RGD.L Regulatory News (RGD)

20 Sep 2007 07:01

Real Good Food Company Plc (The)20 September 2007 Date: 20th September 2007On behalf of: The Real Good Food Company plc ('the Company' or 'RGFC')Embargoed: 0700hrs The Real Good Food Company PlcInterim Results 2007 The Real Good Food Company (AIM: RGD), the food group servicing high end nichemarkets, today announces its interim results for the year ended 30 June 2007. Highlights of the six months ended 30th June 2007 > Total group sales increased by over 12% to £127.8m (2006: £113.4m), > Operating Profit before taxation and significant items of £4.4m (2006: £4.6m) was broadly in line with the previous year, > The sale of Five Star Fish was completed on the 12th June for an initial consideration of £35m, > Earnings per share of 4.8p (2006:0.7p) benefited from the profit on disposal of Five Star Fish > Hayden's Bakeries' sales grew by 8% in the period aided by new product launches into Waitrose > Underlying adjusted EPS was 0.4p (2006: 0.1p loss) > Net debt levels have reduced by £33.9m to £25.3m. Commenting on the results, Pieter Totte, Chairman of The Real Good Food, said: "Strong progress has been made on a number of fronts for the Group. The firsthalf of the year to June 2007 has seen a significant transformation for theGroup. One of the key factors in our progress has been our decision to sell theFive Star Fish division and to focus on the Group's core high end niche markets.This is where our expertise, consistent quality and service levels can add mostvalue to our customer base. "As we continue to advance into a more specialised Group, our focus for theremaining financial year will be to concentrate on developing our assets totheir maximum potential and to exploit all commercial opportunities. We arepleased with the beginning to the current financial year, albeit with a slowstart for our Renshaw division, and we are confident that the Group is welladvanced to manage the European Commission's Sugar Regime changes. We lookforward to the coming year with enthusiasm." A briefing for analysts will be held at 10:30hrs today at the City ConferenceCentre, 80 Coleman Street, London, EC2R 5BJ. Enquiries to: The Real Good Food Company plc Tel: 020 7335 2500Stephen Heslop www.realgoodfoodplc.co.uk ---------------------------- Redleaf Communications Tel: 020 7822 0200Emma Kane/Adam Leviton/Anna Dunkin al@redleafpr.com ------------------- • Publication quality photos are available from Redleaf Communications THE REAL GOOD FOOD COMPANY PLC CHAIRMAN'S STATEMENT INTERIM 6 MONTH PERIOD ENDED 30 JUNE 2007 INTRODUCTION I am pleased to report the Company's Interim results for the six months to 30June 2007. The key headlines include: • Total group sales increased by over 12% to £127.8m (2006: £113.4m), • Operating profit before taxation and significant items of £4.4m (2006: £4.6m) was broadly in line with the previous year • The sale of Five Star Fish was completed on the 12th June for an initial consideration of £35m • Earnings per share of 4.8p (2006:0.7p) benefited from the profit on disposal of Five Star Fish • Underlying adjusted EPS was 0.4p (2006: 0.1p loss) • Net debt levels have been significantly reduced by £33.9m to £25.3m The period under review is the first published results of the Group preparedunder International Financial Reporting Standards (IFRS). Reconciliations of UKGAAP to IFRS are included as an appendix to the interim report along withcomparative years. During the period, the Group successfully disposed of its fish subsidiary, FiveStar Fish, for £35m, with the disposal proceeds being used to reduce net debt. The limited take up of the European Commission's restructuring scheme and theconsequent enforced quota cuts have exacerbated the continuing uncertaintywithin the Sugar sector. Despite this, the Group is well advanced in its plansto manage the opportunity generated in the longer term from the Regime changes. Despite a quieter start than anticipated to the trading year, within bakingingredients the operational capability of the business is much enhancedpresenting a robust platform going into the traditionally busy Christmas period. Group now more focused upon remaining divisions with significantly reducedgearing levels. FINANCIAL INFORMATION SUMMARY The Group's profit and loss account summary for the six-month period ended 30June 2007 is detailed below: £'000s Continuing Discontinued Total 6 months ended Total 6 months ended Operations operations 30th June 2007 30th June 2006 Turnover 112,835 14,962 127,797 113,372 Gross Profit 13,673 2,619 16,292 15,554 --------- ---------- --------- ---------NormalisedProfit /(loss) 2,255 2,158 4,413 4,644 ========= ========== --------- --------- Significantitems (489) (753)Profit onSale ofSubsidiary 8,300 - --------- ---------Earningsbeforeinterest & Tax 12,224 3,891 --------- --------- Interest (2,045) (1,991) Tax (7,086) (1,465) --------- ---------Profit after Tax 3,093 435 ========= ========= THE REAL GOOD FOOD COMPANY PLC CHAIRMAN'S STATEMENT INTERIM 6 MONTH PERIOD ENDED 30 JUNE 2007 SUGAR DIVISION --------------------------------------------------------------------------------£'000s 2007 2006 Six Months Six Months-------------------------------------------------------------------------------- Sales 95,022 81,083Operating Profit* 2,865 2,814 *Normalised profit before significant