RHM profit buoyed by Hovis sales, cost cuts - UPDATE
LONDON (AFX) - RHM PLC reported a 7.6 pct rise in first-half profit as job cuts and strong sales of Hovis bread sheltered the British food producer from rising raw material prices and a weak performance by its Mr Kipling cakes arm.
Operating profit from continuing operations before restructuring costs rose to 70.3 mln stg in the 26 weeks to Oct 29 from 65 mln. Sales were virtually flat at 739 mln stg.
The figures were broadly in line with expectations after a glum trading statement in October.
'These... results demonstrate our ability to grow profits in challenging market conditions... We expect to make further progress during the traditionally busier second half of the year,' chief executive Ian McMahon said in a statement.
RHM shares rose 9.25 pence, or 3.6 pct, to 267 by 8.45 am, valuing the company at 930 mln stg. The stock has still lost 3 pct of its value since making its stock market debut in July.
The company said prospects for the next six months were unchanged from October, with agreed price rises set to offset higher energy costs.
It added that a cost-cutting drive was delivering according to plan, with 20 mln stg of savings achieved during the first half, after it axed 900 jobs.
Underlying operating profit at the company's bread-making arm rose 22 pct to 34.7 mln stg.
Bread sales rose 3 pct to 386 mln stg, helped by the launch of 'Healthiest Ever' and 'Invisible Crust' varieties of Hovis, the country's best-selling brand.
But profit at the cakes division slumped 87 pct on turnover down 13.1 pct after a re-branding of its Mr Kipling ranges failed to lure shoppers.
McMahon told AFX News he was confident that sales will pick up in the second half with a new management team, a bigger and better-tasting range of cakes and improved packaging, now in place.
Cost cuts drove profit up 16 pct to 31.1 mln stg at the Culinary Brands arm, which makes Bisto gravy, Paxo stuffing and Sharwoods oriental foodstuffs.
And profit rose 25 pct to 10.5 mln stg at the Customer Partnerships division, on higher sales of chilled and frozen ready meal to customers such as Marks & Spencer Group PLC.
RHM is to inject 40 mln stg into its pension fund following a triennial review.
Net losses totaled 36.9 mln stg after the company spent 37.3 mln stg on its stock market flotation and took a 78.1 mln stg charge to pay down debt.
RHM proposed a maiden interim dividend of 5.3 pence per share.
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