£550k short-term loan will help Real Good Food ride out turbulence
Food ingredients manufacturer, Real Good Food, has secured a £550,000 short-term loan from two of its principal shareholders and loan note holders, Downing LLP and Ominicane Investors.
The Toxteth-based business which specialises in cake decoration said it supports the additional funding of £2.5m from Hilco Private Capital in November 2022.
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 current Hilco facility becomes due for repayment on November 18.
Real Good Food revealed the 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 £0.7m from Leumi ABL. The group also has a £5.5m invoice discount facility with Leumi, £2.4m of which is currently utilised.
Last December the group announced it had begun “a radical programme of reform” after revealing a £3.8m interim loss, more than treble the levels seen in the same period a year earlier.
Today, it said, as noted in its half year results in December 2022, market conditions remain very challenging due to the perfect storm of rising costs and lower revenues during the currently difficult economic period.
The group’s radical reform programme, however, is progressing well, it said, with significant price resets and cost savings having been achieved.
The focus currently is on improving manufacturing efficiency and balancing capacity to levels of demand. However, it said fourth quarter revenue was below expectations as consumer demand and confidence were knocked by speculation in the media of a recession in the early months of 2023.
As a result, and as previously stated, the board expects to report a loss for the year ended March 31, 2023, following losses in the first half and further losses in the second half.
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 with EBITDA anticipated to be in the range of £2m to £4m, and the group being cash generative. The additional funding reflects the board’s confidence in the reforms being made, the group said.
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.”
