TIDMRGD
RNS Number : 1288N
Real Good Food PLC
21 September 2023
21 September 2023
Real Good Food plc
("RGF" or "the Group")
Final Results for the Year Ended 31 March 2023
Real Good Food plc, (AIM: RGD), the food manufacturing business
specialising in cake decoration, today announces its final results
for the year ended 31 March 2023.
Overview
Financial highlights
-- Revenue decreased by 19.8% to GBP32.4 million (2022: GBP40.4
million) due to macroeconomic headwinds.
-- EBITDA loss of GBP4.8 million (2022: GBP0.2 million profit)
reflected reduced gross margins and operating leverage.
-- Loss before tax was GBP9.0 million (2022: GBP19.0 million
loss, including GBP16.1 million goodwill impairment).
-- Additional GBP2.5 million revolving credit facility secured
from Hilco Private Capital in November 2022 and GBP0.55 million in
short-term shareholder loans (from Downing and Omnicane) on 6 April
2023 to support the Group's radical reform programme.
-- Total net debt increased to GBP31.2m (2022: GBP25.5m).
Operational highlights
-- Volumes were about 26% lower year-on-year, the most severe
reductions being US sales (32% lower) and sales into Europe (22%
lower). The reductions were market driven rather than customer
losses.
-- Key input costs continued to rise during the year with costs
on average being 30% higher. The impact on the business was partly
mitigated with prices to customers being increased, averaging 21%
with increases ranging between 5% and 34% (overall in-year impact
being 10.6%). Limited availability of key ingredients across the
sector also affected performance.
-- The impact of reduced volumes and the lag effect of passing
cost increases through to customers reduced gross margins from
39.9% to 33.3%; margins in the current year are better and continue
to improve (currently 35.9%).
-- A radical reform programme, which was launched in September
2022 to return the business to profitability, is almost complete
and tracking in line with expectations. To date, circa GBP8.0
million of price resets, efficiency gains and cost savings have
been secured for FY24.
-- Evidence based rebranding of Renshaw fondant to "just roll
with it" was launched in September 2022, making products more
accessible to all customers whilst launching new products and
diversifying into complementary products.
Current trading
-- Market conditions remain challenging albeit the self-help
improvements made since September 2022 have been
transformational.
-- New management in place to continue to drive the radical reform programme.
-- After five months of trading in FY24, demand is higher than
last year and despite sales being broadly the same due to cash
constraints, EBITDA is better.
-- The Group has recently agreed terms for a 12-month extension
of the Hilco loan facility through to 18 November 2024. The
facility is being renewed at GBP2.3m. A further announcement will
be made in due course.
-- The Board expects to issue the Group's half year results to
30 September and an update on current trading in December 2023
Mike Holt, Executive Chair commented:
"Market conditions remain challenging; we are however starting
to see volumes in some segments beginning to slowly rebuild and we
are gradually trading our way into a better place as the busier
autumn season kicks in. The radical reform programme we have
implemented over the last year has been transformational and, with
new management now in place, the Group is well positioned to make
further gains, particularly in manufacturing efficiencies, sales,
and customer focus. We have recently agreed a loan extension with
Hilco which provides a more secure platform to continue our journey
to sustainable and satisfactory profitability."
Enquiries:
Real Good Food plc Tel: 0151 541 3790
Mike Holt, Executive Chair
Cavendish Capital Markets Ltd (Nomad and Broker) Tel: 020 7220 0500
Carl Holmes / Abigail Kelly (Corporate Finance)
MHP (Financial PR) Tel: 020 3128 8793
Reg Hoare / Katie Hunt rgf@mhpgroup.com
Chair's Statement and Business Review
Overview
Trading conditions for the year ended 31 March 2023 were
challenging throughout the year due to the perfect storm of rising
costs and lower revenues following a brief recovery post-Covid. The
war in Ukraine, continuing cross border trading issues with Europe
(post Brexit) and significant cost inflation impacted the
availability of key ingredients and services, increased costs and,
with fears of recession and prolonged austerity for consumers,
reduced demand for our products. This resulted in the Group
incurring an adjusted EBITDA loss of GBP4.8 million on revenue of
GBP32.4 million, GBP8.0 million (19.8%) lower than the previous
year.
As announced in October 2022, the Board has put into effect a
well-defined plan to radically reform the Group. As part of the
radical reform, key functions were systematically re-engineered to
improve business processes and create smarter ways of working
throughout the business. The recovery plan included significant
price resets with customers across all sectors to address market
distortions, overhead cost savings and further manufacturing
efficiency gains. In total, the price reset delivered a benefit of
GBP0.7 million in FY23 and should deliver circa GBP3.9 million in
FY24. Cost savings of GBP0.1 million were realised in FY23 and
circa GBP2.1 million has been secured for FY24 (making the total
circa GBP2.6 million when added to savings actioned earlier in
FY23) against a plan of GBP3.0 million; about GBP0.4 million
remains unrealisable whilst the Group continues to be AIM listed.
About a third of the manufacturing efficiencies have been actioned
to date. The cost of the recovery plan was GBP1.1 million,
including GBP0.8 million of redundancy payments. As part of the
plan, employee numbers decreased by 45% from 318 to 201 and have
since reduced to 186 (106 in production related activities and 80
in business support functions).
During FY23, input costs increased by circa 20%. In response,
the Group increased selling prices and for most customers also
reset prices for certain products to deliver satisfactory margins.
On average, prices were increased by 21% of which the in-year
effect was 10.6% due to timing, many contracts having set annual
pricing dates. Current selling prices are circa 27% higher than
they were at the start of FY23. Volumes for the year were about 26%
lower than the year ended 31 March 2022, albeit performance during
H2 was marginally better. Whilst increased selling prices may have
contributed, we believe that the volume reduction is more generally
a recessionary response to household incomes being lower in real
terms. The Group continues to work collaboratively with customers
to win new business, notable examples being a new range (Bake &
Create) for B&M, new products for Hobbycraft, Lakeland, Asda
and Lidl, and new business following the demise of a competitor
(Food Innovations).
Renshaw Rebranding
Following research conducted in 2021, Renshaw's own brand
products were rebranded in September 2022 with a new improved
recipe providing the functionality that regular users love, whilst
making it easier to knead, roll and correct slight imperfections
which anyone can make, to ensure a positive experience for every
user, including first-time users. The "just roll with it" rebrand
has been well received and product range rationalisation has made
choosing the right product easier for all users. We are hopeful
that this will add sales in more normal market conditions.
