Northern Foods PLC Proposed Mothballing of Fenland Foods

14/05/08 Following negotiations with Marks & Spencer, and by mutual agreement, Northern Foods plc has resigned supply of most of the M&S product lines produced at our Fenland Foods ready meals facility. This is in accordance with our strategy to continue with business only where terms generate an adequate return for the Group’s shareholders.  The Group plans to mothball the Fenland site.

The resigned products, amounting to approximately £45 million of annual sales, represent the majority of production at the Fenland ready meals facility in Grantham, UK.  The site operated at break-even profitability in the year ended 29 March 2008, and the Group and M&S have mutually agreed that the site should be mothballed.

Accordingly, we will today begin consultation with Fenland employees on a proposal to cease production and mothball the facility from August 2008, releasing the assets for alternative future opportunities.

The mothballing proposal is not expected to impact materially the Group’s profit before tax and restructuring items.  There would be a one-off cash restructuring cost and a non-cash write-down of asset value, which will be reported in the 2008/09 financial results.  At 29 March 2008, the site had a net book value of £24 million.

Commenting, Stefan Barden, Chief Executive, 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 £20 million to acquire the Ethnic Cuisine ready meal business and the Grimsby soup plant, together with a £9 million 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.”