RGD.L Regulatory News (RGD)

The Real Good Food Company plc (AIM: RGD) 

Trading Update

The Real Good Food Company plc ("the Group"), owns the largest independent non-refining distributor of sugar in Europe (Napier Brown) and is a supplier of dairy ingredients (Garretts), supplies bakery ingredients (Renshaw), jam and bakery ingredients (R&W Scott) and manufactures patisserie and desserts (Haydens Bakery)

Having completed the second interim period (1 July to 31 December 2011), the Group can report CPBT at £5.7M for the year as a whole in line with market expectations and up significantly, 240%, on last year (2010: £2.3M). EBITDA at £9.1M for the year as a whole, was also up significantly by 62% on the prior year (2010: £5.6M). This included a strong second half performance with EBITDA of £6.4M, an increase of 28% over the comparable period (2010: £5M) and continuing the positive trend reported for the first half of 2011. Sales growth and a focus on value added activities were the key drivers behind this improvement.

The key trading divisions of Napier Brown, Garretts and Renshaw all increased their EBITDA performance year on year. Haydens and the newly formed R&W Scott were affected by increased commodity costs that weren't recovered in pricing until late in the year.

Overall, the Net Debt / EBITDA ratio has improved significantly, down from 4.0 at 31 December 2010 to 2.8 at 31 December 2011.

Increased commodity costs during the year have pushed up working capital levels but, as previously forecast, these have now eased with the year closing at £37.0M, down from £39.7M at June 2011. This is reflected, along with the benefit of higher cash generation in the second half, in a lower Net Debt level of £25.8M, down from £31.9M at June 2011.

Divisional Updates

Renshaw enjoyed another strong growth period with Renshaw branded products now in most major retailers. Rollout will continue during 2012, both in the UK and internationally. Retailers, with supporting media coverage, are maintaining a focus on cake decorating and home baking which is bringing new consumers into the category and leading to greater prominence in store and new listings for Renshaw products. A focus on delivering operational improvements will be key in the coming months to enable the business to cope with increasing demand and to improve efficiencies.

We have re-established R&W Scott (based at Carluke and previously a part of Renshaw) as a separate trading division in order to bring more focus to the Chocolate Coatings, Jams and Blends range. Brand development and improved product offerings are key in delivering growth and reducing exposure to commodity movements.

Napier Brown has been successful in extending its Sugar supply base, underpinning its growth plans. The experience gained in supplying these sugars is invaluable as a point of difference with customers looking for options outside of the traditional beet refiners. Investment in sugar handling systems is planned to allow sugar from a variety of sources to be imported, handled and delivered cost effectively. We are hopeful that the revitalisation of the Whitworths retail brand will start to bear fruit as a number of new listings have been gained for new products and packs in 2012.

Garretts has made significant progress in 2011 remaining strong in the ice cream sector and growing in the food manufacturing sectors with new cheese and cultured products complementing the existing range. Garretts has become the sole distributor for Friesland Campina sweet condensed milk in the UK and Ireland; the latest example of building strategic relationships by supplying outstanding customer service and technical assurance and offering added value to customers. Garretts is increasing its supplier base in the UK, Ireland and in particular Eastern Europe to ensure supply lines and help manage risk within the volatile Dairy markets.

Haydens, after a period of difficult trading, ended the year strongly with a record sales month and a Christmas period considerably up year-on-year, demonstrating the continued appetite in the market for its hand crafted bakery and chilled value added products.

Phase I of the site modernisation was completed with the opening of the new distribution facility in May 2011, improving service performance and creating space in the factory for its redevelopment which is, however, now starting six months later than planned. Remedial action to reduce direct costs has been taken with major changes implemented to shift patterns and further production efficiencies are planned at the start of Q2 2012 with the introduction of blast freezing and chilling equipment in the manufacturing process.

This should have a major impact both on material and labour efficiencies on short manufacturing runs as well as providing additional capacity to support growth.

The Group will be reporting its second unaudited interim results for the six months to 31 December 2011 on 20 March 2012.

Pieter Totté, Executive Chairman, comments:

"We are now seeing major benefits coming through from our dual-track programme of adjusting to the structural change affecting our biggest business, Sugar, and implementing strategic initiatives across all our other businesses. We are focused on creating solid sustainable profitability based on brand development, growth and risk management.

I am extremely pleased that the progress we have made is reflected in a significant improvement in our financial performance during 2011. With trading starting positively in January, and divisional management achieving further progress in their improvement programmes, I am confident in meeting our expectations for 2012."

31 January 2011

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