Northern Foods plc Annual report 2005
Supplier 
ofchoice
Northern Foods plc
Annual report 2005
Northern Foods plc
2180 Century Way
Thorpe Park
Leeds
LS15 8ZB 
Tel: 0113 390 0110
Fax: 0113 390 0211 
www.northernfoods.com
          Design and production: 35
Photography: Bill Robinson
Print: St Ives Westerham Press
Northern Foods is one of the 
UK’s leading food producers. 
With a proven reputation 
for quality and innovation, 
our mission is to be the 
supplier of choice to UK 
and Irish retailers in added 
value convenience foods.
Contents
01 Financial highlights
02 Chairman’s review
04 Chief Executive’s operating review
08 Financial review
11 Board of directors and Company Secretary
12 Q&A with the Chief Executive
14 Business review
22 Corporate social responsibility review
26 Report of the directors
31 Directors’ remuneration report
41 Independent auditors’ report
42 Consolidated profit and loss account
43 Consolidated balance sheet
44 Consolidated cash flow statement
45 Reconciliation of net cash flow
to movement in net debt
Consolidated statement of 
total recognised gains and losses
Reconciliation of movements 
in equity shareholders’ funds
46 Company balance sheet
47 Accounting policies
49 Notes to the accounts
67 Five-year record
68 Shareholder analysis
69 Financial calendar
Company information
70 Investor information
71 Principal operations
       Northern Foods plc Financial highlights 01
Financial
highlights:
Business
highlights:
Ambient 
Continuing sales up 7.5 per cent 
with continuing operating profit* 
up 19.8 per cent to £31.5 million
Frozen 
Continuing operating profit* 
held at £36.1 million despite 
continuing sales down 2.2 per cent
Chilled
Continuing sales up 2.0 per cent 
but continuing operating profit* 
down 19.2 per cent to £35.0 million
*Before goodwill amortisation and exceptional items
Financial summary for 2005
2005 YOY%
Continuing sales (£m) 1,416.1 2.0
Operating profit* (£m) 102.4 (4.3)
Pre-tax profit* (£m) 80.2 (6.7)
Earnings per share* (pence) 12.95 (6.0)
Dividend per share (pence) 9.05 1.7
Pre-tax profit (£m) 4.3
Earnings per share (pence) 0.53
*Before goodwill amortisation and exceptional items
> Strategic review of the 
business completed
> New management team established
> Business structure simplified
> Factory closures and product 
transfers implemented
> Disposal of non-core businesses
> GET FIT programme delivery on track
> New headquarters in Leeds 
fully operational
> New finance director appointed
Chilled convenience foods
Estimated market share by manufacturer
•
Northern Foods £668m
•
Greencore Group £376m
•
Geest £357m
•
Samworth Brothers £209m
•
Uniq £152m
Source: Northern Foods data and analyst reports 2003,
excluding cake and dairy
£152m
£209m
£357m
£376m
£668m
                                         Peter Blackburn
Chairman
Chairman’s review:
We have made significant 
progress on our journey 
of transformation as 
we work to realise our 
potential as the supplier 
of choice to UK and Irish
retailers in added value
convenience foods.
02 Chairman’s review Northern Foods plc
    Dividend
The board’s confidence in the management team’s ability to deliver our
business change programme leads it to recommend an increased final
dividend of 5.70 pence per share (2004: 5.60 pence). Together with the
increased interim dividend of 3.35 pence per share (2004: 3.30 pence)
paid in March 2005, this makes a total dividend for the year of 
9.05 pence (2004: 8.90 pence), a rise of 1.7 per cent.
Share buyback
We have made no share buybacks in the second half of the year.
A total of 15.6 million shares were acquired in the first half at a 
cost of £24.2 million.
The board
In February 2005 we announced that Tony Hobson, currently Deputy
Chairman, will succeed me as Chairman of Northern Foods following
my planned retirement from the board in July 2005.Tony joined the board
in May 2002 as Deputy Chairman and senior independent director.
Colin Dyer, currently non-executive director and chair of the audit
committee will become Deputy Chairman. Orna Ni-Chionna, currently
a non-executive director will become chair of the remuneration
committee, and senior independent director. David Nish will join 
the board as a non-executive director, on 1 July 2005 and will chair
the audit committee.
In May 2005 Jez Maiden was appointed Finance Director at a date 
to be confirmed. During the financial year Ian Ellis acted as Head 
of Finance and we are very grateful for his contribution.
