Shares in Renshaw and Haydens Bakery owner Real Good Food plunged by a third yesterday (1 August) after the business issued a profits warning.
The company said it expected earnings for the financial year ended 31 March 2017 to be £2m –around £3m lower than previously forecast – and that profits in 2018 would be lower than expected.
Following the news, shares in the business closed 35% down on the start of the day.
Real Good Food (RGF) announced in yesterday’s statement that during the audit of its accounts: “Two substantial anticipated claims regarding its sugar purchase arrangements have not yet materialised with the effect that it will not meet its previously forecasted profit figures.”
The company added that some development costs that had previously been capitalised in the financial year should have been expensed.
RGF also said profits for the current financial year (ending 31 March 2018) would be lower than previously anticipated after it took the company longer than expected to agree funding for expansion projects at Renshaw and Haydens.
In June, the company announced Renshaw is to receive £7m to expand capacity at the Crown Street site in Liverpool by more than 50% and support the launch of a “mainstream retail brand”, while Haydens in Devizes will receive about £8m to reconfigure site operations to relieve pressure on capacity.
“As the injection of expansion capital was agreed about three months later than anticipated, this has resulted in some delay in the implementation of these projects, particularly at Renshaw,” the company said yesterday.
It added that this delay, and “slightly softer trading conditions” in the first quarter of the 2018 financial year, meant EBITDA for 2018 was expected to be £2.3m lower than previously forecast.
“However, the anticipated benefits of these projects remain robust and are expected to be fully realised in the financial year ending 31 March 2019,” it added.
RGF also revealed that payments for consultancy services made to executive chairman Pieter Totté and non-executive director Peter Salter had not been disclosed in the transaction notes for its accounts in 2014 to 2016. The costs had been accounted for, however, and will not affect reported profit before tax for those three years.
RGF said it had accepted the resignation of Salter, who was chairman of the firm’s audit and remuneration committees, and that he would be stepping down from the board with immediate effect.
The company expects to announce final results for the year ended 31 March 2017 at the end of this month.