2008 press releases

The following trading update and pre-close statement is issued for the 13 weeks ending 29 March 2008 (“fourth quarter”) and for the 52 weeks (“full year”) to the same date, based on the Group’s management accounts to date.

Trading performance has continued to meet our expectations.  In the full year, Group underlying* revenue grew by 3.2%, with prices up 2.4% and volumes up 0.8%.  Underlying operating margin has been maintained year on year and Group profit before tax** will be ahead of median market consensus†.

Fourth quarter underlying revenue increased by 3.9% over the corresponding prior year quarter on flat volumes.  The Group continued to fully recover commodity cost increases, as it has done throughout the year.

The Chilled division continued to grow strongly, with fourth quarter underlying revenue up 5.5%.  Volumes grew by 3.4%, with Sandwich & Salads volumes well ahead.  The integration of the Ethnic Cuisine ready meals business, acquired in November 2007, is on target and we have begun the transfer of our soup production to the new Grimsby site, following its acquisition in January 2008.  Full year underlying revenue for the division grew 5.4% and underlying operating margin continued to improve.

Frozen division underlying revenue grew by 2.8% in the fourth quarter.  The recovery of significant commodity inflation drove average prices 5.1% higher, and volumes declined only modestly.  Operating margin has continued to be constrained, with a strengthening Euro adversely impacting underlying profitability in our Irish businesses by over £1.5 million in the current year.  Full year underlying revenue for the division declined by 0.6%.   However, the successful integration of the McDougall’s pastry business, completed in March 2008, will benefit the new financial year. 

The Bakery division showed encouraging signs of recovery, with fourth quarter underlying revenue up 1.1%, despite eliminating low value products, exiting unprofitable private label contracts and eliminating marginally profitable promotions.  Average prices were 7.5% higher as a result of commodity cost recovery.  Full year underlying revenue grew by 2.9%.  Targeted promotional spending and brand innovation saw underlying operating margin for the second half improve over the prior year period.

The Group has continued the share buyback programme announced on 14 December 2007.  A total of 6,056,846 shares, representing a total value of £5.3m, have been repurchased to date at an average price of 87.4 pence per share.  Low debt, the majority of which is hedged at fixed rates, continues to position the Group favourably.

Stefan Barden, Chief Executive, said:
 
"Our management team has made good progress during the past twelve months in delivering against our strategic plan.  Our profitability and return on invested capital have steadily improved.  We have achieved this through a focus on developing products with ‘above average rates of sale’, which we deliver through our strong commitment to product quality, service and innovation. We will continue to eliminate low margin and low volume products from our range, as well as progressively re-orientating the Group towards markets growing at above average rates.

"We are operating in a volatile trading environment with inflationary commodity prices.  However, we are confident that we will continue to make steady progress in realising the full potential of the business.”

Full year results for the 52 weeks ending 29 March 2008 will be announced on 27 May 2008.

ENDS

Note:  In line with developing market practice, the Group has decided to disclose the impact of the net pensions financing credit as a financing item in the Income statement, rather than within Profit from operations.  This change of presentation will facilitate understanding of the operational performance of the group.  Details of this change, which will be applied for the first time in the 2007/08 Full year results, are set out in a separate announcement today.

* “Underlying” items exclude the impact of currency translation, product categories no longer manufactured, acquisitions and discontinued operations.  Operating margin is the ratio of profit from operations before restructuring items to revenue for continuing businesses.
** Before restructuring items (as defined in the Half year results to 29 September 2007)
† Market consensus for Group profit before tax and restructuring items, based on a range of analyst forecasts, is £45m to £52.3m with a median of £47.5m.