Profits up at Northern Foods
NORTHERN Foods has announced an increase in annual profits after making a number of “tough choices” which included mothballing unprofitable assets and axing poor selling products.
The Leeds-based food manufacturer said its 25.3% increase in pre-tax profits had been delivered against “a backcloth of unprecedented market volatility” and that it had managed to recover costs associated with rising raw material and energy prices.
For the year ended March 29, the group, which makes products including Goodfella’s pizzas and Fox’s biscuits, saw pre-tax profits increase to £50.1m from £40m the previous year. Revenue increased from £888.5m to £931.9m.
The group produces ready meals, sandwiches and salads, frozen foods, baked products, biscuits and puddings.
Earlier this month, Northern Foods made the decision to give up a £45m contract at its Fenland Foods factory in Grantham, Lincolnshire, to produce Italian food products for Marks & Spencer because the facility was unprofitable.
The factory, which employs 730 people, is to stop operating in August. Northern is on the look-out for new customers to work at the site in the future.
Stefan Barden, chief executive of Northern Foods, said he was pleased with performances in the group’s chilled and bakery divisions and said plans were being implemented to improve profitability in the group’s frozen division, which declined over the year.
Mr Barden said: “We have made good progress during the past year in delivering our strategic plan. Our profitability and return on invested capital have improved.
“We have achieved these improvements through a focus on products with ‘above average rates of sale’, delivered through a commitment to quality, service and innovation. By eliminating low margin business and driving efficiency, while progressively re-orientating the group towards markets growing at above average rates, we are well placed to continue to make progress in realising the full potential of the business.
“The current trading environment remains challenging, with continuing commodity cost pressures which we are committed to recovering. Despite some caution, we expect the underlying business to continue to make good progress in 2008/09.”
Mr Barden said Northern Foods, which employs almost 11,000 staff, had identified opportunities to grow further through acquisitions.
He said previous examples of this within the group’s ready meals sector were the purchase of Ethnic Cuisine, which extended Northern’s ready meals base to four major customers, and the acquisition of Baxter’s Foods’ chilled soup facility in Grimsby in January.
Mr Barden made no apologies for making difficult decisions as he said profitably had to be achieved.
He said Northern had a three-pronged strategy for growth: targeting growing market segments, focussing on customers that value quality and service, and running a low cost operating model.
A final dividend of 2.95p per share, up from 2.75p, has been proposed.
