Investors in Real Good Food have provided short-term loans to the embattled UK bakery and ingredients group as it builds stock ahead of the Christmas trading period.
Real Good Food has had a tumultuous summer, with two profit warnings last month, 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.
Alongside Real Good Food’s second profit warning, issued on 29 August, the company had said three of its major shareholders had agreed to provide funds to the business for working capital, if the business required.
In a stock-exchange filing yesterday (20 September), Real Good Food said two of the investors – Omnicane International Investors and NB Ingredients – had agreed to provide a loan facility to the business. The third, UK investment firm Downing, was provided a batch of loan notes. Combined, the support is worth GBP4m (US$5.4m), Real Good Food said.
“The board considered alternative forms of funding and reviewed the other options that may be available from other debt providers; it concluded however that these would take too long to arrange for the company’s short-term requirements and that this offer from existing shareholders was therefore the most appropriate and flexible option to meet the company’s short-term cash requirements,” Real Good Food said.
Downing first invested in Real Good Food in June when it agreed to support two expansion projects at the business through the acquisition of an equity stake and the provision of another tranche of loan notes.
Real Good Food said yesterday the first phase of one of the projects – investment in its Haydens subsidiary – had been commissioned on time. The company said a new production line at the business had started last week.
In June, Real Good Food said new customers won by Haydens had put “short-term pressure” on capacity so it had decided to invest around GBP8m to reconfigure the site’s operations, including the installation of a new, automated Yum Yum line. It is this line that is now up and running.
The business had also announced plans to invest around GBP7m in expanding capacity at the Renshaw’s site by over 50%, as well as the installation of new soft icings and discs production lines to support a strategy of broadening its range to mainstream users.
It said yesterday: “The majority of the remaining investment in new product manufacturing lines at both Renshaw and Haydens is due to be completed by the end of December 2017. These substantial capital expenditure investments are key to the company’s long-term growth plans.”
Real Good Food has yet to report its financial results for the year to the end of March 2017. It said last month it expects its EBITDA for the year to be GBP1m (US$1.3m).
The company yesterday forecast its EBITDA for the year to the end of March 2018 would be “approximately GBP6.5m”.