Companies: FIF   

Premium cake-baker Finsbury Food Group has cooked up tasty half-year results and expects to drive a number of synergies from recent acquisition Lightbody.

Finsbury completed the purchase of Scotland-based Lightbody, a maker of ‘celebration’ and bite-size cakes, for £37.5m in February, of which £10m was paid for by a fundraising. Finance director Linda Morgan informs that closing down Finsbury’s California Cakes factory and moving it to Lightbody’s spare floor space will save the group £2m a year in site, power and purchasing costs.

Morgan points out that Lightbody, which turned over £46.2m in its last full year, has 40% of a £1bn celebration cakes market thought to be growing at 7% a year. It has a licence with Disney and produces at the ‘upper end of the level of the market’ for the major supermarkets. Further to synergies, Morgan explains that much ‘cross fertilisation’ is expected, as Lightbody is a long-time provider to supermarkets (such as Marks & Spencer and Asda) to which Finsbury does not supply, and vice versa.

Interim results to December revealed 32% sales growth to £43.43m and a 12% rise in pre-tax profits to £1.3m. Since the half-year, the pace of growth has increased in each division: Memory Lane cakes from 5% in the first half to 8% in the 38 weeks since; at speciality bread-maker Nicholas & Harris from 18% to 19%; and at California Cakes and Campbells combined from 25% to 28%.

Forecast earnings of 6.89p for the current year to June are then expected to grow by a frantic 46% the year after, according to house broker Panmure Gordon. This represents a drop in the price-earnings ratio from 15.1 times to an appetising 10.3 for 2008. Upgrades seem likely and the shares should perform well.

Finsbury Food Group	AIM	£16.46m	32.00p	-3.50p
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