items, interest and central costs The division supplies a range of sugar and dry ingredients to food manufacturersas well as packing sugar for retail grocery and food service customers,primarily from its site at Normanton near Leeds. The limited take up of the European Commission's restructuring scheme and theconsequent enforced quota cuts have exacerbated the continuing uncertaintywithin the Sugar sector. Despite this, the Group is well advanced in its plansto manage the opportunity generated in the longer term from the Regime changes. Despite the market place remaining competitive, Napier Brown has maintained andin some areas improved its position in key sectors and with major customers.Sales were well ahead of the same period last year, reflecting additionalvolumes in both the bulk and retail sectors, although lower margin bulk saleshave been the key growth driver. Resultant distribution costs have increased dueto the higher level of activity, however profitability is ahead of the sameperiod last year, albeit marginally. The business continues to evaluateopportunities to enhance its value added proposition going into 2008. BAKING INGREDIENTS --------------------------------------------------------------------------------£'000s 2007 2006 Six Months Six Months-------------------------------------------------------------------------------- Sales 12,358 13,767Operating Profit* 115 648 * Normalised profit before significant items, interest and central costs Renshaw supplies a range of high quality food ingredients, primarily to thebaking sector, comprising major cake manufacturers, grocery retailers, wholesaledistribution and craft bakers. It operates from two facilities, one in Liverpooland the other in Carluke, south east of Glasgow. Sales have been slower than anticipated in the first half of the year and aredown slightly on last year after adjusting for the discontinued nut productionactivity (2006: £0.9m) and a non recurring sales income relating to a supplyagreement. This has given rise to the reduction in profitability in the period. Operating efficiencies are continuing to improve and the benefits of this willbe seen in the second half as volumes increase. Service levels and stockplanning remain the priority to ensure that a strong platform is in place forthe key Christmas trading period of the business and beyond. BAKERY DIVISION --------------------------------------------------------------------------------£'000s 2007 2006 Six Months Six Months-------------------------------------------------------------------------------- Sales 8,889 8,234Operating Profit* 58 33 * Normalised profit before significant items, interest and central costs THE REAL GOOD FOOD COMPANY PLC CHAIRMAN'S STATEMENT INTERIM 6 MONTH PERIOD ENDED 30 JUNE 2007 -------------------------------------------------------------------------------- Hayden's Bakeries produces chilled and ambient premium patisseries and dessertproducts for retail grocery customers whilst Seriously Scrumptious suppliessimilar products to foodservice customers from our factory in Devizes,Wiltshire. Sales grew by 8% in the period, aided by new product launches into Waitrose. Thenew senior management team, put in place in May 2007, is addressing the keyissue of material cost control and new product development processes. Labourcost control continues to improve and reductions in overhead costs have beensuccessfully implemented. New capacity in frying came on stream in August andthis is expected to both reduce costs and provide opportunities for growth. FISH DIVISION - Discontinued --------------------------------------------------------------------------------£'000s 2007 2006 23 weeks 26 weeks-------------------------------------------------------------------------------- Sales 14,962 14,024Operating Profit* 2,158 1,821 * Normalised profit before significant items, interest and central costs The sale of Five Star Fish was completed on 12 June 2007 for a grossconsideration of £35m. Tax charges on the disposal are estimated at £6.6m. Atthe time of the disposal, sales were ahead of last year, due to the combinationof raw material price inflation being passed on in price increases to customersand improvements in sales volumes. SIGNIFICANT ITEMS During the period under review, as already mentioned the Group disposed of ourfish division, Five Star Fish. The disposal process was completed on the 12thJune. Changes £'mDisposal Proceeds 35.0Net assets w/o (10.5)Goodwill assets w/o (15.5)Costs (0.7) ------Pre Tax Profit on disposal 8.3 ====== Tax* (6.6) -------Net profit on disposal 1.7 \* Tax charge on disposal is shown within the tax line in the profit and lossaccount. The charge reflects the profit incurred on disposal before Goodwillamortisation write-off, which is not allowable as a tax deduction item. Other significant items in the period relate to costs associated with therestructuring of the plc board at and consequential restructuring of a number ofthe operating division Executive teams CASHFLOW AND DEBT Cashflow from operating activities before working capital and significant itemswas £5.4m. Working capital investment in the period was driven by increases instock levels since the year end. Within Bakery Ingredients, stocks haveincreased by £1.1m due to the start of the seasonal stock build for the busyChristmas trading period, whilst higher levels