RHM, owner of the Hovis, Mr Kipling, Bisto and Sharwood’s brands, said today (24 April) that turnover from continuing operations for the full-year to 29 April is expected to be up 2% to GBP170m, from GBP158.2m (US$282m) reported in FY 2005 – thanks to an improved second half performance. This was driven by considerable investment in brand development, an RHM spokesperson told just-food, which, it is hoped will pay long-term dividends.

The company said that Bread Bakeries had performed well, with top line growth driven by the strength of the Hovis brand, further market share gains following the Healthiest Ever Hovis relaunch, price increases, distribution wins and successful new product introductions, including Hovis Invisible Crust and, most recently, an upgraded Hovis Granary bread range. These gains have been partially off-set by increased distribution costs.

Culinary Brands, driven by the success of the Bisto “ahh night!” advertising campaign and Sharwood’s “Go East” promotion, also reported an improved level of sales.

The underperforming cakes segment reported a turn around in the second half of the year. All Mr Kipling cakes are now free of artificial colours and flavourings and new packaging has been introduced to reinvigorate the brand. The lower fat, lower calorie Delightful range has also received a positive intital consumer response, the company said.

“The cakes segment has adapted to market needs with the launch of the new healthier Mr Kipling Delightful range,” a spokesperson for RHM told just-food, adding that although cakes had attracted the majority of analyst attention the Culinary Brands segment had a heavier weighting in terms of total sales. “For RHM, Bisto is the biggest brand in terms of profitability. The cakes segment has the cities attention because it is seen as needing to prove itself, but Bisto is RHM’s big performer.”

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RHM told just-food that the company had invested heavily in developing its businesses in H2, but that the costs associated with this might negate the benefits of increased sales. “The investments in advertising, product launches and brand development have been made with the end game of increased profits in mind. For example, RHM have invested heavily in the Mr Kipling brand because they expect this to pay off in the long-term,” the spokesperson said. However, it remains to be seen whether the increased sales will be enough to off-set the increased promotional and product development costs seen in this financial year.

Commenting on RHM’s performance, CEO Ian McMahon said: “We will deliver a satisfactory overall outcome for the year. Bread Bakeries’ excellent performance is being driven by its market-leading success in building the Hovis brand. Bisto has been the outstanding contributor to Culinary Brands’ growth. The continued progress of Customer Partnerships highlights the strength of our customer relationships and focus on cost reduction. Much progress remains to be made at Manor Bakeries but at this early stage we are encouraged by the response to the actions we have taken to improve Cakes’ performance.”