Northern Foods executes drastic divesture plan
services of Stamford Partners investment bank to oversee the sale
of its pudding and pies divisions, as the firm struggles to offset
plummeting profit margins.
According to reports in British daily The Telegraph, Northern Foods has asked the bank to handle the sale of Park Cakes, Pork Farm Pies and Bowyers, leaving the firm to concentrate on core brands Goodfella's pizzas and Fox's biscuits.
Park Cakes makes Marks and Spencer's popular hot chocolate puddings that featured in the retailer's successful television marketing strategy last year.
Together with the savoury pastry divisions also up for sale, the businesses have an annual turnover of £300m (€433.3m) and could fetch between £70-80m for the company.
The divestures come after the firm recently announced a £5m loss for the financial year ended 1 April 2006, prompting chief executive Pat O'Driscoll to secure a radical recovery programme that will see 40 per cent of current business ventures go under the hammer.
The manufacturer said it is struggling amidst sliding sales and margins as its supermarket clients adopt tough bargaining positions on prices and consumers change preferences.
Higher costs, particularly for energy, combined with weak pricing, in a number of what the company calls "increasingly discounted and promoted markets" also hit results. About 75 per cent of the company's revenue comes from the five largest retailers in the UK.
The group's underlying revenue grew by 2.2 per cent in the financial year ended 1 April 2005. Operating margin declined to to 4.9 per cent from 6.1 per cent, according to figures released yesterday.
The company's profit before tax and restructuring items was £45.1m, compared to £62.2m in the previous financial year. The loss after accounting for restructuring was £5m, compared to a profit of £22.8m the previous year.
In a bid to turn its fortunes around, the firm will now concentrate on pizzas, biscuits, ready meals, sandwiches and Christmas puddings.
