Real Good Food challenges

The chilled foods manufacturer The Real Good Food Company is countering “unprecedented levels” of material and fuel prices by focusing on improved operational efficiency, inventory management, and product innovation, it said yesterday (17 July). The AIM-listed group, operating in ambient and chilled sectors of the market, was providing a trading update for the six months to 30 June. It said the current trading environment remained very challenging, with both material and fuel prices reaching unprecedented levels. This, coupled with lower consumer confidence, further highlighted the importance of the company’s back-to-basics approach, it added. A focus on improved operational efficiency, inventory management, customer service and cash management was paramount, while ensuring that its product innovation skills were enhanced, to recognise emerging trends and consumer buying patterns. Sales in the company’s sugar division were down on the prior year by 10% while volumes in retail remained strong and ahead of the prior year, up 4%. Plans to further develop the dairy trading and blends business are about to be finalised, ready for implementation in quarter four. Overheads were down 10% on the prior year. Overall profitability was down on the prior year, although in line with expectations. Sales in the bakery ingredients division were well ahead of the prior year, up 13% and 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 its factories were much improved and the business is now well positioned going into the second half, being the busiest trading period. In the bakery division itself, sales are 4% down on the prior year, mainly due to poor performance on two key lines, which are currently being re-developed. Material price increases were partially recovered in the period, but further sales price increases were 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 said, it had completed a new five year re-financing of its debt arrangements with an asset backed lending facility provided by a new banking partner. Company chairman Pieter Totte (pictured) said:"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."