Renshaw and Haydens owner Real Good Food has secured a £2m overdraft facility with Lloyds Bank after discovering a shortfall in its finances.
The move follows Real Good Food (RGF) stating two weeks ago that it expected earnings for the financial year ended 31 March 2017 to be around £2m-£3m lower than previously forecast – and that profits in 2018 would be lower than expected.
RGF yesterday (16 August) said the re-forecast exercise had identified a “short-term working capital requirement” as the business builds up stock ahead of Christmas and proceeds with previously announced investment programmes at Renshaw and Haydens.
The investments are being part-funded by investment managers Downing LLP, and RGF yesterday announced Downing would not be taking up an option to subscribe to a £1.5m second tranche of the loan notes.
“Sales within the cake decoration division continue to show strong year-on-year growth and the need to fund an autumn stock build for a strongly seasonal business is part of the company’s normal trading pattern,” it stated.
Consequently, Lloyds Bank has agreed to provide the company with an overdraft facility of up to £2m, with RGF shareholders Napier Brown Holdings and Omnicane Limited each putting up £1m as security. The shareholder loans have an interest rate of 6.5% per annum.
RGF said the board had considered other debt provision options, but decided that these could take a number of weeks to arrange and that the Lloyds offer was the most appropriate to meet its short-term requirements at this time.
The news has brought a dip this morning to RGF’s share price, which had been recovering following the profits warning.
Founder and executive chairman Pieter Totté resigned and stepped down from the RGF board last week, with non-exec director Pat Ridgwell taking on the role of interim chairman until a permanent chairman can be appointed. Harveen Rai, previously chief financial officer at Arzyta UK Holdings, is to replace David Newman as finance director and company secretary.