RGD.L Regulatory News (RGD)

27 Mar 2007 07:04

Real Good Food Company Plc (The)27 March 2007 Date: 27 March 2007On behalf of: The Real Good Food Company plc ("RGFC" or "the Company")Embargoed until: 0700 hours The Real Good Food Company plc Preliminary Results 2006 The Real Good Food Company plc ('RGFC'), the food manufacturing group, operatingin the ambient, chilled and frozen sectors of the market, today announces itspreliminary results for the 12 months to 31 December 2006. The highlights are: • Total revenues of £250.8m (2005: £117.7m) • Profit before tax, exceptionals and goodwill amortisation up 35% to £9.5m (2005: £7.1m) • Basic earnings per share of 2.6 pence (2005: 7.2p loss) • Integration of Napier Brown Foods ('NBF') into devolved accountability model completed successfully • Year end net debt reduced by 5% to £56.6m Commenting on the results, Pieter Totte, Non-Executive Chairman of The Real GoodFood Company plc, said: "Following the reverse takeover of Napier Brown Foods in September 2005, we havesought to consolidate and strengthen the Company across all divisions to build asolid platform for future growth in Sugar, Fish, Baking Ingredients and Bakery.I am delighted to report that overall trading in our three largest divisions hasmet our expectations. "The successful integration of Napier Brown Foods has resulted in an excellentfull year contribution from the business against a volatile sugar market.Overall, the Company has enjoyed significant organic growth in all divisions. "Our focus for 2007 will be to concentrate on developing our assets to takeadvantage of the significant commercial opportunities that will arise in themedium term. RGFC is well on its way to becoming a significant player in the UKfood sector and we look forward to updating shareholders again at the AGM in May2007." Enquiries to: The Real Good Food Company plc Tel: 020 7234 0570Pieter Totte Non Executive Chairman www.realgoodfoodplc.comJohn Gibson Group Managing DirectorLee Camfield Group Finance Director Redleaf Communications Tel: 020 7822 0200Emma KaneDuncan McCormickSamantha Robbins Shore CapitalClive Black Tel: 0151 600 3701Guy Peters Tel: 020 7468 7912 CHAIRMAN'S STATEMENT Introduction I am pleased to report the Group's Preliminary Results for the twelve months to31 December 2006. This has been a year of consolidation, following the reverseacquisition of Napier Brown Foods ("NBF") in September 2005. Each of themanagement teams in Sugar, Fish, Baking Ingredients and Bakery have beenconcentrating on building a platform for future growth. Overall trading in ourthree largest divisions has met our expectations. The Group achieved a normalised profit (profit before tax, exceptionals andgoodwill amortisation) of £9.5m compared to a normalised trading profit of £7.1mfor the comparable period in 2005. This excellent result came from the full yearcontribution from NBF combined with organic growth in all divisions, improvingmargins, particularly in Bakery Ingredients, and good cost control across theGroup. The divisional highlights are: Sugar Sales increasing steadily throughout the year with improved volumes in retail and special sugars. Fish Increased volumes and good margins at a time of significant raw material inflation. Bakery Ingredients Improved margins and operating efficiency improvements. Bakery Revenues increased by 6% although benefits were more than offset by cost overruns. Strategy Our devolved business unit model has been successfully introduced into BakingIngredients and Sugar. The autonomous management teams here have worked well in2006 and are focussed on meeting the challenges ahead. All of the finance, ITand commercial functions of Napier Brown Foods have been successfullytransferred to Normanton, the Head Office of the Sugar Division, or to Liverpoolfor the Bakery Ingredients Division. Only a small Group Head Office team remainsin St Katharine's Dock, London. Our focus for 2007 will be to concentrate on developing our assets to takeadvantage of the significant commercial opportunities that will arise in themedium term. Current Trading In Sugar, the European Union (EU) market remains competitive with structuralsurpluses overhanging the market. The EU Commission has indicated that quotacuts will be made unless restructuring uptake increases significantly. NBF salesare