of imported sugar and higherdiary prices have combined to leave the Sugar Division's stocks £1.7m higher.Stock values within Five Star Fish increased by £1.6m due to the combinedeffects of raw material price inflation and higher stock levels associated withincreased trading activity. Net interest costs amounted to £2.1m, whilst tax paid in the period was £0.6m. The sale of Five Star Fish realised £34.3m in the period, with a further £0.7mheld in ESCROW until quarter 1 2008. The profit on disposal has generated a£6.6m tax charge which will be paid over the next 10 months. The Group's bank loans were reduced by £23.5m funded by the disposal proceeds.Net debt levels reduced by £33.9m to £25.3m CURRENT TRADING As expected our sales growth momentum within the Sugar Division is currentlyslower, reflecting comparatives, than in the first half. Margin performance asreported in the first half continues into the second half. At Bakery Ingredients the underlying sales trend has marginally improved againstthe second half and the comparative period last year. However, as planned,investment in the overhead base of the business has left operating profitslightly down in this period versus last year. In the Bakery Division sales growth continues, up 5%. Raw material priceinflation, particularly within the wheat and dairy categories, has held back theimprovement in margins, although these are ahead of the comparative period lastyear. The sales profile of the Group is skewed towards the last quarter of the yearand the critical Christmas trading period. As the Group enters this period itdoes so with a more robust operational platform across all of its Divisions anda stronger balance sheet. THE REAL GOOD FOOD COMPANY PLC CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDING 30th JUNE 2007 (UNAUDITED) Notes Period ended 30th June 2007 Period Ended 30th June 2006 (As re-stated) Before Significant Total Before Significant Total Significant Items Significant Items Items Items £'000s £'000s £'000s £'000s £'000s £'000sCONTINUINGOPERATIONS TURNOVER 112,835 - 112,835 99,348 - 99,348Cost of sales 99,162 - 99,162 86,688 144 86,832 -------- -------- -------- -------- -------- --------GROSS PROFIT 13,673 13,673 12,660 (144) 12,516Distributioncosts 5,165 5,165 3,564 3,564Administrationexpenses 6,253 489 6,742 6,251 609 6,860 -------- -------- -------- -------- -------- --------OPERATINGPROFIT 2,255 (489) 1,766 2,845 (753) 2,092 Finance Income 180 - 180 128 - 128Finance Costs 2,220 - 2,220 2,227 - 2,227Net PensionFinance Income 90 - 90 199 - 199 -------- -------- -------- -------- -------- --------PROFIT/(LOSS)BeforeTaxation 305 (489) (184) 945 (753) 192 Taxation 66 - 66 1,014 - 1,014 -------- -------- -------- -------- -------- --------PROFIT/(LOSS)FROMCONTINUINGOPERATIONS 239 (489) (250) (69) (753) (822) ======== ======== ======== ======== ======== ========DISCONTINUEDOPERATIONSTURNOVER 14,962 - 14,962 14,024 - 14,024OperatingExpenses 12,804 - 12,804 12,225 - 12,225 -------- -------- -------- -------- -------- --------OPERATINGPROFIT 2,158 2,158 1,799 1,799 Finance Costs 95 - 95 91 - 91Profit on Saleof Subsidiary - 8,300 8,300 - - -Taxation 439 6,581 7,020 451 - 451 PROFIT/(LOSS)FROMDISCONTINUEDOPERATIONS 1,624 1,719 3,343 1,257 - 1,257 ======== ======== ======== ======== ======== ========PROFIT/(LOSS)FOR THE PERIOD 1,863 1,230 3,093 1,188 (753) 435 ======== ======== ======== ======== ======== ========Basic Profitper share 5 2.9 4.8 1.8 0.7Diluted Profitper share 5 2.9 4.7 1.8 0.7 THE REAL GOOD FOOD COMPANY PLC CONSOLIDATED BALANCE SHEET 30TH JUNE 2007 (UNAUDITED) GROUP BALANCE SHEETAs at 30th June 2007 30th June 2007 30th June 2006 31st Dec 2006 (re-stated) (re-stated) £'000s £'000s £'000sASSETSNon Current AssetsGoodwill 75,794 88,854 90,612Intangibles 548 370 532Property, Plant & Equipment 15,841 17,843 18,186 92,183 107,067 109,330 -------- -------- --------Current AssetsInventory 11,396 15,226 14,685Trade & Other Receivables 27,144 28,184 29,224Financial Instruments atfair value 123 30 63Cash and cash equivalents 23,333 8,987 12,412 -------- -------- -------- 61,996 52,427 56,384 -------- -------- --------Non Current Assets held for sale 487 -------- -------- --------Total Assets 154,179 159,981 165,714 -------- -------- --------LIABILITIESCurrent LiabilitiesBorrowings 17,161 9,013 10,234Trade and Other Payables 20,254 22,658 20,605Financial Instruments atfair value 12 7 19Corporation Tax 7,410 (402) 629 -------- -------- -------- 44,837 31,276 31,487 -------- -------- --------Non current LiabilitiesBorrowings 31,482 59,529 58,992Deferred Tax 844 795 1,124Provisions 470 671 596Pension Scheme Deficit - 36 856 -------- -------- -------- 32,796 61,031 61,568 ======== ======== ========Total Assets LessLiabilities 76,546 67,674 72,659 ======== ======== ======== SHAREHOLDERS' EQUITYCalled up share capital 1,300 1,297 1,297Share premium account 68,870 68,773 68,773Other Reserves 68 44 53Profit and loss account 6,308 (2,440) 2,536 -------- -------- -------- EQUITY SHAREHOLDERS' FUNDS 76,546 67,674 72,659 ======== ======== ======== THE REAL GOOD FOOD COMPANY PLC STATEMENT OF CHANGES IN EQUITY FOR THE SIXTH MONTHS ENDING 30th JUNE 2007 (UNAUDITED) IFRS 2 Issued Share Share Share Premium Option Retained Capital Account reserve Earnings Total £'000s £'000s £'000s £'000s £'000s Balance at 1stJanuary 2006 1,297 68,773 