NORTHERN FOODS PLC - Half-yearly Report

Nov 10, 2009 (PR Newswire Europe via COMTEX) --
NTFOF | Quote | Chart | News | PowerRating -- e>10 November 2009 NORTHERN FOODS PLC

PRESS RELEASE

Half year results for the 26 weeks ended 26 September 2009

`TRADING WELL - INVESTING FOR GROWTH'

Financial overview

- Like-for-like sales# growth up 2.9%, led by strong growth in
Chilled and Bakery

- Total sales of GBP466.9 million (H1 2008/09: GBP468.6m), reflecting
mothballing of Fenland last year

- Profit from operations* up 2.0% at GBP20.5 million (H1 2008/09:
GBP20.1m), as we invested heavily in our brands and businesses this year

- Underlying profit before tax1 in line with prior year at GBP12.9
million (H1 2008/09: GBP12.7m)

- Profit for the period2 increased to GBP12.9 million (H1 2008/09:
loss of GBP17.1m); reflecting much lower restructuring costs and a one-off
tax charge in the prior period

- Underlying EPS3 up at 2.14 pence per share (H1 2008/09: 2.08p);
interim dividend maintained at 1.55 pence per share (H1 2008/09: 1.55p)

- Strong balance sheet with committed facilities in place; net debt4
reduced by 10.0% to GBP222.2 million (H1 2008/09: GBP246.8m); approximately
64% of Group debt is at fixed rates

Operating overview

- Trading well in a competitive environment; benefiting from a
stable, balanced business

- Continued strong performance in Bakery; good margin progression in
Frozen with profits* up 37.8%

- Strong sales performance in Chilled, but lower margins from
reduced Ready Meals profits*; management action in place to improve
returns

- Successful investment in brands to support future growth

- Investment of GBP26.5 million announced today to enhance competitive
position of Fox's Biscuits

Stefan Barden, Chief Executive of Northern Foods, said: "Our
business is stable, balanced, and benefiting from management actions taken to
improve our performance. We have many opportunities to drive shareholder value
over the coming years and today we are announcing a significant investment in
Fox's Biscuits, which will enhance its profitability and provide competitive
advantage.

"Market conditions remain competitive but at this stage of the
year, our sales and profit expectations for the current financial year remain
unchanged, and in line with market expectations."

Enquiries:

Northern Foods: 0113 390 0110

Andy Booker, Group Finance DirectorAndrew Hanson, Head of Corporate
Communications

NOTE: Contact on Tuesday 10 November should be via Andrew Hanson,
07809 595831

Tulchan Communications: 0207 353 4200

A presentation to analysts will take place on 10 November at
09.30am at UBS, 4th Floor, 100 Liverpool Street, London EC2M 2RH. The
presentation is also available live via webcast at www.northernfoods.com

Footnote definitions throughout this statement:

# Like for like sales is underlying revenue which excludes the
impact of currency rate changes and product categories no longer manufactured.

* Results are stated before restructuring items. `Restructuring
items' which relate to significant restructuring events are presented as a
separate column within their relevant Condensed consolidated income statement
category. Presentation of these items in a separate column helps to provide a
better indication of the Group's underlying business performance.
`Restructuring items' includes costs or income associated with the
restructuring of businesses and gains or losses on the disposal or closure of
businesses.

1 Underlying profit before tax is Group profit before tax, before
restructuring items and net pension financing. This is reconciled to profit
before tax in the financial statements.

2 Profit for the period includes restructuring costs after tax of
GBP2.4m (H1 2008/09: GBP18.0m), adverse net pension financing of GBP6.7m and one-off
tax items.

3 Underlying EPS is earnings per share before restructuring items,
movement on deferred tax due to change in legislation, one-off release of
prior year tax liability and net pension financing, net of tax. This is
reconciled to earnings per share in the financial statements.

4 Net debt is defined as total borrowings (including both
short-term and long-term bank loans, bonds, loan notes and finance leases)
less cash and cash equivalents and short-term investments. Net debt will also
include the proportion of the fair value of the currency swaps hedging the
balance sheet value of the Group's dollar denominated loan notes.

5 EBITDA is earnings before interest, tax, depreciation and
amortisation. It is calculated as profit from operations plus depreciation and
amortisation, all measured before restructuring items.

6 Pre-restructuring free cash flow is net cash from operating
activities, less net capital expenditure, plus interest received. Net capital
expenditure is purchase of property, plant and equipment (PPE) less grants
received and proceeds from sale of PPE.

PERFORMANCE REVIEW

Northern Foods has delivered a resilient performance during the first half of
our 2009/10 financial year, continuing the momentum from our last financial
year. Market conditions remain competitive, but we enter the second half of
our financial year in a solid financial and operating position. With a stable
business and strong balance sheet, we have a range of initiatives to drive the
Group forward and realise value for shareholders. Our announcement today of a
major investment in Fox's Biscuits will drive earnings growth and position us
for competitive advantage.

Management actions over the last three years are now reflected in a solid,
well balanced business. Our product mix is good, with established number one
and two positions in key markets. With a core proposition to make great
tasting food that consumers want to buy again and again, Northern Foods
creates above average rate of sale products through the application of recipe
science and food technology.

First half results saw total underlying revenue# increase by 2.9% compared to
the prior half year. Total revenue remained constant at GBP466.9m (H1 2008/09:
GBP468.6m), reflecting the Fenland site closure last year. In line with guidance
provided at our preliminary results in May, the Group delivered stable profit
from operations*, up slightly on the prior year to GBP20.5m (H1 2008/09:
GBP20.1m), reflecting further incremental investment in our brands and
businesses. Group operating margins edged higher to 4.4% (H1 2008/09: 4.3%),
reflecting good margin progression in Bakery and Frozen, and reduced margins
in Chilled. Underlying profit before tax1 was in line with the prior year at
GBP12.9m (H1 2008/09: GBP12.7m), whilst profit before tax increased by GBP15.3m to
GBP7.2m (H1 2008/09: loss of GBP8.1m), with the adverse movement in the net
pension financing charge of GBP6.7m offset by lower restructuring costs of GBP3.2m
(H1 2008/09: GBP25.0m).

We are in a strong, competitive position in our sector and have a strong
balance sheet, differentiating us from many peers. Net debt4 of GBP222.2m was
sharply lower than the prior half year (H1 2008/09 GBP246.8m) and we recently
renewed our Revolving credit facility at GBP250m through to 2012. Commodity
input costs and currency remain broadly in line with our expectations at this
stage of the year. Inflation has fallen from its peak but remains present
across the basket of commodities we source, averaging in the low single
digits. The strong Euro continued to provide a headwind of approximately GBP2m
for our Euro based manufacturing sites during the first half, in line with our
expectations.

