Profits down at M and S food supplier

One of the biggest suppliers of food to Marks & Spencer announced a sharp fall in annual profits today.

One of the biggest suppliers of food to Marks & Spencer announced a sharp fall in annual profits today.

Northern Foods, which makes Dalepak frozen foods, Goodfella’s pizzas and Fox’s biscuits, showed the impact of a year of restructuring after profits slipped to £4.3m (€6.3m) from £75.4m (€111m) a year earlier.

Stripping out a raft of one-off costs, the surplus for the year to April 2 was 6.7% lower at £80.2m (€118m), as Leeds-based Northern looked to give itself a “sound platform from which to move forward”.

M&S accounts for about 30% of Northern’s business and is among major customers that also include Tesco, Asda, Sainsbury’s and Morrisons.

Sales from continuing operations were 2% higher at £1.42bn (€2bn) with strong growth with Tesco and Asda offset by weakness with other clients, including M&S. Difficult trading over Christmas was also a factor in the performance.

The weaker profits for the year were mainly down to the chilled foods division, which saw sales grow by 2% to £764.6m (€1.1bn) but operating profits before exceptional items fall by 19.2% to £35m (€51m).

There were “satisfactory” results in frozen foods and the ambient foods division, which includes Fox’s and Elkes biscuits.

Northern began a restructuring process in autumn 2003, as it looked to address a long period of disappointing financial figures.

Among the measures, chief executive Pat O’Driscoll consolidated 15 former operating companies into three divisions and closed two factories, including a site in Carlisle. Another factory managed to halve waste levels in six months, the company added.

With the strategic review now completed, Northern said its priority was to drive sales growth and keep a close eye on costs across its supply chain.

Chairman Peter Blackburn said: “We have made significant progress on our journey of transformation as we work to realise our potential as supplier of choice to UK and Irish retailers.”

The one-off costs affecting today’s bottom-line figures included £45.3m (€66.9m) relating to the factory closures and the reorganisation. Shareholders will receive a total dividend of 9.05p a share, up 1.7% on a year earlier.

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