Finsbury Food Group saw sales fall for the first time in its history as the recession took its toll on the premium cake market.

Group revenue for the 52 weeks to 3 July 2010 was £168.3m, down 5.9% year-on-year, although the company did manage to increase profits before tax by 7% to £5.4m. This was due to internal efficiencies and the strong performance of its bread and gluten-free arm, which posted sales growth of 14% to £43.7m.

The company’s cake operation, which accounts for 74% of revenue and includes Memory Lane and Lightbody, saw sales drop by 9.7% during the period, due to an overall decline in the cake market and a decision to exit low-margin business.

“During the last 18 months, our focus has been on shaping and improving performance across the organisation by delivering efficiencies,” said non-executive chairman Martin Lightbody. “Although profits are up, the reality is that sales are down for the first time in our history. Our largest market in cakes has been heavily discounted, creating the need to revise our own pricing structures. In addition to the difficulty of implementing price rises under current market conditions, we have also had to cope with increased prices of raw materials in some areas.”

John Duffy, chief executive, said: “We have responded to a difficult trading climate by adapting our range of products, developing strategies to meet the modified purchasing habits of our customers while stepping up the pace of internal change.

Our vision is clear. Success for this business depends on trading through the present period, paying off a proportion of our debt, remaining within financial covenants, building a financial position that is less leveraged and returning to growth in an expanding marketplace.”