Northern Foods: sees results meeting expectations

Leeds / UK. (nf) Northern Foods PLC, the maker of Fox´s biscuits and Goodfella´s pizza, reported slowing sales growth, but said it hopes a new marketing campaign will increase demand for its Christmas puddings. The Leeds-based company, which is a major supplier to Marks + Spencer, announced in a trading statement that results for the first half of its financial year will be consistent with management expectations. Market conditions remain competitive, but Northern Foods has delivered a solid operating performance and continue to drive the business forward. The balance sheet remains strong, the company said in its statement. Highlights:

• Group like for like sales up 2,9 percent, with volumes up 2,5 percent; total sales remain constant, reflecting closure of Fenland last year and with lower Hull volumes
• Strong growth in underlying revenue in Chilled (up 8,8 percent) and Bakery (up 3,9 percent); offsetting decline in Frozen (down 7,5 percent)
• Investment in brands and businesses to enhance the market positions
• Strong balance sheet with net debt approximately 24 million GBP lower than the prior half year

Performance

Northern Foods maintains its momentum and enters the second half of its 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 percent on the prior year, reflecting volumes increasing by 2,5 percent.

• Chilled grew its underlying revenue by 8,8 percent, 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 the 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 percent. Northern Food´s brand investment in Fox´s supported the third «Vinnie» TV and online advertising campaign, which helped the Fox´s brand secure its highest brand share since 2006. The company´s investment to retain leadership in Puddings is continuing, with a new marketing campaign for the Matthew Walker brand being launched ahead of the Christmas trading period.
• Frozen´s results will reflect Northern Food´s focus to drive up margins and profitability. Though underlying revenue was down 7,5 percent compared to the prior year, this reflects the rationalisation programme to support stronger margins in the division. The actions include the closure of the company´s original pizza manufacturing site at Poldys in Ireland last year, the relinquishment of several marginal own label contracts and the decision to terminate the Birds Eye co-pack agreement for supplying individual frozen pies, which will now enable the McDougall´s brand to compete in this segment.

Commodity price movements and currency remain broadly in line with Northern Food´s expectations set out in May.

Financial position

Northern Food´s balance sheet remains strong. Net debt is approximately 24 million GBP lower than the prior half year, including the usual seasonal working capital build. Stefan Barden, Chief Executive of Northern Foods: «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».