Liverpool / UK. (rgf) British Real Good Food Company PLC (RGF) provides the following update on trading for its financial year ended 31 March 2020 and the impact of Covid-19.
Summary
- Revenues were broadly in line with the Board’s expectations although performance was impacted in March due to Covid-19
- Adjusted Ebitda is broadly in line with expectations, and better than prior year
- The Board expects there to be a material impact on revenues in the first quarter of the new financial year and potentially thereafter
- The Group’s manufacturing sites remain open and are supplying customers with product in line with reduced levels of demand
- The Company remains well supported by its major shareholders and funders
Trading in the year ended 31 March 2020
The Group is pleased to confirm for the year ended 31 March 2020 that revenues were up by c 9 percent to circa GBP 67 million on prior year. Adjusted Ebitda was up on prior year by 178 percent to circa GBP 5.4 million and has benefited from further reductions in head office costs.
Brighter Foods revenues were up year on year by 67 percent, securing a new contract with a global customer, that started in January of this year whilst benefiting from continued organic growth with existing customers. Brighter started producing products on its new production line and efficiencies were delivered in line with expectations.
Cake Decoration has come under pressure owing to the declining market for sugar paste (c.-14.7 percent)[1] and marzipan (-2.1 percent). However, frostings are a growing market and the business is well placed in this segment following recent investment. Revenues in the US and Europe are broadly in line with expectations; Cake Decorations has reduced overheads by c11 percent and will continue to review its cost base during FY21.
Financial expectations noted above are subject to the completion of year-end financial close and audit processes.
Covid-19 Impact
Overall, the Board expects there to be a material impact on sales at least in the first quarter of the new financial year due to Covid-19.
Priority – business continuity
Our priority is the safety of our staff whilst still supplying our customers with the highest quality product. We are following all government guidelines, with most back-office staff now working from home and full risk assessments completed in terms of social distancing at our manufacturing sites. The recent IT upgrade at Renshaw’s has enabled home working and the ability to hold virtual meetings with our international customers and colleagues (Brighter was already well invested in this area). In light of lower demand, production planning is being reviewed in consultation with customers to rationalise the products we are making.
RGF has a robust crisis management plan that we have been implementing including taking actions to mitigate risks. For example, when the pandemic first appeared in China, we reviewed our suppliers in China and sourced alternatives in Europe, ensuring adequate production cover.
The impact on the sectors we serve can be summarised as follows:
- the manufacturing sector is likely to be able to maintain or grow sales
- the wholesale sector has had a downturn due to its customers in the restaurant and leisure sectors having to close premises
- the retail sector has focused on filling shelves with ‘essential’ products, and has changed some order patterns, whilst rationalising some niche products and colours
Turning to the impact on our divisions, this may be summarised as follows:
Brighter Foods
- its snack bars have significant sales into the ‘food on the go’ and service station sectors and therefore the current restrictions on travel are impacting these sales
- the nutritionally controlled and diet sector is also facing challenges and therefore there are expected to be lower stock requirements
- overall Brighter is operating in line with demand and is in close contact with its customer base to ensure forecasts are in line with production
Renshaws
- revenues impacted in both France and Netherlands where it has a high proportion of activity
- revenues in America although lower are holding up relatively well so far
- Renshaws has furloughed nearly half of its employees, giving the business a lower cost base, to offset some of the decline in sales
Funding – measures we are taking to conserve cash
We are working to prepare the business for varying levels of revenues and have modelled the effects of these, whilst reviewing all the measures we can take to ensure that the Company exits this period with a sustainable business model for the future. We have close working relationships with our major shareholders and funders who remain supportive.
In common with other companies, RGF is reviewing all options to mitigate the impact of the reduced sales. For example, Cake Decorations is utilising the government job retention programme and has furloughed c.140 staff across all functions, for an initial period of three weeks.
The first priority is conserving cash, and we are using or considering a number of measures including the funding of our debtors; furloughed employees assistance from the government; the delay of discretionary capital expenditure and review of other discretionary costs; deferred payment of VAT; and deferring payments of rent and rates in agreement with our landlords and councils.
Non-executive Chairman’s Statement
Non-executive Chairman Mike Holt said: «We are grateful to our staff and stakeholders as we work together through this challenging period. The budgets we were signing off just a short time ago are now being updated to include all the measures we are taking to ensure that the Group has a sustainable business going forward. We believe the food industry is resilient and that Real Good Food is well placed within the segments we serve and given the quality of our products and operations.»
