Food group reveals deeper losses and a further disposal

Real Good Food, the Liverpool-based food products company, announced interim losses, falling revenue, and a disposal, today.

During the six months to September 30, revenues fell from £31.9m in 2017, to £30.4m.

Pre-tax losses widened from £3.4m last year, to £9.1m, which includes a £6.3m goodwill impairment charge.

And chief executive Hugh Cawley announced that, as was the case last year, there will be no dividend for shareholders.

The company said the underlying financial performance benefited from cost savings, despite weaker trading in its food ingredients division.

In September it sold its Haydens Bakery business for £12m, which enabled a bank term loan to be fully repaid and put cash back into the business.

And today the group announced a further disposal, in its R&W Scott division, to its management team, for £3.95m.

The deal involves a cash payment of £1.5m, £500,000 of which is deferred until September 30, 2019, and the assumption by R&W Scott’s management team of £2.45m of third-party debt.

R&W Scott has been producing jams and preserves for more than 130 years and is based out of Carluke in Lanarkshire, Scotland.

The group said the initial cash proceeds received will be utilised for working capital purposes.

In total, the three disposals completed since the year end, of Garretts, Haydens and R&W Scott, have raised a total of £17.8m, of which £10.1m has been received in cash, £7.2m has been the assumption of third-party debt, and £500,000 is deferred.

Together with the open offer to raise £1m, completed in August, and the funding arrangements put in place in June 2018, the group said its financial position has been transformed this calendar year, eliminating term debt with the bank and providing working capital for continuing general requirements as well as growth.

Hugh Cawley said: “This disposal, alongside those of Haydens and Garretts, marks a significant milestone in the turnaround and performance improvement programme of Real Good Food.

“We are now able to focus on the core continuing businesses, Brighter Foods and Cake Decoration, with no bank term loan and a fully funded growth plan.

“Overall, through the actions of the last 12 months, the performance of, and prospects for, what is now a smaller and more focused group, have improved considerably.

“The company now has a solid platform from which to maximise earnings and look to optimise shareholder value.”

Group net debt, at September 30, stood at £29.9m, down from £35.8m a year ago, being predominantly shareholder loans offset by £10.5m of net cash on the balance sheet, against £700,000 in 2017.

Looking ahead, today’s update declared that trading across the group remains in line with its modest expectations for the year.

The focus will be on profit improvement and growth, while managing net debt.

Mr Cawley said: “The first half saw significant, progressive corporate activity, including further restructuring of the group to focus on our two core divisions, cake decorations and food ingredients.

“At the same time, the underlying performance of these continuing operations improved, reflecting the cost savings made.”

He added: “The performance of these continuing operations remains in line with our modest expectations for the year.

“Overall, the board remains confident, but far from complacent, in the future prospects for the group and reiterates that the performance of, and prospects for, what is now a smaller and more focused group, have improved considerably.”

A team of lawyers from the specialist food and drink team at Walker Morris advised Real Good Food on the sale of R&W Scott to its management team.