
2.20
2.30
Allowance for commutation of pension for cash at retirement
90% of max
allowance
90% of max
allowance
90% of max
allowance
90% of max
allowance
The obligations of the Plan have been calculated by projecting forwards the figures from the initial results of the latest valuation as at
31 March 2018 and then making appropriate adjustments for known experience and for differences in assumptions.
The mortality assumptions adopted at 31 March 2022 and 31 March 2021 imply the following life expectancies from age 65:
31 March
2022
31 March
2021
Male retiring at age 65 in current year
21 years
21 years
Female retiring at age 65 in current year
23 years
23 years
Male retiring at age 65 in 20 years’ time
22 years
22 years
Female retiring at age 65 in 20 years’ time
25 years
25 years
The weighted–average duration of the defined benefit obligation at 31 March 2022 was 15 years (2021: 15 years).
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
67
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
2022
£’000s
12 months
ended
31 March
2021
£’000s
12 months
ended
31 March
2020
£’000s
12 months
ended
31 March
2019
£’000s
12 months
ended
31 March
2018
£’000s
Fair value of assets
21,426
14,527
13,735
13,774
13,529
Defined benefit obligation
(19,929)
(21,885)
(20,750)
(21,177)
(21,448)
Effect of asset ceiling / IFRIC14
–
(147)
(921)
–
–
Asset/(Liability) in scheme
1,497
(7,505)
(7,936)
(7,403)
(7,919)
Experience adjustment on scheme assets
–
–
(168)
518
(232)
Experience adjustment on scheme liabilities
–
–
–
427
–
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:
Reasonably
Possible
Change
Obligation
Increase
Obligation
Decrease
Discount Rate
(+/– 0.5%)
8%
7%
RPI Inflation
(+/– 0.5%)
3%
3%
Assumed Life expectancy
(+/–) 1 Year
5%
5%
Small changes to other assumptions, such as the allowance for commutation of pension for cash at retirement, and the proportion of
members assumed to be married at retirement, do not have such a significant effect on the obligations of the Plan.
Annual Report and Accounts for the year ended 31 March 2022
68
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 2022.
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 £70k 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 Wavertree site was sold on the 26 May 2022.
The assets classified as held for sale within the consolidated statement of financial position at 31 March 2022 were as follows:
Real Good
Food Plc
N Brown
Foods Limited
Brighter
Foods Limited
31 March
2022
£’000s
Real Good
Food Plc
N Brown
Foods Limited
Brighter
Foods Limited
31 March
2021
£’000s
Goodwill
–
–
–
–
–
–
5,031
5,031
Plant and
equipment
–
–
–
–
–
–
4,457
4,457
Property (land
and buildings)
930
148
–
1,078
1,000
148
814
1,962
Right of
use assets
(IFRS16)
–
–
–
–
–
–
563
563
Property (land
and buildings)
–
–
–
–
–
–
2,296
2,296
Property (land
and buildings)
–
–
–
–
–
–
3,390
3,390
Cash
–
–
–
–
–
–
2,458
2,458
Total assets
held for sale
930
148
–
1,078
1,000
148
19,009
20,157
Trade and
other payables
–
–
–
–
–
–
3,598
3,598
Hire purchase
–
–
–
–
–
–
167
167
IFRS16 Lease
liabilities
–
–
–
–
–
–
547
547
Deferred
income
–
–
–
–
–
–
130
130
Total
liabilities
held for sale
–
–
–
–
–
–
4.442
4,442
34. Contingent liability
The Directors are not aware of any legal claims. The claim from the liquidators of Five Star Fish Limited (FSF) regarding a claim for repayment
of an alleged £610k debt owed by RGF to FSH was finalised in FY21 at no cost to RGF plc.
Notes to the Financial Statements (continued)
Year ended 31 March 2022
OUR FINANCIALS
www.realgoodfoodplc.com Stock Code: RGD
69
35. Disposal of Brighter Foods Limited
On 11 May 2021, Brighter Foods Limited was sold to The Hut Group plc (THG) for a cash consideration of £43.0 million. RGF through its
subsidiary NBF, had an interest of 84.334 percent 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. The statement of cash flows includes the following amounts in relation to
discontinued operations; Operating activities £167k (2021 - £1,224k); Investing activities (£20k) (2021 - £234k); Financing activities £41k
(2021 - (£156k)). The table below shows the profit on sale.
Profit on Sale
31 March
2022
£’000s
Cash consideration received
35,732
Cash disposed of
(2,579)
Net cash inflow on disposal of discontinued operations
33,153
Net assets disposed of (other than cash):
Property, plant and equipment
(5,766)
Inventories
(2,784)
Trade and other receivables
(1,520)
Trade and other payables
3,176
Other long term borrowing
338
(6,556)
Goodwill
(5,031)
Disposal costs
(1,138)
Put option
(3,243)
Minority interest
3,131
Result for period until disposal
(330)
Profit on disposal of Brighter Foods Limited
19,986
36. Post-year end activities
{
The property in Wavertree Liverpool that housed the Renshaw Academy, and the Sales and marketing teams was sold on the
26 May 2022 for £0.9 million.
{
Following the sale of Wavertree, the registered office of RGF plc was changed to the Liverpool factory site, 229 Crown Street,
Liverpool, L8 7RF.
{
Maribeth Keeling resigned in April 2022 and left the Group on 30 September 2022.
{
Anthony Ridgwell resigned from the Board on 22 August 2022.
Annual Report and Accounts for the year ended 31 March 2022
70
OTHER INFORMATION
Directors
M J Holt
M Keeling
J M d’Unienville
J A Mackenzie
G Lumsden
Company Secretary
M Keeling
Registered Office
229 Crown Street
Liverpool
L8 7RF
Registered Number
04666282
Auditor
BDO LLP
3 Hardman Street
Spinningfields
Manchester
M3 3AT
Solicitors
Walker Morris LLP
Kings Court
12 King Street
Leeds
LS1 2HL
Nominated Advisor and Broker
finnCap Ltd
60 New Broad Street
London
EC2M 1JJ
Banker
Lloyds Bank plc
5 St Paul’s Square
Old Hall Street
Liverpool
L3 9SJ
Advisors and Company Information
www.realgoodfoodplc.com Stock Code: RGD
C
OTHER INFORMATION
www.realgoodfoodplc.com Stock Code: RGD
IBC
229 Crown Street,
Liverpool L8 7RF
T: 0151 706 8200
enquiries@realgoodfoodplc.com
www.realgoodfoodplc.com