Real Good Food PLC (LON:RGD) has launched a major upgrade of two of its plants to capitalise on rising demand for Yum Yums and cake decoration ranges.
The icings and bakery specialist has raised £15.5mln through new loans and shares to fund the investment.
Financier Downing will lend the group £8.75mln as well investing a further £2.75mln at 35p per share.
Two other existing shareholders, Napier Brown and Omnicane, are also putting up £2mln each through one year secured loans.
The money has been earmarked for Renshaw’s Crown Street site in Liverpool and Haydens in Devizes.
Renshaw’s will receive £7mln to boost capacity of its icings lines by 50% while Haydens will get £8mln to add additional freezing capacity and a new automated Yum Yum glazed pastry line.
This will take capacity at the Devizes’ plant to the equivalent £50mln revenues from £30mln.
Trading pick-up
Real Good also updated on trading, with revenues of £109mln and underlying profits [EBITDA[ of between £5 mln and £5.4mln in the year to March.
The company had already warned it was facing higher prices due to Brexit currency fluctuations. Net debt was £16.2 mln.
The first nine weeks of this year has been better with strong revenue growth across all three of its operating divisions.
To 4 June, sales were 15% up on the previous year in Cake Decoration, 9% up in Premium Bakery and 87% up in Food Ingredients following the Brighter Foods acquisition (like-for-like sales in Food Ingredients increased by 17%).
Undelying profit [EBITDA] for the same period was 56% ahead of the previous year.
Long-term foundations
Pieter Totté, executive chairman, said: "As we have already advised shareholders, we believe that there is a significant opportunity to invest in our operating subsidiaries to drive more efficiencies, customer growth and improve operating margins.
We have already embarked upon this within our Cake Decorating division and are seeing positive results in order intake at Renshaw and Rainbow Dust.
The decision to accelerate our investment programme into other divisions, including a major increase in capacity at our Haydens site within the Premium Bakery is the first significant step in a major medium term investment programme to secure our competitive position, he added.