Two years after its collapse, the Liverpool brewer is struggling to survive. Alex Turner reports

IT IS a chastened Sudarghara Dusanj sat opposite me, preparing to discuss the accounts of RC Brewery, the second Dusanj-owned incarnation of the 160-year-old Liverpool brewer, Cains.

As joint managing director, along with his younger brother Ajmail, the pair have been trying, with very little success, to make the long-troubled Toxteth brewery profitable since they took over in 2002.

Eight years on, the ambitions and dreams have become tarnished.

Gone is the ebullience of 2007, when Cains went from nine pubs to 109 overnight, after the reverse takeover of AIM-listed Honeycombe Leisure, or the defiance of 2008 when the firm collapsed under the weight of that acquisition with debts of £50m, only to be bought back for £103,750.

Like the boxer who has had his invincibility knocked out of him, Sudarghara is less combative, less sure. He is wearing his Cains-branded fleece more through necessity because of the cold meeting room than beaming pride in the brand.

His firm, RC Brewery, is also back on the ropes, parrying the blows as best it can, but knowing how bad the numbers are.

“You will go easy on us, won’t you?” he asks for the first time. But not the last.

The company has just filed two years’ accounts at Companies House – the first set were nearly six months late, delayed to ensure that the improved, but still heavily loss-making, second year could be lodged at the same time.

The accounts show that the phoenix company has not risen from the flames, but is still desperately firefighting.

The auditors, Mazars, have warned that there is a “material uncertainty which may cast doubt about the company’s ability to continue as a going concern”.

That is because, in the 24½ months’ trading to September, RC Brewery amassed debts of £2.765m.

Its rate of losses has halved, from an average of £150,000 a month in its first year to an average of £75,000 in year two, but the firm continues to lose money.

With no bank overdraft, the company is dependent on retaining the confidence of a handful of key supporters.

“How is the £2.8m deficit being funded?” Sudarghara said, staccato, slowly repeating my question out loud – something he did a number of times whenever the interview went into areas or details he would rather not talk about.

He pondered the deficit for several seconds, almost as if he hadn’t quite thought that somewhere there are people waiting, patiently and not-so-patiently, for this money, before saying: “The £2.8m – through Bibby Financial Services and through suppliers.

“We have got Bibby, who have the invoice line, and the suppliers. They give us credit terms.

“The working capital is made up from those bases.”

In the accounts, the company acknowledges “there is pressure on its cashflows”.

Sudarghara and Ajmail Dusanj have carried out a financial review which maintains that the brewery can become profitable “within the foreseeable future trading within its available facilities with the support of its suppliers”.

There is some cause for optimism and the brewery remains busy.

Its work producing brewing beer for others, which accounts for around three-quarters of the company’s £24.6m turnover, is continuing to grow with contracts being added.

It has also recently been granted licences from HM Revenue and Customs that will allow it to package beers sent in from other breweries, a sizeable part of the business before administration. As LDP Business reported last week, Cains has recently joined up with an American distributor, Win-It-Too, and shipped 105,000 bottles across the Atlantic.

In the UK, its beers are well-stocked in supermarkets across the region while some of its products are sold nationally – Cains Mild is in every Asda, Cains IPA in every Tesco and Cains Raisin Beer in every Morrisons.

“Year three, we do believe we should hit break-even point,” said Sudarghara.

“In the last half-year, we saw the benefits of the cost control coming through, month by month.

“The movement is going in the right direction. It’s been going, every month, in the right direction. It’s based on driving costs down at the moment.”

On coming out of administration, lots of things suddenly became more expensive for the firm.

He added: “Negotiating long-term contracts has been a key part of cutting costs. Coming out of administration, we lost all the contracts that were in place – our barley prices and our utility contracts had to be renegotiated.

“The first six months we were buying on the spot, that’s an expensive way of doing it.

“Restructuring was a big part as well. We took on a business that was supplying 100 pubs so we had to restructure it.”

It is not the only time that the failed company is spoken of as if it belonged to somebody else, as he again did when asked why – after achieving only one marginal profit in eight years’ trading – he thinks the company can be run profitably.

He said: “If you take the last company – we did the acquisition and wanted to turn it around. It was a loss-making company. The model that’s in place now and the focus on contracts and the brand, we do believe that there is a strong long-term brand.”

He wants to be convincing, but can’t help saying shortly afterwards: “You will go easy on us, won’t you?”.