Northern shares surge on recovery hope

Shares in British company Northern Foods made a rare surge today as the City eyed the start of a possible recovery at the owner of Goodfella’s Pizzas and Fox’s Biscuits.

Deutsche Bank and Credit Suisse lifted their ratings on the beleaguered stock in the wake of half-year figures from Northern earlier in the week.

While the Leeds-based company said it was braced for more tough trading conditions, analysts noted encouraging signs from the businesses set to remain within the group once a disposal programme has been completed.

Shares were at the top of the risers board in the FTSE 250 Index, following a gain of more than 9% today.

It was a much-needed boost after a difficult period for the company, which serves major retailers including Marks & Spencer.

Northern is looking to raise around £200m (€294.9m) from the sale of businesses accounting for around 40% of group revenues. It will then focus on five market categories of pizza, biscuits, ready meals, sandwiches and salads and Christmas puddings – areas in which it believes it can deliver growth.

With the company breaking out the performance of its retained businesses in this week’s results, analysts were given a chance to judge prospects for the slimmed down company.

Revenues at the core operation grew by 3.6% to £427.8m (€630.8m) whilst profits were broadly unchanged at £25.3m (€37.3m). By contrast, the disposal categories saw revenues fall 6.6% with profits down to £1.4m (€2.06m) from £12.6m (€18.6m).

Deutsche Bank also noted that retailers were increasingly accepting that goods inflation should be passed on to the consumer.