Embattled UK bakery and ingredients group Real Good Food has told the London Stock Exchange it needs more funds over the coming 12 months for working capital and investment purposes.
Real Good Food said “further substantial additional funding” will be necessary to implement its business plans.
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The company, which owns brands including Renshaw and Haydens, said it is exploring options as to how the additional funding will be financed, including the issue of new equity.
Real Good Foods said its three major shareholders – NB Ingredients, Omnicane International Investors and funds managed by investment firm Downing – are to provide additional support for its working capital requirements, in the form of loan notes of GBP3m (US$4.1m) in aggregate. Omnicane and NB Ingredients will each stump up GBP1.285m, with Downing providing GBP430,000.
Real Good Food said the provision of these funds is designed to relieve pressure on cash availability over the coming months while longer-term funding arrangements are put in place.
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It made the announcement on 22 December alongside its interim results for the six months to 30 September which revealed, although revenue was up 30% on the previous year at GBP63.6m, the company’s pre-tax losses had increased from GBP900,000 in the equivalent period in 2016 to GBP6.7m.
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By GlobalDataReal Good Food had a tumultuous summer last year, with two profit warnings, the departures of the company’s executive chairman and finance director and the launch of an external review into its corporate governance after issues with consultancy payments made to directors.
In September it secured a cash injection from Lloyds Bank to shore up its working capital requirements after investor Downing indicated it would not be backing it further.
In October it revealed it was moving its headquarters from London to Liverpool to reduce costs. It also warned the stock market to expect to see a loss for the year to March 2018.
Pat Ridgwell, the company’s interim chairman, said on 22 December: “This has been an extremely difficult period for the company.
“The acquisition of Brighter Foods and investments in new capacity and greater efficiency at both Renshaw and Haydens were pursued in advance of suitable financing arrangements being completed leading to cash shortages and delays in the implementation of these projects.
“Serious failings in corporate governance under the previous regime also became apparent as announced in September 2017, have required significant resources and costs to rectify and resulted in a number of key board changes in order to strengthen the efficacy of the board and improve the company’s internal processes.
“Although we saw a strong sales performance across all divisions, profits were significantly below last year as a result of increased costs associated principally with the delays in the major investment projects, but also the need to react swiftly and professionally to provide the group with an adequate corporate governance structure.”
In its pre-Christmas interim results commentary, Real Good Food said the Christmas trading period had been “largely satisfactory” but added it continued to anticipate its EBITDA in its 2018 financial year would be “materially below” previous expectations.
“We expect EBITDA for FY2018 as a whole to be in the region of break-even, with a consequential overall loss before tax for the period,” it said.
“We have implemented a number of overhead and other cost savings initiatives and are developing plans to ensure that revenue growth starts to translate into increased profits and shareholder value.”
