2007 press releases

The following trading update is issued today for the 26 weeks ended 29 September 2007 ("first half year").  Unaudited financial results for the first half year will be issued on 13 November 2007.

Group trading performance in the first half year has continued in line with the Board’s expectations.  Group underlying revenue* increased by 2.6% on the prior year.  Underlying revenue by division saw continued growth in the Chilled business, with sales 5.4% ahead.  Ready meals volumes grew strongly, reflecting our superior product offering to our customers, delivering excellent repeat purchase with consumers.  Sandwiches & salads also performed well, despite slower year-on-year growth due to the unseasonably poor summer weather. 

The Bakery division returned to sales growth in the first half year, with underlying revenue 2.8% ahead.  This reflected some stabilisation in biscuit volumes, with increased own label volume, whilst more selective promotional expenditure and a new brand identity are creating the platform for future improvement in Fox’s performance.  The period also saw the successful trade launch of The Pudding by Matthew Walker, a new premium branded offer for this Christmas.

Underlying revenue in the Frozen division declined 2.6%.  There was a continuation in the robust performance of our market leading Goodfella’s pizza brand, which will be enhanced by a major initiative to extend the brand into the growing chilled sector with the launch this month of the Goodfella’s Signatore range.  However, performance in the Dalepak meat grills business was very disappointing, adversely impacted by the poor barbeque season.  Restructuring action is currently in hand to reduce the cost base significantly, supported by the launch of a new George Foreman premium grilling range.

In line with industry trends, commodity prices have continued to accelerate during the last three months, especially in cereals, dairy, cocoa and fats, reflecting difficult global market conditions and constrained UK supply.  With significantly higher commodity costs expected for the remainder of this financial year, material costs are now expected to be approximately 4 to 5% higher than the prior year, representing an annualised impact of approximately 8 to 10%.  In discussions with our customers, we have made good progress in recovering these commodity cost increases.  Further information will be provided in the November Half yearly report.

Stefan Barden, Chief Executive, said:

"We are operating in a challenging trading environment, but the achievements of the past twelve months have positioned us well to deal with these conditions.  Our Chilled Division has maintained its momentum and our Bakery Division has returned to revenue growth.  The robust performance of our market leading Goodfella’s business has continued.  In all of our businesses, we have made good progress in recovering commodity cost increases."

This afternoon, Stefan Barden and Jez Maiden, Chief Finance Officer, will host an event for investors/analysts, setting out how the Northern Foods’ strategy is being implemented and the progress being made.  The presentation will be available via webcast at www.northernfoods.com.

*Excludes the impact of currency rate changes, product categories no longer manufactured and discontinued operations