The UK miller and culinary goods group RHM said today (14 December) that a disappointing performance in its branded cake division had hit growth in its first half turnover.
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In a statement, the company said turnover from continuing operations reached £739.3m (US$1.31bn), up 0.3% on the same period last year, after a 13% fall in turnover from its cake operations.
Turnover excluding cakes was up 3%, however.
Following major restructuring and the implementation of a number of cost-cutting measures, RHM confirmed the marginal increase in turnover for the 26 weeks ending 29 October 2005. Underlying operating profitability for bread bakeries, culinary brands and customer partnerships rose by 21.8%, 16.5% and 25% respectively.
“For the most part, RHM’s transformation has continued according to plan,” RHM chairman Jan du Plessis said. “Underlying operating profit increased by 7.7% to £70.3m. Although the development of our branded cakes business was disappointing, our bread bakeries, culinary brands and customer partnerships businesses performed well.”
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By GlobalDataIn July/August, at the time the company floated, RHM said it had been encouraged by the cakes market. However, a tough second quarter in the ambient cake market followed. During this period RHM’s cake sales declined 7.3% by value and 5.7% by volume. Despite this poor showing, the maiden interim dividend of 5.3p per share remains in line with flotation guidance.
“The ambient cake market has been in decline,” a spokesperson for RHM told just-food. “Retail trends have been adversely effected by a general tightening of belts and there has been a shift towards own-labels.”
The company sees its branded cakes’ disappointing performance within the context of an overall downturn in the retail market, the RHM spokesperson continued. “Cakes are a discretionary purchase: when you’re seeing people clawing back on retail spending cakes are often left off the shopping list.”
Avana Bakeries, RHM’s whole cake business, which represents approximately 20% of the cake business turnover, continued to perform in line with expectations, the company said. However, trading at Manor Bakeries, RHM’s small cake and slices business, was described as “disappointing” and Mr. Kipling sales in particular fell below previous expectations.
Looking forward, the company said: “With the exception of Cakes, all our businesses have shown the improvement in performance anticipated at the time of our flotation.
“The overall improvement in our first half results demonstrates our ability to grow profits in challenging market conditions. Our cost savings drive is on track with savings of almost £20m achieved in the first half. Overall, the expectations of the board for the full year outcome remain unchanged from the time of the group’s trading update in October.”
