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Inflationary pressures have impacted profits at Finsbury Food Group despite record first-half sales.
Pre-tax profits fell 9.2% to £11.9m in the six months to 25 December, with operating profits in the UK side of the business down 27% to £4.7m (compared to a 41% rise in the international division) as it managed labour shortages and supply chain disruption.
However, the bakery group said it expected it recover profitability in the second half after passing on cost increases to its customers.
CEO John Duffy said the group had not been immue to the challenge arising from “sudden and unexpected” cost inflation at the end of 2021.
“However, we have been able to mitigate the impact of these pressures through commercial negotiation and operational improvements and will see the benefit of these actions in our second half profit performance,” he added.
“We have also been affected by staff shortages and supply chain disruption and would have been able to supply extra demand for our products and deliver further revenue growth had it not been for these external factors; a positive sign for the future of our business as these issues begin to ease.”
Group revenues in the half jumped 9% to £166.5m as the foodservice arm started its recovery from disruption caused by the pandemic, while growth in supermarkets and overseas continued.
“In the second half, we will continue to monitor closely and work through ongoing pressures using the same strategies employed to date,” Duffy said.
“While headwinds are set to persist, we have a successful track record of navigating challenging market conditions, and the steps we have taken to optimise the business to date stand us in good stead.”
Finsbury confirmed its full-year performance would still meet market expectations as a result of cost recovery and strong top-line growth.
Separately, the group announced it had increased its stake in its European distribution subsidiary Lightbody-Stretz from 50% to 85%, with an option to buy the remaining 15% after two years.
“The company considers that securing a majority stake in this business will enhance its capacity to support the business and deliver growth outside of its primary UK markets.”
Shares in Finsbury sank by 4% to 85p as markets opened this morning.
Morning update
Clipper Logistics has confirmed it has agreed to a sale of the group to New York-listed GXO Logistics in a deal worth almost £1bn.
In a statement to the London Stock Exchange this morning, Clipper said it had told GXO that if a firm offer was made it was “minded” to recommend it unanimously to Clipper shareholders.
The agreed proposals from GXO include 690p in cash and the issue of new GXO stock at 230p for each Clipper share.
Clipper works with the like of Marks and Spencer, Asos and H&M.
GXO is the largest pure-play contract logistics provider in the world. It was a spin-off from XPO Logistics in August 2021 and is now separately listed on the New York Stock Exchange with a market capitalisation of $9.3bn.
GXO chief executive Malcolm Wilson said: “This potential acquisition would enhance GXO’s position as a successful pure-play logistics leader. Our two companies have highly complementary service offerings, customer portfolios, and footprints in the UK and Europe.”
Shares in Clipper soared 14.4% to 890p this morning on the news.
The FTSE 100 bounced back from a bad week this morning, climbing 0.7% to 7,569.97pts so far today.
Early risers today include Real Good Food, up 8% to 2.7p, Hellofresh, up 2.6% to €48.49, Science in Sport, up 2.6% to 60p, and Deliveroo, up 1.9% to 129.3p.
THG is down a further 4.7% to 108.1p in the early going, with other fallers including AG Barr, Finsbury and Cranswick.
This week in the City
It’s looking somewhat quiet this week on the markets in terms of scheduled updates.
Tomorrow brings full-year results from Hellenic Coke bottler Coca-Cola HBC, while Wednesday sees Danone release its fourth quarter and final figures.
Brewing giant AB InBev files its latest quarterly numbers on Thursday morning, while Hormel Foods updates in the US later in the day.
The week closes out with the latest monthly consumer confidence data from the closely followed GfK index.
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