Product Launches
In total the business has launched 69 new products into the
market, across Retail, Renshaw brand, International and B2B
channels. In 2021 we were first to market with a ready to use on
trend drip icings range which has continued to be a focus with
retail and international customers this year. We have expanded all
year-round lines of frostings with exciting trending flavours and
colours to tap into key occasions to drive consumer interest. This
year we have gained shelf presence within the dessert sector with
innovative dessert sauces driving new consumers to purchase our
products. We will continue to review and tap into new and
innovative trends to keep customers engaged and excited about
what's up and coming within the home baking category and to gain
listings within new channels.
Wavertree Property
At the beginning of the financial year in May 2022, the Group
sold its former Wavertree property. The sale made a small loss but
generated net cash proceeds of GBP0.9 million, GBP0.3 million of
which was spent on creating an Innovation Centre on the Crown
Street site next to the main factory. The Wavertree property was
purchased in 2015 and housed the Renshaw Academy (until August
2019), the New Product Development team and Renshaw's marketing
team.
Cash management
The Group secured an additional GBP2.5 million in funding on 21
November 2022 from Hilco Private Capital to support its turnround
plan and supplement the existing GBP6.3 million facility with Leumi
ABL. The new facility was on a twelve-month term, but we are
pleased to report that within the last few days GBP2.3 million of
this has been extended by another year to November 2024. The Group
also received a GBP0.55 million short-term loan from Downing LLP
and Omnicane Investors Ltd on 5 April 2023. During H1 of the new
financial year (FY24), cash has been tight adding to some of our
supply chain issues, but we are pleased to report that near-term
projections forecast an improving trend with a reduction in
borrowings by the end of the calendar year (Q3/FY24).
Dividend
No dividend is being proposed for the year. The Group is highly
leveraged and the Board's focus is on reducing the total level of
debt.
Board & Management Changes
In September 2022, Maribeth Keeling who had been appointed as
Group Finance Director in July 2019 left the business to pursue
other interests. Maribeth was replaced by John Tennant on an
interim basis. Gail Lumsden, having served three years as an
independent non-executive director, stepped down from the Board to
dedicate more time to other non-executive commitments in December
2022. Gail was replaced by Andy Richardson in January 2023. Andy
has a wealth of experience across a range of organisations and a
strong track record of business transformation and is making valued
contributions to the Board. As I did with Gail, Andy and I meet
independently of the Board to discuss matters concerning Loan Note
Holders and major Shareholders. In August 2022, Anthony Ridgwell
stepped down as a non-executive director having served a term of
three years.
During October 2023, Joe Beardwood will be joining the Group and
will replace John Tennant at the end of December as Group Finance
Director. Like John, Joe has significant Finance Director
experience in turnround and private equity situations.
Since year-end, John Tague joined the Group to replace Steve
Moon who stepped down as Managing Director of JF Renshaw and
Rainbow Dust Colours in July 2023. John has relevant, and highly
successful, experience in similar roles at Halo Foods and Seabrook
Crisps.
Strategy
The Group's strategy is to maximise value for shareholders by
leveraging productive capacity. The Group has a valued heritage,
and the strategy is to leverage this with new products and class
leading service.
As Renshaw celebrates its 125th Anniversary, the aim is to
consolidate its market leading position in the UK, build sales in
the USA, accelerate growth in caramels and sauces, and diversify
into products that use the same equipment or process know-how.
Growth in these areas should counterbalance the gradual decline in
fondant icing and marzipan.
Further improvements in profitability, building on the recent
and successful radical reform programme noted earlier, will be
targeted by additional manufacturing efficiencies. Our Crown Street
factory is old but is in reasonable condition and space is becoming
available to improve its configuration and workflow.
The Group remains open to divesting parts of its business for
the right value at the right time.
Outlook
The successful implementation of our transformation plan has
positioned the Group to deliver between GBP3 million and GBP4
million in EBITDA annually beyond FY24.
Market conditions remain challenging. We are however starting to
see volumes in some segments slowly rebuild. Over the last few
months, our trading performance has been affected by our tight cash
position, but we are gradually trading our way into a better place
as the seasonally busier autumn season kicks in. After five months
of trading, demand is higher than last year and despite sales being
broadly the same due to cash constraints, EBITDA is better. The
radical reforms we have made over the last eight to nine months
have been transformational and, with new management now in place,
the Group is well positioned to make further gains, particularly in
manufacturing efficiencies, sales, and customer focus.
Finally, I would like to thank our employees who have worked
hard to overcome various challenges, to ensure that products and
customer service continued (and continue) to be delivered and
embraced the necessary changes for a sustainable future.
Mike Holt
Executive Chair
Finance Review
Revenue
Group revenue for the 12 months ending 31 March 2023 was GBP32.4
million (2022: GBP40.4 million), a decrease of 19.8% on revenue to
31 March 2022. Trading conditions were challenging throughout the
year with significant increases in costs, restricted availability
of key ingredients, and lower demand due to macroeconomic headwinds
and fears of recession and an extended period of austerity.
Profit measure on operations
Gross profit for the Group was GBP10.8 million (2022: GBP16.1
million), resulting in a gross profit margin of only 33% compared
to 40% in the prior year. This reflects the lag effect of increased
prices and costs and the operational leverage from lower
volumes.
The operating loss in the year of GBP7.1 million is reported
after depreciation charges of GBP1.1m and significant items of
GBP1.3m. The significant costs incurred relate to redundancy
payments totalling GBP0.8 million, consultancy costs of GBP0.3
million associated with the programme of radical reform and the
loss on the sale of Wavertree amounting to GBP0.2 million.
The adjusted EBITDA of the underlying continuing business was a
loss of GBP4.8m.
The items adjusted for are:
Significant Items: GBP1.3m
Depreciation and amortisation: GBP1.1m
After finance costs of GBP1.9 million, this resulted in a loss
before tax for the year of GBP9.9 million (loss 2021:
GBP18.9m).
Cash flow and net debt
The Group secured an additional GBP2.5 million in funding on 21
November 2022 from Hilco Private Capital to support its turnround
plan and supplement the existing GBP6.3 million facility with Leumi
ABL. The new facility was on a twelve-month term, but we are
pleased to report that within the last few days GBP2.3 million of
this has been extended by another year to November 2024. The Group
also received a GBP0.55 million short-term loan from Downing LLP
and Omnicane Investors Ltd announced on 5 April 2023. During H1 of
the new financial year (FY24), cash has been tight adding to some
of our supply chain issues, but we are pleased to report that
near-term projections forecast an improving trend with a reduction
in borrowings by the end of the calendar year (Q3/FY24).