Divisionally, our portfolio remains robust. Frozen is benefiting from
management actions, with our rationalisation programme in Pizza eliminating
complexity and lower margin sales to drive up margins and profitability.
Bakery performance remains strong, driven by brand investment within Fox's.
Our marketing investment for Puddings will support our plans to retain
leadership in this important category. In Chilled, strong sales growth was
driven mainly by new discount lines in Sandwiches and Salads, which has
dampened divisional margins. Change project investment in Ready Meals and
slower trading at Hull during the wind-down of the site is, in the short-term,
impacting overall divisional profitability, although we retain a good position
in this attractive market which is returning to growth.

New investment in Fox's Biscuits

We have today announced a major GBP26.5m investment in automated technology
across Fox's Biscuits, which will drive earnings growth, support higher
margins and generate greater operational efficiencies. Starting today and due
to be completed in the first quarter of our 2011/12 financial year, this
investment will introduce new automated technology at each of our Batley,
Kirkham and Uttoxeter sites, with a net reduction of approximately 220
employees, mainly through voluntary redundancy. Adding capacity will help fix
current `pinch-points', with all technology being portable for use at other
sites in the future. This project is expected to generate a return on
investment in excess of 20%. At its conclusion, it will deliver positive
EBITDA5 starting in the 2011/12 financial year.

Our objective is to transition from the current three sites to two world class
facilities, which would further enhance the competitive position of Fox's
Biscuits. The investment announced today reflects how we continue our
disciplined and prudent approach to the management of our balance sheet and to
capital investment.

Operational review

Key performance indicators

Alongside absolute profit and debt measures, the Group uses the following key
performance indicators (KPIs) to measure progress, as follows:

KPI H1 2009/10 H1 2008/09
Revenue growth (underlying) 2.9% 3.8%
Operating margin* 4.4% 4.3%
Pre-restructuring free cash flow6 GBP1.5m (GBP16.9m)
Net debt/EBITDA5 2.4 times 2.6 times
Revenue

Underlying revenue growth, a key measure for the Group, was up 2.9%. Volumes
were 2.5% ahead, with input inflation being fully recovered. Group total
revenue remained constant at GBP466.9m (H1 2008/09: GBP468.6m), reflecting the
closure of the Fenland site last year.

Profit

Profit from operations* was up 2.0% on the prior half year at GBP20.5m (H1
2008/09: GBP20.1m).

Underlying profit before tax1, which removes the distorting effect of net
pension financing, was broadly flat at GBP12.9m (H1 2008/09: GBP12.7m).

The charge for restructuring items before tax, primarily reflecting the
closure of our Hull ready meals facility following the loss of the site's
anchor contract, was GBP3.2m (H1 2008/09: GBP25.0m), comprising GBP2.7m in cash and
GBP0.5m in non-cash items.

Statutory profit for the period2 increased to GBP12.9m (H1 2008/09: loss of
GBP17.1m), reflecting reduced restructuring costs, adverse movement in the net
pension financing and one-off tax items.

Operating margin

Operating margins were stable at 4.4% (H1 2008/09: 4.3%). Margins in Bakery
remain strong, with our rationalisation programme in Frozen showing good early
benefits, helping to improve margins in the division. The lower margin
contribution from Chilled reflects higher discount sales in Sandwiches and
Salads and Ready Meals impacting divisional profitability.

Earnings per share

Basic EPS increased to 2.79 pence (H1 2008/09: loss of 3.63p).

Underlying earnings per share3 increased to 2.14 pence (H1 2008/09: 2.08p).

Dividend

Our interim dividend is being maintained at 1.55 pence per share (H1 2008/09:
1.55p). The dividend will be paid on 29 January 2010 to shareholders on the
register at close of business on 8 January 2010.

Taxation

The underlying full year effective tax rate is expected to be 23.0% (FY
2008/09: 23.8%), reflecting the mix of UK and Irish tax rates.

The tax credit of GBP5.7m includes a GBP7.3m credit in relation to the settlement
of a historic tax liability.

Cash flow and capital management

A continued focus on cash management is supported by our drive to achieve more
profitable utilisation of existing capacity.

Gross capital expenditure (the purchase of property, plant and equipment) was
GBP8.9m (H1 2008/09: GBP15.3m), compared with depreciation and amortisation of
GBP18.9m (H1 2008/09: GBP19.4m). This represents 48% of depreciation (H1 2008/09:
80%). The Group is selectively taking opportunities to deliver investment in
growth and cost efficiency.

The Group continues to generate free cash flow across the year as a whole.
First half free cash flow is impacted, as usual, by the build of seasonal
working capital, but was tightly managed. Pre-restructuring free cash flow6 in
the first half year saw an improvement, with an in-flow of GBP1.5m (H1 2008/09:
out-flow GBP16.9m). Working capital reflected the usual seasonal build ahead of
the Christmas trading period to GBP19.8m (H1 2008/09: GBP33.4m). At the balance
sheet date, net working capital was GBP6.9m (H1 2008/09: GBP8.1m).

Debt

Net debt4 reduced by GBP24.6m on the prior half year. With dividend cash
payments of GBP13.6m during the period (H1 2008/09: GBP13.6m) and the seasonal
working capital build, the resultant net debt at the balance sheet date was
GBP222.2m (H1 2008/09: GBP246.8m).

H1 2009/10 H1 2008/09
GBPm GBPm
Operating cash flow (before working capital) 33.2 33.6
Movement in working capital (19.8) (33.4)
Net interest paid (10.2) (7.6)
Net tax received 3.6 0.3
Capex (8.9) (15.3)
Grants received 0.3 0.2
Free cash flow (1.8) (22.2)
Restructuring cash items 3.3 5.3
Pre-restructuring free cash flow 1.5 (16.9)

The Group has significant medium and long term facilities headroom, with
committed facilities (ranging from July 2010 to December 2017 through
syndicated bank facility and US Private Placement). This continues to position
the Group favourably in current volatile credit markets. Approximately 64% of
the Group's debt is at fixed interest rates. A key measure of our financial
flexibility is our debt ratio, which is the ratio of net debt to EBITDA5. This
is targeted to be well below 3.5 times, the limit imposed by our financing
agreements. At the half year the debt ratio was 2.4 times (H1 2008/09: 2.6
times).

Pensions

The net deficit for total Group post-retirement benefit schemes, calculated
under International Accounting Standard (IAS) 19 on a basis consistent with
the prior year end, decreased from GBP71.5m before tax at 28 March 2009 to
GBP70.6m before tax at 26 September 2009. Actuarial experience (including asset
investment performance) is not updated at the half year.

