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January 31, 2018

Real Good Food issues new profit warning after “disappointing performance”

Beleaguered UK bakery and ingredients group Real Good Food has warned the London Stock Exchange to expect a loss of up to GBP3.5m (US$4.9m) when it reports its full-year results.

Beleaguered UK bakery and ingredients group Real Good Food has warned the London Stock Exchange to expect a loss of up to GBP3.5m (US$4.9m) when it reports its full-year results.

In a trading statement today (31 January) Real Good Food said sales were “largely satisfactory” during the early part of the Christmas trading quarter but admitted its performance in the last few weeks of the year were “materially below the company’s expectations”.

It said this was largely down to “disappointing performance” in UK grocery retail and de-stocking in overseas markets.

Real Good Food is undertaking a review of the various balance sheets of the group companies in order to ensure their accounting treatments are consistent across the group and accord with good practice.

“As a result of this review and of a re-forecast exercise within all the operating businesses, allied to the poorer-than-expected trading late in 2017 and early in 2018, the company now expects the out-turn for the year to be an EBITDA loss of up to GBP3.5m,” it said.

On a brighter note, Real Good Food suggested the investment made in the group in the past 18 months is beginning to yield benefits.  

“A turnaround plan has been formulated and is now in the process of being implemented by the new management team to reverse the negative performance trend and to begin to deliver the sort of returns that investors should more reasonably expect over the medium term,” it said.

“In addition to this, the company continues to improve its corporate governance and internal reporting and accounting processes and procedures.”

Real Good Food said its major shareholders, who are represented on the board, remain “fully committed and supportive” of the turnaround plan and its implementation. 

The company said those shareholders have stated their willingness to bridge any short-term funding needs should a solution for the identified funding requirement not be in place as anticipated by the end of the first quarter.  

At the beginning of January, Real Good Food told the London Stock Exchange it needed more funds over the coming 12 months for working capital and investment purposes.

It said “further substantial additional funding” will be necessary to implement its business plans.

The company, which owns brands including Renshaw and Haydens, said at the time it is exploring options as to how the additional funding will be financed, including the issue of new equity. 

In Real Good Food’s interim results for the six months to 30 September (released on 22 December) it revealed revenue was up 30% on the previous year at GBP63.6m, but its pre-tax losses had increased from GBP900,000 in the equivalent period in 2016 to GBP6.7m.

Real 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.

And in October, it revealed it was moving its headquarters from London to Liverpool to reduce costs and warned the stock market to expect to see a loss for the year to March 2018.

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