IPO expenses, debt repayment force RHM into net loss in 1H

IPO expenses, debt repayment force RHM into net loss in 1H

	Published : Fri, 16 Dec 2005 02:05 By : Phil Bateman Print this Story

LONDON: Cake and bread maker RHM Plc. posted a first-half net loss of 36.9 million pounds, mainly on account of costs linked to its stock market flotation and payment of debts. It incurred 37.3 million pounds on its IPO and took a charge of 78.1 million pounds to repay debts.

The company, however, said underlying operating profits climbed to 70.3 million pounds in the six months ended 29 October, compared to 65.3 million pounds for the previous year. It said cost cutting through a reduction in staff and good sales of its Hovis bread helped it to neutralise the increased raw material costs and a weak show by the Mr Kipling cakes division. It posted sales of 739 million pounds for the period, a slight increase over the previous year period.

Chief executive Ian McMahon said the company could increase its profits during a very difficult period and it hoped to better the performance in the second half.

The company's share price went up 10.25 pence to 268 giving the company a valuation of 933 million pounds.

RHM is set to provide 40 million pounds to its pension fund, following a triennial review. It could achieve a savings of 20 million pounds through cost cutting, mainly through a reduction in jobs -- around 900 during the first half.

The underlying operating profit at the bread-making unit rose 22 per cent to 34.7 million pounds, while sales grew 3 per cent to 386 million pounds. The unit had launched two new varieties -- Healthiest Ever and Invisible Crust -- to its Hovis brand.

Profit at the cakes division dipped by as much as 87 per cent with turnover down 13.1 per cent. A rebranding exercise for the Mr Kipling brand failed to take off, said the company.

In its Culinary Brands unit, ,which makes Bisto gravy, Paxo stuffing and Sharwoods oriental foodstuffs, profits were up 16 per cent. In the Customer Partnership division too, profits were up 25 per cent to 10.5 million pounds.

RHM shares were floated in July at 275 pence after a 13-year absence from the market. The prices dropped more than six per cent and underperformed the U.K. food sector by 13 per cent.