Northern Foods' interim profit to dip 28%, analyst

In a note published ahead of Northern Foods’ interim results on Tuesday (November 9), research analyst Damian McNeela said: “We believe 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. ​

“Despite like-for-like revenues increasing 3% in the first half reflecting an improved performance in the second quarter, we forecast that interim profit before tax will decline by 28% to £9.2m, mainly attributable to investment in Goodfella’s.”​

Frozen: Goodfella’s re-launch struggling?​

First half like-for-like sales in the frozen division dropped 20.9%, noted McNeela. “We continue to see the re-launch of Goodfella’s as struggling, with the market share standing at 21.1% after six months versus its peak of 32%. ​

“We expect the frozen division’s operating profit to decline by £5.4m resulting in an operating loss of £0.3m following its £5m investment in the Goodfella’s re-launch in April.”​

Chilled: Good revenue growth​

Like-for-like sales growth in chilled, by contrast, was up 15.3% in the first half driven by strong sales of ready meals in the second quarter and a strong performance in sandwiches, salads and pizza in the first quarter, said McNeela.

“We forecast a £2.4m increase in operating profits to £9.6m in the chilled division.”​

Bakery: Increased cost pressures​

Bakery volumes recovered in the second quarter following the removal of advertising and promotional support during the World Cup in the first quarter with a 3.3% rise in like-for-like sales, said McNeela.

“We forecast a 5% decline in operating profit to £7.8m as a result of increased cost pressures.”​