UK sugar-to-dessert group Real Good Food Company has booked a 62% increase in EBITDA on strong sales gains.
EBITDA for the 15 months to 31 March rose to GBP9.1m (US$14.3m) on sales that increased from GBP249m to GBP305.5m. Key trading divisions of Napier Brown, Garrett and Renshaw all increased their EBITDA performance year-on-year, the company revealed.
Pre-tax profits rose to GBP4.4m, compared with GBP1.9m last year.
Pieter Totte, RGFC executive chairman, said the firm has "delivered" on its aim to drive sales and profits.
"We are now embarking on an exciting period designed to transform the scale of the group over the next three years," he said.
Show the press release The Real Good Food Company plc (AIM: RGD)
Results for the 15 months to 31 March 2012
The Real Good Food Company plc ("RGFC" or the "Group"), owns the largest independent non-refining distributor of sugar in Europe (Napier Brown), supplies bakery ingredients (Renshaw and R&W Scott ) and manufactures patisserie and desserts (Haydens Bakery)
Highlights
§ Strong performance driven by focus on brand development and by driving sales growth
§ EBITDA up 62% to £9.1m in 12 months to December 2011 (2010: £5.6m) - performance in 3 Months to 31 March 2012 reflects usual seasonal pattern of trading in quarter one (January to March)
§ Key trading divisions of Napier Brown, Garrett and Renshaw all increased their EBITDA performance year on year
§ Significant improvement in EPS adjusted (fully diluted excluding significant items) at 5.7p for 15 months to 31 March 2012 up 119% on 2.6p for 12 months to 31 December 2010
§ Significant improvement in Net Debt / EBITDA ratio, down from 4.0 at 31 December 2010 to 2.8 at 31 December 2011. (March 2012 reflects normal seasonality profile)
§ Net borrowings of £28.7m at 31 March 2012 are up against 2010 driven primarily by the increased value in the supply chain following the impact mainly of higher sugar costs, but still down on position at 31 March 2011
Pieter Totte, RGFC Executive Chairman, commented:
"In 2011 we delivered on our commitment to return to growth in sales and profitability. We are now embarking on an exciting period designed to transform the scale of the Group over the next three years. This strategy is rooted in robust plans produced by each individual business and we have restructured the Group to support these."
Change of Accounting Reference Date
In April 2011 the board announced it was moving its reference date from 31 December to 31 March to better align its financial reporting with its trading seasonality. The October to December period being especially busy generating most of the year's operating profits (approx 58% of EBITDA is generated in 2011 calendar).
Prior to this change the group was faced with preparing annual budgets and market updates for the current year before the key trading period results were known. Whilst we have had a good track record in meeting expectations over the last two to three years the board believe this change will improve the quality and accuracy of reporting in the future.
To help retain transparency where relevant the 2011 calendar year results are presented in this report alongside the 15 Months to 31 March 2012 to aid comparison with the prior year.
Impact of Change
The Jan - March period is the Group's "quietest" trading period with EBITDA typically around the break even level driven by the combination of the lowest sales levels in the year in this quarter with a relatively flat overhead base through the year.
This is evident in the trading comparatives with sales of £305.5m for the 15 Months to 31 March 2012, £56.5m higher than the 12 months ended 31 Dec 2011 (£249.0m) but profitability flat with EBITDA at £9.2m and £9.1m respectively. Given this, the key comparatives and commentary in this report will focus on comparing like with like, with performance for the full year 2011 compared with 2010 (calendar) to ensure that the underlying year on year trading is visible.
CHAIRMAN'S STATEMENT
Overview
I am very pleased with our achievements during 2011: we have delivered significant growth in both sales and EBITDA as well as setting out a clear course for how we intend to build the business over the next three years.
All divisions recorded sales growth and Group EBITDA increased to £9.1m in 2011, an increase of £3.5m on 2010. A significant proportion of this came from Napier Brown as we responded successfully to the market changes but the overall profit performance was supported also by strong results from Renshaw and Garrett Ingredients. Overall profits for the 15 month period to 31 March 2012 were in line with expectations.