The balance sheet position of the post-retirement benefit schemes, and the net
pensions financing in the income statement, are likely to remain volatile in
future. In line with previous guidance, the net pensions financing moved to a
debit of GBP2.5m (H1 2008/09: credit of GBP4.2m) in the first half year.

Divisional review

Chilled

Ready meals, sandwiches and salads all remain attractive markets with good,
long term growth prospects. We deliver quality products and strong innovation
alongside excellent service. Our investment in change projects within Ready
Meals this year also demonstrates our positioning for the next generation of
food manufacturing, which will benefit the Group in the years ahead.

Chilled recorded a strong top-line sales performance, with divisional
underlying revenue 8.8% ahead. A greater contribution from discount products,
mainly in Sandwiches and Salads, and a broadly flat underlying sales
performance in Ready Meals, dampened divisional margins to 3.0% (H1 2008/09:
4.1%). Profit from operations* reduced to GBP7.2m (H1 2008/09: GBP9.9m),
reflecting investment in change projects to support future growth within Ready
Meals, lower promotions and lower ready meals volumes, including the wind-down
of our Hull ready meals facility. Divisional volumes were 7.2% ahead, with
selling prices 1.6% ahead.

In Sandwiches and Salads, revenue growth increased strongly. The early summer
weather supported sales, which were driven by new discount ranges for Tesco
and other customers. These included sandwiches from GBP1 for Tesco and Prepared
and Wet Salads. We also commenced supply of additional sandwich volumes for
M&S during the period.

The challenging ready meals market is slowly returning to growth; we saw a
broadly flat performance in underlying sales. The closure of our Hull ready
meals site, announced in May, impacted divisional profitability, reflecting
lower customer orders during the wind-down phase.

Management action to support future growth and improve factory efficiency
includes feasibility work at our mothballed Fenland site. We continue to focus
on new game changing technology across our Ready Meals business, enabling us
to link our ability to make great tasting food with the lowest cost
operations. Our belief remains that industry consolidation will continue, with
food manufacturing focused around a smaller number of larger and highly
automated sites in the future.

Bakery

In Bakery, our strong momentum continues. Divisional revenue was 3.9% ahead,
driven by both branded and retailer own brand offerings in Biscuits. Profit
from operations* increased by 26.2% to GBP8.2m (H1 2008/09: GBP6.5m) reflecting
the premiumisation of our products, which supported operating margin
improvement to 8.1% (H1 2008/09: 6.7%). Volumes were 4.4% ahead, with net
selling prices slightly down by 0.5%, reflecting promotional activity.

In Biscuits, our ongoing investment to help take the Fox's brand to a wider
national - and younger - audience continues to reap rewards. Our third
`Vinnie' marketing campaign aired during the first half, helping drive brand
share to its highest level since 2006, with a brand share of 11.0% (AC Nielsen
Scantrack 4w/e 08.08.09). We also re-launched our best-selling product, Rocky,
at the end of the first half.

In Puddings, whilst we retain our guidance from May of lower volumes in this
business from competitive pressures, our planned investment to retain market
leadership is continuing. Our new GBP2m marketing campaign for our Matthew
Walker brand is being launched ahead of the Christmas trading period. The
campaign will differentiate the 110 year heritage and unique steam retort
process of the Matthew Walker brand in an increasingly commoditised market.
All of our branded products have been ordered by retailers. Operationally, we
are continuing our plans to reduce complexity in Puddings, whilst maintaining
the quality for which we have become renowned.

New investment in Fox's Biscuits

The Group has to ensure it has the most appropriate biscuit facilities to
remain competitive. Our significant GBP26.5m investment, announced today and
detailed earlier in the Performance Review, will introduce new automated
technology at each of our Batley, Kirkham and Uttoxeter sites, with a net
reduction of approximately 220 employees, mainly through voluntary redundancy.
Key investments over the next eighteen months include a new Creams line at
Kirkham, new automation for our Melts line at Batley and a new wrapping system
at Uttoxeter.

Our objective is to transition from the current three sites to two world class
facilities, which would further enhance the competitive position of Fox's
Biscuits. Once this current investment is completed in the first quarter of
our 2011/12 financial year, further phases of investment will be benchmarked
against those investment opportunities available to Northern Foods at the
time.

Frozen

Our focus on enhancing profitability and return on capital continues. The
division's rationalisation programme has resulted in an increase in operating
margin to 4.1% (H1 2008/09: 2.8%) and a 37.8% increase in profit from
operations* to GBP5.1m (H1 2008/09: GBP3.7m), although there is much work still to
do. Underlying revenue was down 7.5%, reflecting volumes being 6.8% lower
through this programme.

We continue to drive costs out of the business and have relinquished several
marginal own label contracts in pizza and pastry. The elimination of these
contracts and the impact of closing our Poldys pizza manufacturing site last
autumn impacted year on year sales, whilst enhancing profitability.

Terminating our Birds Eye individual pie supply agreement at the end of the
first quarter led to a gap in sales between the end of this contract and the
start of our supply of individual pies under our own McDougalls brand early in
the third quarter. We expect the roll-out of our McDougalls brand to support
sales in our Pastry business in the future.

The continued strength of the Euro on our Irish manufacturing operations
provided an ongoing headwind, with a near GBP2m reduction in overall
profitability due to currency in the first half. Our expectations for currency
impact across the full year remain unchanged, with the division focused on
overcoming the impact of currency over time.

In Pizza, the category has seen an increased level of promotional activity.
Our San Marco discount brand has performed creditably, ensuring our brand
share remains stable across Goodfella's and San Marco. We expect to focus on
increased marketing for Goodfella's in the second half.

Principal risks and uncertainties

The principal risks and uncertainties which could impact the Group have been
reviewed. These include; Economic uncertainty, Customer relationships,
Consumer trends, Operational disruption, Business continuity, Legislation,
regulation and litigation, Change management, recruitment and retention,
Managing procurement costs, Food safety, Environment and Financial risks.
These are detailed in the Annual report 2008/09 on pages 12-13 and are not
considered to have changed in the half year period, with the exception of the
trading tax exposures which have reduced from GBP23.8m at 28 March 2009 to GBP9.8m
at 26 September 2009. This is due to the settlement of a historic tax
liability during the 26 week period which will result in cash payable of
GBP1.0m.

Basis of preparation

This financial information has been prepared using accounting policies
consistent with International Financial Reporting Standards (IFRS), as adopted
by the European Union and in accordance with IAS 34 and the Disclosure and
Transparency Rules of the Financial Services Authority.

