Chairman of Liverpool cake decoration and food ingredients business Real Good Food says the business will have to ‘hunker down’ after a poor festive period hit revenues. Tony McDonough reports
Liverpool food ingredients business Real Good Food (RGF) is reporting full-year losses of £2.8m after festive trading revenues were hit by “erratic” deliveries and staff absences.
Toxteth-based RGF had reported a strong recovery from the pandemic in the half-year to September 30, 2021. But in the run up to Christmas, traditionally its busiest period, the business struggled to fulfil orders and this has impacted its full-year performance.
In a trading update published to the stock exchange on Wednesday, RGF said revenues for the 12 months to March 31 had come in at £40.5m. This is 9% higher than the previous years but still below the last pre-pandemic year.
Adjusted EBITDA (an alternative measure of profitability) was just under £700,000 compared to £200,000 a year ago, equating to an expected, much reduced, loss before tax of £2.8m (2021: loss before tax £6.1m).
However, the statement added: “Overall, this performance is below that which the board had anticipated exiting the half year… revenues during Q3 (October – December 2021), the group’s seasonally busiest period, were disappointing and well below expectations.”
It added this was “due to severe shortages and erratic deliveries of key ingredients and services, compounded by high absence rates because of the Omicron variant”. This, RGF said, affected its ability to fulfil customer orders.
RGF operates two businesses. Renshaw offers cake ingredients such as sugar paste, marzipan and icings while Rainbow Dust Colours sells edible cake decorations and exports all over the world. A third business, Brighter Foods which made snack bars, was sold to Hut Group in May 2021 for £35.6m.
The statement went on: “Trading in Q4 and in the first weeks of our new financial year continued to be impacted by these shortages and absences, whilst significant input cost increases have also dragged profitability down.
“RGF will continue to focus its efforts on products that are profitable and pass these unprecedented cost increases (in sugar, palm oil, energy, packaging and transport) through to its customers, but there is a lag effect of a few months.”
Mike Holt, executive chairman, said: “The last few months have been very difficult due to a number of issues relating to costs, supply chain and unavoidable staff absences leading to our performance for the financial year just ended being worse than we had hoped.
“The unprecedented cost increases being experienced by all businesses are being passed through to our customers but there is a timing lag which is impacting profitability. The group is determined to hunker down, control costs and protect revenues, and has the support of its loan holders and major shareholders to navigate this difficult time.”
Net debt as at March 31, 2022 was £25.3m (2021: £48.6m), a reduction of £23.3m during the year. The sale of Brighter Foods for £35.6m, enabled £23.1m to be repaid to loan note holders and £8.5m to be paid into the pension scheme to fully fund it on an ongoing basis.