Liverpool / UK. (rgf) British Real Good Food Company PLC announced interim results for the six months ending 30 September 2015. Interim Highlights:
- Completion of sale of Napier Brown for a total consideration of 44.4 million GBP (including working capital) delivering an exceptional profit in the period of 9.4 million GBP
- Strong increase in Group Ebitda: 2.0 million GBP (2014: loss of 3.0 million GBP)
- Profit after tax for the period is 9.3 million GBP compared to a loss of 4.7 million GBP for the same period last year
- Successful commercial and management integration of Rainbow Dust Colours into the Group
- Strong financial and operational platform in place for future growth in all three pillar markets: cake decoration, food ingredients and premium bakery
- Significant reduction in net debt at balance sheet date to 3.0 million GBP (2014: 36.3 million GBP)
- Positive sales trends in important third quarter Christmas trading period at Haydens Bakery and Cake Decorating Businesses.
Executive Chairman’s Commentary
Commenting on the interim results, Pieter Totté, Executive Chairman, said: «I am pleased to report that the Group made positive operational and financial progress during the reported period resulting in total Group Ebitda being significantly improved when compared to the same period last year. We completed the sale of Napier Brown for a total consideration of 44.4 million GBP, which delivered an exceptional profit in the period of 9.4 million GBP. Importantly we are now seeing the benefits of the operational strategy and investment programme that we have been implementing over the last couple of years across our individual business units, which are now managed on a stand-alone basis. This coincides with a significant reduction in Group net debt and improved working capital, resulting in a business which is much transformed and well positioned for further future growth».
Commenting on current trading and future strategy, Totté added: «We will now look to use the Group’s strong balance sheet to continue to invest in our three pillar markets of cake decoration, food ingredients and premium bakery, to drive Ebitda and operating profit as well as exploring further bolt-on acquisition opportunities. We are now well into the important third quarter, which includes the Christmas trading period and I am pleased to report positive sales trends so far at both our cake decorating businesses and at Haydens. With this context, the Board is confident that the outcome for the full year will be in line with current market expectations and we look forward with confidence».
Overview
Totté is pleased to report that the Group made healthy operational and financial progress during the reported period resulting in total Group Ebitda being significantly improved when compared to the same period last year. We completed the sale of Napier Brown for a total consideration of 44.4 million GBP, which delivered an exceptional profit in the period of 9.4 million GBP. Importantly we are now seeing the benefits of the operational strategy and investment programme that we have been implementing over the last couple of years across our individual business units, now run on a stand-alone basis. This coincides with a significant reduction in Group net debt and improved working capital, resulting in a business which is much transformed and is well positioned for further future growth.
Divisional Business Reviews
Renshaw: Renshaw is a leading manufacturer of high-quality food ingredients, primarily to the baking sector both in the UK and for export. Key products and brands include: Sugar paste, marzipan, soft icings, mallows, caramel. Customers include large food manufacturers, craft bakers, grocery and specialist retailers both in the UK and internationally. Volumes were slightly down on a like for like basis compared with last year, but this was largely due to the ending of a third party manufacturing contract, in line with our overall strategy of improving sales and margin mix. The result was improved margin and operating profit compared with the same period last year. Early signs are that the important Christmas trading period will be strong and sales in overseas territories such as the US and particularly Australia continue to make good progress. In addition to these sales initiatives, considerable work is underway to upgrade the product range and to invest in flexible manufacturing systems which will improve customer service and thereby underpin our leadership in the sector. We have also started plans to increase the warehouse capacity at the Liverpool site which once completed will bring an immediate cost benefit by reducing outside storage costs.
Rainbow Dust Colours: Recently acquired by the Group, Rainbow Dust Colours is a manufacturer and wholesale supplier of specialist sugar craft and cake decorating products. These include: Edible and food contact glitters; Metallic and none-metallic food paints; Specialist cake decorating powders; ProGel® food colours – concentrated colour for sugar paste marzipan and butter cream; and ready to use paint brushes with unique Click-twist® brushes and double-sided pens. Integration following the acquisition is now complete and overall sales continued to show significant year on year growth with operating profit following a similar trend. Over 500 new accounts were registered to the website in the first six months of the year suggesting that this growth trend is sustainable. Following the appointment of David Grieve as Managing Director a full management structure is now in place, which will facilitate the next phase of the growth plan. New warehouse capacity designed to serve the ‘sugar craft’ sector will be in place early next year and the team is working with Real Good Food Europe to identify additional market opportunities in Europe with a number of new product launches planned for the second half of the year.
