Lower volumes and rising costs have contributed to a 20.1% fall in revenue for cake decoration specialist Real Good Food.
The Renshaw and Rainbow Dust Colours owner reported a revenue of £15.9m in the six months to 30 September, down from £19.9m a year ago. Gross margins fell from 43% in 2021 to 34%, with the business making a £3.8m loss before tax.
“Market conditions have been very challenging over the last twelve months, and show no sign of easing in the near-term, due to a perfect storm of rising costs and lower revenues,” said executive chairman Mike Holt.
The war in Ukraine, continuing post-Brexit trading issues with Europe and cost inflation have increased costs, impacted the availability of key ingredients and services and reduced demand, the business reported.
For the six months to 30 September 2022, volumes were 29% lower than the first six months of last year and about 14% lower than the firm’s 2020 pre-covid benchmark.
The cost of sugar has doubled, and overall costs are about 30% higher, reported the business. Passing on increased costs meant revenues had fallen 20% over the period.
Holt said the situation was not sustainable, and pointed to the previously announced programme of reforms designed to return the business to profitability.
This plan includes price re-sets with customers, around £3m of overhead cost savings and additional manufacturing efficiency gains.
Holt said the business had secured price re-sets with most of its UK retailer customers, and that cost reduction efforts were progressing well. An external manufacturing consultant will be assisting with the changes in manufacturing operations from next month.
Real Good Food last month announced it had secured £2.5m in additional funding to help drive the reforms.
Holt added that the closure of a key competitor in the autumn meant the group was well positioned “to return to profitability and be the first-choice supplier for all markets served by the group”.
“The board is confident that the right actions are being taken and that they will deliver positive returns,” he said. “The simple truth, a crisis was needed to enable the required changes to be possible.”