Shares in Finsbury Food Group have jumped after the UK baker posted a near 13% increase in annual sales, although the company did admit margins were under pressure.

The cake, bread and gluten-free baked goods manufacturer said revenue rose 12.8% during the year to 2 July to reach GBP189.9m (US$311m). Finsbury said the rise in revenue had reversed the 6% fall in sales a year earlier.

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Sales from Finsbury’s cake division climbed 12% to GBP139.9m, with growth from its UK business and from its Lightbody Europe export joint venture, in which the company owns a 50% stake.

Finsbury saw sales from its the bread and free-from division rise 14.2% to GBP50m, driven by “strong growth” from the Genius brand. The company also pointed to the contribution of own-label brands in the fresh gluten-free market and the Vogel’s brand in the speciality bread category.

The company said it is “pleasing” to have returned to “strong organic growth” but admitted that margins had come under pressure from input costs.

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“Commodity and cost inflation has been high throughout the year and again in recent months with no sign of relief,” Finsbury said. “The combination of higher sales growth and savings from internal efficiency projects only partially offset these costs to date and operating margins have reduced as a consequence.”

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Chief executive John Duffy said Finsbury was working to recover the costs related to increasing butter, flour and sugar prices.

“With further commodity increases, the challenge on an ongoing basis is increasingly to recover these costs by reformulation and price increases whilst continuing the growth,” he said.

Shares in Finsbury were up 7.14% at 22.5p at 10:32 BST.