Real Good Food ‘ripe for investment’

16-Dec-2011 - Last updated on 23-Dec-2011 at 14:48 GMT

Inline for growth: rising sugar prices have helped RFG

Bakery, desserts and sugar distributor The Real Good Food Company (RGF) is “an attractive investment opportunity”, according to financial specialist Shore Capital, after the firm posted an interim statement.

Analyst Phil Caroll said: “With the key final weeks in the run up to Christmas ahead, RGF looks to be performing in line with management expectations … to our minds, [RGF] looks to be an undemanding valuation and an attractive investment opportunity.”

Caroll noted that stock levels were reducing during the fourth quarter of this year following an easing in the logistical issues in the sugar supply chain. The pressure on working capital from input cost inflation had also eased, he added.

Consequently, Caroll forecast earnings before interest, taxes, depreciation and amortization (EBITDA) to increase to £9.6M in the 12 months to December 31 2011 compared with £5.6M in 2010.

Full year forecast

This week, a six-month trading update, the group reported continuing improvement in EBITDA performance compared with last year.

Pieter Totté, executive chairman, said: "While we are still only midway through the key Christmas trading period, I am pleased with the progress we have made so far, both in terms of our financial performance this year against last year, and the good progress being made with all the strategic initiatives for each of our businesses."

Paul Smith, md of Haydens Bakery, a manufacturer of desserts and patisseries in the RGF group, told FoodManufacture.co.uk that a development project would start in about three weeks at its Devizes, Wiltshire facility.

The expansion is because of “three years of steady growth” that contributed to RGF’s improved numbers.

Haydens moved its distribution to a new facility and will use the space created to add a number of new production lines. This will increase Haydens’ laminated pastry, tart and pie production capacity.

Agency workers

New shift patterns will also be introduced at about the same time as the project. They will allow greater flexibility and reduce Haydens’ reliance on agency workers, while protecting its permanent workforce, said Smith.

Other contributions to RGF’s performance came from the bakery ingredients sector. Dairy and bakery ingredients supplier, Garrett, had secured two new distribution contracts and expanded its range of products.

The launch of Renshaw, a bakery ingredients brand, earlier this year had been “received positively by customers and consumers”, said Caroll.

Rising sugar prices have also helped RGF due to its ownership of sugar distributor, Napier Brown. 90% of its sugar has already been contracted for the year, said Carroll. RGF will expand foodservice sugar brand, Whitworths, to consumers early next year, he added.

The firm said it will change its accounting reference date from December 31 to March 31, in order to better align its reporting to the markets with the seasonality of its business.

A pre-close update statement covering the six months from July to December 2011 will be released at the end of next month.