Cake decoration specialist Real Good Food has filed a notice of intention to appoint administrators after suffering from supply issues and cash constraints.
The Liverpool-based firm has also suspended its shares on the London Stock Exchange’s Alternative Investment Market (AIM) as it looks to ‘preserve value for creditors’.
An update from the company filed on 28 November 2023 said Richard Harrison and Will Wright of Interpath Advisory were expected to be appointed as joint administrators within 10 business days.
It comes just over a week after Real Good Food appointed turnaround specialists Interpath Advisory to explore a range of options, including a sale of the shares or the business and assets, as well as sourcing necessary external funding. At the time it also revealed it had sold its Rainbow Dust Colours brand to a subsidiary of the Albex Group for a cash consideration of £800k.
Discussions with respect to the sale of remaining brand JF Renshaw are continuing, Real Good Food said, but the board has concluded that the ‘likelihood of a solvent sale of the business and assets is very limited within a constrained timeframe’.
In the statement on the London Stock Exchange, the company said: “As announced on 17 November 2023 the board had carefully reviewed its management accounts and working capital position, as well as the expected sales in November and December. It was noted that performance had been constrained by supply issues and cash constraints which are continuing and that sales in November and December were expected to be lower than previously forecast.
“Given the impact of the current operating environment on the group, the group’s limited working capital position, and the consequential uncertainty regarding the group’s financial position, the Board and the JF Renshaw Board have each concluded that it is required to take the necessary steps to preserve value for creditors.”
Should administrators be appointed, the firm said the outcome to creditors is uncertain. Given the circumstances, the capital structure of the company and options open to it, the board believes that there will be no return to shareholders whether via a solvent sale of JF Renshaw or any procedure in an administration.
A further announcement will be made with an update as soon as practicable or once further steps are taken to appoint the joint administrators, the firm added.
Prior to the latest announcement, Real Good Food had been undergoing a radical reform to get the business back on track. Described as a ‘well defined plan’, the reform was announced in October 2022 and was designed to return the business to profitability. It included significant price resets with customers across all sectors, overhead cost savings, and further manufacturing efficiency gains.
As part of the plan, employee numbers decreased from 318 to 186 (106 of the remaining roles are production related and 80 are in business support functions).
As of September, the firm had secured around £8m of price resets, efficiency gains, and cost savings for the 2024 financial year.
Around the same time the reform was announced, Real Good Food rolled out a new look for Renshaw along with a new recipe while also rationalising the range to make it easier for shoppers to choose the right product.