Going concern

In determining whether the Group's Half year condensed consolidated financial
statements can be prepared on a going concern basis, the directors considered
the Group's business activities, together with the factors likely to affect
its future development, performance and position. The review also includes the
financial position of the Group, its cash flows, liquidity position and
borrowing facilities. The key factors considered by the directors were:

- the implications of the challenging economic environment and
future uncertainties on the Group's revenues and profits by undertaking
forecasts and projections on a regular basis;
- the impact of the competitive environment within which the Group's
businesses operates;
- the potential actions that could be taken in the event that
revenues are worse than expected, to ensure that operating profit and cash
flows are protected;
- the Group has access to overdraft facilities and a committed bank
facility to meet day-to-day working capital requirements.

As at the date of this report, the directors have a reasonable expectation
that the Group has adequate resources to continue in business for the
foreseeable future. Accordingly, the Half year report has been prepared on the
going concern basis.

Forward looking statements

Forward looking statements are made throughout this review. These forward
looking statements are based on a number of assumptions concerning future
events and information currently available. The user of this Performance
review should not rely unduly on these forward looking statements, which are
not a guarantee of performance and which are subject to a number of
uncertainties and other facts, many of which are outside of the Company's
control and could cause actual events to differ materially from those in these
statements.

Although Northern Foods believes that the expectations reflected in those
forward looking statements are reasonable, it cannot assure users that those
expectations will prove to be fulfilled. In addition to those factors
described under Principal risks and uncertainties, other factors could cause
actual results to differ materially from our expectation, including economic
and political conditions, changes in laws, regulation and accounting
standards, customer relationships and actions, effectiveness of spending and
marketing programmes and unusual weather patterns. No guarantee can be given
of future results, levels of activity, performance or achievements.

Condensed consolidated income statement
for the 26 weeks ended 26 September 2009
(unaudited) (unaudited) (audited)

Before
Before Restructu- restructu- Before
restructu- ring items Total ring items Restructu- Total restructu- Restructu- Total
ring items 26 weeks 26 weeks 26 weeks ring items 26 weeks ring items ring items 52 weeks
26 weeks 2009 2008 26 weeks 2008 52 weeks 52 weeks 2009
2009 2009 2008 2009 2009
Continuing operations Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 4 466.9 - 466.9 468.6 - 468.6 975.2 - 975.2
Profit/(loss) from
operations 4,5 20.5 (3.2) 17.3 20.1 (25.0) (4.9) 52.7 (35.4) 17.3
Finance income 6 20.4 - 20.4 27.1 - 27.1 54.2 - 54.2
Finance expense 6 (30.5) - (30.5) (30.3) - (30.3) (59.4) - (59.4)
Profit/(loss) before
taxation 4 10.4 (3.2) 7.2 16.9 (25.0) (8.1) 47.5 (35.4) 12.1
Taxation on
profit/(loss) 4.9 0.8 5.7 (4.1) 7.0 2.9 (6.6) 9.5 2.9
Movement on deferred
tax due to change in
legislation - - - (11.9) - (11.9) (12.5) - (12.5)
Taxation 7 4.9 0.8 5.7 (16.0) 7.0 (9.0) (19.1) 9.5 (9.6)
Profit/(loss) for the
period 4 15.3 (2.4) 12.9 0.9 (18.0) (17.1) 28.4 (25.9) 2.5

The result for the period is all attributable to equity holders of
the parent.

Earnings/(loss) per share (pence)
Basic 9 2.79 (3.63) 0.54
Diluted 9 2.76 (3.54) 0.52


Condensed consolidated statement of comprehensive income
for the 26 weeks ended 26 September 2009
(unaudited) (unaudited) (audited)
26 weeks 26 weeks 52 weeks
2009 2008
2009
GBPm GBPm GBPm
Profit/(loss) for the period 12.9 (17.1) 2.5
Other comprehensive income:
Currency translation differences on overseas investment (1.7) (0.1) 16.9
Actuarial losses on defined benefit pension schemes - - (143.1)
Taxation on actuarial losses taken directly to equity - - 40.1
Fair value movement on cash flow hedge (13.2) 4.6 34.0
Transfer to profit or loss on cash flow hedge 10.9 (6.2) (32.5)
Other comprehensive income for the period (4.0) (1.7) (84.6)
Total comprehensive income for the period 8.9 (18.8) (82.1)

Total comprehensive income for the period is all attributable to
equity holders of the parent.


Condensed consolidated balance sheet
as at 26 September 2009
(unaudited) (unaudited) (audited)
26 September 27 September 28 March
2009 2008 2009
Notes GBPm GBPm GBPm
Non-current assets
Goodwill 57.0 54.8 57.1
Other intangible assets 3.5 4.2 3.9
Derivative financial instruments 12.7 0.5 26.6
Property, plant and equipment 291.0 297.1 301.6
Retirement benefit assets 10 - 76.8 -
Deferred taxation assets 9.3 - 17.1
373.5 433.4 406.3
Current assets
Inventories 67.2 60.4 48.5
Trading investments 0.1 0.1 0.1
Trade and other receivables 128.5 132.7 120.0
Derivative financial instruments 1.7 - 1.1
Cash and cash equivalents 25.8 29.7 60.8
223.3 222.9 230.5
Total assets 4 596.8 656.3 636.8
Current liabilities
Trade and other payables (188.8) (185.0) (182.8)
Provisions (3.0) (3.6) (3.6)
Current taxation liabilities (11.5) (26.5) (22.0)
Bank loans and overdrafts (0.4) (8.9) (9.9)
(203.7) (224.0) (218.3)
Non-current liabilities
Revolving credit facility 2010 (105.0) (125.0) (115.0)
Senior loan notes 2012 - 2017 (151.0) (137.8) (162.0)
Retirement benefit obligations 10 (70.6) (10.1) (71.5)
Deferred taxation liabilities (2.4) (23.5) (2.0)
Accruals and deferred income (13.5) (13.1) (13.9)
(342.5) (309.5) (364.4)
Total liabilities 4 (546.2) (533.5) (582.7)
Net assets 4 50.6 122.8 54.1

Equity
Share capital 128.6 128.6 128.6
Share premium account 65.1 65.1 65.1
Capital redemption reserve 23.6 23.6 23.6
Reserve for own shares (50.5) (50.5) (50.5)
Employee share ownership trust (`ESOT') reserve (8.8) (8.3) (8.8)
Hedging and translation reserve 35.8 19.7 39.8
Other reserves 10.9 6.0 8.0
Accumulated deficit (154.1) (61.4) (151.7)
Equity attributable to the equity holders of the
parent 50.6 122.8 54.1



Condensed consolidated statement of cash flows
for the 26 weeks ended 26 September 2009