Net debt is a key performance indicator for the Group and
increased to GBP31.243m (2022: GBP25.480m) over the course of the
year which reflected increased borrowings and reduced cash. Net
debt is explained in note 9.
2023 2022
12 months to March GBP'000s GBP'000s
------------------------------------ --------- ---------
Revenue 32,441 40,431
Gross profit 10,810 16,130
Delivered margin 7,359 12,170
Delivered margin % 22.68% 30.0%
Underlying EBITDA (adjusted)* (4,757) 227
Operating (loss) before impairment
and significant items (5,814) (679)
Operating loss after impairment and
significant items (7,100) (17,089)
Operating loss % (21.89%) (42.4%)
Loss before tax (9,003) (18,978)
------------------------------------ --------- ---------
All figures refer to continuing businesses.
*See note 3 for reconciliation
Going Concern
The financial statements are prepared on a going concern basis,
which the Directors believe to be appropriate for the reasons set
out below.
As described in the Business Review, the current economic
environment remains difficult, and losses have led to cash
constraints which is impacting current trading. The Directors have
prepared financial forecasts for the Group, comprising income
statements, balance sheets and cash flows through to March 2025. In
assessing the appropriateness of the Group's accounts being
prepared on a going concern basis, the Directors have considered
short-term constraints, and how to manage through these, and
factors likely to affect its planned future performance.
As noted in the Strategic Report and Business Review, the
radical reform of the business has been successful, and the Group
expects to be EBITDA positive at similar volume levels to last
year. Volumes are expected to be better in FY24, albeit the Group
is currently unable to fulfil sales orders in full due to shortages
of key ingredients and services because of cash constraints. The
Group is slowly working through this and is looking to sell some
assets to help boost cash resources. Critical to success is the
ability to pass through ongoing cost increases to customers. Price
increases have already been agreed with a number of UK Retailers,
most international customers and several wholesale and B2B
customers with more expected in the next couple of months. The
forecasts anticipate cash balances of circa GBP2 million by 31
December 2024, GBP3.5 million by 31 December 2025 with average cash
balances of about GBP1 million. Based on current projections, the
lowest point next year will be in September 2024, but a
collaboration is being sought with the Group's largest customer to
more evenly phase deliveries during calendar year 2024, which will
alleviate this dip.
In recent months, several key management roles have been
refreshed and these are already making a very positive contribution
to performance, upskilling, and organisational culture.
The cash flow forecasts reflect the extension of GBP2.3 million
of the GBP2.5 million loan facility with Hilco Private Capital to
18 November 2024 and continuation of the GBP6.6 million facility
with Leumi ABL
On 6 April 2023, the Group secured a GBP550,000 short-term loan
from Downing LLP and Omnicane Investors Ltd, two of it principal
shareholders and loan note holders. Interest rate of 12% annualised
is payable on repayment together with a redemption premium. If the
loan is repaid before 6 October 2024 a 100% redemption premium is
payable if repayment is after 5 October 2024 the redemption premium
is 200%.
In July 2023, John Tague was appointed as MD of JF Renshaw and
Rainbow Dust Colours replacing Steve Moon. John has significant
expertise and a track record of managing successful business
transformations.
A 12-month extension has been agreed with Hilco Private Capital
to roll-over GBP2.3 million of the GBP2.5 million facility dated 18
November 2022.
Pension Scheme
The Group offers a defined contribution scheme for all current
employees that is funded monthly. 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
deficit at 31 March 2023 of GBP0.7 million (2022: surplus GBP1.5
million). The Plan assets decreased by GBP6.0 million to GBP15.4
million (2022: GBP21.4 million) and the Plan liabilities are
GBP16.1 million compared to GBP19.9 million at 31 March 2022.
Dividend
The Directors do not recommend the payment of a final dividend
for the year ended 31 March 2023 (2022: nil).
Consolidated Statement of Comprehensive Income
Year ended 31 March 2023
12 months 12 months
ended ended
31 March 31 March
2023 2022
GBP'000s GBP'000s
------------------------------------------------------------ --------- ---------
Revenue 32,441 40,431
Cost of sales (21,631) (24,301)
------------------------------------------------------------- --------- ---------
Gross profit 10,810 16,130
Other operating income 7 56
Distribution expenses (3,458) (3,960)
Administrative expenses (13,173) (12,902)
------------------------------------------------------------- --------- ---------
Operating loss before impairment and significant
items (5,814) (676)
Impairment charge on goodwill - (16,103)
Significant items (1,286) (310)
------------------------------------------------------------- --------- ---------
Operating loss after impairment and significant
costs (7,100) (17,089)
Finance costs (1,945) (1,891)
Net finance income 42 2
------------------------------------------------------------- --------- ---------
Loss before tax (9,003) (18,978)
Income tax credit - (2,384)
------------------------------------------------------------- --------- ---------
Loss from continuing operations (9,003) (21,362)
Profit from discontinued operations (assets held
for sale) - 19,986
------------------------------------------------------------- --------- ---------
Net loss (9,003) (1,376)
------------------------------------------------------------- --------- ---------
Attributable to:
Owners of the parent (9,003) (1,376)
Net loss (9,003) (1,376)
Items that will or may be reclassified to profit
or loss
Foreign exchange differences on translation of subsidiaries 80 (25)
Items that will not be reclassified to profit or
loss
Actuarial losses on defined benefit plan (2,222) 501
Deferred tax relating to other comprehensive losses 477 527
------------------------------------------------------------- --------- ---------
Other comprehensive loss (1,665) 1,003
------------------------------------------------------------- --------- ---------
Total comprehensive loss for the year (10,668) (373)
------------------------------------------------------------- --------- ---------
Attributable to:
Owners of the parent (10,668) (373)
Non-controlling interests - -
------------------------------------------------------------ --------- ---------
Total comprehensive loss for the year (10,668) (373)
------------------------------------------------------------- --------- ---------
12 months 12 months
ended ended
31 March 31 March
2023 2022
GBP'000s GBP'000s
--------------------------------------------------------- --------- ---------
Basic and diluted loss per share - continuing operations (9.92)p (21.46)p
Basic earnings per share - discontinued operations - 20.07p
Diluted earnings per share - discontinued operations - 6.23p
---------------------------------------------------------- --------- ---------
Consolidated Statement of Changes in Equity
Foreign
Issued Share Share Exchange Restated Restated
Share Premium Other Option Translation Retained Restated Non-Controlling Total
Capital Account Reserves Reserve Reserve Earnings Total Interest Equity
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------- -------- -------- -------- -------- ----------- --------- --------- ---------------- ---------
