17 July 2008 - The Real Good Food Company plc (Aim: RGD), the food manufacturing group, operating in ambient and chilled sectors of the market, is today providing the following trading update for the six months to 30 June 2008, prior to entering a close period.
The current trading environment remains very challenging, with both material and fuel prices reaching unprecedented levels. This, coupled with lower consumer confidence, further highlights the importance of our back-to-basics approach. A focus on improved operational efficiency, inventory management, customer service and cash management is paramount, whilst ensuring that our product innovation skills are enhanced, recognising emerging trends and consumer buying patterns.
Sales in our Sugar Division were down on the prior year by 10%. The two principal reasons being the loss of trading volume in one account as previously reported, and lower prices in the market following the EU reform programme, which has resulted in continuing surplus stocks in the EU.
Volumes in retail remain strong and ahead of the prior year, up 4%. Plans to further develop our dairy trading and blends business are about to be finalised, ready for implementation in quarter four. Overheads, in line with our back-to-basics programme, were down 10% on the prior year. Overall profitability was down on the prior year, although in line with our expectations.
The latest announcements relating to the commissions EU sugar reform programme are most encouraging, with the market effectively moving into equilibrium during 2009. However, we expect difficult trading conditions to prevail for the remainder of 2008.
Sales in our Bakery Ingredients Division were well ahead of the prior year, up 13%. Gross margins were slightly ahead reflecting the lag in recovering all of the material inflation. Currently the business is in dialogue with its customers in relation to a further increase in response to the continued levels of material increases. Operational efficiencies at both factories are much improved and the business is now well positioned going into the second half, being the busiest trading period.
In the Bakery Division, sales are 4% down on the prior year, primarily due to poor performance on two key lines, which are currently being re-developed. Material price increases were partially recovered in the period, however further sales price increases are required in the remainder of the year, in conjunction with further material rationalisation, to help protect margins. Plans to reduce expensive night shift premiums are well advanced and are expected to be fully implemented in late July.
Finally, the Group is pleased to announce that it has just completed a new 5 year re-financing of its debt arrangements with an asset backed lending facility provided by a new banking partner.
Pieter Totte, Chairman, comments:
"As I indicated in my preliminary results statement, the first half has been characterised by challenging market conditions, with lower sugar prices on the one hand and higher prices in our bakery and bakery ingredients businesses on the other. The management team is responding to these difficult conditions by striving for greater operational efficiencies, product innovation and a strong focus on customer service. We remain confident of achieving a satisfactory result for the full year."