RHM lifted underlying profits by 18 per cent as it said efforts to revive sales at its Mr Kipling cakes business appeared to be working.
The foods group, which also owns the Hovis and Bisto brands, removed artificial colours from its cakes and launched a new advertising strategy after sales of Mr Kipling cakes tumbled last year.
Announcing annual results yesterday, RHM said cake sales were down eight per cent in the second half of the year, an improvement on the 14 per cent fall in the first half.
Profits for the division tumbled 27.5 per cent to £13.7 million but were offset elsewhere as RHM posted a surplus of £131.9 million in the year to April 29, compared with £112 million a year earlier.
It added that it had increased investment in its brands and would launch new products under the Hovis, Bisto, Sharwood's and Cadbury Cake labels in the current financial year.
Chief executive Ian McMahon said: "Although we are still at an early stage, we are encouraged by the initial consumer response to our branded cake initiatives."
Many Mr Kipling recipes were upgraded during the overhaul while £3 million of marketing spend was reallocated from advertising to in-store promotional activity as a way to encourage customers to try the new products.
The company said it expected Mr Kipling sales in the current year to at least match last year's level.
However, it added: "There remains much to be done to realise the full potential of the Mr Kipling brand."
Turnover in the bakeries division increased four per cent to £786 million after the company's focus on the premium sector pushed Hovis's market share up from 29.1 per cent to 31.6 per cent. Underlying profits for the division rose 26 per cent to £81.4 million.
Sales of its culinary brands increased by almost two per cent to £271 million, reflecting increased demand for Bisto following an advertising campaign.
Price increases were also achieved across the Bisto, Sharwood's, Paxo and Atora ranges, which helped offset rises in energy costs.
Mr McMahon said: "We were very clear in December that we had issues to address with Mr Kipling. We recognise there's still a lot to do. It has stabilised, there's an encour-aging early consumer reaction, but it's too early to call the turn on this."
Graham Jones, an analyst at Panmure, said the outlook was as confident as it probably could be "although the cakes recovery is still in its early days and competition in bread is likely to be stiffer next year".
And analyst Andrew Saunders at Numis said RHM was trading at a substantial discount.
"It is one of the cheapest stocks in our sector universe, although this now looks poised for correction given the improved newsflow on the cakes business," he said.