(Sharecast News) - Cake decoration specialist Real Good Food announced the sale of the business and certain Rainbow Dust Colours (RDC) assets on Friday to European Fermentation Products for £0.8m in cash, as it lowered its expectations for its remaining operations.
The AIM-traded firm said the disposal was expected to provide its subsidiary JF Renshaw with additional cash to support its working capital needs during the busy Christmas period.
A condition of the sale mandated that £0.22m of the proceeds would be allocated to pay down a portion of the Hilco Private Capital secured loan facility.
The assets included in the sale encompassed plant and machinery, inventory, domain names and trademarks.
Real Good Food anticipated a profit of about £0.325m against the book value of the assets.
It noted that Rainbow Dust Colours reported a break-even result at the EBITDA level for the financial year ended 31 March.
In light of the disposal and the company's financial circumstances, the board of JF Renshaw recently reviewed its management accounts, working capital position and sales projections for November and December.
The company said it had faced challenges related to supply issues and cash constraints, which were persisting.
As a result, sales for the upcoming months are now expected to be lower than previously forecasted.
Given the challenges, the board said it had determined that it was in the best interests of all stakeholders to explore strategic options for its remaining business, JF Renshaw.
To facilitate the process, the board appointed Interpath Advisory as its adviser, adding that strategic options could include the sale of shares or business assets of JF Renshaw and securing external funding as necessary.
Further updates on the strategic options and developments would be made as and when appropriate, Real Good Food said.
"We have made substantial progress over the last year," said executive chair Mike Holt.
"The radical reform programme has delivered significant benefits, and recent senior management changes have also made a real difference.
"The group, however, is struggling to meet demand through supply issues and cash constraints.
"The board, together with JF Renshaw, is exploring all possible options and is working closely with Interpath Advisory to determine the best way forward."
At 0821 GMT, shares in Real Good Food were down 15.15% at 1.4p.
Reporting by Josh White for Sharecast.com.
