2008 press releases

Northern Foods plc today issued a trading statement for the 26 weeks ended 27 September 2008 (“first half year”) ahead of its unaudited financial results for the first half year on 11 November 2008.

Group trading performance in the first half year showed consistent progress in a challenging external environment, with total revenue up 6.5% and underlying revenue* up 3.9% on the prior year.  Underlying revenue was driven by continued progress in recovering input cost inflation through selling price increases averaging 5.6%, which offset lower volumes of 1.7%, partly reflecting marginal contracts which we have exited during the last financial year.  In branded and profitable own label business, we continue to see growth.

Revenue by division saw sales in Chilled up 4.5%, with underlying revenue 2.4% ahead of last year, driven by continued growth in ready meals of 4.5%. This demonstrates our superior product offering against a backdrop of a decline in the ready meals market of
2.5%¹. Mothballing of the Fenland ready meals facility, announced in May, was completed on schedule in August.  In respect of Fenland, the first half will see a restructuring charge of approximately £25 million, of which cash costs are approximately £6 million.  We have commissioned our recently acquired chilled soup site at Grimsby in August, in readiness for the traditional peak winter sales period.  Revenue growth in sandwiches, salads and chilled pizza, at 1.0%, was slowed by the poor summer weather. 

In our Bakery division growth has continued, with underlying revenue up 6.7% on the first half of 2007/08, reflecting the early benefits of our ongoing investment in the Fox’s biscuits brand with our ‘Vinnie’ advertising campaign. At the end of the campaign another 1.6 million households were buying Fox’s biscuits².  In Puddings, retailer orders for Christmas are good.

Frozen division revenue was up 10.2%, or 4.1% on an underlying basis.  Sales were supported by higher selling prices, while, as forecast, margins in our Irish business are being impacted by the stronger Euro.  Our market leading Goodfella’s pizza brand has maintained a strong share in the category, with a number one position, and further cost efficiencies will be delivered following transfer of production from our Poldys site to our scale pizza facility at Naas.  We continue to drive improvements in our other Frozen businesses, in particular following the successful integration of last year’s McDougall acquisition into our Portumna pastry site.

As expected, commodity price movements and a stronger Euro have provided challenging operating conditions.  However, our food propositions continue to be well received by the market, we are achieving a full recovery of higher input costs and we continue to drive cost efficiency improvements.  As indicated earlier this year, profits will be weighted to the second half of the current financial year, reflecting normal seasonality of our business, a lower pension financing credit and substantial investment in our brands and business development, which is starting to show early benefits.
 
Stefan Barden, Chief Executive of Northern Foods, said: "Northern Foods continues to make good progress in the development of our business, despite the challenging environment.  We have excellent products, a strong balance sheet and are making very good progress in strengthening our core business, which will enable us to take advantage of the opportunities which this environment provides.  Although profits are weighted to the second half of the year, at this stage we remain on schedule to deliver profit before tax and restructuring in line with expectations."

* Underlying revenue excludes the impact of currency translation, product categories no longer manufactured, acquisitions and discontinued operations
¹ TNS 52 w/e 7 September 2008 (excludes Soup, Fishcakes & Crispbakes, Pasta & Sauce)
² AC Nielsen Homescan 12 w/e 12 July 2008

Forward looking statements

Forward looking statements are based on a number of assumptions concerning future events and information currently available.  The user should not rely unduly on these statements which are not a guarantee of performance and which are subject to a number of uncertainties and other facts, many of which are outside of the company’s control and could cause actual events to differ materially from those in these statements.

Although Northern Foods believes that the expectations reflected in these forward looking statements are reasonable, it cannot assure users that these expectations will prove to be fulfilled.  Many factors could cause actual results to differ materially from our expectation, including economic and political conditions, changes in laws, regulation and accounting standards, customer relationships and actions, effectiveness of spending and marketing programmes and unusual weather patterns. No guarantee can be given of future results, levels of activity, performance or achievements.