Northern Foods focuses on core profit drivers

By James Knowles

- Last updated on GMT

Related tags Cent Bread Northern foods

Northern Foods yesterday reported a 1.1 per cent drop in underlying
revenues for the quarter ended 30 September, as the UK-based
company continues to shed underperforming units.

The food producer's revenues dropped to £683.2m in the quarter from £700m during the same period last year. Underlying revenues added up to £645.1m.

Underlying revenue is an indicator of the health of the company's operations as it excludes the effects of currency exchange rates, discontinued operations and product groups that are no longer manufactuered.

Pat O'Driscoll, the company's chief executive described the current financial year as one of transition for the company as it attempts to boost margins by refocus the business around higher performing categories.

"Our improvement programmes are progressing to plan and our strong focus on cash generation will deliver significant incremental value,"​ said O'Driscoll.

The company's chilled and frozen division was one of the better performing categories. Sales in the division were up 10.3 per cent during the quarter compared to 9.3 per cent the year before.

The gain was offset by weaker bakery sales, which were down 6.6 per cent from 18.6 per cent.

Operating profit also suffered in the 26 weeks, falling by 26.7 per cent from 38.4 per cent.

Operating margins were also dragged down by 3.9 per cent. However ongoing operations had a margin of 5.9 per cent, while the discontinued units had a margin of less than one per cent.

Northern Foods' brand successes include Goodfella's Pizza, which had about £100m in retail sales during the last 12 months and increased its share of the market to 30 per cent.

Northern Foods said it will now concentrate on core profit drivers and sell poorly performing businesses.

It plans to sell includes non-core businesses that operate in lower margin categories or that need restructuring, all of which represent about 40 per cent of current revenue.

Units in the firing line include chilled pastry, cakes, specialty bread and the flour milling business.

The company sold its chilled distribution business in August for £51.2m.

Sales of the targeted businesses will generate revenues of £200m, the company said. The money will be used to reduce debt and fund pension liabilities. The rest will be used to invest in growing the business.

Northern Foods also plans to reduce central costs by £12m per annum by during the next fiscial year.

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