Real Good Food brand R&W Scott

Shares in Liverpool-based food group Real Good Food (RGD) dropped 5,2% after it warned over increased raw material and commodity prices could hit future earnings.

Releasing its interim results for the six months ending 30 September 2016, the cakes, food ingredients and premium bakery group saw total sales grow by 5% in the first half to £49m.

However, it recorded a headline loss of £0.2m amid weak food ingredients performance and warned its future earnings could come under pressure.

It said third quarter trading had been in line with expectations and the majority of its profits are weighted towards the second half of the year

But Pieter Totté, executive chairman warned: “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.”

The shares dropped 5.3% to 35.5p today and are now more than 37% down year-on-year.

Gross profit increased from £12.5m last year to £13m, but was impacted adversely by performance of food ingredients which struggled with volatile commodity pricing and adverse currency movements.

Total Group EBITDA was down by £0.8m from the previous year to £1.2m, reflecting its investment in a US development centre, while the company recorded a headline loss of £0.2m before exceptional items (which totalled £0.7m).

The group also reported a “substantial” increase in actuarial losses of pension scheme of £3.3m over the six month period.

Totté concluded: “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.”