Real Good Food upbeat on returning to positive EBITDA

Cake decoration specialist Real Good Food reported a slow start to the year on Tuesday, as expected, but said it was now trading well as it entered its busy seasonal third quarter leading up to Christmas.

The AIM-traded firm, holding its annual general meeting, put the performance down to implementing its reform programme, which was anticipated to boost profitability in the coming months.

In the first six months of the financial year to 30 September, RGF’s revenues increased 2% to £16.1m thanks to pricing actions, although there was a decline of 10% in sales volumes due to weak market conditions and the decision to exit low-margin sales.

Notably, revenues for August and September totalled £5.9m - an increase of £1m compared to the same months in the prior year.

In the second half, October revenues were expected to be around £4.6m, reflecting a 6% increase from October 2022.

Real Good Food highlighted a substantial reduction in its unaudited EBITDA loss, which amounted to £0.7m for the first half, compared to £2.3m a year earlier.

Gross margins also showed improvement, reaching 35.9% compared to 34.4% in the first half of last year and 33.3% for the entire 2023 financial year.

The improvement was attributed to price adjustments, more effective handling of cost inflation, and increased cost efficiency.

After factoring in distribution costs, margins for the first half were 26.6% - a notable increase from 22.3% a year earlier.

The company said supply issues and cash constraints were being actively addressed, adding that it remained on track to achieve £8m in price resets, efficiency gains, and cost savings for the full year.

The board said it anticipated reporting a significant turnaround for the full year, with EBITDA expected to be around £1m, compared to a £5.8m loss in the 2023 period.

Additionally, the company was aiming for an exit run rate of between £3m and £4m in EBITDA.

Real Good Food added that it was currently finalising an agreement with Hilco Private Capital for a 12-month extension to its loan agreement, with further details to be announced once the documentation was complete.

“We have made substantial progress since this time last year when the group was really struggling,” said executive chairman Mike Holt.

“The radical reform programme has delivered significant benefits, and recent senior management changes have also made a real difference.

“JF Renshaw is back on form and continuing to improve its performance.”

Holt said the company was focused on getting the group to a sustainable annual EBITDA level of at least £4m moving forward.

“We thank our suppliers for their patience, and we are working hard to achieve best-in-class service and product for our customers despite the challenging market conditions.”

Real Good Food said it was planning to release its half-year results and provide an update on current trading in December.

At 1107 BST, shares in Real Good Food were up 66% at 1.992p.

Reporting by Josh White for Sharecast.com.