Northern Foods gives up £45m M&S contract

NORTHERN Foods has announced that it is to give up a £45m contract producing ready meals for Marks & Spencer.

It said that following talks with the high street giant it has decided to “mothball” its Fenland Foods factory in Grantham, Lincolnshire, where 730 staff are employed making mainly Italian meals.

Chief executive Stefan Barden said that the plant had only operated at break-even profitability in the year to March 29 and the Leeds-based group would look to “secure profitable new business” at the factory after production is shut down in August.

Northern Foods said that its decision to resign the contract – which contributes £45m to its annual sales – with Marks & Spencer “is not expected to impact materially the group’s profit before tax and restructuring items”.

In a statement Northern Foods said: “This is in accordance with our strategy to continue with business only where terms generate an adequate return for the group’s shareholders.”

It will today begin talks with employees and their union representatives at the site, which it said had a book value of £24m on March 29.

The group said there will be a one-off cash restructuring cost and a non-cash write-down of asset value, which will be reported in the 2008-9 financial results.

Mr Barden, said: “We believe that chilled foods is an attractive growth market and that our ready meals are the best in the industry. We have recently invested over £20m to acquire the Ethnic Cuisine ready meal business and the Grimsby soup plant, together with a £9m investment to expand our salads business.

“The Fenland facility would remain mothballed whilst we explore opportunities to secure profitable new business with other customers for the site.

“We have plans to invest in the site so that it can continue to be a leader in its market. Our immediate task is to support our loyal employees through the
consultation period.”