Finsbury Food Group is to invest further to meet demand for artisan-style bread – and said it was committed to growing its business through further acquisitions.
The comments came as Finsbury announced its results for the year to 30 June 2018 and, as stated in a trading update in July, reported like-for-like revenue up 2.4% to £290.2m.
Finsbury said it had delivered a resilient performance in an “unprecedented” inflationary environment, and in the face of customer consolidation, with adjusted EBITDA up 2.7% to £25.6m.
The business had made capital investments of £12.6m in the year, taking total investment to £37.3m over the past three years. It has rolled out a new IT platform to three of its six manufacturing sites, with the remaining three sites due in the first half of the new financial year.
“Inflationary costs, larger customers and competitive markets all present a margin challenge to manufacturers across the market,” said chief executive John Duffy. “But strong, innovative, well-invested manufacturers of scale are an essential ingredient in helping our consolidating customers achieve their own strategies.”
He added that the “shock” butter price increase at the end of last year, following inflation in labour, other commodities and energy, had been offset by efficiency improvements, reformulation, cost recovery and the closure of London bakery Grain D’Or.
“With the losses caused by the butter increase, we had to change our commercial plans. This precipitated the difficult decision to close the business in the first half,” added Duffy. “All in all, it was a necessary step back to take stronger steps forward.”
Annual sales including the loss-making Grain D’Or factory were down 3.4% to £303.6m.
Investments by the business over the year have included a newly installed £8m sharing cake line in its Cardiff bakery, and product launches including free-from bakery brand Wiso in Europe through Lightbody Europe, and the Mary Berry licensed range in the UK.
“Our Mary Berry cake brand has been hugely successful, with a significant level of sales for the group, illustrating the potential of a licence with good consumer recognition and emotional engagement, plus of course, some very good products,” said Duffy.
Sales of Finsbury’s artisan-style bread had doubled after the business invested in the category in 2016, he added.
“The line is a stone-based automated oven that had capacity of about £5m – it’s already full. The opportunity and demand for it is such that the need for further capacity has been recognised so we will be investing to meet that,” Finsbury Food Group finance director Steve Boyd told British Baker.
Breads produced on the line include bloomers, tiger bread and sourdough-based loaves.
“We didn’t expect it would grow as quickly as it did, but it was full within a year. That was primarily off the back of business with not only Waitrose but The Co-op and Sainsbury’s.”
Earlier this month, Finsbury announced the acquisition of gluten-free business Ultrapharm, which has manufacturing facilities in Pontypool in the UK and Zywiec in Poland. Duffy said the business remained committed to future acquisition-led growth.
“With further acquisitions we can introduce new product, customer or channel diversification, or accelerate market consolidation in our main product areas,” he added. “This year, we continued to explore several acquisition opportunities without finding the right balance of risk and reward, but were delighted to have completed the acquisition of Ultrapharm, giving the group a significant opportunity to access an exciting and high-growth marketplace.”
Foodservice will be a focus of this diversification, said Boyd who noted 5.7% growth in Finsbury’s foodservice division at a time when many would expect it to be in decline as a result of high street restaurant closures.
“Six or seven years ago we were all grocery,” added Boyd. “Twenty-two percent of our business is now foodservice and that is a good place to grow these other acquisitions.”