Working capital levels generally have been higher during 2011 as compared to 2010 as a result of both supporting our growth plans and reflecting higher commodity prices, particularly in sugar. As at 31 March 2012 working capital of £38.8m was up 8% on 31 March 2011 (£35.9m) but well within management expectations.
Net Debt as at 31 March 2012 was £28.7m (31 March 2011: £29.4m) in line with expectations with Net Debt/EBITDA levels reducing significantly from 4.0 in 2010 to 2.8 at 31 December 2011.
The changes in the sugar market following the Sugar Regime reform period now give Napier Brown a very clear strategic focus. Customers in the EU are looking for alternative sources of sugar to provide competition to the reducing number of big EU beet producers. With our experience in sugar sourcing and our well established routes to market we are well placed to provide this.
In this respect we are delighted that Omnicane, the biggest sugar producer in Mauritius, has decided to take a significant equity stake in RGFC. We have known them for many years and following their investment in the Company we have held positive discussions which lead us to believe that there are many mutual benefits to be realised from greater cooperation.
Omnicane, with its world class model of sugar cane refining combined with electricity co-generation, is a low cost producer of cane sugar. We believe that this model of refining cane sugar in the source country is the right one, not only for Mauritius but also for other cane producers across the world and we intend to work in partnership with Omnicane to develop this. Omnicane can provide the experience and expertise in cane refining and Napier Brown can provide the routes to market, particularly in Europe where customers want and need new supply sources.
Garrett Ingredients had an extremely successful period benefiting from the management focus we have given it and following a similar strategy to Napier Brown in widening its supply sources within dairy products. Its growth prospects come from developing both its product range and its customer base.
Renshaw has benefited from the growing interest in homebaking both in the UK and internationally and this growth has prompted us to review our vision for the brand. There is an exciting opportunity to broaden its focus from its original strength in the specialist crafting sector in the UK to a much wider consumer audience both in the UK and internationally. We see the web as a major facilitator for this.
Just as we have seen benefits separating Garrett Ingredients from Napier Brown and running it as a stand alone business unit, we have started the same process with R&W Scott at Carluke. By separating it from Renshaw and investing in local management we have given its brand and product portfolios renewed focus which should begin to pay dividends during the course of this year.
At Haydens, 2011 saw the opening of the Hopton Distribution site which both created a new business stream but also critically freed up space for us to invest in the bakery. We now have three business streams, ambient, chilled and frozen, and a broadening customer base particularly in foodservice.
We have now implemented the best structure for the Group to facilitate our stated aim of doubling sales over the next three years. Whilst each division is responsible for its growth plans, we now have, in addition to the PLC board, a Group Executive Board where individual Directors have group responsibilities across key areas such as HR, IT, Compliance & Governance, Operations and Marketing where it is clear cross divisional opportunities can be delivered.
Having the right people in the right roles is essential and we have to ensure that each business is resourced fully and effectively. The Group will help achieve this as well as ensuring consistent and high quality employment practices are observed across all our sites.
Our ambitious growth plans present some exciting challenges operationally and will require investment in new capacity. Again, at Group level we can assess the priorities and help smooth implementation of these projects to support the commercial plans.
Finally, we have discovered over the past two years some hidden gems in the brands we own and it is right that the Group provides quality support and direction in managing these assets. The recent new products have given us some indication of the potential for the Renshaw brand and we now have a significantly enhanced vision of its potential.
We believe R&W Scott can also be extended out from its core jam heritage. Meanwhile our revitalisation of the Whitworths brand in sugar has been enthusiastically greeted by the retail trade supporting as it does Napier Brown's overall strategy of providing customers with a differentiated supply option.
Outlook
In 2011 we delivered on our commitment to return to growth in sales and profitability. We are now embarking on an exciting period designed to transform the scale of the Group over the next three years. This strategy is rooted in robust plans produced by each individual business and we have restructured the Group to support these.
While the strategy is not dependent on any single business, we are fortunate to have the support of Omnicane as a major shareholder to work with us on our plans for Napier Brown, our biggest business. We also believe that Omnicane can also help us with our export ambitions.
I would like to take this opportunity to thank colleagues across all the sites in all our businesses for their enthusiasm and support without which we would not have achieved the progress I have reported.
