RGF: Announces Disposal of Brighter Foods Limited

Liverpool / UK. (rgf) British Real Good Food Company PLC (RGF), the diversified food business, announces that it and the Managers have conditionally agreed to sell the entire issued share capital of Brighter Foods Limited for an aggregate cash consideration of GBP 43.0 million on a cash free/debt free basis to THG PLC. RGF, through its subsidiary NBF, has an interest in 84.334 percent. of the issued share capital of Brighter Foods Limited with the balance owned by Brighter’s Managers. The Group will therefore receive cash proceeds of GBP 35.64 million.

The consideration due to the Sellers is subject to customary adjustments for (amongst other things) the actual working capital at Completion against an agreed target level. The net assets being disposed of amount to GBP 17.3 million, resulting in a profit on disposal of approximately GBP 20.4 million.

The Board believes that the Disposal provides the Company with the opportunity to crystallise an attractive return on invested capital with respect to Brighter Foods, reduce net debt, make a material contribution towards the Group’s pension deficit and also to provide additional financial flexibility to support the operation and growth of the Continuing Group. Following the Disposal, the Continuing Group will consist of the Company’s Cake Decorations businesses being Renshaw and Rainbow Dust Colours, and two vacated properties held as assets for sale. The offer from THG broadly equates to 8.6 times FY-2020 Ebitda and 11.7 times (unaudited) Ebitda for the last 12 months ended 31 March 2021.

Use of Disposal proceeds

It has been agreed with the Group’s pension trustee that GBP 8.5m of the aggregate net consideration will be paid to the Continuing Group’s pension scheme (the Napier Brown Retirement Plan), which is broadly equivalent to the Plan’s low dependency technical provisions basis. As such, it is expected that the Group will not have to pay further deficit contributions, which currently amount to GBP 1.0 million per annum, until a new schedule of contributions is agreed based on the valuation to be agreed as at 31 March 2021 for the Plan; such agreement would take into account this cash injection, which may result in payments of up to GBP 1.5 million (in aggregate) being paid between 1 January 2023 and 30 June 2025 to close the gap towards a buy-out basis.

The Continuing Group has also agreed to pay GBP 23.1 million to the Loan Note Holders, reducing the amount repayable from GBP 45.6 million to GBP 22.5 million in respect of the loan notes, resulting in a significant reduction in the financial liabilities attached to the loan notes. Approximately GBP 3.0 million of net proceeds will be retained to provide working capital to support the financing needs of Renshaw and Rainbow Dust Colours.

As a result, RGF’s total net debt is expected to reduce from GBP 47.6 million (as at 31 March 2021) to GBP 21.2 million. The Board will be undertaking a thorough review of the Group’s working capital needs in the coming weeks, which may result in further payments to Loan Note Holders and the Plan to further de-risk the balance sheet.

Summary of use of proceeds

Pension scheme payment GBP 8.5 million
Loan note repayment GBP 23.1 million
Transaction fees GBP 1.0 million
Retained for working capital GBP 3.0 million
Total RGF proceeds GBP 35.6 million


Notice of General Meeting

The Disposal is of sufficient size relative to that of the Existing Group to constitute a disposal resulting in a fundamental change of business pursuant to Rule 15 of the AIM Rules and Completion is, therefore, conditional upon the approval of Shareholders at a general meeting of the Company.

Accordingly, Shareholder approval of the Disposal will be sought at the General Meeting expected to be held on 10 May 2021. The notice convening the General Meeting and setting out the Resolution to be considered at it will be set out in a circular which is expected to be posted to Shareholders later, extracts of which can be found in the appendix to this announcement. Irrecoverable undertakings to vote in favour of the Disposal have been received by the Company in respect of approximately 51.2 percent of the Company’s issued share capital.

Capitalised terms, unless otherwise defined, have the same meaning as will be set out in the circular to be posted to Shareholders later.

Trading update

As reported on 26 January 2021, the impact of Covid-19 was most severe in Q1 (April to June 2020), during the first lockdown. However, as lockdown restrictions eased, trading in both divisions improved during the second half of the year ended 31 March 2021. Group revenues were 2.4 percent ahead of FY-2020 in Q3. For Q4, revenues within Cake Decorations were marginally ahead of last year, but revenues within Brighter were lower, mainly due to a particularly strong Q4 last year and the timing of limited edition launches. Unaudited Ebitda for the Existing Group for the year ended 31 March 2021 was GBP 2.8 million (FY-2020: GBP 5.4 million).

Mike Holt, Executive Chairman, said: «We are very pleased with the disposal which crystallises substantial value for the Group and enables us to halve our debt burden at a stroke, whilst materially improve the funding of the pension scheme. It also provides a basis for further balance sheet restructuring, as we look to accelerate and maximise value within Renshaw and Rainbow Dust Colours.

Brighter Foods is a very good business and I am sure it will continue to grow and develop with the direction and support of THG. We wish Robin Williams, Brighter’s founder, and his team at Brighter Foods all the best. I would also like to thank Shaun Brownell and his team at Spayne Lindsay for helping to secure best value for the Group on Brighter’s sale.»