Finsbury Foods aims to keep lid on prices

Finsbury Foods, which makes low-fat cakes for the Weightwatchers brand, said shoppers are still buying treats despite the downturn.

The company, which also makes cakes for Thorntons and Disney, reported underlying profits of £5.8m for the year to July 2, an increase of 8.3 per cent on the previous year.

Finsbury said its aim is to make products more affordable, despite the rising cost of key ingredients such as butter, sugar and wheat.

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It said it expects high prices to persist or even increase in the future.

The group’s Livwell division, based in Hull, employs 110 people and is the UK’s leading supplier of gluten free bread, cake and morning goods to the UK’s grocery retailers.

Finsbury said Livwell has launched a number of new ‘free from’ products, focusing on fresh, own label products.

It has also started to contribute to the group’s gluten free Genius range.

Group sales in the year to July 2 rose by 12.6 per cent to £189.6m.

Finsbury, which is the UK’s second largest supermarket cake supplier behind Mr Kipling owner Premier Foods, said Thorntons-branded sales jumped by 17 per cent and Disney by 16 per cent.

This followed heavy promotional activity and the success of Disney films such as Pirates of the Caribbean and Cars 2, while Weightwatchers products also gained market share.

A boost from promotions drove a double-digit sales rise at the group’s Memory Lane Cake factory, although margins were hit by higher input prices.

Retailers removed a small selection of Memory Lane branded cakes from shelves in January in the wake of a fresh egg dioxin scare.

Finsbury said the products remained safe for consumption, no public health risk was involved and the matter has now been resolved.

Chief executive John Duffy said that “keeping things affordable for the customer was essential”, adding that where possible the group will modify its product range to offset price increases.

Sales rose by 12 per cent in the cakes business over the year to £139.6m, with Finsbury’s bread arm, which includes speciality supplier Vogels and a range of gluten free products under the Genius brand, up by 14.2 per cent to £50m. Bottom-line profits for the group rose by 22 per cent to £5.9m. Shares jumped more than five per cent on the back of the results to close up 1.25p at 25.75p.

Analysts at Panmure Gordon raised their target price for Finsbury to 33p from 30p and repeated their “buy” rating.

“This growth, in difficult trading conditions, is in our view a creditable performance, as is the cash generation, which for a second year came in stronger than expected,” they said in a note.

Mr Duffy said: “We are emerging from a complex and exhaustive programme of reorganisation and despite the macro economic factors continuing to buffet the business and our customers, our structured approach has started to bear fruit.

“The difficulties we face should not be underestimated. The global commodities bubble has exerted unprecedented pressure on margins.

“Prices for butter, sugar and wheat have soared over the last 18 months.

“Keeping things affordable for customers is essential.”

Finsbury’s chairman Martin Lightbody said: “Tough times demand a resilient mindset.

“It is our stated intention to help consumers through the recess-ion.

“Doing so demands continual focus on options and choice, whether in the form of optional treats, celebration birthday cakes or lower cost items for lunch boxes. Innovation and adaptability are paramount.”

He added that consumer confidence remains fragile, disposable incomes are under threat and public sector cuts have yet to be fully implemented.

“These are all factors potentially suppressing demand still further,” he said.

“The reality is that the next 12 months are likely to prove testing, but our track record in resisting recessionary influences has been exemplary.”

Having the cake...

Finsbury Food Group makes premium and celebration cakes, low fat cake slices and artisan, organic and gluten free bread and morning goods.

It is the UK’s second largest manufacturer of packaged cakes behind Mr Kipling owner Premier Foods.

Bestselling brands over the year to July 2 include Toy Story, Disney Princess, Cars, Winnie The Pooh and Pirates of the Caribbean cakes.

The packaged cakes market is valued at £886m, according to market research company Kantar.

Finsbury is also the market leader in the supply of gluten free baked goods to the UK’s multiple grocers.

It is currently developing its licensed brand portfolio.

The company’s short-term focus is on organic growth, but it is also keen to take advantage of appropriate bolt-on acquisitions to drive longer term value.