The owner of jam and marmalade maker Tiptree has reported a reduction in full-year gross profitability as the post-Brexit rise in input costs hit its margins.

Overall sales for the year to 31 December 2016 at Wilkin & Sons were up 1.7% to £41.3m after what chairman Walter Scott called a “tough year both politically and commercially”.

Despite the modest revenue rise, escalation in the cost of ingredients and materials reduced gross margin to 22.8% during the year from 23.4%.

Gross profits were down 1% to £9.4m.

Scott said the company has been affected by the post-Brexit fall in the pound, the increasing competitiveness of the supermarkets and “turmoil in our export markets due to the change of four of our distributors”.

The core Tiptree brand “had a particular difficult year”, but its farming business “improved beyond recognition”, bakery performance was “strong” and its tea rooms had a year of consolidation in preparation for acceleration growth in 2017.

Sales outside the UK fell 6.5% to £6.8m, while UK sales were up 3.4% to £34.5m.

International sales were hit by the replacement of four distributors – “a major exercise we hope will not be repeated for some time”. Though annual exports were still the second highest the group has yet achieved.

In the UK retail sales were static – held back by government concerns about sugar and doubts about the health benefits of Manuka honey – but catering and ingredients channels continued to grow.

Scott added that the company emerged from the year in a stronger position than “seemed possible at half way”.

However, he warned: “With volatile conditions in many world markets and lack of confidence in BRIC nations, to maintain recent overseas sales growth will be a challenge.”

He said new relationships in markets such as Italy, the US, Japan and Germany would take time to show positive results and UK retail sales are expected to remain static.

Operating profits were up 64% to £1.5m. However, this was primarily driven by a reduction in the factory redevelopment costs incurred during the year, which were £1.2m lower than in 2015.

The group halted development of a new factory in 2015 and instead began a renovation programme for its existing facilities.

Scott said the abandonment of the new factory will enable the group to “move at a pace the business can effort, adjusting out rate of progress to match changing market and economic conditions.”

However, the total cost of the refurbishment plan is likely to be higher than that of the new build programme.

Reported profits were up by more than 50% to £1.3m as its tax payments reduced from £610k to £275k.

Scott concluded: “We are optimistic for the future of the business, both in the medium and long-term.”