28th Oct 2005 07:00
RHM plc28 October 2005 Date: 28 October 2005 RHM plc Pre-Close Period Trading Update RHM plc, one of the largest food companies in the UK and Ireland and the home ofHovis, Mr Kipling, Sharwood's and Bisto, issues the following update prior toentering the close period for its interim results to 29 October 2005, which arescheduled to be announced on 14 December 2005. Trading Turnover from continuing operations for the first half of the year is expectedto be similar to that achieved in the first half of the year ended 30 April 2005("FY05"). Sales at Cakes have continued to decline, with Cakes turnover expectedto be approximately 12 per cent. down in the first half of the year comparedwith the first half of FY05. Turnover from continuing activities, excluding Cakes, is expected to be over twoper cent. ahead of the comparable period, with total branded turnover, excludingCakes, expected to be around four per cent. ahead, largely driven by strongHovis performance. EBITA* for the first half of the year is expected to be approximately £70m(FY05: £65.3m), seven per cent. ahead of that achieved in the first half ofFY05. Bread Bakeries has performed in line with the Board's expectations at the timeof the IPO, with Hovis recording its highest ever market share following thesuccessful "Healthiest Ever Hovis" relaunch in May and the introduction of HovisInvisible Crust in August. Culinary Brands and Customer Partnerships have also continued to trade in linewith the Board's expectations at the time of the IPO, with good growth in Bistoand chilled ready meals sales. In Cakes, Avana Bakeries, RHM's whole cake business, continues to make goodprogress. Initial good results from Manor Bakeries' Mr. Kipling and Cadbury'sCake relaunches last financial year have not been sustained, with overallperformance below the Board's expectations at the time of the IPO. This hasbeen exacerbated by a slowdown in the overall Cake market in the second quarterand the resultant need for higher promotional support. Decisive actions havebeen taken to improve Manor Bakeries' top line performance in the busier secondhalf of the year. A new management team is in place and plans are at an advancedstage for further investment in the Mr Kipling brand, including product quality,packaging and marketing support, which will come to market early in 2006. Cost Reduction Initiatives Our cost reduction initiatives are on track to deliver the savings expected atthe time of the IPO. The Board remains confident that procurement savings for the full year will bein line with our previous expectations. The impact of higher than anticipatedutility costs, which are expected to increase significantly in the second half,will be largely offset by price increases. RHM's restructuring and rationalisation projects are on track, with savings ofmore than £7m and headcount reduction of 900 in the first half. The closure ofthe Eastleigh cake bakery remains on schedule for December 2005, with themajority of production being consolidated into the Carlton site. This willresult in significant further cost savings in the second half of the currentyear. Pensions Pension service costs in the first half have reduced by £2m, with a further £6mof incremental savings forecast in the second half following changes made topayroll in September. These savings are as anticipated at the time of the IPO. The triennial funding valuation as at 5 April 2005 of the RHM pension scheme iscurrently underway. A further announcement will be made as soon as it iscompleted. Financing Net interest costs for the full year are expected to be approximately £3m lowerthan anticipated at the time of the IPO due to timing of the drawdown of newfacilities and lower interest rates. Ian McMahon, Chief Executive Officer of RHM plc, said: "Despite challenging market conditions, RHM's transformation continues todeliver real and sustainable benefits, with all but one of our four businesssegments recording double digit EBITA growth in the first half of the year. Weremain confident of delivering our cost saving targets for the year. Ourprincipal focus is, and second half performance is dependent, on the keyChristmas and Easter periods and the revitalisation of performance at ManorBakeries." Appended to this announcement is the reconciliation of the comparative FY05operating profit under UK GAAP to IFRS and the statutory IFRS segmentalanalysis. *EBITA is defined as operating profit from continuing operations beforeexceptional costs on the IFRS basis of accounting. ENQUIRIES RHM +44 (0) 1628 478 484Andrew Allner, Group Finance DirectorJohn McIvor, Director of Investor Relations and Industry Strategy Financial Dynamics +44 (0)20 7269 7121Andrew LorenzRichard MountainSally Lewis Appendix 1. Reconciliation of operating profit under UK GAAP to IFRS IFRS adjustments RHM INCOME UK IAS 19 IAS 19 IAS 17 IAS 2 IFRS IFRSSTATEMENT HY 2005 GAAP Short term Pensions Leases Stocks Total benefits adjustments Continuing operationsRevenue 736.8 - - - - - 736.8 Operating profit before 62.5 2.1 0.9 - (0.3) 2.8 65.3restructuring costs IFRS adjustments RHM INCOME UK IAS 19 IAS 19 IAS 17 IAS 2 IFRS IFRSSTATEMENT FY 2005 GAAP Short term Pensions Leases Stocks Total benefits adjustments Continuing operationsRevenue 1,527.5 - - - - - 1,527.5 Operating profit before 155.0 1.2 1.8 0.2 - 3.2 158.2restructuring costs 2. Statutory IFRS Segmental Analysis Half year ended 30 October 2004 Cake brands Bread Culinary Cake Customer and Customer Bakeries Brands Brands Partnerships Partnerships Corporate Continuing Discontinued GroupRevenue £m £m £m £m £m £m £m £m £mTotal sales 390.8 127.7 127.3 120.1 247.4 0.1 766.0 62.8 828.8Inter-segment (16.5) (4.5) (3.0) (5.1) (8.1) (0.1) (29.2) (0.7) (29.9)salesSales to third 374.3 123.2 124.3 115.0 239.3 - 736.8 62.1 798.9parties ResultOperating 28.5 26.7 7.9 8.4 16.3 (6.2) 65.3 7.6 72.9profit beforerestructuringcosts Year ended 30 April 2005 Cake brands Bread Culinary Cake Customer and Customer Bakeries Brands Brands Partnerships Partnerships Corporate Continuing Discontinued GroupRevenue £m £m £m £m £m £m £m £m £mTotal sales 788.3 274.8 270.2 252.9 523.1 0.1 1,586.3 115.7 1,702.0Inter-segment (33.4) (8.7) (6.2) (10.4) (16.6) (0.1) (58.8) (0.9) (59.7)salesSales to third 754.9 266.1 264.0 242.5 506.5 - 1,527.5 114.8 1,642.3parties ResultOperating 64.4 64.9 18.9 23.6 42.5 (13.6) 158.2 14.5 172.7profit beforerestructuringcosts This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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