Diversified food business Real Good Food (RGD) rises 7.5% to 46.75p as a positive pre-close trading update tempts buyers. Having completed the sale of its hard-pressed sugar distribution arm, the £30 million cap says continuing businesses are trading positively in the opening weeks of the new financial year.

As Shares explained here last month, the £34 million sale (20 May) of struggling sugar subsidiary Napier Brown to Tereos, the world's fifth biggest sugar group, improves earnings quality and reduces financial risk at Real Good Food. Besides exiting the volatile sugar business – Napier Brown has been badly hit by the EU sugar price slump - Real Good Food's balance sheet has been transformed.

Post-sale, the Aim counter has swung from £30.1 million net debt to a positive cash position of around £13.7 million. This frees up chairman Pieter Totte and his team to develop the remaining businesses, which boast good growth prospects and more stable earnings profiles.

Web chart - RGD - June 15

Real Good Food is now focused on the cake decoration market through marzipan-to-soft icings maker Renshaw and recent acquisition Rainbow Dust Colours, as well as on food ingredients via Garrett Ingredients arm and jams-to-chocolate coatings producer R&W Scott. It also has tasty growth potential in the premium bakery market, where frozen patisserie-to-desserts producer Haydens' customer base, which already includes Marks & Spencer (MKS), Waitrose and Whitbread (WTB)-owned Costa Coffee, continues to broaden.

Today's short and sweet update, ahead of finals slated for July, flags sales of around £104 million and earnings before interest, taxation, depreciation and amortisation (EBITDA) 'in the order of £5.3 million' from these ongoing businesses for the year to March, during which Renshaw and Haydens posted strong performances.

Forward-looking investors like news that the current financial year is off to a positive start, with the board 'optimistic about the prospects for the full year'. Totte's commentary is more bullish in tone and signals appetite for further acquisitions: 'Our strong cash position will enable us to pursue capital investment plans to support our growth strategies, and we will also consider complementary acquisitions where appropriate.'

Issue Date: 01 Jun 2015