2 July 2008 - Finsbury Food Group plc, a leading manufacturer of premium and indulgent cakes, celebration cakes, low fat cake slices, artisan and organic breads, morning goods, and a range of gluten free bakery products, is today providing an update on trading in advance of entering its close period.
The last financial year has been one of much activity for the Group. The California Cakes Ltd ("California") business was integrated into the Lightbody Group Ltd ("Lightbody") in July 2007 and United Central Bakeries Ltd ("UCB") returned to full production in July 2007 within eight months of the major fire in October 2006. In addition, two complementary acquisitions were made. In October 2007, Anthony Alan Foods Ltd was acquired, which gave the Group the rights to distribute cakes under the Weight Watchers brand and, in April 2008, two gluten free businesses were purchased in Hull to form Livwell Ltd. In conjunction with UCB, this latest acquisition now gives the Group the leading position in the supply of gluten free baked goods to the UK's multiple grocers.
The Board is pleased to confirm that sales have remained strong with excellent growth in all subsidiaries. This is particularly pleasing for the second half of the year where the prior year comparables were much higher. Sales for Memory Lane Cakes Ltd have grown by 11% year-on-year (6% in the second half), with Lightbody up 11% (10% in the second half), and the combination of California and Campbells Cakes Ltd up 14% (11% in the second half). In addition, Nicholas and Harris Ltd sales are up 19% (22% in the second half), and the average weekly sales from UCB have risen by 17% when comparing the second half of the year to the first half.
During the financial year, there has been a well documented and dramatic increase in the prices of core commodities such as wheat, dairy produce and eggs. Whilst the Group was successful in passing these costs on to its customers, the speed of increase was unprecedented and there is a natural time lag in achieving selling price increases. This has led to Group margins being reduced by over £1.50m in the year to June 2008, though this has been compensated for by strict overhead cost control.
There is still upward pressure on input prices with many commodities remaining volatile. This is in addition to continued pressure throughout the supply chain caused by rising fuel and energy prices, coupled with the weakening of Sterling. The Group remains in dialogue with its customers to look for opportunities to recover these costs in a constructive manner.
The underlying fundamentals of the Group remain strong and the Board still expects growth in earnings during the coming twelve months. However, this is likely to be slower than the growth achieved recently due to inflationary pressures and the uncertainty in the spending patterns of consumers. Whilst we continue to control our core commodity costs to the best of our ability, there are certain macro economic factors in the global and UK economy which are outside of our control. We will continue to use our flexibility and innovation skills to be prepared to move with the markets as the situation unfolds, without compromising our desire to create great tasting products.
With market leading positions in all of our chosen operating sectors, the Group can focus on the right balance between immediate returns and longer term investment in the business to ensure it is as well placed as it possibly can be to benefit from the emerging trends in the economy.
Commenting, Chief Executive Dave Brooks, said:
"In times of uncertainty, understanding the consumer, being flexible and having good innovation skills are the most important assets a business can have. In Finsbury, these are three of our core skills and our ability to move with market fluctuations will be our strength in the next twelve to eighteen months.
"Our sales growth prospects remain very positive over the coming year with major range relaunches either in progress or planned with all of our major customers. We are also the beneficiaries of some very strong licensing partnerships with major brands such as Weight Watchers, Thorntons, Disney and Nestlé . . . all of which can offer something new in our core areas.
"The next twelve to eighteen months will see a tough trading environment, though such conditions also contain significant opportunities for the best businesses to seek out and thrive. Our goal is to ensure we are one of those businesses."