Sean Christie resigned as Finance Director by mutual consent 
on 22 October 2004. Main board director Howard Sims resigned 
from the board on 30 June 2004 and retired from the company on 
31 December 2004. On 11 March 2005 we announced the appointment
of Carol Williams as Company Secretary following Julian Wild’s
departure from the business after 26 years. Our thanks go to Sean,
Howard and Julian for their services to the company.
Outlook
Trading for the first seven weeks of the year is in line with our
expectations, but clearly this is an early view in a fast moving 
and challenging market.
I will shortly leave the company under the leadership of Tony Hobson
and Pat O’Driscoll and have every confidence in their ability to
achieve our plans and ambitions for Northern Foods and its customers,
shareholders and employees. We are building momentum towards 
a new Northern Foods.
Peter Blackburn
Chairman
1 June 2005
Results
We have made significant progress on our journey of transformation
as we work to realise our potential as the supplier of choice to UK
and Irish retailers in added value convenience foods.
Following a period of disappointing financial performance, we began
the work of restructuring and refocusing the business in Autumn
2003. The arrival of our new Chief Executive, Pat O’Driscoll, at the
end of March 2004 accelerated the pace. In the last 12 months,
a comprehensive strategic review of the business has taken place,
a new management team has been established and a simplified
business structure and factory reorganisation has been implemented.
Further sales of non-core businesses have been made and the company
has moved to new headquarters in Leeds. The significant changes 
that we have made during the year have given Northern Foods a
sound platform from which to move forward.
Despite tough market conditions and difficult Christmas trading,
continuing sales grew at 2.0 per cent to £1,416.1 million. The
Ambient division showed strong performances with continuing sales
up 7.5 per cent, and continuing operating profit before goodwill
amortisation and exceptional items* up 19.8 per cent to £31.5 million.
Results from the Frozen division were broadly stable with continuing
operating profit before goodwill amortisation and exceptional items*
held at £36.1 million. The performance of the Chilled division was
disappointing with continuing sales up 2.0 per cent, but continuing
operating profit before goodwill amortisation and exceptional items*
was down 19.2 per cent to £35.0 million.
Pre-tax profit
Pre-tax profit before goodwill amortisation and exceptional items was
£80.2 million, a reduction of 6.7 per cent against last year. This resulted
in earnings per share before goodwill amortisation and exceptional
items of 12.95 pence (2004: 13.77 pence). Pre-tax profit after goodwill
amortisation and exceptional items was £4.3 million compared to
£75.4 million last year, resulting in earnings per share of 0.53 pence
(2004: 12.78 pence). Operating exceptional items of £46.4 million included
£45.3 million relating to factory closures and group reorganisation.
Financial position
Northern Foods financial position remains sound and net debt remains
stable at £333.3 million. Our business is characterised by strong 
cash flow. Over the next two years we will continue to address the
pension deficit and will bear exceptional cash costs associated with
the restructuring of the business. However, we expect to remain
comfortably positioned against our key measure of financial strength
– interest cover – throughout this period. At the 2005 year end
interest cover before goodwill amortisation and exceptional items
was satisfactory at 4.6 times.
*Analysed in the turnover and segmental analysis
Northern Foods plc Chairman’s review 03
                  Chief Executive’s 
operating review:
By taking fast, decisive
action, we are addressing 
the challenges of a difficult
operating environment 
and are shaping up to
compete as the market
becomes even tougher.
04 Chief Executive’s operating review Northern Foods plc
Pat O’Driscoll
Chief Executive
     Northern Foods plc Chief Executive’s operating review 05
Business review
As I outlined in our strategic business review in November 2004,
Northern Foods has considerable strengths. We have scale as one of
Britain’s largest food manufacturers, a reputation for quality products,
well-invested assets and skilled people. We have leading market
positions in key growth categories together with strong own label
market shares and leading brands. With our GET FIT programme 
we are now transforming the company to create an integrated
‘One Northern’ business. We have embarked on a three-year
programme to make Northern Foods the supplier of choice to 
UK and Irish retailers in added value convenience foods.
Market conditions
This year we faced tough trading conditions, particularly in the
second half. I believe that the trading environment will continue 
to be challenging, with sales growth likely to be affected by more
cautious consumer sentiment, and with retailers competing ever
harder for market share gains.
