It is not just chocolatiers who look forward to Easter: it is a crucial period for bakers. Suppliers of cakes and baked goods could do with some seasonal cheer. The £8.3bn sector has grown just 2.2 per cent annually over the past five years, according to IbisWorld, a research agency. Brands are under pressure from cheaper alternatives and supermarkets have been keen to cut prices to compete with discounters.

Finsbury Food

This Easter, Finsbury Food will produce 66m hot cross buns — enough for one each for the entire UK population.

One of Britain’s largest speciality bakery groups, Cardiff-based Finsbury supplies supermarket chains with own brand cakes and other baked goods and makes children’s character ranges, including Peppa Pig, Paw Patrol and Disney.

Finsbury has a niche in cakes, artisan breads and, increasingly, the much faster growing “free from” sector that taps into the rising popularity of vegan and gluten free products. “We keep shifting what we do to find these consumer trends,” said chief executive John Duffy. This year, it launched a vegan brioche style burger bun for the food service market, where it is a major supplier.

Floated on Aim in 2002 at 29p, Finsbury grew rapidly by acquisition. Mr Duffy had to sort out debt problems when he took over in 2009 — but subsequent years of strong growth took the company’s shares to a peak of 135p. The current environment of inflationary cost pressures and cautious consumers is more challenging. Companies are also having to invest heavily in bakeries, in areas such as robotic product picking.

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In the six months to December 29, Finsbury closed lossmaking bakeries but also completed its £20m acquisition of Poland-based “free from” company Ultrapharm. Total group revenue was down 3.5 per cent to £152m; adjusted pre-tax profit was broadly flat at £8.3m. The share price is now around 85p — up almost 20 per cent in the past month. It is trading at around five times earnings before interest, tax, depreciation and amortisation, well below leading sector players.

Real Good Food

The Liverpool company is still suffering indigestion after gobbling up several businesses as it sought to expand into new markets.

In the past year it has sold four subsidiaries, most of which were lossmaking. They included Chantilly Patisserie, which made frozen desserts; R&W Scott, a jam making business in Scotland; Haydens Bakery, and Garrett Ingredients. The company received a combined £18m.

Real Good Food said it lacked scale in the sectors the companies operated in so they were not competitive. It will now focus on its core brands of Renshaw, ready-made icing and marzipan, and Rainbow Dust Colours, used in cake decoration.

Hugh Cawley, a turnround expert, arrived as chief executive in January 2018, installed by shareholders to slim down the business and improve performance. Shareholders Napier Brown Ingredients, Omnicane International and Downing also provided £34m in loans.

There are signs of progress, with £2.8m of annual centralised costs cut. In the year to September 30 revenue from continuing operations dropped slightly compared with the same period a year earlier, to £30.4m from £31.9m.

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The pre-tax loss, stripping out exceptional items, was £2.8m (£3.4m last time). The company took a £6.3m goodwill impairment charge to increase the loss to £9.1m.

Mr Cawley must now boost the top line to lift the share price from historic lows.

The shares have been on the slide since reaching 59p in November 2015 and are now about a tenth of that level.

Cake Box

Cake Box is a bakery with a difference. It only sells cakes made without eggs. Co-founder Souk Chamdal began the business with Pardip Dass after failing to find an egg-free cake for his daughter’s birthday — many people of South Asian heritage follow a strict lacto-vegetarian diet.

Cake Box operates as a franchise. The sponges are baked in Enfield, London, and then decorated with fresh cream in shops. They are not suitable for vegans but the chain is expanding fast, especially in areas with historic immigrant populations.

Cake Box floated in June 2018 valued at £43.2m. The shares were priced at 126p and are now worth 164p.

A recent trading update for the year to March 31 2019 showed like-for-like sales growth of 6.5 per cent. The company expected £171m revenue, up 30 per cent on the year before. It opened 28 new stores, to reach 114, and intended to continue at a rate of two a month.

It also opened distribution centres in Coventry and Bradford to support nationwide coverage.

Darren Shirley at broker Shore Capital predicted full-year profit of £4m. “Cake Box remains immature in the large and fragmented UK cake market and offers an attractive mix of capital light growth and strong cash generation,” he said.

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