Annual sales fell at UK food and drink firm Princes as the widespread supermarket price deflation hit revenues, but lower input costs helped profits to grow.

The company, best known for its range of canned fish and pies, saw sales drop 3.6% to £1.49bn in the year to 31 March 2016 from £1.54bn in the previous period.

Princes said this drop was “mainly due to deflationary pressures in the market place” that affected UK revenues, but that its sales volumes remained “fairly consistent” year-on-year.

These deflationary pressures have also helped reduce the group’s cost of sale, which has fallen from £1.27bn last year to £1.2bn.

Cost of sales as a percentage of revenue improved from 82.3% to 81%, leading to a 4% rise in operating profits to £57.8m and a 3.2% increase in statutory profit to £42.2m.

A Princes spokesman told The Grocer: “We have continued our programme of investment in our manufacturing facilities and enhanced our commitment to the integrity and long-term sustainability of our products and operations.

“Deflationary pressures and unprecedented market volatility make trading conditions extremely challenging, however we remain fully confident in our position to grow and develop our business.”

Expansion in Europe meant its top 10 customers accounted for 66.4% of business, down from 70.5% last year.

UK sales were down by a significant 8.6% to £1.07bn driven by deflation, but European sales grew by 9% to £333.1m and Rest of World sales were up 25.3% to £86.5m.

The group’s average headcount over the year jumped from 5,618 to 7,503 driven by an acquisition in March 2015. Employee expenses were up 5.3% to £150.9m.

In addition to its ongoing investment in manufacturing, Princes highlighted its part in launching a Fishery Improvement Project for the Indian Ocean aimed at ensuring a sustainable and healthy level of fish stocks in the region.

Princes will also be the first UK brand or supermarket sourcing tuna from the Marine Stewardship Council (MSC) certified PNA Pacific fishery and providing MSC eco-labelled tuna to UK consumers.

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