Northern alert as profits fall flat

CHILLED foods group Northern Foods jolted investors, warning full-year profits would miss City targets thanks to a sluggish third-quarter performance.

The company, a leading supplier to Marks & Spencer and the large supermarkets, also said its revamp would disrupt business more than it had predicted.

Sales rose 6.5% in the three months ended 31 December. But the spread of business - the Christmas rush came late - left it nursing higher wage costs, which left earnings flat on the year-earlier period.

Finance director Sean Christie said the performance meant Northern would fall short of City profit forecasts of around £108m for the year ended 31 March. That's around £4m higher than last year.

'We needed a really good third quarter to deliver the previous analysts' forecasts and clearly it's not been as good as we had hoped for,' he added.

The stock fell 16 1/2p to 145p by early afternoon as analysts trimmed their forecasts.

The company said the setbacks were particularly evident in those companies coping with restructuring, Eden Vale Minsterley and Park Cakes. In addition, start-up costs at the new ready meals facility in Hull and frozen pizza facility in Longford continued to be a drain on profitability despite sales being ahead of expectations in both factories. Northern predicted significant gains from the revamp in its next financial year.

Christie said sales were 'pretty good' so far in the current quarter but that the final quarter was always tricky to predict.

Northern Foods draws about three-quarters of sales from M&S, Tesco, Sainsbury's, Asda and Safeway. Sales to those five rose 8% in the third quarter.