Real Good Food: profit hit by sugar prices in H1/2010

Liverpool / UK. (rgf) Real Good Food Company PLC, the sugars, ingredients and bakery company, announces Interim Results for six months ended 30 June. Summary:

• Ebitda in line with expectations and 2009 driven by …
  • Significant sales growth – 13 percent in Renshaw (Bakery Ingredients) and 20 percent in Haydens (Bakery)
  • Gross Delivered Margins up 3,2 percent versus 2009
  • Overheads up by 319’000 GBP versus 2009, in line with plan and reflecting the Group´s investment in commercial and operational resource at Hayden´s and Renshaw to support the business development plans in each business
  • Sugar sales at Napier Brown down 19 percent mostly due to reduced Sugar cost levels in the market following the Oct 2009 EU reference price reduction
• Much improved outlook for sugar market in second half of 2010 and in 2011
• Working capital reduction continues, with trading initiatives driving 1,5 million GBP reduction (2,0 million GBP overall including corporate tax repayment and post period end adjustments) versus June 2009
• Continued focus on cash driving reduction in net borrowings of 2,9 million GBP versus June 2009 (including 0,5 million restatement of currency positions at June 2010)

Chairman Pieter Totté: «I am delighted by the progress which the Group has made during the first half. We have achieved significant sales growth at our bakery ingredients and bakery businesses and while sugar has had a more difficult run with lower prices following the end of the EU regime, the summer saw this being reversed to our benefit. In sugar we are now seeing tighter and wider supply conditions and improved pricing, while Renshaw and Haydens are well placed entering their key trading season. All this gives me confidence in achieving market expectations for this year and for the further development of all our businesses in the coming years».

Napier Brown (Sugar Division)

Napier Brown Foods supplies a range of sugar and dry ingredients to food manufacturers and packs sugar for retail grocery and foodservice customers from its facilities at Normanton, near Leeds and Garrett Ingredients at Thornbury, near Bristol.

The sugar business has had to operate in a difficult market as it has gone through the transitional period following the final stage of the reform of the EU sugar regime in October 2009. Lower pricing has hit sales value and sales volumes have been down as a result of the business withdrawing from unprofitable contracts later in 2009, however, the number of customers being served has grown. The Garrett Ingredients business, which sells dairy powders, sugar and other ingredients to smaller industrial customers, has performed particularly well following the recruitment in March of a new Managing Director. The company says that it has now a clearly defined strategy for the business, and has begun to implement plans to benefit from the tightening of the market supply position.

Renshaw (Bakery Ingredients Division)

Renshaw supplies a range of high quality food ingredients primarily to the bakery sector, comprising craft bakers and major cake manufacturers and also to grocery retailers. It operates two facilities, one in Liverpool and the other in Carluke, south-east of Glasgow.

Renshaw has enjoyed strong sales growth since the second half of last year driving increased profitability, with all sectors of the business doing well. In particular sales to our retail export and domestic markets continue to grow. The trend in home baking and crafting is continuing in the US and UK, with more shoppers entering the category, shopping more frequently and spending more money.

Sales in the bakery and wholesale channels remain buoyant, driven by new product developments, particularly for dessert products, and increased focus in the wholesale sector. The company has introduced additional shift patterns to cope with this increased demand and to ensure we are well placed for the busier second half of the year, in a business which remains very seasonal, with the bulk of profitability coming in the final quarter of the year.

To further support this rapid growth, the company has strengthened its operations and commercial teams, both in terms of level of resource and capabilities. Together with additional investment in plant, the company has been able to maintain a high level of service to its customers and is well prepared for its main trading season in the lead up to Christmas.

The company´s innovations activity has increased and it has invested in its core brands through development of a number of new branded product initiatives. As a result the company is in the process of launching a new range of premium jams to the regional retail trade under our R+W Scott brand and has developed an exciting range of new and unique products, which will further enhance the business and that of the customers.

Haydens Bakeries (Bakery Division)

Haydens Bakeries produces chilled and ambient premium-quality patisserie and dessert products, principally for three retail customers: Waitrose, Marks + Spencer and Costa Coffee. It operates from a site in Devizes, Wiltshire.

Haydens Bakery continues to demonstrate sustainable recovery as part of the company´s three-year turn-around plan, and the strong sales growth reflects a growing appetite for the high quality, added value and hand crafted products that Haydens produces. The Ebitda performance was in line with the expectations, and reflects a planned increase in quality management at operating level, to drive and control the future aspirations of the team, together with input cost increases to the business.

The new management team is undertaking a number of initiatives to strengthen the business and the company is pleased to report that all of these are on track, including the addition of 36’000 square feet of space, which will enable delivery of the company´s growth plans for this business. Looking to the seasonally-stronger second half, all major sales initiatives for the period have been agreed with customers, action is being taken to recover material cost increases, while completion of the new facility is on track for the first quarter of the next year.

Info: The Regulatory Announcement is available on the company`s web server.