34 (3,359) 66,745 Shares to beissued -Options - - 10 - 10 Profit for theperiod - - - 435 435 Pension schemesurplus forperiod - - - 484 484 -------- -------- -------- -------- --------Balances as at30th June 2006 1,297 68,773 44 (2,440) 67,674 -------- -------- -------- -------- -------- Balance at 1stJanuary 2007 1,297 68,773 53 2,536 72,659 Shares to Beissued -Options - - 15 - 15 Optionsexercise inperiod 3 97 - - 100 Profit forPeriod - - - 3,093 3,093 Pension Schemesurplus forperiod - - - 679 679 -------- -------- -------- -------- --------Balances as at30th June 2007 1,300 68,870 68 6,308 76,546 ======== ======== ======== ======== ======== THE REAL GOOD FOOD COMPANY PLC CASH FLOW STATEMENT FOR THE SIXTH MONTHS ENDING 30th JUNE 2007 (UNAUDITIED) 6 months to 6 months to 30th June 2007 30th June 2006 £'000s £'000sCash Flows from Operating ActivitiesOperating Profit before significant items 4,413 4,644Depreciation 997 916Significant Items (95) (255)(Profit)/loss on Disposal of non current assets - 27IAS Adjustable 23 10 Changes in Working Capital(Increase)/Decrease in Inventory (4,214) (836)(Increase)/Decrease in trade & otherreceivables (2,386) 711Increase/(Decrease) in trade payable 2,927 580 -------- --------Cash Generated from Operating Activities 1,665 5,797 Interest Paid (2,250) (1452)Interest Received 180 128Interest on finance lease repayments (42) (22)Income taxes paid (584) (359) -------- --------Net Cash from Operating Activities (1031) 4,092 Cash Flows from Investing ActivitiesPurchase of property, plant & equipment (1,435) (1,148)Purchase of Intangibles (70) -Net Proceeds from sale of subsidiary 33,974 (1,912)Receipts from sales of non current assets - 137Contributions to Pension Fund (87) (88)Hire Purchase Payments (346) (151) -------- --------Net Cash outflow from Investing Activities 32,036 (3,162) -------- --------Cash Inflow/(Outflow) before FinancingActivities 31,005 930 Cash Flows From Financing ActivitiesShare Options Exercised 100 - Borrowing Repayments (23,476) (1,600) -------- --------Net Cash Used by Financing Activities (23,376) (1,600) -------- --------Net Increase/(Decrease) in Cash and CashEquivalents 7,629 (670) Opening Cash and Cash Equivalents 6,925 7,347 -------- --------Cash and Cash Equivalents at end of period 14,554 6,677 ======== ======== THE REAL GOOD FOOD COMPANY PLC NOTES TO THE INTERIM RESULTS 1. GENERAL INFORMATION The Real Good Food Company PLC is a public limited company ("company")incorporated in the United Kingdom under the companies act 1985 (registrationnumber 4666282). The Company is domiciled in the United Kingdom and it'sregistered address is International House, 1 St Katherine's Way, London, E1W1XB. The Company's shares are traded on the Alternative Investment Market("AIM"). The principal activities of Group are the sourcing, manufacture, marketing anddistribution of food and industrial ingredients. Copies of the interim report are being sent to shareholders. Further copies ofthe interim report and Annual Report and Accounts may be obtained from theaddress above. 2. BASIS OF PREPERATION Real Good Food Plc has adopted International Financial Reporting Standards(IFRS) with effect from 1st January 2006. The group will apply IFRS in itsconsolidated financial statements for the year ending December 2007. Thereforethese interim statements are the group's first financial statements prepared inaccordance with IFRS. The financial information set out in this document does not comprise of thestatutory accounts of the Company within the meaning of section 240(5) of theCompanies Act 1985. A detailed explanation of the impact of the transition from UK GAAP to IFRS iscontained in appendix to this interim report. THE REAL GOOD FOOD COMPANY PLC NOTES TO THE INTERIM RESULTS 3. SEGMENT ANALYSIS The group has adopted IFRS 8 - Operating Segments in advance of its effectivedate, with effect from 1st January 2007. IFRS 8 requires that operating segmentsbe identified on the basis of internal reporting and decision-making. This is inline with the previous Divisional reporting which the group previously publishedand therefore the information is consistent with that of previous financialstatements. The following table shows the Group's revenue and results for the periods underreview analysed by operating segment. Segment profit represents the tradingprofit after depreciation but before any interest and significant items. Sugar Bakery Bakery Head Office Total Fish Total Group Ingredients and Consolidation Adjustments Turnover-External 91,687 12,259 8,889 - 112,835 14,962 127,797Turnover-Internal 3,335 99 - (3,434) - - - -------- -------- -------- -------- -------- -------- --------Total Revenue 95,022 12,358 8,889 (3,434) 112,835 14,962 127,797 ======== ======== ======== ======== ======== ======== ======== -------- -------- -------- -------- -------- -------- --------Operating Profit 2,865 115 58 (783) 2,255 2,158 4,413 ======== ======== ======== ======== ======== ======== ========SignificantItems (489)Profit on Sale of Subsidiary 8,300 --------Earningsbeforeinterestand Tax 12,224 Interest (2,135)Net FinanceIncome 90Tax (7,086) Profit --------after Tax 3,093 ======== Sugar Bakery Bakery Head Office Total Fish Total Group Ingredients and Consolidation Adjustments Net Assets 54,513 22,551 2,944 23,566 103,574 (1,724) 101,850 ======== ======== ======== ======== ======== ======== Net