8th Apr 2005 07:00
Real Good Food Company Plc (The)08 April 2005 Date: 8th April 2005 On behalf of: The Real Good Food Company plc Embargoed until: 0700hrs THE REAL GOOD FOOD COMPANY PLCPRELIMINARY RESULTS 2004 The Real Good Food Company plc, the food group focused on servicing high endniche markets, today announced its preliminary results for the sixteen monthsended 31 December 2004. The highlights of which are: • Total revenues of £44,608,000 (2003: £3,723,000) • Loss for the period of £698,000 - (2003: (£232,000)) • Basic loss per share of £0.064 - (2003: £0.074) following the issue and conversion of shares during the year • Acquisition of Five Star Fish Limited and its subsidiary, Tom Darwood Limited Commenting on the preliminary results, Pieter Totte, Chairman, said: "During 2004, the Group has continued to pursue its strategy of organic andacquisitive growth and in the second half moved into profit. In addition,investments have been made in improving the quality of our assets and ourmanagement has been further strengthened to support our next planned phase ofgrowth. We now look forward to building The Real Good Food Group plc into amajor force in the food sector in the years ahead - we are on our way." For further information: The Real Good Food Company plc Tel: 020 7234 0570Pieter Totte Numis Securities Tel: 020 7776 1500Andrew Dawber/Nick Westlake Redleaf Communications Tel: 020 7955 1410Emma Kane/Duncan McCormick Notes to Editors: • The Real Good Company plc is a food group servicing high end niche markets. It aims to grow both through acquisitions and organically. It acquires underperforming businesses lacking critical mass, product focus and wide ranging retail relationships, and profitable businesses lacking business focus or access to markets. It is listed on AIM (Symbol: RGD). CHAIRMAN'S STATEMENT Introduction I am pleased to report the Company's Preliminary Results for the sixteen monthsto 31 December 2004. As indicated in our last Interim Results, the Companychanged its reporting year to 31st December following the acquisition of FiveStar Fish in May 2004. Highlights in the period include: • Restructuring of the Group is now complete, providing a strong platform for future growth. • Haydens Bakeries sales are up by more than 20% on the prior year with improved profitability in the second half of 2004 and record sales in the pre-Christmas period. Tony Harris, new Managing Director recently appointed. • Five Star Fish has more than met our expectations since its acquisition in May 2004 with sales levels up 10% on the prior year. • Seriously Scrumptious has won new business and Dennis Scott has been appointed as its new Managing Director. • Trading at Coolfresh has improved following the planned restructuring of the business. Discussions are at an advanced stage to bring about a substantial increase in the utilisation of our capacity in line with our strategy. In accordance with our expectations, the Company has made good progress in bothfinancial and strategic terms in this period. Each of our businesses hassucceeded in improving efficiency through restructuring the cost base and therewill be continued focus on this in 2005. We have made a number of seniormanagement appointments across the Group that will underpin our growth in themonths and years ahead, supported by the improved systems that we implementedduring 2004. Results It is pleasing to report total Company turnover of £44.6 million, comprising of£28.8 million on continuous operations and £15.8 million generated from theacquisition of Five Star Fish. Sales growth has been driven by the BakeryDivision (Haydens and Seriously Scrumptious) with new product launches, rangeextensions and new customer listings. The Sandwich division's (Coolfresh)turnover has, as expected, declined on the previous period due to the plannedrestructuring of the business but as we note above we have ambitious plans forour facilities in the future. The Group recorded a small net loss for the period of £0.7 million afterexceptional reorganization costs of £0.4 million and interest payable of £0.4million. Overall net debt levels at the end of 2004 were £9.0 million, compared to £1.1million at the 31st August 2003. The increase reflects incremental facilitiesrelating to the purchase of Five Star Fish. Operating Company Review Haydens Bakeries Haydens Bakeries supplies premium, innovative pattiserie and desserts to groceryretail customers. During the period under review, Haydens moved into profitability within a yearof our acquisition of the business. Prior to the acquisition, Haydens had beenloss-making for the previous four years. Increased sales, better control overdirect labour, some improvement in raw material costs and stable