Sugar distributor-to-bakery products supplier Real Good Food (RGD:AIM) sours 16.7% to 35p as it disappoints with a profit warning. Year-to-March earnings are expected to come in 'significantly behind current market expectations', with the fall in EU sugar prices continuing to bite.

The diversified food group's latest market missive is short, but it sure ain't sweet. Entrepreneurial executive chairman Pieter Totte warns the well-publicised slump in EU sugar prices has continued to take its toll on Napier Brown, Real Good Food's sugar distribution arm, as well as on dairy and specialist food ingredients unit Garrett.

Web chart - RGD - Apr 15

Real Good Food, which swung to a severe first half loss on account of its pricing dispute with British Sugar, also says the annual numbers will bear the scars of one-off transaction costs, as well as legal costs related to discussions with the UK and EU Competition Authorities.

Following a 'very poor' first half, Napier Brown has returned to profit, but its overall full-year performance fell short of expectations. Totte sees signs sugar prices have reached their nadir and 'will recover over the next two years', though today's big development is the news talks with 'several parties' are underway regarding a potential sale of Napier Brown.

Any such disposal would strengthen the balance sheet and enable Real Good Food to 'focus on more stable earnings growth going forward.' Indeed, the rest of the group has momentum, with Renshaw and Haydens performing particularly well. Liverpool-based baking ingredients maker Renshaw is going gangbusters in cake decoration, with January's acquisition of edible glitters supplier Rainbow Dust Colours opening up new sales opportunities, while desserts and patisserie producer Haydens is trading well and expanding its customer base.

Issue Date: 01 Apr 2015