Iceland has posted a decline in full-year profits after confronting challenging trading conditions and bearing increased costs.

Iceland reported adjusted EBITDA of £140.1m in the 52 weeks to March 29, down 8.7% on the previous year. Sales advanced 2.2% to £3.08bn

The frozen food specialist, which owns the Food Warehouse chain as well as eponymous stores, said the slide in earnings “occurred entirely in the first half of the year and reflected sales performance, increased staffing costs as a result of the rise in the National Living Wage, increased distribution costs as a result of both higher fuel prices and the need to adapt our network to accommodate growing demand, investment in price, notably in our Seven Day Deal great value offers, and the timing of marketing expenditure”.

Over the year, the retailer opened 43 net new stores and The Food Warehouse grew from 57 to 90 branches. Iceland also struck a strategic alliance with homewares giant The Range, introducing a food offer to nine of the latter’s stores. A new website also launched.

The grocer undertook a variety of high-profile sustainability initiatives. Palm oil ingredients were removed from Iceland own-label food and its associated Rang-Tan cartoon was said to be “the most viewed Christmas commercial of all time”. A plastics removal programme saved 1,500 tonnes over the year.

Iceland group chief executive Tarsem Dhaliwal said: “Within an intensely competitive UK market place, adversely affected by consumer uncertainty and the well-known pressures of changing shopping habits on the high street, we have continued to focus on investing for the future: expanding our store footprint, enhancing the appeal of our existing stores, growing our award-winning online business, continuing to roll out new and exciting food lines that are unique to Iceland, developing our supply chain to support the growth of our retail estate, and finding new channels to sell our food through The Range in the UK and a growing global franchise and export business.

“Our sustainability initiatives over the last year have substantially raised public awareness of Iceland and enhanced respect for our brand and its values, and we are confident that this can only enhance our prospects in the longer term.”