ahead of last year and slightly ahead of expectations, whilst margins areslightly below last year but in line with plan. Five Star Fish sales are significantly ahead of last year. Raw materialinflation continues in the sector and it is likely that the first half of theyear will again be characterised by work on price increases. Volumes in Bakery Ingredients are in line with last year, albeit in what isseasonally a very quiet period for the business. After a disappointing result in 2006, the Bakery Division has made asatisfactory start to this year. Volumes are ahead of last year and the costreduction programme has given some benefits. Overall, the Board is satisfied with the start to the current financial year,although recent interest rate rises will have an impact on financing costs inthe current year. We look forward to further updating shareholders at the AnnualGeneral Meeting in May 2007. FINANCE DIRECTOR'S REPORT Revenue Group sales were up 113% to £250.8m reflecting the full year contribution fromthe acquired NBF business and organic growth in both the Fish and BakeryDivisions. Strong sales growth was experienced within the Fish and Bakery Divisions up13.7% and 6.2% respectively; the revenue growth within Fish was aided by therecovery (via price increases) of raw material cost increases. Within the SugarDivision proforma sales fell 6% reflecting both the lower price realisations inthe UK market and the reduced sales in Quarter 1 2006. Sales within BakeryIngredients, excluding discontinued nut sales, were up 1.6%. Margins The Group's gross profit margin reduced by six percentage points to 14.1%reflecting the full year effect of the acquired NBF business. Operating margins(before interest, exceptional costs and goodwill amortisation) were alsodiluted, from 7.7% to 5.3%, reflecting the lower average margins within theSugar Division. However, operating margins in the second half improved over thefirst half reflecting the stronger seasonal contribution from the BakeryIngredients Division. Profit Before Tax Profit before tax, exceptional items and goodwill amortisation has increased by35% to £9.5m, reflecting the increased contribution from the acquired NBFbusiness along with the benefits of the Group restructuring programme intodevolved accountability at operating division level. The programme has seen theclosure of the Sugar Division offices in London with activities transferred toour Normanton factory site. Basic earnings per share in the year were 2.6p (2005: 7.2p loss). Exceptional Costs During the year, the Group incurred £1.1m of exceptional costs (2005: £4.3m) dueto the transfer of finance, administration and IT activities for the SugarDivision from London to Normanton and the completion of the closure of the nutplant in Runcorn. This sees the conclusion of the restructuring of the Groupfollowing the acquisition in late 2005 of NBF. Cash Flow and Debt Net debt at the year end was £56.6m, compared to £59.4m at the end of 2005.During the year scheduled loan repayments of £3.5m were made, in addition afurther £0.4m was repaid, being the disposal proceeds for the sale of theremaining Sefcol property. A 53% increase in EBITDA to £15.2m aided the delivery of a strong cash flowduring the year. Funds from operating activities, after exceptional costs,generated £12.4m. Interest payments were significantly up at £4.5m, reflectingthe increased debt position in September 2005, whilst tax payments were £0.7m.Capital expenditure was £2.1m and the sale of the second Sefcol property, asmentioned above, generated some £0.4m, after disposal costs. Cash acquisition costs of £2.5m were incurred during the year, reflecting thefinal payment of £1.0m to the vendors of Five Star Fish, £0.5m relating to thefinal payment for the acquisition of James Budgett Sugars and the final feepayments in relation to the acquisition of NBF last year, leaving total cashgeneration before loan repayments of £3.6m. Pensions A subsidiary of the Group, NBF, operates a defined benefit pension scheme. Thescheme is closed with benefits no longer accruing. The IFRS 17 valuation of thescheme identified a £1,223k deficit as at 31 December 2006, up £72k on theprevious year. During the year the Group contributed £175k to the scheme. OPERATING COMPANY REVIEWS Sugar Division £'000s 2006 2005 12 months 4 monthsTurnover(1) 