Finsbury Foods has reported that it now expects full year profit to come in ahead of market expectations.

In a pre-close trading update, the bakery supplier said continuing full year sales for the year ending 28 June were down 0.5% at £175.7m.

The sales performance improved in the second half of the year – in March, Finsbury reported that first-half sales had dropped 1.8%.

Finsbury said annual UK bakery sales were broadly in line with last year, while sales from Lightbody Europe, its European joint venture, were down 1.2%. Even through Lightbody sales were down, profits improved thanks to a shift to higher margin business.

Finsbury said profit levels would be ahead of last year thanks to recent steps to improve performance including an overhead reduction programme implemented in the second half and increased market activity to boost sales.

Finsbury has also benefited from a doubling of CAPEX this year to £6m. Recent projects include what Finsbury claimed to be the largest cake bite robotic picking installation in the world and expansion of the Nicolas and Harris bread facility – adding 60% extra capacity. It said the extra capacity was now fully operational.

“Our continued capital investment programme is heralding positive signs and we are encouraged by the contribution that this has made,” said Finsbury CEO John Duffy. “Although cost inflation keeps margins under pressure, the strategies we have in place have mitigated against this and with more favourable profit dynamics; we are well placed to take advantage of the market as it improves.”

The shares reacted positively to the update in trading on Thursday morning climbing 9.7% to 59.8p.