Real Good Food’s radical reform programme is ‘progressing well’ with significant price resets and cost savings achieved, according to the firm.
The information was shared in a trading update, which also noted the cake decoration specialist had secured a £550,000 short-term loan. The loan supports additional funding of £2.5m, which was secured from Hilco Private Capital in November 2022. It will be repaid in October 2023 as part of the refinancing of debt when the Hilco facility becomes due for repayment.
The additional funding reflects the board’s confidence in the reforms, it said.
Real Good Food’s focus has been on improving manufacturing efficiency and balancing capacity to levels of demand. However, this progress is happening amid ‘very challenging’ market conditions due to what it describes as a perfect storm of rising costs and lower revenues during the current difficult economic climate.
Q4 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, the board expects to report a loss for the year ended 31 March 2023 following losses in the first half and further ones 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 1 April 2023, with EBITDA anticipated to be in the range of £2m to £4m.
“Market conditions remain as challenging as when we last reported in December 2022,” said executive chairman Mike Holt. “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.”
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