Lees Foods has warned that its first-half profit will be hit by raw material costs.

The cake company reported a 7% increase in full-year pre-tax profit to £720,700 on sales up 5% at £15.1m but said that although first half trading had been strong, second half trading was affected by cost increases in raw materials, labour, power and distribution which it had not been able to pass onto consumers because of competition from suppliers in other European countries.

Ice cream cone sales at its Waverley business and meringue sales at Lees in the new financial year had also been affected by an early Easter and poor weather conditions.

“This has had an inevitable effect on our first half profit and they will be down on last year's figures,” the company said.