Lees Foods this morning predicted its full year pre-tax profit will be ahead of expectations – despite the rising cost of raw materials.

The group, which owns confectionery manufacturer Lees of Scotland and Waverley Bakery, reported that sales had increased by 6% in the six months to 30 June, up from £9.6m to £10.2m. Gross profit increased by 5% to £3.4m.

However, the company saw its adjusted pre-tax profit fall from £564,000 to £505,000 as a result of soaring material costs – mainly sugar – which Lees said had been “caused by the ongoing shortage of supply in Europe”.

Clive Miquel, chief executive of Lees, said: “We are very pleased with the results for the first half of this year especially the increase in sales to our key customers. Lees of Scotland has shown good growth over the period, across most product categories. The Waverley Bakery achieved new listings which would have resulted in this business being well ahead of last year, had it not been for very poor weather in May and June which adversely affected ice cream cone and wafer sales.’’

He added: “Pre-tax profit is down on the same period last year, predominantly as a result of raw material costs. As previously reported, there has been a natural time lag in the process to mitigate the impact of these increases. However, the steps we took to address this issue earlier in the year have been successful.”

And Miquel confirmed the company was pressing ahead with new product development. “The management team at Lees will continue to focus on new product development and our stated objective of moving into new product categories, in order to maintain the growth we have achieved over recent years,” he said.