Finsbury profit slump just a bump in the road

17-Sep-2018 - Last updated on 17-Sep-2018 at 15:30 GMT

Finsbury's dip in profit should be set in context of a challenging market, according to analysts

Finsbury Food Group’s financial struggles reported in its preliminary results – following the sale of an unprofitable plant – should be set in the context of the challenging bakery market, business consultancy City Index claimed.

Senior market analyst Fiona Cincotta of City Index said that despite Finsbury taking a hit from the closure of the loss-making croissant factory, it had reported another sure and steady result against significant obstacles.

“Management has had to weather higher butter and egg prices and lower consumer confidence, so they've done well to squeeze out higher like-for-like revenue, while expanding margins to boot,” said Cincotta.

“Finsbury Food is navigating harsh conditions by successfully expanding into niche categories and the recent acquisition of [free-from baker] Ultrapharm provides some welcome exposure to the growing free-from market – and its 1.3bn Brits who identify as gluten-free.”

Finsbury’s balance sheet

In spite of all this, Finsbury’s balance sheet was still in decent enough shape to mull other expansion opportunities, according to Cincotta.

“[Investors] haven't been let down with this result,” she added.

Profit before tax plummeted 65.7% to £4.47m for the speciality cake and bread manufacturer, reflecting significant one-off costs related to the closure of the before mentioned loss-making bakery.

Group revenue took less of a hit, only dropping 3.4% to £303.6m for the year. However, revenue was up 2.4% (£290.2m) on a like-for-like basis, while adjusted profit before tax grew 4% to £17.2m.

‘Stable trading performance’

In a statement, chairman Peter Baker said: “The overall story from the year is one of a stable trading performance by the group, delivered in the face of unprecedented cost inflation of commodity inputs – especially butter.”

“We have achieved a like for like top-line and underlying bottom-line growth despite this cost pressure and in a rapidly changing market.”

Chief executive John Duffy said Finsbury’s ongoing capital investment programme and efficiency focus of recent years had enabled the company to cope with a tough market environment and maintain its margin.

“We are confident that we are well positioned to deliver on our strategic objectives and capitalise on growth opportunities both organically and through future M&A,” Duffy concluded.

Earlier this month, Finsbury announced its acquisition of free-from baker Ultrapharm for an initial payment of £17m.