UK: Real Good Food Co. shares hit after weak Q3
- Trading lower than anticipated
- Napier Brown sales less than expected
- Garrett unit affected by market volatility
Trading in its third-quarter had been “lower than anticipated”
UK bakery and ingredients firm The Real Good Food Co. said trading activity in its third quarter had been "lower than anticipated", with December proving "particularly challenging".
Shares in the company were hit after the company reported a mixed performance from its business.
The company said that trading in the last three months of 2012 was in line with market conditions but admitted its performance in the fourth quarter, in particular the Easter period, will be "critical" to its annual results.
Sales in the firm's Napier Brown sugar distribution division were lower than expected, it said. However, The Real Good Food Co. said it had entered into a contract to acquire a site at Immingham that will provide a facility for importing sugars more cost effectively globally.
The company's dairy ingredients unit Garrett was affected by some "short-term volatility" in the market, resulting in reduced volumes, but continues to "broaden both its product offering and customer base", the firm said.
Executive chairman Pieter Totté said The Real Good Food Co.'s "overall profitability" will be higher year-on-year.
Nevertheless, shares in the company slid today, down 15.26% at 40.25p at 13:54 GMT.
The Real Good Food Company plc (AIM: RGD)
Third Quarter Trading Update
The Real Good Food Company plc ("the group" or "RGFC") is a diversified food group, which owns Napier Brown (Europe's biggest non-refining sugar distributor) as well as Renshaw and R&W Scott (bakery ingredients), Garrett Ingredients (dairy ingredients) and Haydens Bakery (patisserie and desserts).
Third Quarter trading activity - from 1 October to 31 December 2012 - proved to be lower than anticipated, with December proving particularly challenging, but in line with market conditions in the food sector generally. Despite this, the medium and long term strategy for each of the group's divisions remains on track.
Trading during the Fourth Quarter, and in particular the crucial Easter period, will be critical to the Group's outcome for the year. The Group overall has performed well, with the key challenge from current market weakness being the need to accelerate implementation of strategic development plans.
The Group will provide a further update on trading in mid March.
The Group recently announced that it has completed a new five year £50 million bank facility with its current financiers, PNC Financial Services UK Ltd., ahead of the maturity of its existing facilities in July 2013. This will enhance the group's ability to achieve its growth plans in 2013.
Napier Brown's sales following this year's main contract season have been lower than anticipated. A contract has now been entered into to acquire a site at Immingham, which will provide an unparalleled facility for importing sugars cost effectively from all parts of the world. It is expected that this facility will be fully operational during the summer of 2013.
Meanwhile, sales to industrial customers have increased and there has been a successful launch of the added value Whitworths baking sugars in retail channels.
Garrett has been affected by some short term volatility in dairy markets, which has reduced volumes, but the business continues to broaden both its product offering and customer base.
At Renshaw there has been considerable investment in resource to progress growth plans, particularly online and internationally. An online web shop www.renshawbaking.com has been launched in the last few weeks to take advantage of the increasing demand for online trading. Its scope will be broadened considerably during 2013.
R&W Scott has returned to profit following its separation into a distinct business unit and has plans in place to develop a distinct branded offering in both jams and chocolate coatings. A number of new product launches will take place in April.
Haydens has improved operational labour and material efficiencies and, after a slow start, profits since October have met expectations and the current run rate is in line with the group's budget. Its customer base is extending, with strong growth planned in foodservice.
Pieter Totté, Executive Chairman, comments:
"The strategic changes that have been made across the group during the current financial year are now settling down and producing positive results. There has been a return to profitability at Haydens and R&W Scott, for example, and overall profitability is expected to be well ahead of the previous year.
"Our underlying performance is clearly on an upward curve and our plans for further growth are underpinned by our partnership with PNC which, through the recent extension of our banking facilities, provides us with the financial support we need. I remain confident that we are on course to achieve my vision for the business."
Original source: The Real Good Food Co
Companies: Real Good Food Co.
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