In its latest trading update, the Liverpool-based group said it now expected earnings before interest, tax, depreciation and amortisation (EBITDA) for the year to March 31 2016 to remain flat, meaning the final profit outcome wasn’t likely to meet market expectations.
It said the current financial year had been one of “significant transition” as the group embarked on an operational strategy and investment programme and reorganised into three markets – cake decoration, food ingredients and bakery.
The update said: “The business has invested heavily in people, product and brand across all its businesses, as it executes its strategy of achieving the optimal operating platform from which to drive significant future growth.
“The board now expects that within the continuing business EBITDA will remain flat year-on-year, as this investment, when combined with other one-off events within the various business divisions, has led to a short-term impact on margins.
“The board is confident, however, that the negative impact on margins is short-term and that the group is well-positioned for future growth following its investment programme."
Real Good Food sold its sugar subsidiary Napier Brown for £44.4M last May, which will result in an exceptional profit of £9.4M in the current financial year. It said the money raised from the disposal would substantially reduce net borrowings.
Investment and acquisition
The group claimed it was now in a strong position to execute a dual strategy of investment and acquisition, which was already well underway, leading to future growth and increased financial strength.
A further update will be given as the company enters its pre-close period ahead of the announcement of preliminary results for the year.
Real Good Food operates in three main markets: cake decoration (Renshaw, Rainbow Dust Colours), food ingredients (Garrett Ingredients and R&W Scott) and bakery (Haydens). It serves the retail, manufacturing, wholesale, foodservice and export markets.
Shares in the business fell 19.1% to 36p in early trading following this morning’s announcement.