180,053 61,942Operating Profit(2) 7,373 4,494Operating Profit % 4.1 7.2 (1) Including inter-company trading (2) Normalised operating profit before exceptional items, goodwill amortisationand central costs Napier Brown Foods supplies a range of sugar and dry ingredients to foodmanufacturers and packs sugar for retail grocery and foodservice customers fromits facilities at Normanton, near Leeds. Sales were in line with expectations and ahead of the previous year for the lastfour months of last year. During the course of the year, sales grew consistentlyquarter by quarter after the difficult beginning to 2006. Volumes gained inretail and in special sugars, during the second half, contributed to a muchimproved performance in that period, with operating margins up 1.1% basis pointsin the second half. Increased efficiencies in production have come from thecommissioning of a new Fawema high speed packing line, linked to arobot-controlled palletiser and shrink wrapper. Administration costs have been reduced and communication lines radicallyshortened by the transfer of all finance, IT and administrative staff to thesite at Normanton. In July 2006, the new European Union Sugar Regime commenced and this will see asignificant reduction in price and production in the EU from 2009. The slow paceof reform and subsequent market volatility has affected prices and marginsthroughout Europe. Napier Brown has been impacted but the strategic initiativesundertaken in a number of areas of the business will stand us in good stead forthe future. As a flexible non-refiner, we believe we will be well placed to take advantageof the new supply arrangements and provide our customers with high qualityproducts from a range of sources. Fish Division £'000s 2006 2005 12 months 12 monthsTurnover(1) 29,075 25,561Operating Profit(2) 4,011 3,788Operating Profit % 13.8 14.8 (1) Including inter-company trading (2) Normalised operating profit before exceptional items, goodwill amortisationand central costs Five Star Fish is a leading supplier of added-value, prepared frozen fish to thefoodservice sector. It operates from a modern facility on the outskirts ofGrimsby. Another record year for sales at Five Star Fish saw a 14% increase year on year,half coming from volume growth and half from price increases. The last year hasseen significant raw material inflation and a tightening of supply, soconsiderable effort has been put into recovering these costs in the marketplace.The reduction in operating profit margin should be seen against this background.The factory has had to work hard to cope with a more complex range of rawmaterial supplies. Sales of added-value products continue to increase within the overall mix as themargins on commodity lines erode in the face of increases in raw material costs.Export sales have been particularly strong. Much effort is being put into creating healthy, quality products for the schoolssector, which is changing radically in the light of the "Jamie Oliver effect".Five Star Fish is leading the way with reduced frying time products, Omega 3products and batters that bake rather than fry. Investments in additional frying and battering facilities, along with newcoating technology, were made during the period. These will allow the businessto move even further into added-value coatings, batters and flavourings. During the course of the year, John Fenty, part-time Executive Consultant andformer Chairman of the company, indicated his desire to concentrate on otherbusiness commitments in the area and has subsequently resigned his formalposition. Bakery Ingredients Division £'000s 2006 2005 12 months 4 monthsTurnover(1) 33,183 15,703Operating Profit(2) 3,182 1,639Operating Profit % 9.6 10.4 (1) Including inter-company trading (2) Normalised operating profit before exceptional items, goodwill amortisationand central costs Renshaw supplies a range of high quality food ingredients primarily to thebakery sector, comprising craft bakers and major cake manufacturers and also togrocery retailers. It operates two facilities, one in Liverpool and the other inCarluke, south-east of Glasgow. Sales for the year were in line with expectations and were similar to the priorperiod last year (4 months September to December), after adjusting for thediscontinued nut activity. On a like for like