Sales
Continuing sales were up 2.0 per cent at £1,416.1 million. Underlying
sales, excluding the impact of currency, acquisitions, divestments 
and the 53rd week last year, grew by 2.7 per cent. Total underlying
growth with our top five retailers was around the same level. Strong
growth with Tesco and Asda was offset by slower growth with other
customers. Jointly with our largest customer, Marks & Spencer,
we have established a more structured, category-focused relationship 
and also had some great success stories with products such as
Melting Middles chocolate puddings, a star of their current advertising
campaign. Other highlights included new own label cake sales with
Asda, a new hot pies range with Tesco, Taste the Difference salads 
for Sainsbury’s and chilled ready meals for Morrisons. In brands,
the success of the Creations seasonal biscuit range from Fox’s 
and Goodfella’s La Bottega pizza have been notable.
Operating profit
Operating profit before goodwill amortisation and exceptional items
was down 4.3 per cent at £102.4 million, with continuing businesses
showing a decline of 2.9 per cent.
Operating margin
Our goal is to increase our continuing operating margin before
goodwill amortisation and exceptional items to 8.6 per cent by 2007.
The operating margin before goodwill amortisation and exceptional
items for continuing operations was 7.2 per cent in 2005. Satisfactory
results in Ambient and Frozen were offset by underperformance 
in Chilled – driven by customer and category mix issues, Christmas
trading and some inflation under-recovery.
Ambient
The Ambient division made good progress with continuing sales 
up 7.5 per cent and continuing operating profit before goodwill
amortisation and exceptional items* up 19.8 per cent to £31.5 million.
We continued to reap the benefits of last year’s integration of the Fox’s
and Elkes biscuit businesses. Fox’s branded products have outperformed
the market in all the business’s core sectors, with year-on-year sales
growth of 11.1 per cent versus an industry growth rate of 1.0 per cent.
Within the seasonal sector, the redesign of Creations helped Fox’s 
to outperform the market. Cake performance also improved due 
to new business wins and greater factory efficiencies.
*Analysed in the turnover and segmental analysis
Frozen
The Frozen division delivered £36.1 million continuing operating
profit before goodwill amortisation and exceptional items* and a 
10.5 per cent continuing operating margin before goodwill amortisation
and exceptional items. This was despite a 2.2 per cent decrease 
in continuing sales, mainly due to business losses resulting from
Morrisons’ acquisition of Safeway. Key to these results was rigorous
cost control and a tight operational focus. The launch of premium 
La Bottega pizzas helped maintain Goodfella’s market leadership.
Chilled
The Chilled division produced a disappointing performance with
continuing sales growing by only 2.0 per cent and continuing operating
profit before goodwill amortisation and exceptional items down 
19.2 per cent. There were good results in products such as sandwiches
and pizzas but other categories, including meal solutions and pastry
products, failed to meet expectations. Our two factory closures and
new divisional structure were the first steps in addressing these issues.
Business transformation programme update
I am pleased with the progress of our GET FIT programme.We set clear
three-year objectives for driving sales growth, lowering costs to improve
efficiencies, enhancing our commercial approach and developing 
an effective organisation and results are now beginning to appear.
> Simplified business structure
The reshaping of our business structure has gone to plan. We have
consolidated 15 former operating companies into a more relevant
divisional structure (Ambient, Frozen and Chilled). In doing so,
we eliminated a great deal of duplication, removed a layer of
management and shortened and clarified reporting lines.
> New operating board
We established an operating board comprising divisional and
functional directors in order to blend the business and specialist
expertise needed to address changing market demands. In the process
we have made new functional appointments in human resources,
supply chain, technical, commercial, marketing and finance.
An immediate benefit of our business restructure was the more
focused and streamlined approach to customer management.
Different parts of Northern Foods no longer talk to customers in
isolation and the benefits of better customer management are already
evident. Our new group commercial director will ensure we continue
to improve our approach.
                        06 Chief Executive’s operating review Northern Foods plc
Looking ahead
We have to accelerate the pace of change to meet our strategic
targets in an increasingly tough marketplace. In the coming year 
we will therefore focus our efforts in two key areas: driving sales
growth and reducing costs in the supply chain.
Sales growth remains critical and we will continue to target the
category and customer opportunities we identified in the strategic
business review. Constant innovation is also key and the appointment
of our group marketing director will help us to accelerate the 
pace and scope of new product development. Successful product
launches so far this year include a new Count on Us range supporting 
Marks & Spencer’s ‘Eat Well’ proposition.
The performance of the Chilled business is fundamental to the success
of our strategy. In order to deliver improvement fast, we need 
a streamlined, effective and lower cost organisation in place.
