Food group says recipe for recovery is within reach

Liverpool-based food ingredients business Real Good Food Group has reported better annual revenues and a reduction in pre-tax losses for the year to March 31.

Sales rose from £61.560m to £66.576m, while pre-tax losses improved from last year’s £26m loss to £20.14m this year. No dividend is recommended.

Following disposals in the prior year, the two remaining divisions, cake decoration trading as Renshaw and Rainbow Dust Colours, and food ingredients, trading as Brighter Food, are profitable, before impairment, depreciation, amortisation and significant items, and generated an adjusted EBITDA of £6.8m before central costs.

The group said goodwill has been impaired this year by £12.6m, compared with £18.7m in 2019, to reflect the value today of the continuing businesses. COVID-19 impact has been reflected in the impairment.

Net debt stood at £45.4m, up from £35.7m in 2019, being predominantly shareholder loans, of which £12.3m is in the form of convertible loan notes. The loan interest in the year is £5m, of which £500,000 has been paid.

During the reporting period the group said Brighter Foods made significant progress in earnings and revenue since March 2019, outperforming the board’s expectations.

Meanwhile, cake decorations is still in the last phases of turnaround, demonstrating an ability to win new business from a streamlined cost base.

Following the end of the fiscal year, Real Good Food said the impact of COVID-19 was seen in the first quarter, as many customers felt the impact of lockdown.

However, with lockdown restrictions easing, trading has improved in both divisions with quarter three (October 2020 to December 2020) sales in line with fiscal year 2020 and in line with board expectations.

Within cake decorations, where the operating structure has been significantly improved, the focus is on strengthening customer relationships, enhancing customer service and growing sales through new product launches and category expansion.

There have been new client wins since the year end both in the retail and B2B markets, overseas markets have recovered well.

Since the start of the financial year, the business has successfully launched more than 40 new products which generated in excess of £2m of sales on an annualised basis.

Brighter Foods, after the initial impact of the lockdown, has continued to grow its earnings from a wider customer base than this time last year. Third quarter earnings are on target to be ahead of 2020.

Meanwhile, the board said it is reviewing all initiatives to improve the capital structure of the group.

Mike Holt, executive chairman, said: “A lot has happened since March.

“Clearly, COVID-19 has impacted financial performance in the current year, and the near-term outlook continues to hold challenges due to the pandemic.

“However, both businesses are getting stronger and more resilient.

“In particular, Brighter Foods continues to grow and has further strengthened its reputation for innovation and responsiveness.

“For the group as a whole, Brexit ought to be more positive than negative.”

He added: “The board is committed to reducing the company’s debt burden and normalising its capital structure as soon as possible.”