Northern Foods put businesses worth £200m up for sale yesterday as it embarked on its second strategic rethink in as many years and revealed it had plunged into the red.
The struggling food manufacturer, which has been caught on the wrong side of the healthy eating fence, is selling off many of its divisions that make own-label food for supermarkets in an attempt to position itself in more profitable, faster-growing areas. It also halved its annual dividend to 4.25p to help save cash.
Two profits warnings since January have forced the chief executive Pat O'Driscoll to scale back the business, which has a long history of disappointing investors. The company, which supplies 30 per cent of Marks & Spencer's food and pioneered the ready meal, is selling businesses that contribute 40 per cent of group revenues spread over 15 of its 35 manufacturing sites. It will have almost half the number of employees following the disposals.
Cakes, pastry products, speciality breads and its flour milling and distribution arms are all going, although it stopped short of hoisting a "for sale" sign over the entire business. The £200m of expected proceeds will go to cutting net debt and reducing its £64m pension deficit.
Ms O'Driscoll's surgery, which will increase the company's focus on its branded lines such as Fox's biscuits, left most analysts unimpressed. Graham Jones, at Panmure Gordon, said: "The strategy is being executed from a point of weakness and to us looks rushed and poorly thought out." Shares in the group closed down 0.25p at 92.5p.
Going forward, Northern will concentrate on five main products: pizzas, ready meals, sandwiches, biscuits and Christmas puddings. Higher-margin branded products will comprise 50 per cent of its sales, up from 20 per cent. It warned its customers, dominated by the top five supermarket chains, that the days of its "yes culture", which saw it often bend over backwards in an attempt to win new business, were over.
Ms O'Driscoll said the strategic overhaul, her second since she joined the group, was intended to "reduce risk and complexity". The company's previous targets, of achieving £2bn of sales and £200m of profits over the next two years, have been abandoned.
Its full-year figures showed it made a total £5m loss last year compared with a £23m profit the previous year after incurring £61.2m of restructuring charges. The bulk reflected its decision to slash the carrying value of its chilled and bakery assets by £39m and included a cash charge of £13.4m. Excluding the charges, pre-tax profits were £45.1m, down from £62.2m last year.
A spiralling energy bill, which rose 60 per cent or nearly £9m last year, coupled with its failure to increase prices fast enough, contributed to the profit collapse.Reuse content