Liverpool food ingredients business Real Good Food says it is weathering its ‘perfect storm’ despite reporting a full-year loss of £9m and slashing its workforce by 45%. Tony McDonough reports
Real Good Food (RGF) has cut its annual pre-tax loss by more than half as it continues to battle what it called a ‘perfect storm’ of rising costs and lower revenues.
Based in Toxteth in Liverpool, RGF is a stock market-listed business that operates 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.
On Thursday it revealed its annual results for the 12 months to March 31, 2023. They reveal a 19.8% fall in revenue to £32.4m. Its pre-tax loss for the year is £9m, more than half of the £19m loss reported in 2022.
Despite a brief recovery following COVID RGF 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.
This figure now stands at 186. The business has 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.
In total, the price reset delivered a benefit of £700,000 in the 12-month period and should deliver around £3.9m in the current financial year.
Cost savings of £100,000 were realised in the reporting period and around £2.1m has been secured for the current year.. This makes the total saving around £2.6m when added to savings actioned earlier.
In November 2022 the firm said it had secured a £2.5m cash lifeline. This was provided by Hilco Private Capital for a term of 12 months and supplements the existing £6.3m facility with Leumi ABL.
In April this year it secured another short-term loan for £550,000. This came from principal shareholders Downing LLP and Omnicane Investors. These loan notes rank behind Hilco and Leumi ABL but ahead of existing loan notes.
It is intended the newest loan notes will be repaid in October 2023 as part of the refinancing of debt when. The Hilco facility was due for repayment on November 18 but this has now been extended to November 2024.
After five months trading in the current year demand is higher than last year, despite sales being broadly the same due to cash constraints.
RGF executive chairman Mike Holt said: “Market conditions remain challenging. We are however starting to see volumes in some segments beginning to slowly rebuild and we are gradually trading our way into a better place as the busier autumn season kicks in.
“The radical reform programme we have implemented over the last year has been transformational and, with new management now in place, the group is well positioned to make further gains, particularly in manufacturing efficiencies, sales, and customer focus.
“We have recently agreed a loan extension with Hilco which provides a more secure platform to continue our journey to sustainable and satisfactory profitability.”