(unaudited) (unaudited) (audited)
26 weeks 26 weeks 52 weeks
2009 2008 2009
Notes GBPm GBPm GBPm
Net cash from/(used in) operating activities 12 6.7 (7.4) 54.1
Investing activities:
Interest received 0.1 0.3 0.4
Purchase of property, plant and equipment (8.9) (15.3) (31.0)
Grants received 0.3 0.2 0.7
Net cash used in investing activities (8.5) (14.8) (29.9)
Financing activities:
Dividends paid (13.6) (13.6) (20.7)
Decrease in amounts drawn on Revolving credit facility
2010 (10.0) (5.0) (15.0)
Purchase of treasury shares - (11.0) (11.0)
Purchase of own shares for ESOT - - (0.5)
Net cash used in financing activities (23.6) (29.6) (47.2)
Net decrease in cash and cash equivalents (25.4) (51.8) (23.0)
Net cash and cash equivalents:
At start of period 50.9 72.6 72.6
Effect of foreign exchange rates (0.1) - 1.3
Cash and cash equivalents at end of period 25.4 20.8 50.9

Cash and cash equivalents comprise:
Cash and cash equivalents 25.8 29.7 60.8
Bank loans, overdrafts and loan notes due within one year (0.4) (8.9) (9.9)
25.4 20.8 50.9


Condensed reconciliation of net cash flow to movements in net debt
for the 26 weeks ended 26 September 2009

(unaudited) (unaudited) (audited)
26 weeks 26 weeks 52 weeks
2009 2008 2009
Notes GBPm GBPm GBPm
Net decrease in cash and cash equivalents (25.4) (51.8) (23.0)
Decrease in amounts drawn on Revolving credit
facility 2010 10.0 5.0 15.0
Decrease in finance leases 0.1 0.2 0.3
(15.3) (46.6) (7.7)
Effect of foreign exchange rates (0.1) - 1.3
Other movements (0.1) - (0.1)
Movements in net debt in period (15.5) (46.6) (6.5)
Net debt at start of period (206.7) (200.2) (200.2)
Net debt at end of period 11 (222.2) (246.8) (206.7)



Condensed consolidated statement of changes in shareholders' equity
for the 26 weeks ended 26 September 2009


Share Share Capital Reserve ESOT Hedging and Other Accumulated Total
capital premium redemption for own reserve translation reserves deficit
account reserve shares reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 30 March 2008 128.6 65.1 23.6 (39.5) (8.3) 21.4 5.2 (30.7) 165.4
Net loss for the period - - - - - - - (17.1) (17.1)
Other comprehensive income - - - - - (1.7) - - (1.7)
in the period
Total comprehensive income - - - - - (1.7) - (17.1) (18.8)
in the period
Transaction with owners:
Equity dividends - - - - - - - (13.6) (13.6)
Purchase of treasury shares - - - (11.0) - - - - (11.0)
Equity settled incentive - - - - - - 0.8 - 0.8
schemes net of deferred tax
Balance at 27 September 2008 128.6 65.1 23.6 (50.5) (8.3) 19.7 6.0 (61.4) 122.8
Balance at 28 September 2008 128.6 65.1 23.6 (50.5) (8.3) 19.7 6.0 (61.4) 122.8
Net profit for the period - - - - - - - 19.6 19.6
Other comprehensive income - - - - - 20.1 - (103.0) (82.9)
in the period
Total comprehensive income - - - - - 20.1 - (83.4) (63.3)
in the period
Transaction with owners:
Equity dividends - - - - - - - (7.1) (7.1)
Purchase of shares for ESOT - - - - (0.5) - - - (0.5)
Equity settled incentive - - - - - - 2.2 - 2.2
schemes net of deferred tax
Other movements - - - - - - (0.2) 0.2 -
Balance at 28 March 2009 128.6 65.1 23.6 (50.5) (8.8) 39.8 8.0 (151.7) 54.1
Balance at 29 March 2009 128.6 65.1 23.6 (50.5) (8.8) 39.8 8.0 (151.7) 54.1
Net profit for the period - - - - - - - 12.9 12.9
Other comprehensive income - - - - - (4.0) - - (4.0)
in the period
Total comprehensive income - - - - - (4.0) - 12.9 8.9
in the period
Transaction with owners:
Equity dividends - - - - - - - (13.6) (13.6)
Equity settled incentive - - - - - - 3.0 (1.9) 1.1
schemes net of deferred tax
Other movements - - - - - - (0.1) 0.2 0.1
At 26 September 2009 128.6 65.1 23.6 (50.5) (8.8) 35.8 10.9 (154.1) 50.6



Notes to the Condensed financial statements

1. General information

The financial year figures for the year ended 28 March 2009 set out
in this report do not constitute statutory accounts for the purpose of section
240 of the Companies Act 1985 but are derived from the statutory accounts for
that financial year. The statutory accounts for that financial year were
approved on 27 May 2009 and have been delivered to the Registrar of Companies.
The Auditors' report on these accounts was unqualified, did not draw attention
to any matters by way of emphasis and did not include a statement under
Section 237 (2) or (3) of the Companies Act 1985.

The Condensed financial statements are unaudited and were approved
by the Board on 10 November 2009. The Condensed financial statements have been
reviewed by the auditors and the Independent review report is set out in this
document.

2. Basis of preparation

The Condensed financial statements for the 26 weeks ended 26
September 2009 have been prepared in accordance with International Accounting
Standard (IAS) 34 `Interim Financial Reporting' and the Disclosure and
Transparency Rules of the Financial Services Authority. The condensed
consolidated interim financial information should be read in conjunction with
the annual financial statements for the 52 weeks ended 28 March 2009 which
have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union.

3. Accounting policies

The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial statements as
applied in the Group's published Annual report for the 52 weeks ended 28 March
2009, with the exception of:

I. The taxation charge before restructuring items for the 26 weeks
ended 26 September 2009 has been calculated on the basis of the estimated
effective tax rate for the full year. This is lower than the standard UK
corporation tax rate of 28% principally due to lower overseas tax rates.
Taxation arising on restructuring items is recognised as incurred.

II. Actuarial valuations of the pension schemes for the purposes of
the Annual report are performed on an annual basis and the pension cost for
the half year period is calculated on a year-to-date basis by applying the
actuarially determined pension cost rate as at the end of the prior financial
year. Where considered necessary this cost is adjusted to take account of
significant market fluctuations since that time and for significant
curtailments, settlements, or other significant one-time events in the period.

