Real Good Food: battles with challenging market conditions

London / UK. (rgf) The British Real Good Food Company PLC has issued its trading update for the six months to 30 June 2008, prior to entering a close period. A really mixed trading update, because the company has to battle with rising commodity prices and other imponderables:

The current trading environment remains very challenging, with both material and fuel prices reaching unprecedented levels. This, coupled with lower consumer confidence, further highlights the importance of the company´s back-to-basics approach. A focus on improved operational efficiency, inventory management, customer service and cash management is paramount, whilst ensuring that its product innovation skills are enhanced, recognising emerging trends and consumer buying patterns.

Sales in the company´s Sugar Division were down on the prior year by ten percent. The two principal reasons being the loss of trading volume in one account as previously reported, and lower prices in the market following the EU reform programme, which has resulted in continuing surplus stocks in the EU.

Volumes in retail remain strong and ahead of the prior year, up four percent. Plans to further develop the company´s dairy trading and blends business are about to be finalised, ready for implementation in quarter four. Overheads, in line with our back-to-basics programme, were down ten percent on the prior year. Overall profitability was down on the prior year, although in line with its expectations.

The latest announcements relating to the commissions EU sugar reform programme are most encouraging, with the market effectively moving into equilibrium during 2009. However, Real Good Food Company expects difficult trading conditions to prevail for the remainder of 2008.

Sales in the company´s Bakery Ingredients Division were well ahead of the prior year, up 13 percent. Gross margins were slightly ahead reflecting the lag in recovering all of the material inflation. Currently the business is in dialogue with its customers in relation to a further increase in response to the continued levels of material increases. Operational efficiencies at both factories are much improved and the business is now well positioned going into the second half, being the busiest trading period.

In the Bakery Division, sales are four percent down on the prior year, primarily due to poor performance on two key lines, which are currently being re-developed. Material price increases were partially recovered in the period, however further sales price increases are required in the remainder of the year, in conjunction with further material rationalisation, to help protect margins. Plans to reduce expensive night shift premiums are well advanced and are expected to be fully implemented in late July.

Finally, the Group is pleased to announce that it has just completed a new five year re-financing of its debt arrangements with an asset backed lending facility provided by a new banking partner.