The branded division will comprise Goodfella’s Pizza, McDougalls, Holland’s Pies, Fox’s Biscuits and Matthew Walker Puddings, while the chilled division will combine sandwiches and salads with ready meals and the British Airways supply business.
The restructuring, which will cost up to £6m, will “further streamline the business, focus management expertise and drive performance improvements and cost savings”, said the firm.
Bakery recovery
Chief executive Stefan Barden (pictured) said trading during the first half was “in line with expectations” while group finances “remained strong”.
Group sales increased by 3%, reflecting a 7.1% improvement in the second quarter of 2010 due to strong performances in the chilled and bakery sectors (up 16.4% and 10.9% respectively in the second quarter), although frozen sales fell 16.2%.
Analyst were divided on the interim statement, although far more positive than on the release of first quarter sales figures in July, which Shore Capital described at the time as “worryingly poor”.
Damian McNeela, research analyst at Panmure Gordon, said: “We believe that Northern Foods continues to face a number of challenges to its core businesses, such as input cost inflation and tougher competition in particular in its frozen business.”
Continued margin pressure
Accordingly, McNeela said he expected “continued margin pressure and a 28% decline in profit before tax to £9.2m at the interims [due in November],” reflecting the impact of a £5m investment to relaunch Goodfella’s frozen pizza.
But Clive Black from Shore Capital noted a “strong sales recovery” in bakery after a 5.6% decline in the first quarter, adding that although frozen sales during the second quarter were “disappointing”, there was an improvement on the 25% decline posted in the first quarter.
He said net debt levels of around £220m were “comfortable, albeit we seek clarification as to future pension commitments.”
Overall, Black was positive about Northern Foods’ prospects: “If operating cash flows can remain stable and the pension requirements manageable, then there is perhaps considerable scope for capital appreciation.”