Liverpool / UK. (rgf) British Real Good Food Company PLC, the food manufacturing business specialising in cake decoration, announces that it has secured a GBP 550,000 short-term loan from Downing LLP and Omnicane Investors Ltd, two of its principal shareholders and loan note holders.
The funding supports the additional funding of GBP 2.5 million secured from Hilco Private Capital in November 2022. The new loan notes rank behind Hilco and Leumi ABL but ahead of existing loan notes. It is intended that the new loan notes will be repaid in October 2023 as part of the refinancing of debt when the current Hilco facility becomes due for repayment on 18 November.
As noted in its half year results announcement on 16 December 2022, market conditions remain very challenging due to the perfect storm of rising costs and lower revenues during the currently difficult economic period. The Group’s radical reform programme, however, is progressing well with significant price resets and cost savings having been achieved. Our focus currently is on improving manufacturing efficiency and balancing capacity to levels of demand. However, 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, and as previously stated, the Board expects to report a loss for the year ended 31 March 2023, following losses in the first half and further losses 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 GBP 2 million to GBP 4 million, and the Group being cash generative. The additional funding reflects the Board’s confidence in the reforms being made.
Terms of the loan
- The loan is intended to be repaid when the Company re-finances its current facility with Hilco Private Capital in November 2023.
- Interest rate of 12 percent (annualised), payable on repayment, compounding monthly and 35 percent redemption premium.
- If the loan is repaid later than 31 October 2023 and before the 18 months from initial drawdown, 100 percent redemption premium and accrued interest at 12 percent.
- If the loan is repaid 18 months or longer after initial drawdown, 200 percent redemption premium and accrued interest at 12 percent.
As Omnicane is a substantial shareholder of the Company and Judith MacKenzie, a director of the Company, is a Partner of Downing which is also a major shareholder of the Company, the transaction constitutes a related party transaction pursuant to the AIM Rules for Companies. The Independent Directors of RGF, being Mike Holt and Andy Richardson (both being independent for the purposes of the related party transaction under review), having consulted with the Group’s nominated adviser, finnCap, consider the terms of the loan to be fair and reasonable insofar as the Group’s shareholders are concerned.
The new loan notes increase convertible loan notes and shareholder loans to GBP 25.9 million, including accrued interest and redemption premiums. In addition, there is a GBP 2.6 million loan from Hilco Private Capital Ltd and a term loan of GBP 0.7 million from Leumi ABL. The Group also has a GBP 5.5 million invoice discount facility with Leumi, GBP 2.4 million of which is currently utilised.
Executive Chairman’s Perspective
Executive Chairman Mike Holt said: «Market conditions remain as challenging as when we last reported in December 2022. 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.»