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Real Good Food back in profit

The jettisoning of the Napier Brown business has steadied the ship
Cake decoration
Let them eat cake

The disposal of the loss-making Napier Brown business transformed the fortunes of sugar products group Real Good Food PLC (LON:RGD) last year.

Without Napier Brown weighing it down, the retained businesses – focused on cake decoration, food ingredients and premium bakery products – saw profit before tax rise to £4.8mln in the year to the end of March from £1.6mln the year before.

The group generated a profit of £9.1mln on the sale of Napier Brown, boosting its statutory profit before tax to £12.9mln, compared to a loss of £3.5mln the year before.

Revenue from the continuing business was £100.4mln, down from £104.6mln the previous year. 

The consensus forecast for the full-year results was for pre-tax profit of £2.6mln on revenue of £103.1mln.

Underlying earnings, or EBITDA, on the continuing businesses eased to £5.0mln from £5.3mln the previous year, but with the divested Napier Brown included in the numbers EBITDA improved to £5.0mln from £1.9mln.

Furthermore, the balance sheet of the group has been massively improved by the sale of Napier Brown, with net debt down to £5.1mln from £30.1mln a year earlier. The group has taken advantage of this balance sheet strength by investing in the business and making the occasional judicious bolt-on acquisition, such as the acquisition of the maker of high-quality desserts, Chantilly Patisserie, back in February.

Looking at the three businesses of Real Good Food, the cake decoration arm returned an EBITDA of £7.3mln (2014/15: £6.5mln) on revenue of £48.3mln (£49.2mln); food ingredients notched up a small underlying loss of £0.1mln (profit of £0.5mln) on revenue of £22.7mln (£27.0mln), while the premium bakery business’s EBITDA dipped to £0.7mln (£1.3mln) on revenue of £29.4mln (£28.4mln).

"Trading in the first three months of the new financial year has been satisfactory with recent order intake positive, and with the investments we are making, I am confident that we will deliver growth across all three divisions," said Pieter Totté, executive chairman of Real Good Food.

"The food industry faces challenging times with diversifying sales channels, increasing legislative burdens, the growth in the minimum wage and ever-demanding consumers. The response to these trends require being alert to all these factors and having the resources to invest and adapt.  I am confident that with our clear strategy and strong balance sheet we are in a good position to build three increasingly strong businesses in our three pillar markets,” he added.

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