Debt (25,304) --------Group NetAssets 76,546 ======== The Group operates a central treasury function, finance costs cannot bemeaningfully allocated to individual operating divisions. Therefore segmentprofit represents trading profit after depreciation, but before any interestcosts and significant items. The Group does not recharge any central costs tothe Operating divisions THE REAL GOOD FOOD COMPANY PLC NOTES TO THE INTERIM RESULTS 4. CASH AND CASH EQUIVALENTS Cash and cash equivalents, for the purposes of the cash flow statement,comprises cash in hand and at the bank, any deposits repayable on demand, lessany bank overdrafts. An analysis of the figures is as follows: 30th June 2007 30th June 2006 £'000s £'000s Cash in Hand and at Bank 23,333 8,987Bank Overdrafts (8,779) (2,310) -------- --------Net Cash and Cash Equivalents 14,554 6,677 ======== ======== 5. EARNINGS PER ORDINARY SHARE Earnings per share is calculated on the basis of profit for the year after tax,divided by the weighted average number of shares in issue for 2007 of 65,014,348(2006: 64,866,749). Diluted (loss)/earnings per share is calculated by adjusting the weightedaverage number of ordinary shares outstanding to assume conversion of allpotential dilutive ordinary shares. Potential dilutive ordinary shares arisefrom share options and warrants. For these, a calculation is performed todetermine the number of shares that could have been acquired at fair value(determined as the average annual market share price of the Company's shares)based on the monetary value of the exercise price attached to outstanding shareoptions. Thus the dilutive weighted average number of shares considers thenumber of shares that would have been issued assuming the exercise of the shareoptions. An adjusted earnings per share and a diluted adjusted earnings per share, whichexclude exceptional items and goodwill amortisation, has also been calculated asin the opinion of the Board this allow shareholders to gain a clearerunderstanding of the trading performance of the Group. 2007 2006 Earnings Weighted Per Earnings Weighted Per share £'000s Average No. share £'000s Average No. amount of shares amount of shares pence penceEarningsattributableto ordinaryshareholders 3,093 65,014,348 4.8 435 64,866,749 0.7 Amortisation of Goodwill - - - - - - Significantitems (1,230) - - 753 - - ------- -------- ------- ------- --------- --------AdjustedEarnings pershare 1,863 65,014,348 2.9 1,188 64,866,749 1.8 Dilutiveeffect ofoptions - 243,782 - - 113,816 -Dilutiveeffect ofwarrants - 105,776 - - 33,972 - ------- -------- ------- ------- --------- -------- Dilutedearnings pershare 3,093 65,363,906 4.7 435 65,014,537 0.7 ------- -------- ------- ------- --------- -------- Dilutedadjustedearnings pershare 1,863 65,363,906 2.9 1,188 65,014,537 1.8 ------- -------- ------- ------- --------- -------- THE REAL GOOD FOOD COMPANY PLC NOTES TO THE INTERIM RESULTS-------------------------------------------------------------------------------- 6. DIVIDENDS No dividend is proposed for the six months ended 30th June 2007. 7. TAXATION The charge for taxation is based on the results for the period and takes intoaccount taxation deferred because of timing differences between the treatment ofcertain items for taxation and accounting purposes. Provision is made in full for taxation deferred in respect of timing differencesthat have originated but not reversed by the balance sheet date, except forgains on disposal of fixed assets which will be rolled over into replacementassets. No provision is made for taxation on permanent differences. Deferred taxis not discounted. Deferred tax assets are recognised to the extent that it is more likely than notthat they will be recovered. THE REAL GOOD FOOD COMPANY PLC NOTES TO THE INTERIM RESULTS 8. PENSION ARRANGEMENTS A subsidiary of the Group, Napier Brown Foods Limited operates a defined benefitpension scheme, The Napier Brown retirement Benefits scheme. The assets of thescheme are held separately from those of the Group in an independentlyadministered fund. The contributions made by the employer over the six-monthperiod have been £87,500. Following completion of the scheme's tri-annualvaluation as at April 2006, completed in June, the company's annualcontributions have been reduced from £175,000 to £97,740. Assumptions The assets of the scheme have been taken at market value and the liabilitieshave been calculated using the following principal actuarial assumptions: -------------------------------------------------------------------------------- 30 June 2007 31 December 2006 % per annum % per annum--------------------------------------------------------------------------------Rate of increase in pensions in payment 3.30 3.25Discount rate 5.90 5.20Inflation assumption 3.30 3.25Revaluation rate for deferred pensions 3.30 3.25 The fair value of the assets in the scheme, the present value of the liabilitiesin the scheme and the expected rate of return at each balance sheet date were: -------------------------------------------------------------------------------- 30 June 2007 31 December 2006 % %--------------------------------------------------------------------------------Equities 7.50 7.50Bonds 5.00 5.00Property 6.00 6.00Cash 4.50 4.50 -------------------------------------------------------------------------------- 