Finsbury boss says firm to enter ‘new financial stability’
“These results signal the group's shift from a transitionary period, to a new period of financial stability,” said Duffy, the firm’s chief executive. “While a strategic disposal has driven this change, the company is trading maturely, paying down debt and generating cash.”
Key priorities remain driving organic growth, developing product innovation and – thanks to “the transformed balance sheet” – evaluating merger and acquisition opportunities.
The manufacturer of cake, bread and bakery goods posted underlying profit before tax up by 19% to £5.5M, while underlying operating profit from continuing activities rose to £7.4M from £7.2M.
Group revenue from continuing operations was £176.6M, compared with £178.9M in the same period of last year.
The sale of its Free From business for about £21M helped to slash debt by 78% to £7.4M from £33.9M last year. In November last year its equity initiative raised £3.8M.
‘Light at the end of the tunnel’
Duffy said: “Light at the end of the tunnel is always welcome. While the precise length of the tunnel remains a matter of debate, it is pleasing to reflect on a year in which the enduring efforts of senior management and staff at all levels of Finsbury Foods generated demonstrable progress.”
The firm reported 17% sales growth in bread, driven by growth of licensed brands – such as Vogel’s, Cranks and Village Bakery.
Finsbury said it had a mixed year in its core UK bakery division. The bread business maintained long-term growth trends, as the business doubled in size over the past five years, driven by increased demand for artisan and organic products.
But the cake business endured tougher trading conditions. UK sales were relatively flat, while performance in the overseas division was adversely affected by exchange rate fluctuations.
‘Middle is under stress’
“Both ends of the [UK] grocery scale are exhibiting signs of expansion but the middle is under stress,” said Duffy. Consumers were buying treats where they perceived uniqueness or real quality, shopping across locations to obtain the best mix.
“It's hard to keep growing at 17% if your major customers are not but our coverage is reassuring,” said Duffy. For example, Finsbury Foods’ speciality bread business was “significantly weighted” towards Sainsbury and Waitrose, which are growing and Finsbury is growing alongside them, he said.
The economic environment remained unhelpful with promotional activity at “unsustainable levels” in most categories of food.
While commodity prices have settled down, without the huge fluctuations of recent years, the overall trend remained upwards with marked volatility in key ingredients such as wheat, eggs and sugar.
“One of the reasons for investing so significantly in the businesses going forward is that the only way we can square the circle of keeping prices keen for consumers and stimulating deals is by being a low cost manufacturer,” said Duffy.
“We’ve spent a lot of time and effort changing pack sizes, reformulating products and becoming more efficient. Our managers are pulling every possible lever to try and make sure we get back to sensible levels of return.”
Finsbury is the second largest manufacturer of ambient packaged cake – excluding in store bakery – in the UK, a market valued at £901M, according to Kantar Worldpanel.
