Park Cakes makes some headway on losses

CAKE and pastries maker Park Cakes, which counts Marks & Spencer among its clients, has made a £3m loss but further invested in improvements, latest accounts show.

The Oldham-based company has moved closer to profitability in its second year of ownership by private equity firm Vision Capital, which acquired the business from Northern Foods January 2007.

Unprofitable lines were cut in the previous year and management consultancy Coriolis was brought in to improve efficiency and improve management.

The company said it had further reduced its trading in low performing categories in 2009, and together with improved efficiencies saw gross margins increase to 32.4% compared to 29.4% in the previous year.

The company’s operating loss has improved to £1.1m for the year to March 28, 2009, from a loss of £4.2m for 72 wk period a year earlier.

Turnover stood at £99m (2008: £119.4m for 72 weeks), but pre-tax losses of £3m were still racked up, compared to the £5.8m loss for 72 week period in 2008.

However, it has invested £4.6m in capital equipment over the year, in automated packing, sponge manufacture and bulk material handling equipment, which it said would further help the company’s future growth and development.

Park Cakes also said market conditions meant it had not been able to recoup the significant increases in energy costs it incurred over the year, but added that as commodity food prices stabilised this did help to offset some energy price increases.

The company employed 1,210 staff at year end, down from the 1,342 in the previous year. Redundancy costs for the year were £424,000, compared with £1.2m in 2008.

The directors’ report said: “The second year of trading saw an improved level of performance building on the foundations laid in the previous year and the further work completed on addressing the issues affecting the business.”