Rising cakes keep Finsbury Food figures looking tasty to investors

Published on Wednesday 23 March 2011 15:16

Rising cakes keep Finsbury Food figures looking tasty to investors

Finsbury Food has passed an "important milestone" with the return of growth in its dominant cake-baking business during the first half of the financial year, pushing its shares more than 6 per cent higher.

The group, which owns the Hamilton-based Lightbody bakeries business that specialises in celebration cakes, expects a further lift within the division after securing a licence to bake confections featuring Disney characters. The agreement to make small cakes, which is in addition to an existing Disney large cake deal, takes effect next month.

Chief executive John Duffy said he was optimistic about the prospects for this year's key Easter trading period, with the dates falling "really well" alongside next month's royal wedding and other bank holidays.

Despite January's contaminated egg scare at the Memory Lane cake business in Wales, Finsbury's overall cake sales continued to rise in the second half, up 6 per cent so far on the same period a year earlier. Group like-for-like sales - which include cakes, breads and "free-from" products - were 5.7 per cent higher.

"We have seen strong growth in bread and free-from and perhaps more encouragingly the return to growth of our cake division," Duffy said. "Although we are adopting a cautious approach with the trading environment as it is, we look forward to exploiting the growth opportunities available to us in both the bread and free-from market, and also the cake market, in the coming year."

The price of many raw ingredients - such as cocoa, sugar, butter and packaging materials - has shot up in recent months. The group has responded by implementing an efficiency drive, but admits that some costs will eventually have to be passed on to the consumer.

During the six months to 1 January, group pre-tax profits were 3 per cent higher at 1.9 million on revenues that rose 6 per cent to 87.8m.

Within this, cake sales were up 3 per cent at 64.2m, reversing the previous year's 9.7 per cent decline. Sales in the bread and free-from division - which includes the United Central Bakeries factory in Bathgate - jumped by 14 per cent to 23.6m following the relaunch of Finsbury's speciality Vogel bread brand.

The group employs about 1,000 people at its Lightbody operations in Hamilton, which focuses on birthday and other speciality cakes sold by supermarkets. United Central Bakeries has a further 150 Scottish staff.

Finsbury's biggest shareholder is non-executive chairman Martin Lightbody, whose 13.7 million shares give him a 26 per cent stake in the business. He acquired his stake as a result of the reverse takeover of his family's bakery business by Aim-quoted Finsbury in 2007.He was named interim chief executive the following year, and served in that role until Duffy's appointment in September 2009.

The group is in continuing talks with insurers to recover costs from the January egg scare, which stemmed from fears that some Memory Lane cakes might have been made from eggs contaminated with dioxin.