Real Good Food Plc (AIM:RGD), the diversified food business, announces a trading update for its current financial year ending 31 March 2021 to date, ahead of its General Meeting and Shareholders' Q&A being held later today.
As reported on 16 December, at the time of the publication of the notice of General Meeting and Trading Update, the Group's two businesses are getting stronger and more resilient after a tough first half. The near-term outlook continues to hold challenges due to covid-19 but improved Q3 trading demonstrated encouraging progress and provides confidence for the future.
Our plan for the current financial year was to leverage the capacity investment made during FY20 in Brighter Foods, to accelerate operational changes made within Renshaw and to generate revenue growth from new products and better customer service delivery. It is frustrating therefore that the covid-19 pandemic and Brexit uncertainties have constrained these objectives, albeit the Board believes the Group did well in the first half of the year to hold revenues to within 26% of last year under these circumstances (H1 2019: £32.4m). However, given the operational gearing of the business, particularly within Renshaw, the reduction in revenues meant that there was a greater drop in profitability, such that the Group operated at around break-even at the adjusted EBITDA level for the first half (H1 2019: EBITDA of £2.8m).
Following the easing of some covid-19 restrictions, encouragingly Q3 (September - December 2020) revenues and EBITDA were in-line with last year's third quarter at £19.4 million and £1.7 million, respectively as well as being in line with Board expectations.
Renshaw's performance improvement initiatives, which had commenced in FY20, have continued to focus on developing strategic partnerships with customers and distributors and driving fundamental operational improvements. Benefits from these are beginning to come through. The business has also continued to develop and innovate new products, most notably with recent product launches in Tesco, Waitrose, and Marks & Spencer.
Brighter Foods, which ended FY20 with very significant revenue growth (25.0% CAGR since acquisition), was impacted by the sectors it sells into being substantially closed during the first lockdown. However, by working closely with its customers to identify new potential outlets, the management team was successful in recovering revenues in Q2 and Q3. By flexing its cost base, the business has remained profitable throughout the year.
Once covid-19 restrictions are lifted, Brighter Foods is well-placed to recommence the growth reported in FY20, capitalising on its additional capacity, market opportunities and new product innovation capabilities, whilst Renshaw should benefit more fully from its restructuring and greater focus on product innovation and customer service.
As announced on 30 December 2020, Real Good Food confirms that it will be releasing its half year results for the six months ended 30 September 2020 by Friday 29 January 2021, when we look forward to updating shareholders further.
Mike Holt, Executive Chairman commented:
"It is pleasing that both businesses are getting stronger and more resilient despite the current economic challenges and that the Group's Q3 performance was much improved on the first half and in line with last year and Board expectations. The Board remains committed to reducing the Group's debt burden and reviewing all initiatives to improve its capital structure."
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