Food ingredients specialist Real Good Food PLC (LON:RGD) has proposed a maiden interim dividend payment, despite a slightly cloudy outlook for raw material prices.
The diversified food business is proposing to pay its first ever dividend (of 0.04p), it revealed in its interim results. The company will continue to invest in the business to drive growth, but the board feels it is important to start to pursue a progressive dividend policy alongside this investment.
The group said total group sales in the six months to the end of September rose 5% to £49.0mln from £46.7mln, primarily as a result of a strong performance by its Premium Bakery Division, which has been boosted by the inclusion of Chantilly Patisserie, the business it acquired in February.
The group’s results are traditionally weighted to the second half of the financial year, which includes the important Christmas trading period, and the first half saw a widening of the loss before tax to £949,000 from £216,000 the year before.
Earnings before interest, tax, depreciation and amortisation (EBITDA) were positive at £1.2mln, before one-off items, albeit lower than last year’s EBITDA of £2.0mln.
The reduction in EBITDA was attributed to increased investment costs across the group, plus volatile commodity price movements, which had a big impact on the Food Ingredients division. Those commodity price movements are hard to predict, and while the group is confident full year EBITDA will be up year-on-year, there is a possibility it will fall short of current market expectations.
"We have continued to make good progress on developing our growth strategies in each business division. With the exception of Garrett Ingredients, where the dairy and sugar markets have continued to be difficult, exacerbated by recent currency fluctuations, trading performance has been broadly in line with the board's expectations,” said Pieter Totté, Real Good Food’s executive chairman.
"Sales trends for the key third quarter are in line with expectations to date and we anticipate significant year on year growth in EBITDA in the second half; however, we face some challenges due to the recent weakening of sterling and increased raw material prices and the timing of price recovery. This, as well as the uncertainty in commodity pricing in particular at Garrett Ingredients, means that, while we expect our year end EBITDA to be ahead of last year, there is a risk that it could fall short of current market estimates," Totté added.