The following new standards and amendments to standards are
mandatory for the first time for financial years beginning on or after 1
January 2009:

I. IAS 1 (revised), `Presentation of financial statements'. The
most significant change within IAS 1 (revised) is the requirement to produce a
statement of comprehensive income setting out all items of income and expense
relating to non-owner changes in equity. There is a choice between presenting
comprehensive income in one statement or in two statements comprising an
income statement and a separate statement of comprehensive income. The Group
has elected to present comprehensive income in two statements. In addition,
IAS 1 (revised) requires the statement of changes in shareholders' equity to
be presented as a primary statement.

II. IFRS 8, `Operating segments'. IFRS 8 replaces IAS 14, `Segment
reporting' and requires the disclosure of segment information on the same
basis as the management information provided to the chief operating decision
maker. The adoption of this standard has not resulted in a change in the
Group's reportable segments.

III. IAS 23 (revised) `Borrowing Costs' and amendments to IFRS 2
`Share based payments' have been adopted but have not had a material impact on
the financial statements of the Group.

Non-GAAP measures:

Definitions of non-GAAP measures used by Northern Foods are shown
below:

I. Profit from operations

Profit from operations is earnings stated before finance income and expenses
and taxes.

II. Underlying earnings per share

Underlying earnings per share is before restructuring items, movement on
deferred tax due to change in legislation, one-off release of prior year tax
liability and net pensions financing, net of tax. This is reconciled to
earnings per share in note 9.

Notes to the Condensed financial statements
continued

4. Segmental analysis

The Group has adopted IFRS 8 `Operating Segments' with effect from 29 March
2009. IFRS 8 requires operating segments to be identified on the internal
financial information reported to the Chief Operating Decision Maker (CODM).
The Group's CODM is deemed to be the Chief Executive who is primarily
responsible for the allocation of resources to segments and the assessment of
performance of the segments.

The CODM assesses profit performance using profit from operations measured on
a basis consistent with the disclosure in the Group accounts.

The Group has identified 7 operating segments: Ready Meals, Sandwiches &
Salads, Frozen Pizza & Fish & Vegetables, Pastry, Meat & Meat-free products,
Biscuits and Puddings. IFRS 8 allows the aggregation of operating segments for
reporting purposes where the aggregation criteria has been met. The Group
continues to report on 3 reportable segments; Chilled, Frozen and Bakery which
meet the aggregation criteria as set out in IFRS 8.

Previously, segments were determined and presented in accordance with IAS 14,
`Segment Reporting'. The adoption of IFRS 8 has not resulted in a change in
the Group's reportable segments.

Reportable Segment Operating Segment
Chilled Ready Meals, Sandwiches & Salads
Frozen Frozen Pizza & Fish & Vegetables, Pastry, Meat & Meat-free products
Bakery Biscuits, Puddings

Segmental information
The segmental information is as follows:

Chilled Frozen Bakery Total
52
26 weeks 26 52 26 26 52 26 26 52
26 weeks weeks 2009 weeks 26 weeks weeks weeks weeks weeks weeks weeks weeks
2009 2008 2009 2008 2009 2009 2008 2009 2009 2008 2009
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External revenue 240.3 239.7 486.8 125.2 131.3 272.4 101.4 97.6 216.0 466.9 468.6 975.2
Product categories
no longer
manufactured - (18.8) (18.8) - - - - - - - (18.8) (18.8)
Foreign exchange - - - - 4.1 4.0 - - - - 4.1 4.0
Underlying revenue 240.3 220.9 468.0 125.2 135.4 276.4 101.4 97.6 216.0 466.9 453.9 960.4

Underlying revenue allows comparability between the current and
prior periods. Comparability is achieved by excluding the impact of revenue
from those product categories which are no longer manufactured (due to the
mothballing of the Fenland site), and excluding any gain or loss from currency
translation.

The figures shown for both the 26 weeks ended 26 September 2009 and the 26
weeks ended 27 September 2008 are unaudited.

Inter-segmental sales are not material.

Seasonality of revenue
The Bakery division has a higher proportion of revenue in the second half of
the financial year due to higher demand for its products during the Christmas
period.

Revenue for the Chilled and Frozen divisions is not significantly impacted by
seasonality.

Notes to the Condensed financial statements

continued

4. Segmental analysis continued

(unaudited) (unaudited) (audited)

26 weeks 26 weeks 52 weeks
2009 2008 2009
Profit Profit Profit Profit Profit Profit
from Restructuring from from Restructuring from from Restructuring from
operations* items operations operations* items operations operations* items operations
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Chilled 7.2 (2.7) 4.5 9.9 (23.2) (13.3) 22.9 (30.2) (7.3)
Frozen 5.1 - 5.1 3.7 (1.1) 2.6 9.3 (2.7) 6.6
Bakery 8.2 (0.5) 7.7 6.5 (0.7) 5.8 20.5 (2.5) 18.0
20.5 (3.2) 17.3 20.1 (25.0) (4.9) 52.7 (35.4) 17.3
Unallocated
amounts:
Net finance
costs (10.1) - (10.1) (3.2) - (3.2) (5.2) - (5.2)
Profit/(loss)
before
taxation 10.4 (3.2) 7.2 16.9 (25.0) (8.1) 47.5 (35.4) 12.1
Taxation 4.9 0.8 5.7 (16.0) 7.0 (9.0) (19.1) 9.5 (9.6)
Profit/(loss)
for the
period 15.3 (2.4) 12.9 0.9 (18.0) (17.1) 28.4 (25.9) 2.5

* before restructuring items

There were no discontinued operations in the period.

A reconciliation of profit before taxation* to underlying profit
before tax* is shown below:

(unaudited) (unaudited) (audited)
26 weeks 26 weeks 52 weeks
2009 2008 2009
GBPm
GBPm GBPm
Profit before taxation* 10.4 16.9 47.5
Net pensions financing
charge/(credit) 2.5 (4.2) (8.5)
Underlying profit
before tax* 12.9 12.7 39.0
* before restructuring items

(unaudited) (unaudited) (audited)

26 September 27 September 28 March
2009 2008 2009
Assets Liabilities Total Assets Liabilities Total Assets Liabilities Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Assets/(liabilities)
Chilled 225.1 (78.4) 146.7 237.4 (77.4) 160.0 229.1 (74.0) 155.1
Frozen 188.3 (60.8) 127.5 179.4 (61.9) 117.5 194.2 (67.6) 126.6
Bakery
Bakery 130.4 (42.6) 87.8 129.8 (40.9) 88.9 103.7 (36.5) 67.2
Operating
assets/(liabilities) 543.8 (181.8) 362.0 546.6 (180.2) 366.4 527.0 (178.1) 348.9
Unallocated corporate
assets:
Cash and cash -
equivalents 25.8 25.8 29.7 - 29.7 60.8 - 60.8
Trading investments 0.1 - 0.1 0.1 - 0.1 0.1 - 0.1
Corporate other -
receivables 3.4 3.4 2.6 - 2.6 4.1 - 4.1
Retirement benefit -
assets - - 76.8 - 76.8 - - -
Deferred taxation -
assets 9.3 9.3 - - - 17.1 - 17.1
Derivative financial -
instrument 14.4 14.4 0.5 - 0.5 27.7 - 27.7

