Real Good Foods asks what ‘necessary’ means on reduced profits

By Caroline Scott-Thomas

- Last updated on GMT

Related tags Bakery ingredients Industry Food

The Real Good Food Company has forecast reduced profits and announced that it will move from its London office in order to cut costs.

CEO of the sugar, bakery and bakery ingredients group Stephen Heslop told that troubled economic times are encouraging businesses to reassess what they mean by necessary and unnecessary. For Real Good Foods, that means relocating its London administrative facilities to its manufacturing site in Liverpool, and Heslop said that the company sees it as a permanent move.

“What is now unnecessary cost because of the current financial climate was probably not unnecessary two or three years ago,”​ he said. “You will certainly see more businesses making cutbacks, but for us it is also a more effective communication model having us on site.”

In a trading update, Heslop said that all trading divisions had suffered from the deterioration of the economic climate in the UK.

He said: “Within our sugar division, Napier Brown Foods, revenues have suffered from reduced sales to our customers in the industrial sector, as they continue to feel the effects of reducing customer spending; consequently, we now expect our revenues to be seven to nine per cent behind last year.”

Baking ingredients sales

Heslop underlined a drop in demand for its bakery ingredients from the manufacturing sector, although he said that an increasing trend towards home baking had helped retail sales to offset those reduced volumes.

“The Group now expects that its results for the year to December 31 will show a profit before taxation of £0.5m,”​ he said. “…As part of a series of cost reduction initiatives, the group is relocating its London head office function to its Liverpool manufacturing site.”

When questioned about what those cost reduction initiatives might involve, Heslop said that he could not comment, but that more details would be available in the New Year.

“We remain positive and hope to come out of it stronger,”​ he added.

The group posted a pre-tax profit of £4m to December 31 2007 and had previously forecast 2008 profits to be in line with last year.

The Real Good Food Company is an AIM-listed company incorporating Napier Brown Foods, its sugar division; Renshaw, for bakery ingredients; and Hayden’s Bakeries, which supplies finished bakery products. Renshaw supplies manufacturers with marzipans, ready-to-roll icings, baking chocolate and jam from its factories in Liverpool and Carluke, Scotland.

Its main customers in the food industry include Premier Foods, Nestle, Finsbury Foods and Greencore.

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