30 June 2007 31 December 2006 £'000s £'000s--------------------------------------------------------------------------------Total fair value of assets 17,315 16,585Present value of scheme liabilities (15,978) (17,808) ----------------------------------Surplus/(Deficit) in the scheme 1,337 (1,223)Related deferred tax asset (401) 367 ----------------------------------Net Surplus/(Deficit) 936 (856)-------------------------------------------------------------------------------- The scheme is a closed scheme and therefore under the projected unit method thecurrent service cost would be expected to increase as the members of the schemeapproach retirement. As the scheme is closed and benefits are no longer accruing to members, thesurplus is unrecoverable by the company, and as such the surplus of £936k is notreflected in the Group balance sheet. THE REAL GOOD FOOD COMPANY PLC APPENDIX TO THE INTERIM RESULTS Reporting Under International Financing Reporting Standards This interim report is the first report to be prepared under IFRS. The Group'sdate of transition is 1st January 2006, therefore the opening balance sheet forIFRS purposes is that reported at 31st December 2005 as amended for changes dueto IFRS. The comparative figures have been prepared on the same basis and havetherefore been restated from those previously prepared under UK GAAP. Notesbelow explain the effect of converting from UK GAAP to IFRS in these accounts. To show the impact of adopting IFRS, reconciliation schedules have been includedin this appendix as follows: - 1. Reconciliation of Group Balance Sheet as at 31st December 2005 UK GAAP to IFRS 2. Reconciliation of Group Balance Sheet as at 30th June 2006 UK GAAP to IFRS 3. Reconciliation of Group Balance Sheet as at 31st December 2006 UK GAAP to IFRS 4. Reconciliation of Group Income Statement for six months ending 30th June 2006 The transition of UK GAAP to IFRS does not affect the cash flows generated bythe Group. There is therefore no reconciliation statement required for itsimpact on cash flows. Goodwill and business combinations The Group has taken exemption not to apply IFRS 3 retrospectively to businesscombinations occurring prior to the date of transition to IFRS. Goodwill arisingon acquisitions has been retained at its carrying value as at 1st January 2006,with the exception of the negative Goodwill in the Bakery Division which hasbeen written back to the Income statement, and these values are subject toannual revaluations. Goodwill amortisation is no longer allowed under IAS 36,which has resulted in this charge being reversed in these accounts. Intangible Assets The Group has applied IAS 38 'Intangible Assets' and reclassified computersoftware from Tangible to Intangible assets. Derived Financial Instruments The Group uses forward currency contracts in order to reduce its exposure tocurrency fluctuations, due to exchange rate movements in its dealings with bothcustomers and suppliers. The Group has applied IAS 39 Financial Instruments:Recognition and Measurement, and valued these instruments at their fair value ateach balance sheet date, taking any gain or loss to the income statement. The Group also has a number of interest rate swap contracts; these have alsobeen valued at fair value and revalued at each balance sheet date. Non Current Assets Held for Resale Under IFRS 5 Non current assets held for sale and discontinued operations anyassets that the Group have decided are for sale have to be reclassified as aseparate item under Current Assets. Accordingly in 2005 a decision was made todispose of the Runcorn property along with some of the Plant and Equipment atthe site. Therefore the Net Book Value of these assets has been reclassified asHeld for Resale in the 31st December 2005 Balance Sheet and the 30th June 2006Balance Sheet. The site was disposed of in October 2006; however some of thePlant and Equipment was retained for use in the business. These remaining assetswere reclassified back into Non Current Plant and Equipment and a depreciationadjustment has been put through to the December 2006 income statement. Finance & Operating Leases IAS 17 'Leases' details the distinction between an operating and a financelease. The Group has reviewed all leases to consider whether they have beentreated correctly within the new definition. This review has led to some leasesfor Forklift trucks to now be considered as Finance Leases, due to the term ofthe lease being considered to be for the major part of the assets life. Theseassets have been capitalised and depreciated in accordance with the normalaccounting policies of the group. Reconciliation of Group Balance Sheet at 31st December 2005 from UK GAAP to IFRS (Unaudited) IFRS 5 IAS 39 IAS 39 Assets IFRS ASSETS IAS 38 Foreign Interest IAS 36 IAS 12 Held as at UK Goodwill Exchange Rate IAS 17 Goodwill Income for 31st December GAAP Impairment Contracts Swaps Leases Amortisation Taxes Resale 2005Non Current £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000sAssetsGoodwill 88,724 98 - - - - - - 88,822Property, Plant andEquipment 18,451 - - - 71 - - (487) 18,035 ------------------------------------------------------------------------------------------------------ 107,175 98 - - 71 - - (487) 106,857 ------------------------------------------------------------------------------------------------------Current