LONDON (Alliance News) - The Real Good Food Company PLC Friday said it swung to a loss in its last financial year, after trading was hit by its sugar pricing dispute with the sugar subsidiary of Associated British Foods PLC, which caused several of its profit-making businesses to record a loss.
The group swung to a pretax loss of GBP1.5 million for the financial year ended March 31, from a pretax profit of GBP6.1 million the prior year.
The baker and sugar producer had warned several times earlier in the year about challenges facing its sugar business and also its largest business, Napier Brown, especially when in February it said its pricing dispute with British Sugar had taken a nasty turn when British Sugar temporarily withdrew the supply of sugar to Napier Brown.
"The current year's results are dominated by the dispute with British Sugar. The reduction in earnings before interest before taxes, depreciation and amortisation... is all within Napier Brown and Garrett Ingredients trading, which are both directly affected," said Chairman Pieter Totté in a statement.
British Sugar, the sugar subsidiary of Associated British Foods, is a major supplier to Real Good Food's non-refining sugar distribution business, Napier Brown. However, Real Good Food has complained to the Competition and Markets Authority, complaining that British Sugar is in breach of EU competition laws, alleging an abuse of a dominant position by British Sugar.
The group said it "remains in close dialogue with the Competition and Markets Authority," in its statement Friday.
"However, the current sugar contract year does not end until 30th September, coinciding with our half year, so despite continued strong trading at Renshaw and Haydens, our first half performance will still be materially affected," said Totté.
Totté said negotiations for the new sugar contract year are progressing.
In a positive note, Real Good Food said revenue in the year increased by 2.6% to GBP272.6 million, up from GBP265.8 million a year earlier, boosted by revenue growth across most of the group's businesses.
"It would be easy to focus on the impact on our results caused by what we believe to be anti-competitive behaviour by British Sugar... The reduction in group EBITDA hides significant progress in a number of operating divisions," said Totté.
While its sugar business Napier Brown swung to a loss hit by the dispute with British Sugar, the business posted revenue growth on the back of increased sales volumes across industrial, retail and wholesale.
Dairy ingredients supplier, Garrett Ingredients, saw a drop in profit and revenue, as volumes fell in both sugar and dairy, and sales were hit by the British Sugar dispute.
Sales and profits also fell at its coatings and sauces business R&W Scott, as it withdrew from some low margin business to business contracts and increased inter-company sales.
Outside the group?s sugar-related activities, its other businesses are said to be in good shape, as its new European business based in Brussels, Real Good Food Europe, is generating sales and the turnaround at Hayden?s is making good progress.
Haydens Bakery, a manufacturer of sweet bakery products, swung to an operating profit and increased revenue, with sales growth driven by both existing and new customers.
Its bakery ingredients business, Renshaw, saw sales rose 4.7% and increased its operating profit.
The group also established Real Good Food Europe as a stand-alone business during the year. The business produced revenue but recorded a loss, it said.
Real Good Food shares were untraded Friday mid-morning, at 30.70 pence.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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