Restated
balance as
at 31 March
2022 1,991 3,294 540 - (85) (2,302) 3,438 - 3,438
-------------- -------- -------- -------- -------- ----------- --------- --------- ---------------- ---------
Total
comprehensive
(loss)/gain
for the year
Loss for the
year (9,003) (9,003) - (9,003)
Other
comprehensive
(loss)/gain
for the
year 80 (1,745) (1,665) - (1,665)
-------------- -------- -------- -------- -------- ----------- --------- --------- ---------------- ---------
Total
comprehensive
(loss)/gain
for the year 80 (10,748) (10,668) - (10,668)
-------------- -------- -------- -------- -------- ----------- --------- --------- ---------------- ---------
Transactions
with owners
of the Group,
recognised
directly in
equity
Balance as at
31 March
2023 1,991 3,294 540 - (5) (13,049) (7,229) - (7,229)
-------------- -------- -------- -------- -------- ----------- --------- --------- ---------------- ---------
Consolidated Statement of Financial Position
Year ended 31 March 2023
Restated
31 March 31 March
2023 2022
GBP'000s GBP'000s
-------------------------------------------- --------- ---------
NON-CURRENT ASSETS
Goodwill 16,619 16,619
Other intangible assets - -
Tangible fixed assets 6,256 6,970
22,875 23,589
-------------------------------------------- --------- ---------
CURRENT ASSETS
Inventories 3,695 4,024
Trade and other receivables 4,711 6,572
Retirement benefit asset 1,497
Cash collateral 50 50
Cash and cash equivalents 93 2,734
--------------------------------------------- --------- ---------
8,549 14,877
-------------------------------------------- --------- ---------
Assets classed as held for sale 148 1,078
--------------------------------------------- --------- ---------
TOTAL ASSETS 31,572 39,544
--------------------------------------------- --------- ---------
CURRENT LIABILITIES
Trade and other payables 6,609 6,950
Borrowings 5,310 4,009
Lease liabilities 46 48
Current tax liability 4 4
--------------------------------------------- --------- ---------
11,969 11,011
-------------------------------------------- --------- ---------
Liabilities classed as held for sale - -
-------------------------------------------- --------- ---------
NON-CURRENT LIABILITIES
Borrowings 25,869 24,293
Lease liabilities 110 155
Deferred tax liabilities 170 647
Retirement benefit obligation 683 -
--------------------------------------------- --------- ---------
26,832 25,095
-------------------------------------------- --------- ---------
TOTAL LIABILITIES 38,801 36,106
--------------------------------------------- --------- ---------
NET ASSETS (7,229) 3,438
--------------------------------------------- --------- ---------
EQUITY
Share capital 1,991 1,991
Share premium account 3,294 3,294
Other reserves 540 540
Share option reserve - -
Foreign exchange translation reserve (5) (85)
Retained earnings (13,049) (2,302)
--------------------------------------------- --------- ---------
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT (7,229) 3,438
TOTAL EQUITY (7,229) 3,438
--------------------------------------------- --------- ---------
Consolidated Cash Flow Statement
Year ended 31 March 2023
31 March 31 March
2023 2022
GBP'000s GBP'000s
-------------------------------------------------------- --------- ---------
CASH FLOW FROM OPERATING ACTIVITIES
Adjusted for:
(Loss) before taxation (9,003) 1,008
Finance and other finance costs 1,903 1,889
Share options reserve credit - (3)
Foreign Exchange movement 2 (3)
Goodwill impairment charge - 16,103
Impairment charge on fixed assets - 70
Share based payment expense - (19,986)
Loss on disposal of property, plant and equipment 159 -
Depreciation of property, plant, and equipment 1,057 1,326
Amortisation of intangibles - 9
--------------------------------------------------------- --------- ---------
Operating Cash Flow (5,881) 413
Decrease in inventories 328 (915)
Decrease/(increase) in receivables 1,862 2,606
Pension contributions - (8,500)
Decrease in cash collateral - 165
Increase/(Decrease) in payables (685) (2,518)
--------------------------------------------------------- --------- ---------
Cash from operations (4,731) (8,749)
Interest paid (345) (139)
Interest on leases (10) -
--------------------------------------------------------- --------- ---------
Net cash inflow from operating activities (4,731) (8,888)
--------------------------------------------------------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment (397) (844)
Proceeds from sale of investment 931 33,153
Disposal of discontinued business, net of cash disposed
of - (1,138)
--------------------------------------------------------- --------- ---------
Net cash outflow from investing activities 534 31,171
--------------------------------------------------------- --------- ---------
CASH FLOW USED IN FINANCING ACTIVITIES
Repayment of lease liabilities (102) (113)
Repayment / (Inflow) of term loans (466) (865)
Interest paid on investor loans (5,310)
Repayment of investor loans - (17,790)
Drawdown on new credit facility 2,582 -
Drawdowns on revolving credit facilities 14,203 36,045
Repayments on revolving credit facilities (15,034) (34,571)
--------------------------------------------------------- --------- ---------
Net cash outflow from financing activities 1,475 (22,604)
--------------------------------------------------------- --------- ---------
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS (2,721) (321)
--------------------------------------------------------- --------- ---------
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period 2,734 3,080
Effects of currency translations on cash and cash
equivalents 80 (25)
Net movement in cash and cash equivalents (2,721) (321)
--------------------------------------------------------- --------- ---------
Cash and cash equivalents at end of period 93 2,734
--------------------------------------------------------- --------- ---------
Notes to the Financial Information
Year ended 31 March 2023
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). The principal activity of the company is the manufacture of
icings, frostings, marzipan, sauces and caramels serving the global
cake decoration market.
As permitted by section 408 of the Companies Act 2006, the
profit and loss account of the company is not presented as part of
these financial statements. The Company's total comprehensive loss
for the financial year was GBP4.1m (2022 GBP45.5m).
Basis of preparation
This financial information is presented on the basis of
international accounting standards and have been prepared in
accordance with AIM rules and the Companies Act 2006, as applicable
to companies reporting under IFRS. The accounts are prepared on a
going concern basis.
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 - the Conceptual Framework;
-- Amendments to IAS Amendments to IAS 16 - Property, Plant and
Equipment, The amendments prohibit deducting the amounts received
from selling items produced from the cost of PPE while the asset is
being prepared for its intended use;
-- Amendment to IAS 37 - Provisions, Contingent Liabilities and
Contingent Assets, The amendments specify that the costs of
fulfilment are those that relate directly to the contract,
consisting of both: the incremental costs of fulfilling that
contract - for example, direct labour and materials; and an
allocation of other costs that relate directly to fulfilling
contracts - for example, an allocation of the depreciation charge
for an item of property, plant and equipment used in fulfilling
that contract among others.