overhead costshave all played a part in achieving this result. The Group acquired Haydens in July 2003 and has since implemented acomprehensive review of practices and procedures across the operation. Inparticular, we were concerned about the problems experienced during theintroduction of new products at the beginning of the financial year.Consequently, a number of changes have been made including the appointment of anew Operations Director together with a number of other senior appointments.Most recently, Tony Harris, formerly Chief Executive of Elizabeth the Chef, hasbeen appointed Managing Director. We are confident that the business is now ingood shape. Whilst Waitrose remains the largest customer by some way, Marks & Spencer hasplaced a meaningful level of business with Haydens as a result of our uniqueposition in the production of fried, laminated dough products. Sales toWaitrose grew significantly throughout the period as a consequence of the launchof new products, growth in existing lines and the commencement in the supply tonew Waitrose stores, purchased from Morrisons. Over the period, total grossweekly sales increased from £220,000 to in excess of £300,000. Investments in new equipment designed to increase productivity but not to affectthe high quality, hand finished nature of the product have been made in a numberof areas. A new laminating plant producing up to 500kg of pastry per hour forDanish pastries, croissants and Yum Yums was commissioned in April 2004. Piemanufacturing has been improved by purchasing a Comas line, commissioned inDecember 2004, and a purpose-built croissant moulder was acquired for a range ofnew products at the end of 2004. The total cost of those investments was inexcess of £1 million. In addition, a further £450,000 was spent on other smaller projects, includingflour wrapping and crumble manufacture. Further investments in an automatedfrying line and weighing machines, for better raw material, control are plannedfor 2005. Total capital expenditure is forecast to be in excess of £750,000 thisfinancial year. The combined impact of these capital projects will be to providethe business with increased capacity and efficiency in the key segments of ourproduct portfolio. During the current financial year, a total of up to 40 new products will belaunched with our major customers, which are expected to contribute up to 40% ofHaydens' projected incremental sales growth. In March 2004, the business returned to profitability and has maintained animproving trend throughout the period. On a quarter-by-quarter basis, netmargins have improved and management expects this trend to continue through2005. Five Star Fish Five Star Fish supplies value-added, prepared frozen fish for the food servicesector. Five Star Fish became part of RGFC in May 2004. We are delighted to confirm thatduring the period since acquisition, the business achieved the EBIT earn outtarget set at the time of the acquisition and has proven to be a highlysuccessful addition to the RGFC Group. Sales exceeded expectations with growthin added-value products more than compensating for the planned reduced sales inlower margin products. Sales to all key customers grew year on year and a numberof new end-user customers came on stream. Capital expenditure was minimal in the period. However, the Board is consideringa project to increase the unit's capability to batter/bread, fry and freeze inline for implementation in the second half of 2005. Sourcing of high quality raw material is a key aspect to the efficient runningof the plant. During the year, the Company has strengthened its worldwidesourcing arrangements and has put in place a number of "partnership"relationships with suppliers in all the key producing areas. The senior management team remained unchanged during the financial year,however, at the end of January 2005 as expected Roy Matthews, a long termDirector of Five Star Fish Ltd, left the Company on reaching retirement age. Wewish Roy a long and happy retirement. It is our expectation that the currentFive Star management will remain in place for some time to come. Five Star is well set for further growth in volume and, having increased sellingprices to reflect the higher raw material costs incurred in 2004, net marginsare expected to remain at previous year levels. Whilst the factory is operatingat higher levels of throughput, there is ample capacity for further growth. Since acquisition, Five Star has focused on consolidating its position in thefood service sector. However, contacts have now been made in the retail sectorand a review of opportunities is being undertaken in the summer of 2005 with aview to diversifying Five Star's customer base into this area. There are a number of