Northern Foods set to slash its bakery division
02 June, 2006
Northern Foods insisted it will not be “holding a fire sale” after revealing it is to divest many of its bakery businesses over the next 12 months.
The supplier said this week it wants to dispose of businesses which currently account for 40% of its sales, including Park Cakes, Fletchers Bakery, its chilled pastry businesses and Smith Flour Mills.Chief executive Pat O’Driscoll told British Baker the disposals will reduce the risk and complexity in Northern Foods’ business. She said: “This is not a fire sale, these are good businesses we are selling. We are still very much in the bakery business, but we are focusing on strong brands or growing own label businesses.”Northern Foods hopes to “work through” the sales over the next 12 months, and raise £200m from them. Around 9,000 of its 20,500 staff are expected to transfer to new owners, and a consultation with unions and employee forums is underway, Driscoll said.The rationalisation will leave Northern Foods with five categories: pizza, biscuits, ready meals, sandwiches and Christmas puddings, through its Matthew Walker brand. Brands will account for half the remaining business.Worksop-based Smiths Flour Mills, which has three sites in the UK, is being sold as it is “non-core”, Driscoll said.Park Cakes, which employs 2,000 staff in Oldham and Bolton, and Sheffield-based foodservice supplier Fletchers Bakery, which makes rolls, muffins and scones under the Kara and Fletcher brands are being divested as they are “somewhat lower margin businesses”. Northern Food’s chilled pastry products businesses now on the market are Pork Farms pies and sausage rolls business, Melton Mowbray pork pies, Hollands Pies and Riverside Bakery. These have significant potential, but require major investment “best executed by another market participant”, Northern Foods said.The company hopes to raise £200m from the sales, to fund its pension liabilities, reduce its debts and invest in remaining businesses.Analyst Andrew Saunders from Numis said: “We were expecting more. If this is about playing your best hand of cards, what is being kept is slightly puzzling, There have been three profit warnings in the last three years on biscuits, and Christmas puddings is not a growing market.”The news, which follows a three month review, was announced as the company posted its preliminary results for the year to April 1 with a 27% slide in pre-tax profits - down to £45.1m. Sales were up from £1.42 bn to £1.44bn, as strong sales in the frozen division offset weaker results in bakery and chilled foods arms.