Unallocated corporate
liabilities:
Total borrowings - (256.4) (256.4) - (271.7) (271.7) - (286.9) (286.9)
Retirement benefit -
obligations (70.6) (70.6) - (10.1) (10.1) - (71.5) (71.5)
Deferred taxation -
liabilities (2.4) (2.4) - (23.5) (23.5) - (2.0) (2.0)
Current taxation -
liabilities (11.5) (11.5) - (26.5) (26.5) - (22.0) (22.0)
Corporate other -
payables (23.5) (23.5) - (21.5) (21.5) - (22.2) (22.2)
Total
assets/(liabilities) 596.8 (546.2) 50.6 656.3 (533.5) 122.8 636.8 (582.7) 54.1

Notes to the Condensed financial statements continued

5. Restructuring items

(unaudited) (unaudited) (audited)
26 weeks 26 weeks 52 weeks
2009 2008 2009
GBPm GBPm GBPm
Restructuring items from operations (3.2) (25.0) (35.4)
Taxation 0.8 7.0 9.5
Total (2.4) (18.0) (25.9)

Restructuring costs of GBP3.2m comprised: GBP2.4m relating to the closure of the
Hull ready meals facility and other rationalisation cash costs of GBP0.8m in the
Chilled and Bakery divisions.

Items which relate to significant restructuring events are presented as a
separate column within their relevant Condensed consolidated income statement
category. Presentation of these items in a separate column helps to provide a
better indication of the Group's underlying business performance.
Restructuring items include costs or income associated with the restructuring
of businesses and gains or losses on the disposal or closure of businesses.

6. Net finance expense

(unaudited) (unaudited) (audited)
26 weeks 26 weeks 52 weeks
2009 2008 2009
GBPm GBPm GBPm
Finance income:
Loans and receivables at amortised cost:
Bank interest receivable - 0.2 0.3
Other interest receivable - 0.1 0.1
Expected return on pension scheme assets 20.4 26.8 53.8
20.4 27.1 54.2
Finance expense:
Financial liability held at amortised cost in a
cash flow hedging relationship:
Interest on Senior loan notes 2012-2017 (3.9) (3.9) (7.8)
Other financial liabilities at amortised cost:
Interest on bank overdrafts and loans (2.7) (3.6) (6.1)
Other interest payable (1.0) (0.2) (0.2)
Interest on pension scheme liabilities (22.9) (22.6) (45.3)
(30.5) (30.3) (59.4)
Net finance expense (10.1) (3.2) (5.2)

Notes to the Condensed financial statements continued

7. Taxation

(unaudited) (unaudited) (audited)
26 weeks 26 weeks 52 weeks
2009 2008 2009
GBPm GBPm GBPm

Current taxation:
UK corporation tax (13.8) 1.8 1.8
Overseas tax 0.5 0.3 2.0
Tax on restructuring items - UK (0.7) (1.9) (4.2)
Tax on restructuring items - overseas - - (0.2)
(14.0) 0.2 (0.6)
Deferred taxation:
UK deferred tax 8.0 1.8 3.2
Overseas tax 0.4 0.2 (0.4)
Movement on deferred tax due to change in
legislation - 11.9 12.5
Tax on restructuring items - UK (0.1) (5.1) (5.1)
8.3 8.8 10.2
Tax (credit)/charge for the period (5.7) 9.0 9.6

The tax credit of GBP5.7m includes a GBP14.0m corporation tax provision release
and a GBP6.7m deferred tax charge in relation to settlement of a historic
liability which was provided for as at 28 March 2009.

The movement on deferred tax in 2008/09 due to the change in legislation arose
from the amendments to the Industrial Buildings Allowance regime which were
substantively enacted in the Finance Act 2008.

8. Dividends

(unaudited) (unaudited) (audited)
26 weeks 26 weeks 52 weeks
2009 2008 2009
Equity dividends on ordinary shares GBPm GBPm GBPm
Amounts recognised in the period:
Final dividend for the 52 weeks ended 28 March
2009 of 2.95p (2007/08: 2.95p) per share 13.6 13.6 13.6
Interim dividend for the 52 weeks ended 28 March
2009 of 1.55p (2007/08: 1.55p) per share - - 7.1
13.6 13.6 20.7

The interim dividend of 1.55p (2008/09: 1.55p) per share amounting to
GBP7.2m (2008/09: GBP7.1m) was approved by the Board on 10 November 2009 and
accordingly has not been included as a liability as at 26 September 2009.

Notes to the Condensed financial statements
continued

9. Earnings/(loss) per share

(unaudited) (unaudited) (audited)
Basic Diluted Basic Diluted Basic Diluted
earnings/ Earnings/ (loss)/ (loss)/ Earnings/ earnings/
Earnings/ (loss) (loss) (Loss)/ earnings earnings Earnings/ (loss) (loss)
(loss) per share per share earnings per per (loss) per share per share
26 weeks 26 weeks 26 weeks 26 weeks share share 52 weeks 52 weeks 52 weeks
2009 2009 2009 2008 26 weeks 26 weeks 2009 2009 2009
Earnings/(loss) and GBPm pence pence GBPm 2008 2008 GBPm pence pence
earnings/(loss) per share pence pence

Earnings/(loss) used for
calculation of
earnings/(loss) per share 12.9 2.79 2.76 (17.1) (3.63) (3.54) 2.5 0.54 0.52
Restructuring items 2.4 0.52 0.51 18.0 3.82 3.73 25.9 5.55 5.40
Movement on deferred tax due
to change in legislation - - - 11.9 2.53 2.46 12.5 2.68 2.61
One-off release of prior - - -
year tax liability (7.3) (1.58) (1.56) (4.7) (1.01) (0.98)
Net pension financing
charge/(credit) net of tax 1.9 0.41 0.41 (3.0) (0.64) (0.62) (6.1) (1.31) (1.27)
Underlying earnings per
share* 9.9 2.14 2.12 9.8 2.08 2.03 30.1 6.45 6.28



26 weeks 26 weeks 52 weeks
Number of shares 2009 2008 2009
number (m) number (m) number (m)

Weighted average number of shares 514.2 514.2 514.2
Own shares held (45.5) (36.9) (41.2)
Shares held in ESOT (6.1) (6.1) (6.2)
Weighted average number of shares used for
calculation of basic earnings/(loss) per share 462.6 471.2 466.8
Long term incentive plan 0.2 0.5 0.4
Deferred share plan 1.5 2.9 2.8
Matching share award 0.4 1.0 1.0
Performance share plan 2.9 7.3 8.3
Weighted average number of shares used for
calculation of diluted earnings/(loss) per share 467.6 482.9 479.3

* Underlying earnings per share is earnings used for calculation of earnings
per share before restructuring items, movement on deferred tax due to change
in legislation, one-off release of prior year tax liability and net pensions
financing, net of tax.

