Real Good Food has flagged its intent to put the London-listed cake decorations group into administration within ten business days.
On the 17 November, Real Good Food announced the sale of its Rainbow Dust Colours business for £800,000 (then $994,507) and said it would conduct a review of its remaining operation, JF Renshaw.
Interpath Advisory, which had been appointed as adviser to explore “strategic options” for JF Renshaw, including a possible sale, will now oversee the administration process if it comes to fruition, Real Good Food said in a stock-exchange filing late yesterday (28 November).
Concurrently, the company said the group’s shares would be suspended from trading, effective today.
“Discussions with respect to a sale of JF Renshaw are continuing. However, the board has concluded that the likelihood of a solvent sale of the business and assets of JF Renshaw is very limited within a constrained time-frame,” Real Good Food said in the filing.
“Given the impact of the current operating environment on the group, the group’s limited working capital position and the consequential uncertainty regarding the group’s financial position, the board and the JF Renshaw board have each concluded that it is required to take the necessary steps to preserve value for creditors.”
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Real Good Food added a ‘notice of intention to appoint administrators’ in the next ten business days was filed yesterday, with Richard Harrison and Will Wright of Interpath Advisory earmarked to oversee the process.
The group said it “reserves the right to alter any aspect of the process or to terminate it at any time”, adding a cautionary note for its investors.
“Should administrators be appointed, the outcome to creditors of the group is currently uncertain. Given the circumstances, the capital structure of the company and options open to it, the board believes that there will be no return to shareholders whether via a solvent sale of JF Renshaw or any procedure in an administration.”
JF Renshaw supplies cake decorations such as marzipan, icings and caramel to retailers and the foodservice channel. With Rainbow Dust Colours discarded, Real Good Food said on 17 November that sales in the run-up to Christmas were expected to be less than previously envisaged.
The Liverpool-based group has faced a tumultuous 12 months or so amid what Real Good Food has previously called “challenging” market conditions, including supply chain disruptions and “macroeconomic headwinds”.
A so-called “radical reform programme” was launched in September 2022 to return the group to profitability through price “resets”, cost savings and efficiency gains.
However, in October this year the company reported an EBITDA loss of £700,000 in the first half to 30 September, narrowing from a £2.3m loss a year earlier. In the previous fiscal 12 months to 31 March, the loss was £4.8m, compared to a £200,000 profit in the corresponding period.
Revenue was up 2% at £16.1m but volumes were down by around 10%.
In the previous year to 31 March, Real Good Food’s sales revenue dropped 19.8% to £32.4m, while net losses before tax narrowed to £9m from £19m. Reporting those results in September, Real Good Food said it had net debt of £31.2m.
Real Good Food secured a £500,000 loan earlier this year from two of its key shareholders – investment manager Downing, based in the UK capital, and Omnicane Investors, a sugar-cane grower and refiner headquartered in Mauritius.
Omnicane holds 20.7% of the business group and Downing 7.9%, according to Real Good Food’s investor relations website page. The largest shareholder is NB Ingredients with 22.6%.
The company also got a £2.5m loan in 2022 from Hilco Private Capital, with some of the funds raised from the Rainbow Dust sale to be used to offset a portion. Real Good Food also generated $35.6m from the sale of its snack-bar business Brighter Foods to The Hut Group the previous year.
“The [Rainbow Dust Colours] disposal provides JF Renshaw cash to help fund its working capital during the busy period in the run up to Christmas and to leverage its recently completed and successful programme of radical reform,” Real Good Food said in its 17 November filing.