Liverpool food ingredients business Real Good Food needs fresh injection of cash to continue trading as losses hit almost £19m. Tony McDonough reports

Liverpool food ingredients business Real Good Food (RGF) says there is “material uncertainty which may cast significant doubt” on its ability to keep trading as it battles soaring costs.

Last Friday LBN reported how Toxteth-based RGF was ready to cut more jobs on top of the 51 redundancies announced earlier this year. Costs have soared 30% this year and it said it was dealing with daily supply shortages and “erratic deliveries”.

On Monday morning it published its full results to the Stock Exchange for the 12 months to March 31, 2022. These showed revenues up for £37.3m to £40.4m but pre-tax losses widening from £6.1m last year to £18.9m this year.

Now RGF says it must implement a “radical” cost reduction programme to ensure the survival of the businesses. It also needs approval of new loans totalling £2.5m being obtained, including an additional £1m of shareholder loans.

In order to secure the incremental £1.5m asset-backed loan, the business requires a re-financing of the facilities currently funded by Leumi ABL to an alternative provider. Discussions have already commenced with asset-backed lenders but are yet to be agreed.

And in a stark warning its report says there is “material uncertainty which may cast significant doubt on the group and parent company’s ability to continue as a going concern”.

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.

Executive chairman Mike Holt said on Monday: “The group made a good start to the year and expected to build on this during the seasonally busier second half of the year. Market conditions changed during Q3 and have remained extremely challenging as noted in our trading updates in April and earlier today.

“To mitigate this, we are putting into effect a more radical programme of reform to reduce costs, protect revenues and preserve the inherent value of the group. This involves the refinancing of the group and discussions are under way with potential lenders.”

In the full-year report, RGF said it had seen “unprecedented increases” in the cost of raw materials and energy in recent months. These increases had continued. The company added: “Since January 1 2022, the cost of sugar has doubled, and glycerine and butter have increased by 87% and 82% respectively.

“It is anticipated that for the current financial year (to March 31, 2023), the increased cost of raw materials and other costs of production will exceed £5m given current cost levels.”

It went on: “The group is determined to hunker down, control costs, maximise savings opportunities and protect revenues. Wage inflation has been held at 3% and a voluntary redundancy programme was agreed in May 22 which will reduce 51 jobs during Q3 saving £1.4m per year.”