Inter Link: It's just the icing on the cake for Harry Potter

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Barbie, Bob the Builder, Thomas the Tank Engine, Winnie-the-Pooh and Harry Potter are all helping a small company in Lancashire to grow. The company is not, however, in cartoons, films or the television business.

It has merchandising deals to make cakes in the mould of the fictional characters and supply them to retailers such as Tesco, Sainsbury's and Safeway.

"We manufacture cakes and sell them to the retail multiple grocers," said Alwin Thompson, chief executive of Inter Link Foods, who got into the cake-making business after working in sales for retail firms.

"Creative cakes, which are celebration and novelty cakes, is a fast-growth area," added Mr Thompson.

Harry Potter, the best-selling character created by author AJ Rowling, is the latest fictional character to be manufactured into a cake. He will hit the high street in early October, just ahead of the release of the Harry Potter film. The group hopes Harry Potter will prove to be as big a success as Bob the Builder was at the height of his popularity and that Inter Link's sales will get a boost.

Inter Link Foods, which focuses on the cake and pastry sectors of the market, lists its mainstream products as being chocolate mini-rolls, Swiss rolls, fruit pies and cherry Bakewells. In less than seven years the firm has become one of the largest cake-makers in the UK, taking on more established rivals such as Mr Kipling.

According to Mr Thompson chocolate-coated mini-rolls are the most popular cake in Britain, and the British have definitely not lost their sweet tooth. There has, however, been a change in the type of cakes that are popular. Apart from cakes for celebrations, people like individually wrapped cakes which, according to the company, are more suited to people's "on the go" lifestyle.

Inter Link Foods was set up in 1994 when Mr Thompson bought a cake- maker called Crossfield Foods. The firm was in financial difficulty and the staff were about to be made redundant. He managed to turn the business round, from a loss of £350,000 to a profit of £35,000 for the first year, on a turnover of £1.4m.

"My background was with blue-chip companies, but I had a life-time ambition to build my own business," said Mr Thompson.

The company, which made its debut on the Alternative Investment Market in 1998, has grown rapidly. The group, which now employs 700 people, consists of seven separate businesses and is expected to post a profit of £3.3m for this financial year, on a turnover of £46m.

The group, which likes to add mainstream products to its list, includes Crossfield Foods and Lisa Bakery – which bake the group's chocolate mini-rolls and fruit pies. Since the flotation, which raised £2.1m, Inter Link Foods acquired Maid Marian Bakeries makers of novelty cakes.

Inter Link, which has raised £5.8m to fund expansion, has made four acquisitions this year. Hepworth & Whittles, which makes fairy cakes and decorated buns, and Cake for the Connoisseur, which distributes cakes and biscuits, were bought at the start of the year. They were followed by The Creative Cake Company, which has the rights to make cakes based on characters such as Harry Potter.The group's most recent purchase was William Lusty, which sells premium cakes to outlets around the country.

The shares, which started at 110p, swap hands at around 393p. The group had a net debt of £7.7m, as of the end of April. According to analysts, the management is integrating the recent acquisitions well and the company is well-placed for continued growth.

Mr Thompson intends to expand the business. "It is conceivable we will double our size in five years, providing we can make the acquisitions we are targeting at the right price," he said.

And Alwin Thompson will be keeping an eye on both television and cinema screens to make sure Bob the Builder is still popular with children, and the film version of Harry Potter turns out to be the hit it's expected to be .

Small is Beautiful features fast-growing companies with a turnover of up to £100m.