AssetsInventory 14,390 - - - - - - - 14,390Trade and OtherReceivables 28,892 - - - - - - - 28,892Financial Instruments atfair value - - 38 25 - - - - 63Cash and cash equivalents 11,999 - - - - - - - 11,999 ------------------------------------------------------------------------------------------------------ 55,281 - 38 25 - - - - 55,344 ------------------------------------------------------------------------------------------------------Non Current Assets held for sale 487 487 ------------------------------------------------------------------------------------------------------Total Assets 162,456 98 38 25 71 - - - 162,688 ------------------------------------------------------------------------------------------------------LIABILITIESCurrentLiabilitiesBorrowings 11,151 - - - 18 - - - 11,169Trade & Other Payables 22,661 - - - - - - - 22,661Financial Instruments atfair value - - - - - - - - -Corporation Tax (396) - - - - - - - (396) ------------------------------------------------------------------------------------------------------ 33,416 - - - 18 - - - 33,434 ------------------------------------------------------------------------------------------------------Non CurrentLiabilitiesBorrowings 60,413 - - - 60 - - - 60,473Deferred Tax 143 - - - - - 342 - 485Provisions 746 - - - - - - - 746Pension Scheme Deficit 806 - - - - - - - 806 ------------------------------------------------------------------------------------------------------ 62,108 - - - 60 - 342 - 6,510 ======================================================================================================TOTAL ASSETS LESSLIABILITIES 66,932 98 38 25 (7) - (342) - 66,744 ======================================================================================================Shareholders'EquityCalled up share capital 1,297 - - - - - - - 1,297Share premium account 68,773 - - - - - - - 68,773Other reserves 34 - - - - - - - 34Profit and loss account (3,172) 98 38 25 (7) - (342) - (3,360) ------------------------------------------------------------------------------------------------------- EQUITY SHAREHOLDERS'FUNDS 66,932 98 38 25 (7) - (342) - 66,744 ====================================================================================================== Reconciliation of Group Balance Sheet at 30th June 2006 from UK GAAP to IFRS (Un-audited) IFRS 5 IAS 39 IAS 39 Assets IFRS ASSETS IAS 38 Foreign Interest IAS 36 IAS 12 Held as at UK Goodwill Exchange Rate IAS 17 Goodwill Income for 30 June GAAP Impairment Contracts Swaps Leases Amortisation Taxes Resale 2006Non Current £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s AssetsGoodwill 86,455 98 - - - 2,301 - - 88,854Property,Plant &Equipment 18,638 - - - 62 - - (487) 18,213 ------------------------------------------------------------------------------------------------------- 105,093 98 - - 62 2,301 - (487) 107,067 -------------------------------------------------------------------------------------------------------Current AssetsInventory 15,226 - - - - - - - 15,226Trade & Other Receivables 28,184 - - - - - - - 28,184FinancialInstrumentsat fair value - - 3 27 - - - - 30Cash and cash equivalents 8,987 - - - - - - - 8,987 ------------------------------------------------------------------------------------------------------- 52,397 - 3 27 - - - - 52,427 -------------------------------------------------------------------------------------------------------Non CurrentAssets heldfor sale - 487 487 -------------------------------------------------------------------------------------------------------Total Assets 157,490 98 3 27 62 2,301 - - 159,981 ------------------------------------------------------------------------------------------------------- LIABILITIESCurrentLiabilitiesBorrowings 8,994 - - - 19 - - - 9,013Trade & OtherPayables 22,658 - - - - - - - 22,658FinancialInstruments at fair value - - 7 - - - - - 7Corporation Tax (402) - - - - - - - (402) ------------------------------------------------------------------------------------------------------- 31,250 - 7 - 19 - - - 31,276 -------------------------------------------------------------------------------------------------------Non CurrentLiabilitiesBorrowings 59,479 - - - 50 - - - 59,529Deferred Tax (536) - - - - - 1331 - 795Provisions 671 - - - - - - - 671PensionScheme Deficit 36 - - - - - - - 36 ------------------------------------------------------------------------------------------------------- 59,650 - - - 50 - 1331 - 61,031 =======================================================================================================TOTAL ASSETSLESSLIABILITIES 66,590 98 (4) 27 (7) 2,301 (1331) - 67,674 =======================================================================================================Shareholders'EquityCalled upshare capital 1,297 - - - - - - - 1,297Share premiumaccount 68,773 - - - - - - - 68,773Other Reserves 44 - - - - - - - 44Profit and loss account (3,524) 98 (4) 27 (7) 2,301 (1331) - (2,440) ------------------------------------------------------------------------------------------------------EquityShareholders'Funds 66,590 98 (4) 27 (7) 2,301 (1331) - 67,674 ====================================================================================================== Reconciliation of Group Balance Sheet at 31st December 2006 from UK GAAP to IFRS (Unaudited) IFRS 5 IAS 39 IAS 39 Assets IFRS ASSETS IAS 38 Foreign