Fox's biscuits leads Northern Foods toward healthy profit

Published on Tuesday 6 October 2009 21:32

NORTHERN Foods is on track for some appetising full-year profits thanks, in part, to a cartoon character called Vinnie.

The group said its Fox's biscuit division achieved its highest brand share since 2006 after the third instalment of a television and online advertising campaign based around the gangster-type character, which is a cross between a panda and a dog.

The Fox's arm saw underlying sales rise 3.9 per cent in the 26 weeks to 26 September, despite tough trading conditions.

Northern, which makes branded and private-label food and ready meals for retailers as diverse as Marks & Spencer and Aldi, reported a 2.9 per cent increase in group-wide like-for-like sales during the period.

Strong growth in chilled foods and bakery products helped offset a decline in sales of frozen goods.

However, the figure marks a slowdown from the 5.5 per cent growth seen in the first quarter.

The group said it expected to report full-year results in line with market expectations.

Sales and profits are traditionally weighted towards the second half, with festive trading driven by brands such as Matthew Walker puddings.

Northern churned out almost 20 million Christmas puds last year, making it Britain's biggest manufacturer of the traditional dish.

City forecasts for full-year pre-tax profit range between 32 million and 37.6m, with the consensus at 36.7m.

Chief executive Stefan Barden said the biggest factor behind the slowdown in underlying sales growth was Northern's decision to end an agreement to supply frozen pies to Birds Eye and relaunch its own McDougall brand instead.

"We stopped supplying Birds Eye at the end of quarter one and we're not re-supplying retailers with McDougall until quarter three," he said.

The closure of a pizza manufacturing operation in Ireland and the ending of several own-label contracts had also affected frozen sales, Barden added.

Northern said new discount lines in sandwiches and salads were behind an 8.8 per cent increase in underlying revenue in its chilled division, which accounts for about half of its sales.

Nicolas Ceron, an analyst at brokerage Numis Securities, downgraded the stock to "sell" from "reduce".

He said: "The group has a history of delivering strong sales growth without profits growth. It seems that when they focus on profits they find it harder to deliver the sales growth."

Stockbroker Panmure Gordon described sales as disappointing and estimated that growth slowed to 0.3 per cent in the second quarter, leading the firm to trim its full-year profits forecast by 1m to 36m.