UK-based bakery firm Finsbury Foods has announced improved sales in a first quarter (Q1) trading driven by significant gains in its export business, but high commodity prices continue to squeeze profit margins.
The group’s total sales revenues surpassed £100m (€120.7m) for the first time in the company’s history to £102m (€123.1), representing 16% organic growth on last year.
The company saw growth in both its UK Cake and free form business, but the strongest growth came in its joint venture export business Lightbody Europe, which experienced growth of 167%.
Lightbody is based in Hamilton, UK and employs around 1,000 people. The business has two bakeries plus a European sales and marketing operation based in Rennes, France.
Finsbury CEO John Duffy said: “The Group has reached an important milestone, with over £100m sales in the first half. This demonstrates our resilience and more importantly the quality and appeal of our product ranges with consumers.”
High commodity prices
However, the company said in its statement that despite efforts to optimise operations, year-on-year commodity inflation had meant profit margins were lower than the previous year.
Analysts from investment banking firm Panmure said they expected operating margins to decline 3.3% on the previous year, but due to a lower interest charge, they still forecast 16% growth to £2.1m (€2.5m).
“Over the past twelve months Finsbury’s shares have increased by 18%, which we believe reflects the progress being made at returning the business to top line growth and strengthening its balance sheet. We reiterate our buy recommendation,” they said.
The company itself said that it expects a tougher Q2.
“The second half and consequently full year growth rates will not be as high as the first half as the Group has now reached the anniversary of last year's new product launches, European contract gains and increased promotional activity levels,” it said.
“The trading environment remains very tough, with the challenges of a financially squeezed shopper, and stubbornly high commodity and input price inflation,” it continued.
Finsbury said that it would invest in all its business to improve operating efficiencies, though CEO John Duffy warned that commodity inflation would continue to squeeze margins in the short-term.