UK food company RHM has said sales of its cakes division continued to decline in the first half to 29 October.
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The company, which owns the Mr Kipling cake brand, said turnover from its cakes business was expected to be approximately 12% down in the first half of the year compared with the first half of the previous year.
RHM, whose other brands include Hovis, Sharwood’s and Bisto, said turnover from continuing operations for the first half is expected to be similar to that achieved in the first half of the prior year.
Turnover from continuing activities, excluding cakes, is expected to be over 2% ahead of the comparable period, with total branded turnover, excluding cakes, expected to be around 4% ahead, largely driven by strong Hovis performance.
EBITA (operating profit from continuing operations before exceptional costs) for the first half of the year is expected to be approximately £70m (US$124.4m), up 7% from a year earlier.
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By GlobalDataRHM said Hovis recorded its highest ever market share following the successful “Healthiest Ever Hovis” relaunch in May and the introduction of Hovis Invisible Crust in August.
The company said initial good results from Manor Bakeries’ Mr Kipling and Cadbury’s cake relaunches last financial year have not been sustained, with overall performance below the board’s expectations. This has been exacerbated by a slowdown in the overall cake market in the second quarter and the resultant need for higher promotional support.
Decisive actions have been taken to improve Manor Bakeries’ top line performance in the busier second half of the year, RHM said, adding that a new management team is in place and plans are at an advanced stage for further investment in the Mr Kipling brand, including product quality, packaging and marketing support, which will come to market early in 2006.
“Despite challenging market conditions, RHM’s transformation continues to deliver real and sustainable benefits, with all but one of our four business segments recording double digit EBITA growth in the first half of the year. We remain confident of delivering our cost saving targets for the year. Our principal focus is, and second half performance is dependent, on the key Christmas and Easter periods and the revitalisation of performance at Manor Bakeries,” said CEO Ian McMahon.
