Troubled Liverpool food ingredients business Real Good Food calls in a turnaround specialist following a year of heavy financial losses and job cuts. Tony McDonough reports
Food ingredients specialist Real Good Food (RGF) has brought turnaround specialists Interpath Advisory weeks after reporting another heavy annual loss.
And the south Liverpool-based business has also announced it has disposed of Rainbow Dust Colours, its cake decoration supplies division, to European Fermentation Products for £800,000.
This leaves just its cake and food ingredients business, JF Renshaw. Stock market-listed RGF said it was now bringing in Interpath Advisory to review “all strategic options”
It added that given the “challenging environment” and “cash flow constraints” its options “may include the sale of the shares or the business and assets of JF Renshaw as well as sourcing necessary external funding”.
In September RGF revealed annual pre-tax losses of £9m in the year to March 31, 2023, a big improvement on the £19m loss reported in 2022. The results also showed a 9.8% fall in revenue to £32.4m.
Prior to the sale of Rainbow Dust Colours, RGF operated two divisions. 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.
Despite a brief recovery following COVID, the business hit “significant headwinds” as its cost base soared by 20%. It put in place a “radical” transformation plan. This saw its Liverpool workforce reduced during the period by 45% from 318 to 201.
As of late September this figure stood at 186. The business cut 106 people from its production operation and a further 80 from business support functions.
Due to rising costs it has been forced to raise prices for most of its customers. On average, prices were increased by 21% of which the in-year effect was 10.6%. This was due to timing, with many contracts having set annual pricing dates.
On Friday RGF said the Rainbow Dust disposal provides JF Renshaw with cash to help fund its working capital during the busy period in the run up to Christmas.
A condition of the sale is that £220,000 of the proceeds will be used to pay down a proportion of the Hilco Private Capital secured loan facility.
Assets being sold as part of the deal include plant and machinery, inventory, domain names and trademarks. The sale is expected to make a profit of around £325,000 against book value for the company.
In further gloomy news the company added that sales in November and December are now expected to be lower than previously forecast.
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This has led to the board to conclude that it is in the best interests of all stakeholders to explore strategic options for its remaining business JF Renshaw.
Mike Holt, executive chair, said: “We have made substantial progress over the last year. The radical reform programme has delivered significant benefits and recent senior management changes have also made a real difference.
“The group, however, is struggling to meet demand through supply issues and cash constraints. The board together with JF Renshaw is exploring all possible options and is working closely with Interpath Advisory to determine the best way forward.”