small to medium sized companies competing with Five Star.We believe many of these are likely to exit the sector in the shorter term asscale and critical mass become increasingly important. We believe that we are inan ideal position to take advantage of any sector restructuring to further widenthe customer base or increase our range. Coolfresh Coolfresh supplies sandwiches, wraps and panninis to the food service sector. We further restructured the business during the late summer after our decisionto withdraw from the Caffe Nero trade, enabling the business to focus upondeveloping a robust platform for future growth. As indicated in our pre-closestatement, discussions are taking place with a number of other suppliers with aview to strengthening our position in this key market sector and increasing ourmarket share. A new Managing Director was appointed in spring 2004 and performance improvedsignificantly over the summer period. Seriously Scrumptious Seriously Scrumptious supplies hand finished celebration cakes and otherindividual pattiserie and dessert products to the retail and food servicesectors. The business achieved British Retail Consortium higher-level accreditation inApril 2004 and has developed a number of good customer relationships as aconsequence. In recent months, additional sales have been made to Waitrose andSelfridges and trading has recommenced with Q.V.C. Whilst retaining a presence in the high quality, high value celebration sector,the new Managing Director, Dennis Scott, is concentrating development on the "snacking" and convenience sectors of the quality cake market. These sectors arehighly fragmented presenting Seriously Scrumptious with a significantopportunity to provide a high quality offering on a direct basis to customersbuying centrally and also link with the offering from the sandwich division totheir customer base. Development is also underway to produce a range of chilled individual cakes anddesserts specifically designed for the foodservice sector. Whilst sales and margins have been disappointing to date, the unit now has newmanagement (the former owner of the business left at the end of 2004) and a newfocus, giving the business strong prospects. Current Trading Overall sales levels and operating profit across the group are in line with ourexpectations for the first two months of 2005. Both of RGFC's principalbusinesses, Haydens Bakeries and Five Star Fish, are trading well above the sameperiod a year ago. Coolfresh and Simply Scrumptious are trading in line withexpectations. Gross margins in all our major business units have improved incomparison with the same period in 2004. A wide range of new product development activity is in place with our majorcustomers which we expect to give rise to a significant uplift in volumes in thesecond half of the year. Strategy Since inception, the Group has grown both organically and through theacquisition of businesses operating in areas of significant strategicopportunity for the Company. Investments in improving the quality of our assetshave been made and management strengthened. A number of acquisition/restructuring opportunities have been presented to theCompany in 2004 and 2005. The Company continues to review these opportunities aspart of our overall strategy to reach significant critical mass as a diversifiedfood production business. We will however remain highly selective in theopportunities that we explore. Summary At the time of our Interim Statement, we indicated that the Group would moveinto profit in the second half of 2004. This has been achieved and we lookforward to building The Real Good Food Group plc into a major force in the foodsector in the years ahead. Pieter TotteChairman8 April 2005 The Real Good Food Company plcCONSOLIDATED profit and loss accountperiod ended 31 December 2004 Before Before goodwill Goodwill goodwill Goodwill amortisation amortisation amortisation amortisation and and and and exceptional exceptional exceptional exceptional items items Total items items Total 16 months 16 months 16 months 7 months 7 months 7 months ended 31 ended 31 ended 31 ended 31 ended 31 ended 31 December December December August* August* August* 2004 2004 2004 2003 2003 2003 £'000s £'000s £'000s £'000s £'000s £'000s TURNOVERContinuing operations 28,813 - 28,813 3,723 - 3,723Acquisitions 15,795 - 15,795 - - - 44,608 - 44,608 3,723 - 3,723Cost of sales (31,826) - (31,826) (2,850) - (2,850) GROSS PROFIT 12,782 - 12,782 873 - 873Distribution costs (3,185) - (3,185) (82) - (82)Administration expenses (9,641) (666) (10,307) (1,004) (6) (1,010)Other operating income 54 - 54 - - - OPERATING LOSS 10 (666) (656) (213) (6) (219)Continuing operations (2,008) (666) (2,674) (213) (6) (219)Acquisitions 2,018 - 2,018 - - EXCEPTIONAL ITEMSReorganisation costs - (440) (440) - - - LOSS ON ORDINARYACTIVITIES BEFOREINTEREST AND TAXATION 10 (1,106) (1,096) (213) (6) (219) Interest receivable 59 - 59 1 - 1Interest payable (494) - (494) (14) - (14) LOSS ON ORDINARYACTIVITIESBEFORE TAXATION (425) (1,106) (1,531) (226) (6) (232) Taxation 533 300 833 - - - LOSS FOR THE PERIOD 108 (806) (698) (226) (6) (232) Basic loss per share (0.064) (0.074)**Diluted loss per share (0.063) (0.074)** * the prior seven month period incorporates two months' trading. There are no recognised gains and losses other than those shown in the aboveprofit and loss account. The Real Good Food Company plcconsolidated balance sheet31 December 2004 31 December 31 August 2004 2003 £'000s £'000s FIXED ASSETSIntangible assets:-Negative goodwill (433) (435)Positive goodwill 16,737 1,233 Tangible fixed assets 6,377 2,540 22,681 3,338 CURRENT ASSETSStock 4,218 489Deferred tax asset 914 158Debtors 6,315 2,892Cash at bank and in hand 1,420 554 12,867 4,093 CREDITORS:Amounts falling due within one year (16,132) (5,373) NET CURRENT LIABILITIES (3,265) (1,280) TOTAL ASSETS LESS CURRENT LIABILITIES 19,416 2,058 CREDITORS:Amounts falling due after more than one year (6,421) (606) PROVISIONS FOR LIABILITIES AND CHARGES - (276) NET ASSETS 12,995 1,176 CAPITAL AND RESERVESCalled up share capital 282 79Share premium account 13,643 1,329Profit and loss account (930) (232) SHAREHOLDERS' FUNDS 12,995 1,176 The Real Good Food Company plcCONSOLIDATED cash flow statementperiod ended 31 December 2004 As restated Period ended Period ended 31 December 31 August 2004 2003 £'000s £'000s Net cash (outflow)/inflow fromoperating activities (1,354) 280 Returns on investment and servicing of financeInterest received 59 1Interest paid on bank loans, overdrafts andloan stock (391) (14) Net cash outflow from returns on investmentsand servicing of finance (332) (13) Taxation paid (10) - Capital expenditurePurchase of intangible assets - (13)Purchase of tangible fixed assets (1,934) (221)Sales of tangible fixed assets 24 - (1,910) (234)Acquisitions and disposalsPurchase of investments in subsidiary undertakings (15,178) (979)Overdrafts and cash received with acquisition (788) (539) Net cash outflow from acquisitions and disposals (15,966) (1,518) Net cash outflow before use ofliquid resources and financing (19,572) (1,485) Financing 17,127 1,408 Decrease (2,445) (77) The Real Good Food Company plcNOTES TO THE FINANCIAL STATEMENTSperiod ended 31 December 2004 1. ACCOUNTING POLICIES The following accounting policies have been applied consistently in dealing withitems which are considered material in relation to the Group's financialstatements. a) Basis of Preparation The financial statements have been prepared in accordance with applicableaccounting standards under the historical cost accounting rules. b) Basis of Consolidation The Group financial statements consolidate the financial statements of theCompany and its subsidiary undertakings. The acquisition method of accountinghas been adopted. Under this method the results of all the subsidiaryundertakings are included in the consolidated profit and loss account from thedate of acquisition or up to the date of disposal. Intra-group sales and profitsare eliminated on consolidation and all sales and profit figures relate toexternal transactions only. Under Section 231(4) of the Companies Act 1985 the Company is exempt from therequirement to present its own profit and loss account. The loss for thefinancial period, before dividends payable, dealt with in the financialstatements of the holding Company, which have been approved by the Board, was£799,000. 2. Earnings per SHARE The calculation of the basic loss per share is based on a loss on ordinaryactivities after taxation of £698,000 (31 August 2003 - £232,000), and on theweighted average number of ordinary shares in issue during the period of10,964,662 (31 August 2003 - 3,152,713**). Diluted loss per share are based on a loss on ordinary activities after taxationof £698,000 (31 August 2003 - £232,000). The dilution effect is calculated onthe full exercise of options and warrants compared with the average mid-marketprice over the period for which they were outstanding. The resulting number ofshares on which diluted earnings have been calculated is 11,039,906 (31 August2003 - 3,154,963**). ** In accordance with FRS 14 the weighted average number of shares for 31 August2003 has been adjusted to take account of the ordinary share capital split whichtook place on 29 September 2003. As such the earnings per share for the priorperiod has been restated from a loss of £4.90 per share to a loss £0.074 pershare. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RGD.L