Real Good Food has sold jams and preserves business R&W Scott and reported a half-year loss before tax of £9.1m.
The R&W Scott management team has bought out Real Good Food in a £4m deal that follows RGF selling off Haydens Bakery in September and Garrett Ingredients in April.
Based in Carluke in Lanarkshire, R&W Scott has been producing jams and preserves for more than 130 years and last year had a turnover of almost £11m. The business also makes chocolate flavoured coatings, sweet and savoury spreads and soft icings for retail, foodservice and wholesale customers worldwide.
The management buyout was led by R&W Scott managing director John Easton, who has worked at the business for more than 12 years, along with fellow directors Stephen Currie and Michael Hewitt (pictured right). Funding was from the management team, supported by Bibby Financial Services.
“We are recognised as a leading supplier in our sector and we are committed to growing the business further and cementing our position within the industry,” said Easton. “For employees and customers it’s very much business as usual in the short term, however, we do have several exciting innovative new products planned for the future.”
The disposals of Garretts, Haydens and R&W Scott have raised £17.8m for RGF, of which £10.1m has been received in cash, £7.2m in taking on third-party debt and £0.5m is deferred.
RGF, which still owns cake decorations supplier Renshaw, snack bar manufacturer Brighter Foods and Chantilly Patisserie, said the disposals and new funding arrangements had “transformed” the group’s financial position.
RGF previously reported a £23.2m operating loss in the year to 31 March 2018 – prompting chief executive Hugh Cawley to say the business would look back on the year with “little pride or satisfaction”.
The results followed a troubled period for RGF including the exit of founder and executive chairman Pieter Totté, profit warnings, and the announcement it would be improving its corporate governance and reporting after admitting standards had been below those investors “might reasonably expect”.
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In today’s statement, RGF said the funds raised had eliminated term debt with the bank and provided working capital for general requirements as well as growth.
"This disposal, alongside those of Haydens and Garretts, marks a significant milestone in the turnaround and performance improvement programme of Real Good Food,” said Cawley. “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.”
In its interim statement for the six months to 30 September 2018, RGF reported £30.4m revenue from continuing operations, down from £31.9m the previous year. Underlying adjusted EBITDA from continuing operations, was £0.9m compared to a loss of £0.4m, although loss before tax was £9.1m and includes a £6.3m goodwill impairment charge against the cake decorations business.
Cawley said the underlying performance of continuing operations had improved, reflecting cost savings made.
“The performance of these continuing operations remains in line with our modest expectations for the year,” he added. “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.”
RGF divisional business performance
Cake Decoration – Renshaw Europe and Renshaw Americas
- Revenue: £22.2m (-1.2%)
- Adjusted EBITDA: £1.3m (+167%)
“Revenue was broadly flat for the first half. Some encouraging revenue growth has been seen in Renshaw North America and Rainbow Dust Colours. The UK market remains challenging, however, and offsets the benefits seen in these units. Underlying adjusted EBITDA at £1.3m is an improvement of £0.8m on the prior year. The improvement over the prior year relates to the cost savings made within the year and a stronger gross profit. The loss before tax stood at £5.5m and reflects an impairment charge of £6.3m. The Cake Decoration division is a core division for the group and is currently in turnaround. The investments made in manufacturing capability in the last couple of years have not yet started to deliver the returns that could be expected, for example, and the Board believes that the current valuation, reflected here, necessarily and materially underplays the potential value of this division.”
Food Ingredients Brighter Foods
- Revenue: £6.9m (-15.9%)
- Adjusted EBITDA: £1.4m (-20%)
“The phasing of revenue at Brighter Foods is more heavily weighted to the second half in this financial year when compared to the prior year due to the timing of promotional products and new product launches. Although the underlying adjusted EBITDA performance for Brighter Foods is behind its equivalent period last year due to lower revenue, full recovery of the shortfall is expected in the full year. Profit before tax of £0.6m is £0.4m behind the prior year.”
Premium Bakery – Chantilly Patisserie
- Revenue: £1.3m (+4%)
- Adjusted EBITDA: -£27k
“RGF Patisserie (Chantilly) was part of Haydens Bakery in the prior year and was set up as a separate legal entity on 31 July 2018, in order to allow the separate sale of Haydens Bakery Ltd.”
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