The adoption of the amendments to IFRS 3, IAS 1, IAS16 and IAS37
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. Revenue
The revenue for the Group for the current year arose from the
sale of goods in the following areas:
Manufactures, sells, and supplies cake decorating
GBP32.4 million products and ingredients
Cake Decoration (2022 GBP40.4m) for the baking sector.
--------------- ---------------- -------------------------------------------------
3. 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.
Head Office
and non-trading
Cake Decoration subsidiaries Total Group
12 months ended 31 March 2023 GBP'000s GBP'000s GBP'000s
--------------------------------------------- --------------- ---------------- -----------
Total revenue 33,804 - 33,804
Intercompany sales (1,363) - (1,363)
--------------------------------------------- --------------- ---------------- -----------
External revenue 32,441 - 32,441
Cost of sales (20,631) - (21,631)
--------------------------------------------- --------------- ---------------- -----------
Gross profit 10,810 - 10,810
Other operating income 4 3 7
Distribution expenses (3,458) - (3,458)
Administrative expenses (12,523) (650) (13,173)
--------------------------------------------- --------------- ---------------- -----------
Operating (loss) / profit before
impairment and significant items (5,167) (647) (5,814)
Significant Items (738) (548) (1,286)
Operating (loss)/profit after impairment
and significant items (5,905) (1,195) (7,100)
Finance costs (355) (1,548) (1,903)
Other finance costs - - -
--------------------------------------------- --------------- ---------------- -----------
(Loss)/profit before tax (6,260) (2,743) (9,003)
Income tax credit/(expense) - - -
--------------------------------------------- --------------- ---------------- -----------
(Loss)/profit after tax as per comprehensive
statement of income (6,260) (2,743) (9,003)
--------------------------------------------- --------------- ---------------- -----------
Continuing Discontinued Total
Operations Operations Group
12 months ended 31 March 2022 GBP'000s GBP'000s GBP'000s
--------------------------------------------- ----------- ------------ ---------
Total revenue 42,545 1,275 43,820
Intercompany sales (2,114) - (2,114)
--------------------------------------------- ----------- ------------ ---------
External revenue 40,431 1,275 41,706
Cost of sales (24,301) (1,063) (25,364)
--------------------------------------------- ----------- ------------ ---------
Gross profit 16,130 212 16,342
Income from Furlough Scheme - 137 137
Other operating income 56 - 56
Distribution expenses (3,960) (47) (4,007)
Administrative expenses (12,902) (403) (13,305)
--------------------------------------------- ----------- ------------ ---------
Operating (loss) / profit before
impairment and significant items (676) (101) (777)
Impairment charge (16,103) - (16,103)
Significant Items (310) (229) (539)
--------------------------------------------- ----------- ------------ ---------
Operating (loss)/profit after impairment
and significant items (17,089) (330) (17,419)
Finance costs (1,891) - (1,891)
Other finance costs 2 - 2
--------------------------------------------- ----------- ------------ ---------
(Loss)/profit before tax (18,978) (330) (19,308)
Income tax credit/(expense) (2,384) - (2,384)
--------------------------------------------- ----------- ------------ ---------
Profit on disposal 20,316 - 20,316
--------------------------------------------- ----------- ------------ ---------
(Loss)/profit after tax as per comprehensive
statement of income (1,046) (330) (1,376)
--------------------------------------------- ----------- ------------ ---------
Geographical segments
The Group earns revenue from countries outside the United
Kingdom, as shown below:
Group
12 months ended 31 March 2023 GBP'000s
------------------------------ ---------
UK 23,825
Europe 3,654
USA 3,606
Rest of World 1,356
------------------------------ ---------
Total 32,441
------------------------------ ---------
The Group has one customer which constitutes over 13% of revenue
in the Cake Decoration division.:
Discontinued
Group Operations
12 months ended 31 March 2022 GBP'000s GBP'000s
------------------------------ --------- ------------
UK 26,992 1,275
Europe 5,722 -
USA 6,892 -
Rest of World 825 -
------------------------------ --------- ------------
Total 40,431 1,275
------------------------------ --------- ------------
For the year ended 31 March 2022 two customers accounted for 10%
of revenue.
Head Office
Reconciliation of operating (loss)/profit Cake and non-trading
to underlying adjusted EBITDA to Decoration subsidiaries Group
31 March 2023 GBP'000s GBP'000s GBP'000s
------------------------------------------ ----------- ---------------- ---------
Operating (loss)/profit (5,905) (1,195) (7,100)
Significant items 738 548 1,286
Depreciation 1,057 - 1,057
Underlying adjusted EBITDA (4,110) (647) (4,757)
------------------------------------------ ----------- ---------------- ---------
Head Office
Reconciliation of operating (loss)/profit Cake and non-trading Continuing Discontinued Total
to underlying adjusted EBITDA to Decoration subsidiaries Operations Operations Group
31 March 2022 GBP'000s GBP'000s GBP'000s GBP'000s GBP'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
------------------------------------------ ----------- ---------------- ----------- ------------ ---------
Head Office
Cake and non-trading
Decoration subsidiaries Group
31 March 2023 GBP'000s GBP'000s GBP'000s
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Segment assets 14,336 17,237 31,572
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Segment liabilities 13,214 25,587 38,801
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Net operating assets / (liabilities) 1,122 (8,350) (7,229)
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Non-current asset additions - - -
Depreciation (1,057) (4) (1,061)
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Head Office
Cake and non-trading Continuing Discontinued Total
Decoration subsidiaries Operations Operations Group
31 March 2022 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------------- ----------- ---------------- ----------- ------------ ---------
Segment assets 36,017 4,623 40 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)
------------------------------------- ----------- ---------------- ----------- ------------ ---------
4. Significant items
12 months 12 months
ended ended
31 March 31 March
2023 2022
GBP'000s GBP'000s
--------------------------------------------------- --------- ---------
Professional fees in relation to refinancing costs (349) (62)
Loss on sale of Wavertree site (199)
Professional fees in relation to Liverpool factory - (90)
Closure of Renshaw US warehouse (48) (15)
Management restructuring (690) (143)
--------------------------------------------------- --------- ---------
Significant items - Continuing business (1,286) (310)
--------------------------------------------------- --------- ---------
Continuing business (1,286) (310)
Discontinued business - (229)