basis, margins improved during theyear as a result of better raw material purchasing and improvements inoperational efficiencies. The introduction of modern manufacturing technologiesand procedures is taking more time to implement than originally envisaged butsubstantial progress has been made during the latter part of 2006 with more tocome in 2007. Customer service improvements and new product / customer development have beenmajor focuses during the year and improvements here will stand the business ingood stead for 2007. Developments into other sectors of the food market, beyondbakery, will be targeted during 2007. During the period, the closure of the Runcorn nut plant was completed and thefreehold site has subsequently been sold for £0.5m. The new senior management team has begun well and has been supplemented byfurther middle management appointments. The team at Renshaw is now capable ofachieving step function change in performance in this business in the years tocome. Bakery Division £'000s 2006 2005 12 months 12 monthsTurnover(1) 17,173 16,196Operating Profit(2) 67 388Operating Profit % 0.4 2.4 (1) Including inter-company trading (2) Normalised operating profit before exceptional items, goodwill amortisationand central costs Haydens Bakeries produces chilled and ambient premium patisserie and dessertproducts to retail grocery customers. It operates from a site in Devizes,Wiltshire. During the period under review, Haydens' profitability deteriorated in spite ofincreased sales, some 6% up on the previous year. This was primarily due to costoverruns in product launches for both new and existing customers, increasedoverheads and a very poor trading performance in the summer. The exceptionallywarm weather gave rise to operational issues at the plant, reduced consumerdemand for bakery products and consequently high wastage levels. Waitrose remains by some way, the largest customer, selling to both the Bakeryand Chilled Prepared Food departments and providing distribution services. Salesto Marks and Spencer have consolidated, while progress has been made servicingtheir In-store Bakeries with fried products. During the year a new frying line was commissioned successfully and a second ison order for delivery in the summer of 2007 to meet increased demand for friedlaminated products. Phil Wicks, who joined the business in September 2005, has resigned to exploreother career opportunities and Stephen Heslop, Managing Director of BakeryIngredients, has been appointed to the newly created position of ManagingDirector, Bakery/Ingredients Division and will become responsible for Devizes'activities as well as Renshaw's activities. A programme of overhead cost reductions commenced at the beginning of January2007 with targeted head count reductions in operations and a review of thesenior management team, particularly in the commercial area. Increased emphasison yield improvements will be sought but with a more disciplined approach thanhas been present in the past. SUMMARY A significant year in the development of The Real Good Food Company plc (RGFC)including: • The successful integration of NBF, a substantial acquisition on the previous year; • Positive outcomes in a volatile sugar market; • Good progress in our three major divisions. RGFC is well on its way to becoming a significant player in the UK food sector. Pieter Totte CHAIRMAN The Real Good Food Company plc THE REAL GOOD FOOD COMPANY PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTYEAR ENDED 31 DECEMBER 2006 Year ended 31 December 2006 Year ended 31 December 2005 £'000s £'000s (As Restated) Before Before Goodwill Goodwill Goodwill Goodwill Amortisation Amortisation Amortisation Amortisation and and and and Exceptional Exceptional Exceptional Exceptional Items Items Total Items Items Total Notes TURNOVER Continuing operations 2 250,810 - 250,810 116,390 - 116,390 Discontinued operations - - - 1,260 - 1,260 250,810 - 250,810 117,650 - 117,650 Cost of sales (215,352) - (215,352) (93,378) - (93,378) GROSS PROFIT 35,458 - 35,458 24,272 - 24,272 Distribution costs (9,143) - (9,143) (6,854) - (6,854) Administration expenses 3 (12,909) (4,682) (17,591) (8,386) (3,148) (11,534) OPERATING PROFIT 13,406 (4,682) 8,724 9,032 (3,148) 5,884 Continuing operations 13,406 (4,682) 8,724 9,372 (3,148) 6,224 Discontinued operations - - - (340) - (340) EXCEPTIONAL ITEMS Reorganisation costs 3 - (1,117) (1,117) - (3,277) (3,277) Loss on termination of an 3 - - - - (1,025) (1,025) operation PROFIT/(LOSS) ON ORDINARY 13,406 (5,799) 7,607 9,032 (7,450) 1,582ACTIVITIES BEFORE INTEREST &TAXATION Interest receivable 300 - 300 209 - 209 Interest payable (4,544) - (4,544) (2,174) - (2,152)Other finance income 372 372 - PROFIT/(LOSS) ON ORDINARY 9,534 (5,799) 3,735 7,067 (7,450) (383)ACTIVITIES BEFORE TAXATION Taxation 4 (2,026) - (2,026) (1,871) - (1,871) PROFIT/(LOSS) FOR THE FINANCIALYEAR 7,508 (5,799) 1,709 5,196 (7,450) (2,254) Basic earnings per share (pence) 11.6 - 2.6 16.9 - (7.2)Diluted earnings per share (pence) 11.6 - 2.6 16.0 - n/a THE REAL GOOD FOOD COMPANY PLCCONSOLIDATED BALANCE SHEET31 DECEMBER 2006 2006 2005 £'000s £'000sFIXED ASSETS (As Restated)Intangible assets:-Negative goodwill (387) (410)Positive goodwill 86,218 89,134Net goodwill 85,831 88,274 Tangible fixed assets 18,754 18,451 104,585 107,175 CURRENT ASSETSStock 14,685 14,390Deferred tax asset - 253Debtors 29,224 29,828Cash at bank and in hand 12,412 11,999 56,321 56,470 CREDITORS:Amounts falling due within one year (31,449) (34,748) NET CURRENT ASSETS 24,872 21,722 TOTAL ASSETS LESS CURRENT LIABILITIES 129,457 128,897 CREDITORS:Amounts falling due after more than one year (58,952) (60,413) PROVISIONS FOR LIABILITIESDeferred tax (826) -Other provisions (596) (746) NET ASSETS EXCLUDING PENSION DEFICIT 69,083 67,738 PENSION SCHEME DEFICIT (856) (806) NET ASSETS INCLUDING PENSION DEFICIT 68,227 66,932 CAPITAL AND RESERVESCalled up share capital 1,297 1,297Share premium account 68,773 68,773Other reserves 53 34Profit and loss account (1,896) (3,172) SHAREHOLDERS FUNDS - ALL EQUITY 68,227 66,932 THE REAL GOOD FOOD COMPANY PLCCONSOLIDATED CASH FLOW STATEMENTYEAR ENDED 31 DECEMBER 2006 Notes 2006 2005 £'000s £'000s Net cash inflow fromoperating activities 5 12,438 4,468 Returns on investment and servicing of financeInterest received 300 209Interest element of finance lease repayments (48) (29)Interest paid on bank loans, overdrafts and loan stock (4,496) (2,145)Net cash outflow from returns on investmentsand servicing of finance (4,243) (1,965) Taxation paid (660) (482) Capital expenditurePurchase of tangible fixed assets (1,928) (1,172)Sale of tangible fixed assets 630 2,059 (1,298) 887 Acquisitions and disposals (2,489) (54,849) Net cash inflow/(outflow) before use ofliquid resources and financing 3,597 (51,941) Financing (4,169) 62,229 (Decrease)/Increase in cash 5 (422) 10,288 THE REAL GOOD FOOD COMPANY PLCNOTES TO THE FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2006 1. BASIS OF PREPARATION The financial statements have been prepared in accordance with applicableaccounting standards under the historical cost convention. 2. TURNOVER A geographical analysis of turnover is given below: Year ended Year ended 31 December 31 December 2006 2005 £'000s £'000s United Kingdom 244,434 114,861Europe 4,750 2,304Rest of the World 1,626 485 250,810 117,650 3. GOODWILL AMORTISATION AND EXCEPTIONAL ITEMS Year ended Year ended 31 December 31 December 2006 2005 £'000s £'000sExceptional costs*: -Reorganisation costs 1,117 3,277Loss on termination of an operation - 1,025 1,117 4,302Other exceptional costs and amortisation:-Amortisation 4,682 2,874Abortive acquisitions** - 274 4,682 3,148 * During the year the Company incurred costs in respect of reorganisation costs.In accordance with FRS 3 'Reporting Financial Performance' these have beenclassified as exceptional items after the operating loss and before interest.These costs were allowed for taxation purposes which resulted in a reduction ofthe overall tax charge of £0.3m. ** These costs related to an aborted acquisition and due to their size andnature are considered by the Directors to be exceptional. However, they do notfall into the category of exceptional items, as defined by FRS 3 'ReportingFinancial Performance', which must be shown separately in the face of the profitand loss account. These costs were therefore included within administrationcosts. THE REAL GOOD FOOD COMPANY PLCNOTES TO THE FINANCIAL STATEMENTS (continued)YEAR ENDED 31 DECEMBER 2006 4. TAXATION Year ended Year ended 31 December 31 December 2006 2005 £'000s £'000sAnalysis of tax charge for the yearCurrent tax (see note below)UK