Garrett Ingredients: Garrett Ingredients sources dairy, sugar and other specialist food ingredients from across the UK, Eire and continental Europe and sells them to large, medium + small food manufacturing businesses across the UK. The dairy portfolio comprises dry powder mixes and bespoke blends as well as chilled and cultured products. Other specialist ingredients include dextrose, stabilisers and emulsifiers. The sugar and dairy markets continued at unprecedented lows during the first half bringing fierce price competition and as a consequence, despite a similar volume and product mix, revenues were around 30 percent below the previous year. However, pleasingly, operating profit was only down by 15 percent when compared with the same period last year. The business has completed its transformation to a ‘stand-alone’ business unit following the sale of Napier Brown and the team are focusing on pursuing a number of added value initiatives such as the targeting of new sectors including the growing Sports Nutrition market. While there are some signs that sugar prices will rise following the new October ‘contract season’, dairy markets remain volatile.
R+W Scott: R+W Scott produces chocolate coatings and sauces, jams and dry powder blends for the industrial, retail, wholesale and foodservice markets. Key products and brands include: chocolate coatings which are supplied in liquid, drops and block formats; jams – supplied both to food manufacturers and in jars for retail; and mixes, which are supplied in bags for food manufacturers. Sales volumes were slightly down on the previous year, but operating profit and gross margin again increased reflecting our underlying strategy of improving the sales mix and migrating the business towards added value accounts and new products. Operational improvements were delivered in materials control and stock management and an investment has been made in additional capacity for the new pie filling business. The second half of the year will see the completion of a significant capital investment programme which will give the business the manufacturing profile it requires to maximise its sales growth opportunities.
Real Good Food Europe: Real Good Food Europe sells, markets and distributes products from Real Good Food UK companies across Europe. While most of its sales are currently of Renshaw produced products (in particular icings), opportunities are now being identified with Rainbow Dust Colours and R+W Scott. Although still relatively small in overall Group terms, operating profit improved compared to the same period last year. The introduction of new business systems to integrate order and stock management in the warehouse and the installation of a new labelling machine will enable a more bespoke service offering. A new ‘tropical’ recipe of sugar paste has also been launched to meet the requirement for a firmer product in hotter climates in Southern Europe. The focus is now to grow market share across all European geographies and the second half should benefit from sales growth in the important German market, where two new sales representatives have been recruited.
Haydens Bakery: Haydens Bakery produces an extensive range of hand-finished, added value bakery and dessert products. Customers include Waitrose, Marks and Spencer, Costa Coffee, Caffè Nero, Morrisons, Aldi and Food Service Distributors. Haydens focuses on six product groups: Tarts, Danish, Yum Yums, Pies + Crumbles, Sweet Buns and Premium Doughnuts. Sales and operating profit at Haydens were broadly flat when compared with the same period last year. However, the critical trading period is the third quarter lead up to Christmas and encouragingly, initial signs are promising with a strong presence of products over Christmas in Waitrose, Costa, M+S , Aldi and Morrisons. A new sales manager for the foodservice sector has also already delivered a number of new opportunities and the company is undergoing a major overhaul of its identity to reflect its new strategy and ability to serve a broader customer base.
Cash Flow and Debt
During the period a gross cash inflow of 44.4 million GBP, prior to expenses, was received from the sale of the Napier Brown business. These funds were used to repay the all of the Group’s borrowing with PNC Business Capital. The result is a sound financial basis from which the Group will invest in its existing businesses, as well as exploring bolt-on acquisitions to provide further growth to the Group. In order to assist with this growth the Group is pleased to announce that is has entered into a new facility arrangement with Lloyds Bank PLC, creating a ten million GBP revolving credit facility secured on its Debtor book. This facility will fund the Group’s future working capital requirements and assist in funding its capital projects. Update on Proposed restructuring of share capital to enable dividend payments: Following approval at the EGM held on 23 September 2015 the Group has instructed its solicitors to begin the process to transfer its share premium reserve into distributable reserves. Upon completion of the legal process the Board of Directors will consider the approval of a dividend to shareholders.
Future Strategy
We will look to use the Group’s strong balance sheet to invest further in our three pillar markets of cake decoration, food ingredients and premium bakery, using the new operational and stand-alone management structures to drive growth and profitability. Coupled with this we are keen to explore further earning enhancing acquisitions, in the mould of Rainbow Dust Colours, and believe our chosen markets present a number of interesting consolidation opportunities.
Outlook
We are now well into the important third quarter, which includes the Christmas trading period and I am pleased to report positive sales trends so far at both our cake decorating businesses and at Haydens. Accordingly at this stage, the Board is confident that the outcome for the full year will be in line with current market expectations and we look forward to the rest of the year with confidence.
