UK cake maker Finsbury Food Group said this morning (25 March) that half-year profits tumbled 45% but insisted earnings would improve in the second half of its fiscal year.

The company booked underlying pre-tax profits of GBP1.8m (US$2.6m) for the six months to 31 December, down from GBP3.3m a year earlier.

Finsbury’s cake business was hit by rising sugar and chocolate costs, while the group has also incurred costs integrating its two main cake units, Lightbody and Memory Lane.

Revenues were up 11% to GBP92.1m, partly boosted by acquisitions. Like-for-like sales were up 2%, Finsbury said.

Gross margins also improved, rising from 35.6% to 36.5%, despite a higher level of promotional support, Finsbury said. The company said a higher proportion of bread and free-from sales and a jump in sales of branded products had helped boost margins.

Finsbury also claimed its profits would improve during the second half of its fiscal year thanks to hot cross bun sales over Easter and the benefit of efficiency programmes.

Chief executive Martin Lightbody said: “It is encouraging to see that sales have remained strong and resilient despite the recessionary environment. We have focussed our investment and attention on further integration of our businesses and improving our facilities.”

Finsbury, meanwhile, said the company had also renegotiated its lending arrangements with its backers, HSBC.

Lightbody said the deal created a “more appropriate banking facility”. He said: “As a stronger business, we are well positioned to face the challenges ahead and take advantage of future opportunities.”

Shares in Finsbury were down 3.4% to 14.25p at 10:15 GMT this morning.