RGF warns of £3.5m loss following weak end of year

Real Good Food has warned it is set to make a £3.5m earnings loss following poor trading at the end of last year.

The Haydens and Renshaw owner today said trading had been “largely satisfactory” in the early part of the Christmas period, but fell below expectations in the last few weeks of the year due to a “disappointing performance in UK grocery retail and de-stocking in overseas markets”.

As a result of this, and an ongoing review and re-forecast of the group’s finances, Real Good Food (RGF) said it now expects the year to bring an EBITDA loss of up to £3.5m.

Although the company had warned in December that EBITDA for the 2018 financial year would be below previous expectations, it had said it would be “in the region of break-even”, with an overall loss before tax.

The latest warnings follow a troubled period for the business that included a shake-up of its board and an overhaul of its corporate governance procedures (see timeline below). While the company’s revenue rose 30% year on year to £63.6m in the six months ending 30 September 2017, it made a £6.7m pre-tax loss.

RGF has made investments, including a £15.5m spend on Renshaw and Haydens and, today (31 January), said there were “clear signs that the considerable investment made throughout the group in the past 18 months is beginning to yield benefits”. 

“A turnaround plan has been formulated and is now in the process of being implemented by the new management team to reverse the negative performance trend and to begin to deliver the sort of returns that investors should more reasonably expect over the medium term.”

The company added it was continuing to improve its corporate governance and internal reporting and accounting processes and procedures.

RGF, which last month revealed it had secured further funding, said its major shareholders remained committed to the turnaround plan.

“The major shareholders have again stated their willingness, for instance, to bridge any short-term funding needs should a solution for the identified funding requirement not be in place as anticipated by the end of the first quarter.”

RGF added that its board believed each of the company’s divisions held good market positions and had “valuable prospects and individual worth”.

Real Good Food timeline

1 August 2017:

RGF announces earnings for 2017 will be £2m, around £3m lower than previously forecast, and that profits in 2018 will be lower than expected.

RGF also reveals that payments for consultancy services made to executive chairman Pieter Totté and non-executive director Peter Salter have not been disclosed in transaction notes for accounts in 2014 to 2016, but have been accounted for.

Salter, chairman of RGF audit and remuneration committees, resigns.

8 August:

Founder and executive chairman Pieter Totté resigns and steps down from the board with immediate effect.

Non-exec director Pat Ridgwell becomes interim chairman, while non-exec director Christopher Thomas becomes executive director.

Finance director David Newman is replaced by Harveen Rai, but remains with the company for a changeover period.

New non-executive director Hugh Cawley joins the board to head RGF’s audit committee, while non-exec director Judith Mackenzie becomes head of the remuneration committee.

16 August:

RGF secures a £2m overdraft facility with Lloyds Bank after a re-forecasting exercise finds 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.

29 August:

RGF further reduces profit expectations for 2017 to £1m.

14 September:

RGF says it is committed to improving its corporate governance and reporting, admitting standards have been below those investors “might reasonably expect”, adding it is “committed to rectifying this important aspect of operations and disclosure”.

21 September:

Shareholders agree to give the business a £4m short-term debt facility.

2 October:

RGF reports a £5.8m loss in the 12 months ending 31 March 2017, despite a £7.8m year-on-year increase in group sales to £108.2m. The loss is attributed to factors including “the effect of currency exchange on key commodity prices and poor financial control of central costs”.

22 December:

RGF announces revenue up 30% year on year to £63.6m in the six months ending 30 September 2017, although it made a £6.7m pre-tax loss compared with a £0.9m loss in the same period the previous year.

Shareholders agree to provide an initial £3m of additional funds, while longer-term funding arrangements are put in place.

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