RHM boosts restructuring spend

By Anita Awbi

- Last updated on GMT

Related tags: Mr kipling, Premier foods

British food manufacturer RHM has announced a steady year-end
performance, even though it splashed out more than expected on a
reform package for the ailing cakes division.

RHM, home of Bisto, Hovis, Mr Kipling and Sharwood's, said today in a trading update that full-year turnover from continuing operations will be up two per cent on last year, and is in line with analyst expectations.

Operating profit before restructuring costs and taxation will be more than £170m, compared to last year's £158.2m.

But restructuring costs are now expected to total £19m, £5m higher than previously anticipated, as the company struggles to overcome the weak brand performance of Mr Kipling cakes and pastries.

Throughout the year RHM's Manor Bakeries division, which houses the Mr Kipling brand, was subjected to a tough sales-enhancing strategy, causing the restructuring budget to rocket.

CEO Ian McMahon hinted that the firm will continue this approach, saying that much progress must still be made in the cake sector.But he added "at this early stage we are encouraged by the response to the actions we have taken to improve Cake's performance."

In December the firm closed its Eastleigh cake-making facility, consolidating production at its Carlton site to reduce costs.

And the Mr Kipling range, which has seen sales plummet over recent years, has been upgraded. All lines are now free of artificial colours and flavourings, recipes have been updated and packaging redesigned.

A new line of Mr Kipling "Delightful" products was launched in January, with lower fat and reduced calorie content to target growing consumer concern for healthier diets.

But while the firm said in a statement it is still too soon to conclude whether Mr Kipling's problems have been successfully addressed, it is confident that the rate of decline of the branded cakes division has slowed.

The Bread Bakeries division continued to perform well throughout the second half of the year, however.

RHM's Hovis brand made market share gains through the "Healthiest Ever Hovis" relaunch, and new product introductions such as Hovis Invisible Crust and the upgraded Hovis Granary range.

But these gains have in part been offset by increased distribution costs, the manufacturer said.

And full-year utility costs rose by around £11m, £9m of which was in the second half alone. But RHM said it worked to absorb the increased costs with price hikes and private label volume growth.

Related topics: Processing & Packaging

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