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Cake and bakery goods supplier Finsbury Food Group (FIF) was back in profit in the first half of its financial year, though business closures meant headline revenues declined.
Group revenue, on a like for like basis excluding revenue from acquired and closed businesses increased in the 26 weeks to 29 December 2018 by 0.5% year on year to £145.5m.
Including the revenue from acquired and closed businesses the revenue declined by 3.5% from £157.8m to £152.3m.
Headline profit before tax rose back to £7.5m in the period following a £1.2m loss in the corresponding period in 2017. Though profit before interest, tax and significant non-recurring and other items remained flat at £8.7m.
In UK bakery, revenues decreased by 5% to £133.4m driven by the loss of the sales from the closure of loss-making bakeries in the previous year of £13.m. Like for like revenue growth was 1.7%.
The closure of the bakeries has however aided profit, with operating profit margin increasing from 5.2% to 5.5% and operating profits remaining broadly flat at £7.4m.
Finsbury said the bakery sector “continues to face commodity head winds” led by flour and continuing labour inflation, which will continue to necessitate price recovery from customers.
Its overseas business, which comprises Lightbody Europe trading primarily in France and specialising in the import UK manufactured food products, saw revenues rise 9.3% to £18.9m. Excluding the revenue from the acquisition, like for like sales were down £1.4m primarily driven by biscuits.
CEO John Duffy commented: “In what has been a challenging period, we are pleased to report another robust set of financials, testament to the strength of our business and our position in the market place. This strength is clearly illustrated by the growth in margins achieved and the further increase in our dividend.
“This resilience comes from a number of areas, both historic and ongoing: our capital investment, the diversification of the Group into foodservice and high growth areas such as Free From, and our constant drive for efficiency. However importantly, alongside this, our relentless drive to deliver on customer trends and ensure our products are not only best in class, but also what customers are looking for.
“Whilst there is no doubt that the wider market pressures will continue in the period ahead, our market position is solid and we are well positioned both now and for the longer term.”
Looking forward, the board expects stronger organic growth in the second half following new business wins and product launches.
However, it said the UK grocery market continues to be challenging with seemingly no rest in cost inflation. It expects the second half to be under pressure to fully offset cost inflation, but the board is confident of achieving adjusted EBITDA not less than that achieved in the first half.
Morning update
Associated British Foods (ABF) has issued a pre-close update ahead of its annual results to be announced on 24 April.
ABF said that, other than the expected reduction in sugar revenue, second half sales growth will be delivered by all of its businesses.
It expects adjusted earnings per share to be broadly in line with the same period last year, with lower net financial expenses offsetting a small reduction in adjusted operating profit.
For the full year, adjusted operating profit and adjusted earnings per share for the year expected to be in line with last year.
In grocery, revenue and operating profit in the first half are expected to be ahead of last year on an underlying basis, with a further improvement in margin. Including a £12m one-time cost in respect of supply chain consolidation at Twinings Ovaltine, adjusted operating profit for the first half will be in line with last year.
Twinings Ovaltine revenues are ahead of last year, with sales in Australia and the UK benefiting from the continued success of the cold Infuse teas range launched last summer. Jordans and Ryvita achieved good sales growth in a number of international markets, while sales of Ryvita Thins grew in the UK, although profit declined due to increased raw material costs. Work continues to reduce the operating losses at Allied Bakeries and some bread sales volume will be lost next year as a result of recent customer discussions on pricing.
AB Sugar revenue from continuing operations is expected to be lower than last year in the first half, in line with previous guidance, with lower EU contracted sugar prices impacting our UK and Spanish businesses. As a result, in the first half AB Sugar will record a marginal loss, but operating profit for the full year remains in line with expectations.
It also expects revenue growth in its agriculture and ingredients divisions.
Sales at its key Primark retail chain are expected to be 4% ahead of last year in the first half, at both constant currency and actual exchange rates, driven by increased retail selling space partially offset by a 2% decline in like-for-like sales.
With a much higher margin, profit is expected to be well ahead of the same period last year, while early trading of the new spring/summer range has been “encouraging”.
Primark’s UK operations “continued to perform well”, increasing its share of the total clothing, footwear and accessories market with sales 2% ahead of last year. Sales in the Eurozone are expected to be 5% ahead of last year, with particularly strong sales growth in Spain, France, Italy and Belgium. Its US business “continues to perform strongly” and reduced its operating loss as the effect of a weaker US dollar on purchases contracted for the first half benefited input costs.
Elsewhere, over the weekend there was plenty of speculation on the future of Sainsbury’s and Asda, with the latter being linked to a multi-billion pound takeover bid by private equity giant KKR.
See this morning’s Media Bites for details.
On the markets this morning, the FTSE 100 has opened the week up 0.2% to 7,194.2pts.
Finsbury Food Group has dropped 4.1% to 78.7p this morning, while ABF is down 1.2% to 2,285.5p.
Early risers include McBride (MCB), up 3.2% to 94.5p after last week’s losses, Coca-Cola HBC (CCH), up 0.9% to 2,665p and Morrisons (MRW), up 0.9% to 231.6p.
Fallers include PayPoint (PAY), down 2.2% to 855p, Devro (DVO), down 2% to 168.6p, Nichols (NICL), down 1.5% to 1,510p and Greggs (GRG), down 1.3% to 1,765p.
This week in the City
After ABF and Finsbury Food Group kicking off the week with trading updates already this morning, there’s plenty more in the calendar in the UK and abroad.
Tomorrow brings half year results from chocolatier Hotel Chocolat (HOTC), while sausage skin maker Devro (DVO) will issue its full year results on the same day.
Wednesday brings full year results from Vimto manufacturer Nichols (NICL).
Ready meals giant Bakkavor (BAKK) will issue its own full year results on Thursday alongside FTSE 100 tobacco giant British American Tobacco (BATS) and cider and beer producer C&C Group (CCR).
There’s plenty in the calendar internationally too, with Ahold Delhaize, Beiersdorf and HAIN Celestial all issuing full year results on Wednesday.
French hypermarket Carrefour and brewing giant AB InBev (ABI) will release their full year earnings on Thursday.
Back in the UK, PM Theresa May has delayed the latest Commons vote on her Brexit plan, but MPs are scheduled to take a vote potentially ruling out a ‘no deal’ Brexit on Wednesday.
Thursday will bring the monthly GFK consumer confidence figures, while the monthly PMI manufacturing index numbers are out on the same day.
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