Notes to the Condensed financial statements continued

10. Retirement benefit (obligations)/assets

(unaudited) (unaudited) (audited)
26 weeks 26 weeks 52 weeks
2009 2008 2009

GBPm GBPm GBPm
(Deficit)/surplus at start of period:
UK defined benefit schemes - assets - 71.5 71.5
UK defined benefit schemes - obligations (59.6) (0.3) (0.3)
Irish defined benefit scheme (8.3) (5.2) (5.2)
Post retirement medical benefit scheme (3.6) (4.4) (4.4)
Net (deficit)/surplus at start of period (71.5) 61.6 61.6
Current service cost (0.9) (3.5) (6.2)
Expected return on scheme assets 20.4 26.8 53.8
Interest on obligation (22.9) (22.6) (45.3)
Contributions from sponsoring companies 3.6 4.0 7.1
Actuarial losses - - (143.1)
Benefits paid - - 0.3
Curtailment gain 0.7 0.4 1.2
Exchange differences - - (0.9)
(Deficit)/surplus at end of period:
UK defined benefit schemes - assets - 76.8 -
UK defined benefit schemes - obligations (59.2) (0.3) (59.6)
Irish defined benefit scheme (8.4) (5.3) (8.3)
Post retirement medical benefit scheme (3.0) (4.5) (3.6)
Net (deficit)/surplus at end of period (70.6) 66.7 (71.5)
Related deferred tax asset/(liability) 18.5 (19.5) 19.7
(52.1) 47.2 (51.8)

Actuarial valuations of the pension schemes for the purposes of the
Annual report are performed on an annual basis. Actuarial experience
(including asset investment performance) is not updated at the half year. The
pension cost for the half year period is calculated on a year-to-date basis by
applying the actuarially determined pension cost rate as at the end of the
prior financial year. Where necessary, the directors adjust this cost to take
account of significant market fluctuations since that time and for significant
curtailments, settlements, or other significant one time events in the period.

During the period a curtailment gain of GBP0.7m arose on the post
retirement medical benefit scheme when the excess payout towards costs was
increased. There were no other adjustments considered necessary.

Notes to the Condensed financial statements continued

11. Analysis of net debt

References to net debt refer to the total borrowings of the Group, including
both short term and long term bank loans, bonds, loan notes and finance
leases, after offsetting the cash and cash equivalents of the business and
short term investments. Net debt will also include the proportion of the fair
value of the currency swaps hedging the balance sheet value of the Group's US
Dollar denominated loan notes.

The table below reconciles net debt:
(unaudited) (unaudited) (audited)
26 September 27 September 28 March
2009 2008 2009
GBPm GBPm GBPm
Cash and cash equivalents 25.8 29.7 60.8
Trading investments 0.1 0.1 0.1
Bank loans and overdrafts (0.4) (8.9) (9.9)
Finance leases (0.4) (0.6) (0.5)
Revolving credit facility 2010 (105.0) (125.0) (115.0)
Senior loan notes 2012-2017 (151.0) (137.8) (162.0)
Currency element of fair value of swaps hedging
the Group's US Dollar denominated loan notes 8.7 (4.3) 19.8
Net debt (222.2) (246.8) (206.7)

Net debt

Net debt is not a defined term under IFRS and may not therefore be comparable
with other similarly titled non-IFRS debt measures reported by other
companies. The Group adopts this measure because it is used in calculating the
banking covenants. It is also the measure used for internal debt analysis. In
addition, the net debt balance provides an indication of the net borrowings on
which the Company is required to pay interest.

12. Reconciliation of net cash flow from/(used in) operating activities

(unaudited) (unaudited) (audited)
26 weeks 26 weeks 52 weeks
2009 2008 2009
GBPm GBPm GBPm
Profit/(loss) from operations 17.3 (4.9) 17.3

Adjustments for:
Depreciation of property, plant and equipment and
amortisation of other intangible assets 18.9 19.4 39.3
Impairment of property, plant and equipment 0.4 18.4 24.0
Loss on disposal of property, plant and equipment 0.1 - 0.1
(Decrease)/increase in provisions (0.6) 1.3 1.3
Change in retirement benefit asset/obligations (3.4) (0.9) (2.5)
Equity settled incentive scheme 1.1 0.8 2.7
Grants and other non-cash movements (0.6) (0.5) (1.5)
Operating cash flow before movements in working
capital 33.2 33.6 80.7
Movement in inventories (18.9) (13.2) 1.3
Movement in trade and other receivables (8.8) (21.4) (2.8)
Movement in trade and other payables 7.9 1.2 (8.5)
Cash from operations 13.4 0.2 70.7
Interest paid (10.3) (7.9) (15.6)
Net taxation received/(paid) 3.6 0.3 (1.0)
Net cash from/(used in) operating activities 6.7 (7.4) 54.1

Notes to the Condensed financial statements continued

13. Related party transactions

Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.

Responsibility statement

We confirm that to the best of our knowledge:

a) The condensed set of financial statements has been prepared in accordance
with IAS 34 `Interim Financial Reporting' as adopted by the European Union;

b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first 26
weeks and description of principal risks and uncertainties for the remaining
27 weeks of the period); and

c) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein).

By order of the Board

S Barden A Booker
Chief Executive Group Finance Director
10 November 2009 10 November 2009

Independent review report to Northern Foods plc

We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the 26 weeks ended 26
September 2009 which comprises the Condensed consolidated income statement,
the Condensed consolidated statement of comprehensive income, the Condensed
consolidated balance sheet, the Condensed consolidated statement of cash
flows, the Condensed reconciliation of net cash flow to movements in net debt,
Condensed consolidated statement of changes in shareholders' equity and
related notes 1 to 13. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.

This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
issued by the Auditing Practices Board. Our work has been undertaken so that
we might state to the Company those matters we are required to state to them
in an independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company, for our review work, for this report, or for the
conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.

Scope of Review

We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the 26 weeks ended 26 September 2009 is not prepared, in
all material respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditors

Leeds

10 November 2009




END

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