The RHM group trumpeted “a significantly improved trading performance” in the second half of the year to 29 April. The full year pre-tax profit fell to £7.4m from £63.7m the year before.
Although group sales grew 2.1% last year to £1.6bn, growth picked up in the second half and reached 3.7%, said RHM. Strong sales of Hovis, for example, helped to compensate for a fall in sales of branded cakes, especially in the first half.
The cakes division’s sales fell 8.7% to £241m and underlying profit fell 27.5% to £13.2m. RHM said the second-half performance of Manor Bakeries was better than a year before despite “a disappointing” first half, including poor Mr Kipling cake sales.
Mr Kipling sales fell 14.1% year-on-year in the first half and 8% in the second half, but RHM predicted that sales this financial year would at least match last year’s.
Mr Kipling cakes are now free of artificial flavours and colourings, with some upgraded recipes and new packaging. In the second half, RHM switched £3m from advertising to in-store and other promotions to stimulate sales but added: “There remains, however, much to be done to realise the full potential of the Mr Kipling brand.”
RHM’s bread bakeries division boosted turnover by 4.1% to £786m, with increased sales of Hovis and Hovis price rises. It said the division’s underlying profit increased 26.4% to £81.4m, with better pricing, restructuring and lower pension costs offset in part by the higher cost of supplying new convenience store customers and £11m of higher energy costs.
New Hovis products including the crustless Hovis Invisible Crust loaf and demand for healthier products helped to increase the brand’s market share from 29.1% the year before to a record 31.6%.
The flour business in the bakeries division increased sales to £140m from £134m the year before. RHM said that the impact of the closure of three old mills was more than offset by increased sales from its Wellingborough mill, which it bought in July 2005.