Embattled Real Good Food has secured additional funding to support its ongoing turnaround efforts.
Investors greeted the news positively, sending shares soaring 62% to 1.7p today.
Hilco Private Capital is providing the new £2.5m funding for a 12-month term, supplementing an exisiting £6.3m facility with Leumi ABL.
It comes after the cake decoration business behind Renshaw and Rainbow Dust Colours unveiled a “radical” reform programme in September to deal with inflationary pressures and protect the attempted turnaround.
Executive chairman Mike Holt said he was “delighted” to secure new funding to support the radical reform intended to reduce costs, protect revenues and “preserve the inherent value of the group”.
“With support from both customers and employees, we are making good progress on the required reforms and several major customers have already agreed to significant price resets,” he added.
“We are confident that the right actions are being put in place to return the business to sustainable profitability and being cash generative.”
Real Good Food is attempting to significantly reduce overhead costs, reset pricing and achieve further manufacturing efficiencies to return the business to profitable growth.
Revenues increased 8.3% to £40.4m in the year ended 31 March 2022, with adjusted EBITDA of £700k, according to the latest results. However, pre-tax losses spiralled to £19m, compared with £6.1m in the previous year, after a big writedown of goodwill in the cake decoration business.
Soaring costs for sugar, glycerine, butter and other raw materials, as well as production, is expected to exceed £5m this year, pushing the group to an underlying loss.
The recovery plan in place is expected to lead to a return of between £2m and £4m in EBITDA under current market conditions.
Real Good Food has taken a battering in recent years, with a string of profit warnings, declining sales, management shake-ups and accounting scandals. The plc’s share price has almost completely collapsed from historic highs of 165p in 2005.
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