Ultrapharm, which was established in 1993, operates factories in Pontypool and Poland. The Polish site specialises in modified atmosphere packaging to achieve long shelf-lives of up to six months and frozen bread, rolls and filled pastries and pies. Almost all of its production is exported, with Italy, Germany, France, the UK and Ireland its biggest markets. The Pontypool facility supplies UK retail.
Finsbury has retained a foothold in the free-from market via Lightbody Stretz, in which it owns a 50% share. Ultrapharm supplies free-from products to this European enterprise. Finsbury said the opportunity to invest in Ultrapharm’s sites and expand the group’s existing facilities to manufacture free-from products provided significant sales potential in a growing segment.
Market growth
Finsbury cited Kantar Worldpanel figures indicating the UK free-from bread and morning goods market had grown by 92% over the past four years [52 w/e 20 May]. It looked set for further growth over the next five years in line with the continued growth forecast for the wider free-from grocery market.
In the Europe, Middle East and Africa region, the gluten-free bakery market was expected to grow at a compound annual growth rate of 10.6% from 2017–21 [Technavio, Global Gluten Free Bakery Market 2017-2021]. As a result, Finsbury said it believed there was a sizeable opportunity to grow the business across a number of channels.
Finsbury is paying £17m in cash initially for the deal, plus up to £3m payable in annual instalments, and a one-off incentive payment of £1m–£5m subject to performance, up to 30 June 2021.
For the year ended 31 December 2017, Ultrapharm generated pre-tax profit of £0.8m on revenue of £19.5m, up 35% from £14.5m for the comparative period in 2016. At latest official valuation, its gross assets were £10.8m.
‘Commercial opportunities’
“Ultrapharm has a robust market position both in the UK and Europe, extensive technical ability and strong relationships across a high-quality and diverse customer base,” said Finsbury chief executive officer (CEO) John Duffy. “This provides Finsbury with the opportunity to build upon both businesses’ existing retail relationships, as well as unlocking further commercial opportunities.
“Alongside the growth opportunities this acquisition brings, in line with the group’s strategy, it further diversifies us by geography and category; giving us a further foothold in Europe and allowing us to diversify into the free-from market.
“We look forward to welcoming Ultrapharm to the team and investing in the wider group to capitalise on such a significant opportunity for growth.”
Ultrapharm CEO Marc Lewis said: “We are delighted to be joining the Finsbury Group and looking forward to growing Ultrapharm’s exciting prospects with their support.”
Speciality bakery group
Finsbury is one of the largest speciality bakery groups in the UK and, with its overseas division, chalked up sales exceeding £300m in the financial year ending 1 July 2017. It supplies many of the licensed celebration cakes sold by major retailers. Its range also includes small snacking cake formats, such as cake slices and bites and artisan, plus fresh and frozen healthy lifestyle and organic breads; rolls; muffins (sweet and savoury); and morning pastries.
Finsbury sold much of its gluten-free operations to Genius in 2013 in a deal worth £21m. It stated at the time that it had sealed the deal to focus on its core bread and cake business, generate cash for further investment, and pay off debt.