Cake supplier Finsbury Food said it had been hit by rising ingredients and labour costs as it posted falling revenues.
The AIM-listed company, which makes cakes with Disney logos, fancy cupcakes as well as artisan breads, has been hit by higher prices of imported goods such as sugar and cocoa after the Brexit-induced pound’s slump and by a rise in the national living wage.
Full year revenues to the end of June fell by 3.4 per cent to £303.6million, although if excluding the revenues from the two bakeries it closed down last year, like-for-like revenues rose 2.4 per cent.
The company makes cakes with Disney logos, fancy cupcakes as well as artisan breads
The company’s key UK bakery division saw like-for-like sales rise 2.8 per cent, ahead of the wider market, Finsbury said.
Shares in the company recovered after falling by about 2 per cent this morning, trading just 0.1p lower at 114.9p at around lunchtime.
‘In what has been a very challenging environment with unprecedented commodity and labour inflation, the group has done well to recover those cost pressures through a combination of operational efficiency and price recovery and at the same time, accelerating the reshaping of its asset footprint to drive further efficiency,’ Finsbury Food said in a statement.
The company, which supplies all major supermarkets and a variety of wholesale catering firms, has been compensating for higher costs by adapting recipes, making some products smaller, putting up prices where possible, reducing promotional activity and using robots to drive down wage bills.
Finsbury boss John Duffy said he expects the company to still deliver profits in line with market expectations, despite a ‘challenging’ environment.
‘We are pleased with the resilient performance of the group in what has once again been a period of market-wide inflationary pressure, illustrating that the work and investment undertaken in prior periods has continued to bear fruit,’ he said.
Last year Finsbury was forced to shut its loss-making Grain D’Or pastry factory in North London, resulting in the loss of 250 jobs.
Finsbury acquired Grain D’Or as part of its takeover of the Fletcher Group of Bakeries in 2014 but the pastry and bread supplier is facing the chopping block after failing to turn a profit amid rising competition.
Ian Forrest, investment research analyst at The Share Centre commented: ‘Commodity and labour inflation remain significant challenges although the company is managing to offset those with better operational efficiency and some price recovery. Management said that the challenging UK economic environment shows little sign of abating but it remains well positioned.’
‘The shares fell back 3 per cent in response to today’s news which is a reflection of the challenges which the company mentioned,’ he continued.
‘They are mostly issues beyond the control of the company but it is taking measures where it can to address them and retains a strong position in the UK bakery market. The shares are good value and we continue to recommend them as a buy for higher risk investors seeking growth.’