2003 press releases

Whilst Christmas seasonal trade was satisfactory and we achieved the expected improvement in factory efficiencies compared with 2001, overall sales growth in the third quarter to 31 December 2002 was lower than we had anticipated and below that achieved in the first half.

Key sales data

 

	6 months to 30 Sept 2002	3 months to 31 Dec 2002
Total sales	-2.9%	-2.9%
Underlying retail sales	+3.5%	+2.5%
Total sales to five largest customers	+1.0%	0.0%
Underlying sales to five largest customers	+6.0%	+3.5%

 

Northern’s five largest customers are Marks & Spencer, Tesco, Sainsbury’s, Asda and Safeway.

Total sales performance reflects disposals over the past year, principally the sale of the Ski and Munch Bunch brands in April 2002. The slowing of the underlying sales trend was compounded by difficult trading in biscuits. Third quarter biscuit sales were 6.0 per cent lower than in the comparable period last year, while margins were weaker owing to intense competition in the market place.

Operations and major projects

Our Convenience operations generally performed satisfactorily during the third quarter. Among those businesses which were affected by restructuring projects or start-up costs in the prior year, Park Cakes traded smoothly in the run-up to Christmas following the successful integration of our R&K Wise acquisition. Our new ready meals factory in Hull continued to make sales progress towards break-even, and we expect this to be achieved early in the next financial year. Following the Ski and Munch Bunch disposal, our remaining Eden Vale business at Minsterley continues to seek additional sales and cost savings in order to achieve profitability.

In Grocery, the Longford frozen pizza facility, which started production in Autumn 2001, performed satisfactorily in line with our expectations.

Fourth quarter prospects

We expect trading in our Convenience division to be robust in the final quarter, though our Grocery performance is likely to reflect ongoing difficult conditions in the biscuit market. Biscuit margins are expected to remain under pressure, and price increases are necessary to recover significant rises in chocolate input costs.

Full year outlook

As previously noted, our results for the year will reflect dilution from the Ski and Munch Bunch disposal and the substantial, industry-wide increase in insurance costs. Despite the additional profit pressures previously described, and in the absence of significant unforeseen developments, we expect earnings per share before exceptional items to be broadly in line with last year.

Chief Executive Jo Stewart commented: ‘During this financial year our Convenience operations have performed well, and we have made good progress in realising the targeted returns from our restructuring projects and start-up investments. Our recent performance has been affected by a weaker sales trend and poor trading in biscuits but, looking forward, the Group remains well positioned in growing sectors with well-invested facilities and proven capabilities in product innovation.’