Corporation tax at 30% 1,588 16Adjustments in respect of prior periods (409) 94 1,179 110 Deferred TaxDeferred Tax on Pension Scheme Liability 164 -Origination and reversal of timing differences 683 1,761 UK corporation tax charge on profits of the year 2,026 1,871 Factors affecting tax charge for the year: The tax assessed for the year is higher than the standard rate of corporationtax in the UK (30%). The differences are explained below:- Year ended Year ended 31 December 31 December 2006 2005 £'000s £'000s (As Restated) Profit/(Loss) on ordinary activities before tax 3,735 (383) Profit/(Loss) on ordinary activities multiplied by standardrate of corporation tax in the UK of 30% (2005 - 30%) 1,121 (110) Effects of:Expenses not deductible for tax purposes 1,151 329Ineligible depreciation - 3Profit/(Loss) on disposal of ineligible assets (12) 57Differences in fixed assets transfer value - (168)Capital allowances for the year (in excess)/less than depreciation (288) 367Income not taxable (10) -FRS 17 income adjustments not taxable (164) -Additional deduction for R&D expenditure (14) (17)Other short term timing differences (181) (6)Marginal relief (11) (55)Adjustments to tax in respect of prior periods (409) 93Utilisation of tax losses and other deductions (4) (383) Current tax charge for the year 1,179 110 THE REAL GOOD FOOD COMPANY PLCNOTES TO THE FINANCIAL STATEMENTS (continued)YEAR ENDED 31 DECEMBER 2006 5. RECONCILIATION OF OPERATING PROFIT TO NET CASHFLOW FROM OPERATING ACTIVITIES 2006 2005 £'000s £'000s Operating profit 8,724 5,901Amortisation of goodwill 4,682 2,874Depreciation 1,818 1,164(Profit)/Loss on disposal of fixed assets (175) 475Exceptional items (1,384) (4,302)Movement in working capital:Increase in stocks (296) (157)(Increase)/Decrease in debtors (284) 3,215Decrease in creditors (647) (4,702) Net cash inflow from operating activities 12,438 4,468 6. RECONCILIATION OF NET CASHFLOW TO NET DEBT 2006 2005 £'000s £'000s (Decrease)/Increase in cash during the year (422) 10,288Cash flow from movement in liquid funds 4,169 (57,522) Change in net debt arising from cash flow 3,747 (47,234)Other loan notes & finance leases acquired with subsidiary - (2,774)New finance leases (943) (375) Movement in net debt in the year 2,804 (50,383) Net debt brought forward (59,390) (9,007) Net debt at end of year (56,586) (59,390) 7. ANALYSIS OF NET DEBT At 1 January 2006 Cash Flow Non-cash movements At 31 December 2006 £'000s £'000s £'000s £'000s Cash at bank and in hand 11,999 413 - 12,412Overdraft (4,652) (835) - (5,487) 7,347 (422) - 6,925 Bank loan (63,535) 3,890 - (59,645)Loan notes (2,774) - - (2,774)Hire purchase (428) 279 (943) (1,092) (59,390) 3,747 (943) (56,586) THE REAL GOOD FOOD COMPANY PLCNOTES TO THE FINANCIAL STATEMENTS (continued)YEAR ENDED 31 DECEMBER 2006 8. DIVISIONAL INFORMATION Operating Divisions Sugar Fish Bakery Bakery Head Consolidation Total Ingredients Office adjustments Turnover 180,053 29,075 33,183 17,173 - (8,674) 250,810 Cost of sales (162,045) (22,975) (25,558) (13,443) - 8,669 (215,352) Gross Margin 18,008 6,100 7,625 3,730 - (5) 35,458 Distribution costs (6,389) (785) (1,640) (329) - - (9,143) Administration costs (4,246) (1,304) (2,803) (3,334) (1,296) 74 (12,909) Normalised Profit/(loss) 7,373 4,011 3,182 67 (1,296) 69 13,406 Goodwill amortisation (4,682) Exceptional costs (1,117) Earnings before interest 7,607 & tax Interest (3,872) Tax (2,026) Profit after tax 1,709 9. DISTRIBUTION OF THE ANNUAL REPORT AND ACCOUNTS TO SHAREHOLDERS The announcement set out above does not constitute a full financial statement ofthe company's affairs for the year ended 31 December 2006. The Company'sauditors have reported on the full accounts of the said years and haveaccompanied them with an unqualified report. The accounts have yet to bedelivered to the Registrar of Companies. This annual report and accounts will be posted to all shareholders of theCompany, and will be available on our web site www.realgoodfoodplc.com and forinspection by the public at the registered office of the Company during normalbusiness hours on any weekday. Further copies will be available on request fromThe Real Good Food Company plc, International House, 1 St Katharine's Way,London E1W 1XB. This information is provided by RNS The company news service from the London Stock Exchange