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Concerns about rising raw material costs have weighed heavily on Finsbury Food's share price in the past few months, though interim results show the baker is coping well.

During the six months to December, the group – which bakes premium cakes, low-fat slices and speciality breads – expanded revenues organically across all parts of the business, though the addition of cake-maker Lightbody in February 2007 was the driver behind 91% growth in turnover to £82.8m. Even after £400,000 of re-organisation costs, pre-tax profits rose by 95% to £2.6m and earnings by 27% to 4.3p.

Management admit current industry conditions ‘continue to be challenging‘ – rising raw material input costs added 10% to group costs during the period, equivalent to a £6m hit over a whole year. However, the company has managed to pass on three price increases to customers in the past 12 months and seems confident about their ability to manage margins and the company’s product positioning.

This is indicated by the 41% and 15% growth in the niches – premium and healthy – in which Finsbury specialises, compared with a cake market growing at circa 7%. Finsbury's performance in the first eight weeks of the second half backs this up, with all businesses showing strong year-on-year growth .

Management has re-affirmed expectations of meeting full-year forecasts of around 10.4p of earnings, placing the shares on a price-to-earnings ratio of almost half that of peers. Down from a three-year high of 117.5p last April, the shares have attractions on a value basis but may continue to flounder against a harsh market backdrop.

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