--------------------------------------------------- --------- ---------
Total significant items (1,286) (539)
--------------------------------------------------- --------- ---------
5. Operating loss
Operating loss for continuing operations
12 months 12 months
ended ended
31 March 31 March
2023 2022
GBP'000s GBP'000s
------------------------------------------------- --------- ---------
External Sales 32,411 40,431
-------------------------------------------------- --------- ---------
Staff Costs (11,023) (11,696)
Inventories:
- cost of inventories as an expense (included in
cost of sales) (16,642) (18,577)
Depreciation of property, plant, and equipment (1,057) (1,326)
Amortisation of intangible assets - (9)
Significant items (1,286) (310)
Impairment charges - (16,103)
Research and development expenditure - (646)
Impairment of trade receivables - (53)
Foreign exchange gains/(losses) - 3
Other net operating expenses (9,532) (8,803)
Total (39,723) (57,520)
-------------------------------------------------- --------- ---------
Operating loss (7,100) (17,089)
-------------------------------------------------- --------- ---------
6. Finance costs
12 months 12 months
ended ended
31 March 31 March
2023 2022
GBP'000s GBP'000s
-------------------------------------------------------- --------- ---------
Interest on bank loans, overdrafts, and investor loans (1,895) (1,896)
-------------------------------------------------------- --------- ---------
Interest on Pension scheme (42) -
Interest on lease liabilities (8) (12)
Finance cost on substantial modification of convertible
loan notes** - 17
(1,945) (1,891)
-------------------------------------------------------- --------- ---------
Total (1,945) (1,891)
-------------------------------------------------------- --------- ---------
7. Other finance (income)/costs
12 months 12 months
ended ended
31 March 31 March
2023 2022
GBP'000s GBP'000s
--------------------------------------- --------- ---------
Interest on pension scheme liabilities (546) (429)
Interest on pension scheme assets 588 431
42 2
--------------------------------------- --------- ---------
8. Directors' remuneration
12 months 12 months
ended ended
31 March 31 March
2023 2022
GBP'000s GBP'000s
---------------------------------------- --------- ---------
Directors' salaries, benefits, and fees (484) (650)
---------------------------------------- --------- ---------
(484) (650)
---------------------------------------- --------- ---------
The emoluments of the Directors for the period were as
follows:
12 months 12 months
Fees/Salaries ended ended
inc. Er's Taxable Pension 31 March 31 March
NIC Benefits Bonus Contributions 2023 2022
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------- ------------- --------- --------- -------------- --------- ---------
M J Holt 224 - 63 - 287 281
J M d'Unienville 25 - - - 25 25
M Keeling (to 30 September
2022) 88 5 - 93 250
J A Mackenzie 25 - - - 25 25
A Ridgwell (to 23 August 2022) 10 - - - 10 27
G Lumsden (to 28 February
2023) 34 - - - 34 42
A Richardson (from 1 January
2023) 10 - - - 11 -
416 5 63 - 484 650
------------------------------- ------------- --------- --------- -------------- --------- ---------
The current Company Directors disclosed are considered as key
management personnel.
9. Notes supporting the cash flow statement
The cash collateral figure for the Group is GBP0.05 million
(FY22: GBP0.5m). This has been provided to Lloyds Bank plc as
security for insurance claims of the Group. This amount is not
included in the cash flow.
Group
Non-current Current
Loans and Loans
Borrowings and Borrowings
GBP'000s GBP'000s Total
Real Good Food plc (Group) (Note 23) (Note 23) GBP'000s
-------------------------------------------------- ----------- ----------------- ---------
At 31 March 2021 46,624 2,659 49,283
-------------------------------------------------- ----------- ----------------- ---------
Cash Flows (23,100) 899 (22,201)
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 4,009 28,302
-------------------------------------------------- ----------- ----------------- ---------
Cash Flows 374 1,301 1,966
Non-cash flows
- Interest accruing on loans 1,202 1,202
At 31 March 2023 25,869 5,310 31,179
-------------------------------------------------- ----------- ----------------- ---------
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:
31 March 31 March
2023 2022
Group Group
GBP'000s GBP'000s
----------------------------- --------- ---------
Short term borrowings (5,310) (4,009)
Short term lease liabilities (46) (48)
Long term borrowings (25,896) (24,293)
Long term lease liabilities (110) (155)
Cash 93 2,734
------------------------------ --------- ---------
Total Net Debt (31,243) (25,771)
------------------------------ --------- ---------
Group
Net cash
and current Non-current
borrowings borrowings Net debt
GBP'000s GBP'000s GBP'000s
---------------------------- ------------ ----------- ---------
At 1 April 2021 2,130 46,624 48,754
Cash flow(1) (1,617) (23,100) (24,717)
Other non-cash movements(2) 519 1,215 1,734
---------------------------- ------------ ----------- ---------
At 31 March 2022 1,032 24,739 25,771
Cash flow 4,912 566 5,478
Other non-cash movements (2) (45) (47)
---------------------------- ------------ ----------- ---------
At 31 March 2023 5,982 25,301 31,243
---------------------------- ------------ ----------- ---------
10. 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 12 months
ended ended
31 March 31 March
2023 2022
Group Group
------------------------------------------------- --------- ---------
(Loss)/profit after tax attributable to ordinary
shareholders (GBP'000s) (9,003) (21,362)
Weighted average number of shares in issue
for basic EPS ('000s) 99,564 99,564
Employee share options ('000s) - -
Convertible loan notes ('000s) 246,291 220,980
Weighted average number of shares in issue
for diluted EPS ('000s) 345,855 320,544
------------------------------------------------- --------- ---------
Basic and diluted (loss)/earnings per share (9.04)p (21.46)p
------------------------------------------------- --------- ---------
The total loss per share for 2023 is (2.85)p for continuing and
discontinued operations (2022 continuing and discontinued loss per
share: (6.66)p).
The weighted average number of shares in issue for the year was
99,564,430 and no options outstanding.
There were also 8,806,571 convertible loan notes outstanding, of
which the weighted average number of shares was 246,290,606.
Therefore, the weighted average number of dilutive potential
ordinary shares is 345,855,036
11. Goodwill
Goodwill acquired on business combinations is allocated at
acquisition to the cash generating units that are expected to
benefit from that business combination (2022: Impairment charge of
GBP16.1m). The carrying amount of goodwill has been allocated as
follows:
Group
GBP'000s
----------------- ---------
Cost
At 1 April 2022 16,619
----------------- ---------
Impairment -
----------------- ---------
At 31 March 2023 16,619
----------------- ---------
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 0% growth
rate due to decline in market.