Interest IAS 36 IAS 12 Held as at UK Goodwill Exchange Rate IAS 17 Goodwill Income for 31st December GAAP Impairment Contracts Swaps Leases Amortisation Taxes Resale 2006Non current £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000sAssets Goodwill 85,831 98 - - - 4,683 - - 90,612Property,Plant &Equipment 18,754 - - - 54 - - (90) 18,718 ------------------------------------------------------------------------------------------------------- 104,585 98 - - 54 4,683 - (90) 109,330 -------------------------------------------------------------------------------------------------------CurrentAssetsInventory 14,685 - - - - - - - 14,685Trade andOtherReceivables 29,224 - - - - - - - 29,224FinancialInstrumentsat fair value - - - 63 - - - - 63Cash and cashequivalents 12,412 - - - - - - - 12,412 ------------------------------------------------------------------------------------------------------ 56,321 - - 63 - - - - 56,384 ------------------------------------------------------------------------------------------------------Non Current Assets heldfor sale - - ------------------------------------------------------------------------------------------------------Total Assets 160,906 98 - 63 54 4,683 - (90) 165,714 ------------------------------------------------------------------------------------------------------LIABILITIES CurrentLiabilitiesBorrowings 10,215 - - - 19 - - - 10,234Trade & OtherPayables 20,605 - - - - - - - 20,605FinancialInstrumentsat fair value - - 19 - - - - - 19Corporation Tax 629 - - - - - - - 629 -------------------------------------------------------------------------------------------------------- 31,449 - 19 - 19 - - - 31,487 --------------------------------------------------------------------------------------------------------Non CurrentLiabilitiesBorrowings 58,952 - - - 40 - - - 58,992Deferred Tax 826 - - - - - 298 - 1124Provisions 596 - - - - - - - 596PensionScheme Deficit 856 - - - - - - - 856 -------------------------------------------------------------------------------------------------------- 61,230 - - - 40 - 298 - 61,568 ========================================================================================================TOTAL ASSETSLESSLIABILITIES 68,227 98 (19) 63 (5) 4,683 (298) (90) 72,659 ========================================================================================================SHAREHOLDERS'EQUITYCalled upshare capital 1,297 - - - - - - - 1,297Share premiumaccount 68,773 - - - - - - - 68,773Other 53 - - - - - - - 53reservesProfit andloss account (1,896) 98 (19) 63 (5) 4,683 (298) (90) 2,536 --------------------------------------------------------------------------------------------------------EQUITYSHAREHOLDERS'FUNDS 68,227 98 (19) 63 (5) 4,683 (298) (90) 72,659 ======================================================================================================== Reconciliation of Group Income Statement for the six months ended 30th June 2006from UK GAAP to IFRS (Unaudited) UK GAAP IAS 39 Foreign IAS 17 Leases IAS 39 Interest IAS 36 Goodwill IAS 12 IFRS Exchange Rate Swaps Amortisation Income Taxes ContractsCONTINUING OPERATIONS £'000s £'000s £'000s £'000s £'000s £'000s £'000s TURNOVER 99,348 - - - - - 99,348Cost of Sales 86,690 - (2) - - - 86,688 ----------------------------------------------------------------------------------------------- 12,658 - 2 - - - 12,660 ----------------------------------------------------------------------------------------------- DistributionExpenses 3,564 - - - - - 3,564Administration 6,250 - 1 - - - 6,251 - - - - - -----------------------------------------------------------------------------------------------OperatingProfit 2,844 - 1 - - - 2,845 ----------------------------------------------------------------------------------------------- Finance Income 128 - - - - - 128Finance Costs 2186 43 1 (3) - - 2,227Net PensionFinance income 199 - - - - - 199 - - - - - -----------------------------------------------------------------------------------------------Profit BeforeTax 985 (43) - 3 - - 945 ----------------------------------------------------------------------------------------------- Amortisation 2,301 - - - 2,301 - -Exceptionals 753 - - - - - 753Income TaxCharge 25 - - - - 989 1,014 - - - - - - - ----------------------------------------------------------------------------------------------- (2,094) (43) - 3 2,301 (989) (822) ===============================================================================================DISCONTINUEDOPERATIONSRevenue 14,024 - - - - - 14,024Expenses 12,315 - 1 - - - 12,316OperatingProfit 1,709 - - - - - 1,708Income TaxCharge 451 - - - - - 451 ----------------------------------------------------------------------------------------------- 1,258 - 1 - - - 1,257 ===============================================================================================Total Profit/(Loss) for theperiod (836) (43) 1 3 2,301 (989) 435 =============================================================================================== 10. ENQUIRIES Pieter Totte/ Stephen Heslop/ Lee CamfieldThe Real Good Food Company PlcInternational House1 St Katharines' WayLondonE1W 1XB 020 7335 2600www.realgoodfoodplc.co.uk Guy PetersShore Capital 020 7408 4090 Emma Kane/Adam LevitonRedleaf Communications 020 7822 0200 This information is provided by RNS The company news service from the London Stock Exchange