Bottom line: Get your fill of Northern

NORTHERN Foods is one of the best-run UK food manufacturing companies. Further proof came yesterday as the company posted pre-tax profits of pounds 153m for the year to 31 March, up from pounds 126m.

Operating profits from dairies were 47 per cent ahead at pounds 92m. In convenience foods - ready-made meals - profits were 51 per cent up at pounds 44m, and the grocery business notched up a 13 per cent increase to pounds 24m.

Admittedly, much of the increase was thanks to Express Dairies and Eden Vale, acquired in November 1991, but underlying profits were still 6 per cent higher. The impressive advance meant that a setback in the notoriously bad meat market could be easily forgiven.

These solid figures did little to dispel the view that Northern is caught in the teeth of margin-eating supermarkets and that it is about to be crucified by changes to the Milk Marketing Board and the way milk is bought from farmers.

During the past 12 months the shares have underperformed the FT All-Share Index by 23 per cent, and lagged behind other food firms by 12 per cent. They closed yesterday up 2p at 255p, helped by a 7 per cent rise in the dividend to 8.4p a share.

That means Northern shares are trading on a little more than 11 times earnings, assuming profits of pounds 171m for the current year. Not only is that significantly below the market average, it is also some way behind other food manufacturers.

The unfair but popular bearish view of the company means the shares will stay in the doldrums for a while. Northern deserves more recognition. Buy the shares.

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