Discount rate assumptions:
The discount rate applied to the cash flows is 15% (2022: 10%).
This rate is in line with the Company's actual weighted average
cost of capital of 14.37% which takes account of the increased risk
of being listed on AIM rather than the main market. It is
representative of businesses operating within the food sector.
Impairment charge:
The impairment review did not result in an impairment of the
goodwill held for Cake Decoration (2022: GBP16.1mil). 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 5% in the Group's weighted average cost of
capital of 15% to 20% would not cause an impairment.
12. Borrowings and capital management
31 March 31 March 31 March 31 March
2023 2023 2022 2022
Group Company Group Company
GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------------------- --------- --------- --------- ---------
Secured borrowings at amortised cost
Bank term loans 719 - 1,476 -
Revolving credit facilities 5,310 - 3,267 -
Leases 156 - 203 -
Investor loans* 7,725 7,725 7,256 7,256
Convertible loan notes** 17,425 17,425 16,103 16,103
Government grants - - - -
----------------------------------------------- --------- --------- --------- ---------
31,335 25,151 28,505 23,559
----------------------------------------------- --------- --------- --------- ---------
Borrowings due for settlement within 12 months 6,029 - 4,009 -
Lease liabilities due for settlement within
12 months 46 - 48 -
Borrowings due for settlement after 12 months 25,150 25,151 24,293 23,559
Lease liabilities due for settlement after
12 months 110 - 155 -
----------------------------------------------- --------- --------- --------- ---------
Total 31,335 25,151 28,505 23,559
----------------------------------------------- --------- --------- --------- ---------
* The investor loans shown consists of GBP4.7 million principal
amount, GBP2.3 million accrued interest up to 31 March 2023 and
redemption premiums of GBP0.7 million
** Convertible loan notes shown at 31 March 2023 consist of
GBP8.8 million investment (2021: GBP8.8 million), GBP8.6 million
accrued interest (2022: GBP7.5 million),
All existing shareholder loans are due to be paid in May
2024
All existing shareholder loans are due to be paid in May
2024.
Convertible loan notes
In May 2018, the Company secured further funding from each of
its major shareholders totalling GBP8.8 million. NB Holdings Ltd
and Omnicane Investors Ltd each providing GBP3.4 million, and funds
managed by Downing LLP provided GBP1.9 million. This instrument has
since, with shareholder approval, been replaced with convertible
loan notes ("CLN's") of GBP8.8 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 2023, the derivative liability was valued at GBP0.02 million
(2022: GBP0.02 million). The convertible loan notes shown consist
of a host loan at amortised cost of GBP17.4 million, GBP8.6 million
of accrued finance costs. There were no substantial modifications
to the loan notes in the period ended 31 March 2023.
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 GBP5.45 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 GBP2.1 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 GBP1.3m 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 loan principals at 31 March 2023 were as follows:
Principal
Date Amount Method of Funding Major Shareholder(s)
-------------- --------- ------------------- ---------------------------------------
May 2018 GBP8.8m Secured convertible NB Holdings Ltd (GBP3.4m), Omnicane
loan notes Investors Ltd (GBP3.4m),
Funds managed by Downing LLP (2.0m)
-------------- --------- ------------------- ---------------------------------------
March 2018 GBP2.3m Secured loan notes NB Holdings Ltd (GBP0.9m), Omnicane
Investors Ltd (GBP0.9m),
Funds managed by Downing LLP (GBP0.6m)
-------------- --------- ------------------- ---------------------------------------
January 2018 GBP0.3m Secured loan notes Funds managed by Downing LLP (GBP0.3m)
-------------- --------- ------------------- ---------------------------------------
September 2017 GBP0.8m Secured loan notes Funds managed by Downing LLP (GBP0.8m)
-------------- --------- ------------------- ---------------------------------------
June 2017 GBP1.3m Secured loan notes Funds managed by Downing LLP (GBP1.3m)
-------------- --------- ------------------- ---------------------------------------
Total GBP13.5m
-------------- --------- ------------------- ---------------------------------------
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 monthly and
monitors its forecast and actual cash flows against maturing
profiles of its financial assets and liabilities.
The following table details the Group's maturity profile of its
financial liabilities:
3 months
Less than to
1 month 1-3 months 1 year 1-5 years 5+ years Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------- --------- ---------- --------- --------- --------- ---------
2023
Trade and other payables 5,247 852 510 - - 6,609
Investor loans - - - 4,704 - 4,704
Convertible loan notes - - - 8,807 - 8,807
Bank term loans - - - 714 - 714
Revolving credit facilities - - 5,310 - - 5,310
5,247 852 5,820 14,225 - 26,144
Interest - - - 10,938 - 10,938
Redemption premiums - - - 706 - 706
--------------------------- --------- ---------- --------- --------- --------- ---------
Total 5,247 852 5,820 25,865 - 37,788
--------------------------- --------- ---------- --------- --------- --------- ---------
3 months
Less than to
1 month 1-3 months 1 year 1-5 years 5+ years Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'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 - 1,184
Revolving credit facilities - - 3,558 - - 3,558
Leases 4 8 36 155 - 203
4,980 1,268 4,184 14,588 - 25,019
Interest - - - 9,349 - 9,349
Redemption premiums - - - 706 - 706
--------------------------- --------- ---------- --------- --------- --------- ---------
Total 4,980 1,268 4,184 24,643 - 35,074
--------------------------- --------- ---------- --------- --------- --------- ---------
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.
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.
13. Pension arrangements
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. A pension funding agreement has been agreed with the
