Goodfellas and Fox’s prove winning combo for Northern Foods

NORTHERN Foods’ bold strategy to rebuild its business is paying off when it matters most.

The Leeds-based food manufacturer, which produces ready meals, sandwiches and salads, frozen foods, baked products, biscuits and puddings, today reported strong sales growth for the 26 weeks to September 27 with revenues increasing by 6.8% to £468.6m. Underlying revenue was up 3.9% on the previous year.

A decision to focus on Fox’s biscuit brand is also reaping dividend with the brand now accounting for around two third of the bakery division’s revenue.

However, the group did not update on the situation at its Fox’s biscuit factory in Batley, West Yorkshire saying that any decision on the division’s transformation would be made in March.

Earlier this year it announced plans to invest £40m in a new factory and will close one of two sites – either Batley or its Uttoxeter factory in Staffordshire – which will then be combined.

The chilled division also put in a resilient performance with underlying revenue increasing by 2.4%, helped by a strong performance in ready meals despite a declining market. Underlying revenue in frozen increased by 4.1%, with Goodfella’s performing well.

Average sales prices across the group were 5.6% higher, reflecting the manufacturer’s robust approach to recovering increases in commodity costs during the period.

The group said it was also planning to develop Northern Foods in areas “beyond its traditional channels”. It confirmed that it was actively pursuing a number of opportunities with £0.5m already invested in a number of projects.

Currency and pension credit changes, as well as investment in brands took their toll on pre-tax profits however, which fell from £20.1m to £16.9m.

Mothballing of its Fenland Foods factory in Grantham, Lincolnshire, which was completed in August, also resulted in a first half restructuring charge of around £25m, of which cash costs were approximately £6m.

Stefan Barden, chief executive of Northern Foods, said that the firm was making good progress despite tough conditions and that the past two years of restructuring had transformed it into a better balanced and more resilient business.

“We have successfully responded to the current economic environment by
introducing value product ranges for our customers, including the discounters,” he said.

“Our traditional premium ranges continue to be successful and we have a good
proposition across all market segments.

“In these market conditions, we remain focussed upon growing our brands, operational efficiency and maintaining our strong balance sheet. We remain confident of maintaining good progress throughout the balance of our financial year, while sharing the widely publicised uncertainty around consumer spending over the Christmas period.”

Adjusted earnings per share were 2.72p per share (2007/08: 3.21p). Basic
earnings per share recorded a loss of 3.63p per share (2007/08: 3.07p).

The board is maintaining the interim dividend at 1.55p per share (2007/08:
1.55p).