2006 press releases

Northern Foods plc today provides a trading update for the 26 weeks ended 30 September 2006, ahead of the release on 14 November of its Interim Results.

The Group’s trading performance has continued in line with the Board’s expectations.  Overall group underlying revenue* for the period declined by 1.1% on the prior year.  Underlying revenue in those businesses which do not form part of our disposal programme† grew by 3.5%.  Within these businesses, strong sales growth was achieved in the Chilled and Frozen divisions.  Warm summer weather supported increased sales from successful market development in the Sandwiches & salads category in the Chilled division, and the Frozen division delivered continued market share gain in pizza, consolidating the leading position of the Goodfella’s brand.  By contrast, revenue in the Bakery division has continued to decline.  Although some market share has been successfully regained, overall biscuit volumes have remained disappointing, partly due to the unusually hot weather.

The disposal of our chilled distribution business was successfully completed in August for £51.2 million, the first step in raising an estimated £200 million from disposals.  The remaining disposal processes, covering our flour milling, speciality bread, chilled pastry and cakes businesses, are in progress.  First half underlying sales in the disposal businesses declined by 6.7%, impacted by product and site rationalisation and the fire in the Speciality Bread category.

Encouraging progress is being achieved in the other key initiatives announced as part of our business review in May 2006.  Central costs are on target to be reduced by at least £12 million per annum by 2007/08.  Our programme to embed rigorous cash and capital management across the business has achieved notable early success in reducing capital spend and tightening seasonal working capital.  Our Chilled division simplification programme is also making good progress.

As expected, the trading environment has been very competitive.  The first half profit will be in line with expectations and reflects a limited re-phasing of some seasonal sales into the second half and a continuation of the challenging trading conditions that have impacted parts of the business, particularly in biscuits and the disposal businesses.  Results for the full year will, as ever, depend upon performance in the seasonally busier second half year, supported by the successful initiatives outlined above.

Commenting, Pat O’Driscoll, Chief Executive, said:

"The sales performance in those businesses which form the core of the group going forward has been good across the Chilled and Frozen divisions, and our disposal programme is progressing to plan.  Although achieving a step change in business performance will take time, our key improvement programmes are progressing well and successful delivery will see us emerge as a more focused and competitive business, with a strong emphasis on driving value."

^{* underlying revenue excludes the impacts of currency effects, discontinued operations and product groups no longer manufactured.}

^{† as announced in May 2006, the core of the group going forward will be focused on five categories: Pizza (chilled & frozen), Biscuits, Ready meals, Sandwiches & salads and Christmas puddings.}