Trustee under which employer contributions to the scheme will total
GBP1.5 million between 1 January 2023 and 30 June 2025. For the
purposes of IAS 19 the data provided for the 31 March 2023
actuarial valuation, has been approximately updated to reflect
defined benefit obligations on the accounting basis at 31 March
2023. This has resulted in a Liability of 682k.
Present values of defined benefit obligations, fair value of
assets and deficit
31 March 31 March 31 March 31 March 31 March
2023 2022 2021 2020 2019
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------- --------- --------- --------- --------- ---------
Present value of defined benefit
obligation 16,123 19,929 21,885 21,750 21,177
Fair value of Plan assets (15,440) (21,426) (14,527) (13,735) (13,774)
--------------------------------- --------- --------- --------- --------- ---------
Deficit in Plan 683 (1,497) 7,358 7,015 7,403
Effect of asset ceiling/IFRIC14 - - 147 921 -
--------------------------------- --------- --------- --------- --------- ---------
Gross amount recognised 683 (1,497) 7,505 7,936 7,403
Deferred tax* - - (1,426) (1,508) (1,258)
--------------------------------- --------- --------- --------- --------- ---------
Net liability 683 (1,497) 6,079 6,428 6,145
--------------------------------- --------- --------- --------- --------- ---------
* Deferred tax rate 2022 at 25%; 2021 and 2020: 19%, and 2017,
2018 & 2019: 17%
Reconciliation of opening and closing balances of the present
value of the defined benefit obligations
31 March 31 March
2023 2022
GBP'000s GBP'000s
---------------------------------------------- --------- ---------
Defined benefit obligation at start of period 19,929 21,855
Interest cost 546 429
Actuarial losses / (gains) (3,482) (1,536)
Past service cost - -
Benefits paid (871) (849)
---------------------------------------------- --------- ---------
Defined benefit obligation at end of period 16,123 19,929
---------------------------------------------- --------- ---------
Reconciliation of opening and closing balances of the fair value
of Plan assets
31 March 31 March
2023 2022
GBP'000s GBP'000s
---------------------------------------------------------------- --------- ---------
Fair value of Plan assets at start of period 21,427 14,527
Interest income on Plan assets 588 431
Return on assets less interest income (5,704) (1,182)
Contributions paid by the Group - 8,500
Benefits paid, death-in-service insurance premiums and expenses (871) (850)
---------------------------------------------------------------- --------- ---------
Fair value of Plan assets at end of period 15,540 21,426
---------------------------------------------------------------- --------- ---------
UK equities - -
Other investments 15,540 21,426
---------------------------------------------------------------- --------- ---------
Total plan assets at end of period 15,540 21,426
---------------------------------------------------------------- --------- ---------
Total expense recognised in the Statement of Comprehensive
Income within other finance income
31 March 31 March
2023 2022
GBP'000s GBP'000s
----------------------------------------------- --------- ---------
Interest on liabilities 546 429
Interest on assets (588) (431)
Interest on effect of asset ceiling / IFRIC 14 - -
----------------------------------------------- --------- ---------
Net interest cost (42) (2)
Past service cost - -
----------------------------------------------- --------- ---------
Total cost (42) (2)
----------------------------------------------- --------- ---------
Statement of recognised income and expenses
31 March 31 March
2023 2022
GBP'000s GBP'000s
------------------------------------------------------------ --------- ---------
Actuarial gain/(loss) on the Plan assets (5,704) (1,182)
Actuarial gain/(loss) on the Plan liabilities arising from
changes in demographic assumptions (238) 199
Actuarial (loss)/gain on the Plan liabilities arising from
changes in financial assumptions 4,481 1,620
Actuarial (loss)/gain experience (761) (283)
Change in the effect of the asset ceiling / IFRIC14 - 147
------------------------------------------------------------ --------- ---------
Total amount recognised in Statement of Other Comprehensive
Income (2,222) 501
------------------------------------------------------------ --------- ---------
Assets
31 March 31 March 31 March
2023 2022 2021
GBP'000s GBP'000s GBP'000s
--------------------- --------- --------- ---------
UK equity - - 2,408
Absolute return fund 2,575 4,113 1,412
Corporate Bonds - - 2,936
Gilts 4,299 3,427 2,769
Multi-Asset Funds 1,716 4,621 4,827
Cash 6,850 9,265 175
--------------------- --------- --------- ---------
Total assets 15,440 21,426 14,527
--------------------- --------- --------- ---------
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 31 March 31 March 31 March
2023 2022 2021 2020
GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------------------- ---------- ---------- ---------- ----------
Inflation 3.10 3.80 3.40 2.70
Salary increases - - - -
Rate of discount 4.50 2.80 2.00 2.30
Allowance for pension in payment increases
RPI max 5% 3.10 3.70 3.30 2.70
RPI min 3% max 5% 3.50 3.90 3.60 3.20
Allowance for revaluation of deferred pensions 2.60 3.30 2.70 2.20
----------------------------------------------- ---------- ---------- ---------- ----------
Allowance for commutation of pension for 90% of 90% of 90% of 90% of
cash at retirement max max max max
allowance allowance allowance 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 2021 and then making appropriate adjustments for known
experience and for differences in assumptions.
The mortality assumptions adopted at 31 March 2023 and 31 March
2022 imply the following life expectancies from age 65:
31 March 31 March
2023 2022
------------------------------------------- -------- --------
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).
Historic funding positions
The funding positions applicable at the start of each period are
as follows:
12 months 12 months 12 months 12 months 12 months
ended ended ended ended ended
31 March 31 March 31 March 31 March 31 March
2023 2022 2021 2020 2019
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------------------------------------- --------- --------- --------- --------- ---------
Fair value of assets 15,440 21,426 14,527 13,735 13,774
Defined benefit obligation (16,122) (19,929) (21,885) (20,750) (21,177)
Effect of asset ceiling / IFRIC14 (147) - (147) (921) -
-------------------------------------------- --------- --------- --------- --------- ---------
(Deficit) in scheme (682) 1,497 (7,505) (7,936) (7,403)
Experience adjustment on scheme assets - - - (168) 518
-------------------------------------------- --------- --------- --------- --------- ---------
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 Obligation Obligation
Change Increase Decrease
------------------------ ---------- ---------- ----------
Discount Rate (+/- 0.5%) 6% 6%
RPI Inflation (+/- 0.5%) 3% 3%
(+/-) 1
Assumed Life expectancy Year 4% 4%
------------------------ ---------- ---------- ----------
Small changes to other assumptions, such as the allowance for
commutation of pension for cash at retirement, and the proportion
of members assumed to be married at retirement, do not have such a
significant effect on the obligations of the Plan.
14. Post balance sheet events
On 6 April 2023, the Group secured a GBP550,000 short-term loan
from Downing LLP and Omnicane Investors Ltd, two of it principal
shareholders and loan note holders. Interest rate of 12% annualised
is payable on repayment together with a redemption premium. If the
loan is repaid before 6 October 2024 a 100% redemption premium is
payable if repayment is after 5 October 2024 the redemption premium
is 200%.
In July 2023, John Tague was appointed as MD of JF Renshaw and
Rainbow Dust Colours replacing Steve Moon. John has significant
expertise and a track record of managing successful business
transformations.
A 12-month extension has been agreed with Hilco Private Capital
to roll-over GBP2.3 million of the GBP2.5 million facility dated 18
November 2022.
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END
FR FLFLDATIIFIV
(END) Dow Jones Newswires
September 21, 2023 02:00 ET (06:00 GMT)
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