Northern Foods on Track to Meet Expectations

Group sales and operating profit expectations remain in line with market expectations. Group underlying revenue for the first half grew by 2.9% on the prior year, reflecting volumes increasing by 2.5%.

06 Oct 2009 --- Northern Foods plc has issued a trading statement for the 26 weeks ending 26 September 2009 (first half year), ahead of its unaudited financial results to be announced on Tuesday 10 November 2009.  Results for the first half of our financial year will be consistent with management expectations.  “Market conditions remain competitive, but we have delivered a solid operating performance and continue to drive the business forward.  Our balance sheet remains strong,” the company said in a statement.

The company reported that they will maintain momentum and enter the second half of the financial year in a solid financial and operating position.  Group sales and operating profit expectations remain in line with market expectations. Group underlying revenue for the first half grew by 2.9% on the prior year, reflecting volumes increasing by 2.5%.

Chilled grew its underlying revenue by 8.8%, driven by new discount lines in Sandwiches and Salads, which will dampen divisional margins.  Chilled profitability is being impacted by Ready Meals, with reduced promotions, slower volumes and project investment to support future growth.  The loss of the anchor contract at our Hull ready meals facility, announced in May, will see this site close at the end of October following a rundown period.

Bakery has maintained its momentum and underlying revenue grew by 3.9%.  Brand investment in Fox’s supported our third "Vinnie" TV and online advertising campaign, which helped the Fox’s brand secure its highest brand share since 2006. Their investment to retain leadership in Puddings is continuing, with a new marketing campaign for our Matthew Walker brand being launched ahead of the Christmas trading period. 

Frozen’s results will reflect their focus to drive up margins and profitability.  Though underlying revenue was down 7.5% compared to the prior year, this reflects our rationalisation programme to support stronger margins in the division.  Actions include the closure of our original pizza manufacturing site at Poldys in Ireland last year, the relinquishment of several marginal own label contracts and our decision to terminate the Birds Eye co-pack agreement for supplying individual frozen pies, which will now enable our McDougall’s brand to compete in this segment.

Commodity price movements and currency remain broadly in line with expectations set out in May.

The company’s  balance sheet remains strong.  Net debt is approximately £24 million lower than the prior half year, including the usual seasonal working capital build.
 
Stefan Barden, Chief Executive of Northern Foods, said: "Northern Foods has shown its resilience during the first half, in tough market conditions.

"We continue to invest in our brands and businesses and we have a range of opportunities to drive shareholder value in the coming years.  As usual, group sales and profits are weighted to the second half of our financial year.  At this stage of the year, we expect to report results in line with market expectations.”