Northern Foods: «Trading in line with expectations»

Leeds / UK. (nf) Northern Foods PLC issues an interim management statement for the 26 weeks ending 02 October 2010 (H1/2010) ahead of its unaudited financial results to be announced on Tuesday 09 November 2010. Overview:

• H1/2010 Group like for like sales increased by 3,0 percent, reflecting Q2/2010 improvement
• Q2/2010 Group like for like sales increased by 7,1 percent, reflecting a strong performance in Chilled (LFL sales up 16,4 percent in Q2/2010) and Bakery (LFL sales up 10,9 percent in Q2/2010), offset by Frozen (LFL sales down 16,2 percent in Q2/2010)
• Incremental investment in Goodfella´s pizza relaunch during the first half to deliver an improved second half performance
• Major investment in automated production technology for Fox´s Biscuits proceeding to plan
• New organisational structure announced to streamline the Group through two divisions – Branded and Chilled
• Strong financial position with net debt expected to be at a similar level to the prior half year

Performance

The Group continues to trade in line with expectations. The company is taking decisive actions to ensure that it is well positioned for the competitive market conditions in which the company is operating and to position Northern Foods for growth.

Chilled grew like for like sales by 16,4 percent in /2010 (up 14,3 percent in Q1/2010), driven by Ready Meals, where our actions to enhance factory efficiencies and focus operations around our large scale sites positions us well ahead of the main autumn and winter selling period. Sandwiches + Salads saw a continuing strong performance, driven by new product lines for existing customers and new business wins, including British Airways and Costa Coffee.

Frozen´s like for like sales decline in Q1/2010 (down 24,9 percent) reduced markedly in Q2/2010 (down 16,2 percent). Operational initiatives and the relaunch of the Goodfella´s pizza brand has seen market share increase from 16,3 percent in May 2010 to 21,1 percent in September 2010. Performance is in line with the full year forecast, although the market remains very competitive.

Bakery grew like for like sales by 10,9 percent in Q2/2010 (down 5,6 percent in Q1/2010), giving a total increase of 3,3 percent for the first half. Biscuit volume growth returned to normal levels following our decision to return to promotional activity after the World Cup. These actions helped maintain strong divisional margins. The major investment in new automated production technology at Fox´s Biscuits is proceeding to plan and will further strengthen the company´s competitive position in the second half and next financial year. In Puddings, Northern Foods has a good Christmas order book for both the Matthew Walker brand and own label offerings.

New organisational structure

Northern Foods has announced a new organisational structure to manage the business through two divisions: Branded and Chilled. The Branded division will comprise Goodfella´s Pizza, McDougalls and Holland´s Pies, Fox´s Biscuits and Matthew Walker Puddings. The Chilled division will combine Sandwiches and Salads with Ready Meals and the British Airways supply business. This new structure will further streamline the business, focus management expertise and drive performance improvements and cost savings which will pay back by the end of 2011. The associated restructuring charge of up to six million GBP will be taken in the second half of this financial year.

Financial position

Northern Foods´ financial position remains strong. Net debt is at a similar level to the prior half year at approximately 220 million GBP, despite the additional capital investment in new technology for Fox´s Biscuits. The new revolving credit facility (RCF) commenced in July, comprising a 250 million GBP facility maturing in July 2012. This sits alongside our long term US Private Placement (USPP) facilities totalling 208 million GBP. Approximately 79 percent of the borrowings are at fixed rates, maturing in tranches between 2012 and 2020. Stefan Barden, Chief Executive of Northern Foods: «We are taking decisive actions to ensure that we are well positioned for the competitive market conditions which we are experiencing and expect to continue. Our finances remain strong and we continue to trade in line with expectations».