Finsbury Food Group, the AIM-listed manufacturer of cakes and bread, this morning said its profit expectations for 2013 were “significantly” ahead of expectations.

In a pre-close statement the company, which sold its free-from business, United Central Bakeries, to Genius Foods for approximately £21m in February, added that its debts and interest costs had also “significantly reduced”.

The disposal, coupled with a £3.8m successful equity placing, had “transformed” the company’s balance sheet and total debt is lower than expected at below £10m versus £34m a year ago, said Finsbury.

It added: “Consequently, capital investment in our core UK bakery division is now being stepped up significantly, providing both product capabilities-led growth as well as improved cost competitiveness.”

John Duffy, chief executive of Finsbury Food Group, said: “I am pleased to be announcing that the hard work and improvements made in the business have allowed us to recommend an increased dividend for our shareholders. The board believes that this, combined with the driving down of debt, increased profit expectations and continued growth, is further ensuring shareholder value.

“The sale of free from has proven hugely beneficial for the group, allowing further investment and laying the foundation for continued growth. The board is committed to continuing the successes of the past year, and I am confident that our improvements will assure shareholders and consumers alike of the company’s fortitude and resilience in what continue to be adverse trading conditions.”

The board will be recommending an increased final dividend of 0.5p giving a total dividend payment of 0.75p for the year.