Embattled Liverpool food ingredients business Real Good Food secures extra cash lifeline of £550,000 from two of its principal shareholders as it reports ‘signs of improvement’ in demand. Tony McDonough reports

Struggling food ingredients business Real Good Food (RGF) has secured a £550,000 short-term loan from two of its principal shareholders.

RGF, which operates a factory in Toxteth in Liverpool, said in December that market conditions were “very challenging” due to the “perfect storm” of rising costs and lower revenues.

During that update it revealed a pre-tax loss of £3.8m for the six months to September 30, 2022. This compares to a loss of £1.2m for the same period in 2021.

Stock market-quoted RGF operates two divisions in Liverpool. 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.

In November 2022 the firm said it had secured a £2.5m cash lifeline. This is being provided by Hilco Private Capital for a term of 12 months and supplements the existing £6.3m facility with Leumi ABL.

This latest short-term loan comes from principal shareholders Downing LLP and Omnicane Investors. The new loan notes rank behind Hilco and Leumi ABL but ahead of existing loan notes.

It is intended that the new loan notes will be repaid in October 2023 as part of the refinancing of debt when. The Hilco facility will become due for repayment on November 18.

In a trading update on Thursday RGF said revenue in the final quarter of its fiscal year, to March 31, 2023, was “below expectations” amid falling consumer demand and confidence. The board expects to report a full-year loss.

It added: “The group’s radical reform programme, however, is progressing well with significant price resets and cost savings having been achieved. Our focus currently is on improving manufacturing efficiency and balancing capacity to levels of demand.”

RGF went on to say: “The full year benefit of the price resets and cost savings are expected to lead to a significant performance improvement in the new financial year commencing April 1, 2023.”

These new loan notes increase convertible loan notes and shareholder loans to £25.9m, including accrued interest and redemption premiums. In addition, there is a £2.6m loan from Hilco Private Capital and a term loan of £700,000 from Leumi ABL.

RGF also has a £5.5m invoice discount facility with Leumi, £2.4 million of which is currently utilised. Executive chairman Mike Holt said: “Market conditions remain as challenging as when we last reported in December 2022.

“However, our internal reform programme is progressing well and, without relying on a market upturn, the board expects the group to be both EBITDA profitable and cash generative in the new financial year.

“After a tough start to 2023, we are beginning to see early signs of some improvement in demand, particularly within B2B and wholesale markets.”