In May 2005 we therefore integrated our two Chilled business units
into a single Chilled division. The move, based on a detailed site
planning process, will further remove duplication in our structure,
lower business costs and help Northern Foods realise its growth
potential through more focused customer and consumer insight.
In order to maximise the impact of the integration, the divisional
director will be supported by the group supply chain, commercial,
marketing and technical directors.
In conclusion, although the year has been tough and results 
have suffered, the changes under way are transforming Northern
Foods. Throughout the year our people have maintained their passion
for making outstanding food and giving excellent service to our
customers. I do not underestimate the challenges ahead but I believe
our people have the will, determination and the skills to make the
changes needed for success in a demanding industry. I am proud of
their achievements to date and know that they will continue to help
Northern Foods realise its potential as we accelerate the pace of
change in 2005/06.
In closing, I would like to add a note of personal thanks to our retiring
Chairman, Peter Blackburn, who has been an enormous strength in
recognising the need for change and enabling its delivery. We all 
wish him every happiness in his retirement.
Pat O’Driscoll
Chief Executive
1 June 2005
> Factory restructuring completed
As we moved to rationalise our manufacturing capacity we announced
two factory closures in September 2004, one at Evesham Foods and
one at London Road, Carlisle. The process of closing these factories
took place with no disruption to production, despite occurring at a
time which included the peak Christmas trading period. The closures
have allowed Northern Foods to transfer products to other sites and
so improve capacity utilisation. I would like to thank the staff at both
sites, but particularly those in Carlisle who had to cope with major
flooding at the same time.
> Manufacturing excellence
We continued to improve our manufacturing efficiency, offsetting
higher costs for labour, raw materials and utilities through higher
productivity, better utilisation of our capacity and better demand
planning. Company-wide performance measures on key areas such 
as waste and labour utilisation were introduced to all sites and success
is already evident. On one site we were able to halve waste levels in
just six months. The lessons learned are being shared across the business.
SAP implementation at all Northern Foods sites and the upgrade 
to MySAP have made it possible to monitor progress, allowing us 
to compare manufacturing performance on a like-for-like basis.
> Procurement
We made good progress in working to capitalise on our scale as 
an integrated ‘One Northern’ business. Our centralised procurement
team was established and made savings through a range of initiatives
such as e-auctions, while supplier conferences highlighted further
opportunities for improvement.
In the year ahead we will accelerate the pace by consolidating our
supplier base, using our scale as one of the largest purchasers of food
ingredients in the UK to achieve better terms and better standards 
of delivery, and improving our overall supply chain efficiency. This process
is being led by our newly appointed group procurement director.
> People
In order to develop a ‘One Northern’ culture characterised 
by leadership and accountability, we revised our approach to
performance management and remuneration structure, redesigned
our Management Information (MI) system and introduced 
company-wide performance metrics. We also initiated a leadership
development and training process to accelerate change in the business
and are committed to enhancing our employee communications.
               Northern Foods plc Chief Executive’s operating review 07
What we’ve done:
> By simplifying our structure, we’ve
been able to sharpen our focus and
enhance customer relationships
> We launched a range of GET FIT
initiatives to reduce costs and
improve performance
> To measure our progress and build
accountability we introduced new
business reporting tools and linked
remuneration to reward 
What we said:
> Through a rigorous business review 
we identified the strengths and
weaknesses of Northern Foods
> We committed to drive sales
growth, lower costs, improve
efficiencies, enhance our
commercial approach and 
develop our capabilities
> We set out clear three-year targets
for growing our business and
becoming ‘supplier of choice’
> With good progress to date,
we will accelerate the pace 
of delivery to meet our targets 
in tough market conditions
> We will sustain our efforts 
in managing our cost base and
streamlining our organisation 
whilst staying sharply focused 
on growing our sales
> In pursuit of our business ambition
we intend to be best in class:
with products that excite our
customers; world-class supply 
chain management; and 
outstanding employees
What
next?
        Our financial
position remains
satisfactory
despite difficult
trading conditions
Ian Ellis
Head of Finance
08 Financial review Northern Foods plc
Financial review:
Our financial position remains satisfactory despite difficult trading
conditions. Our business is characterised by strong cash flow. Over
the next two years we will continue to address the pension deficit
and will bear exceptional cash costs associated with the restructuring
of the business. However, we expect to remain comfortably positioned
against our key measure of financial strength – interest cover –
throughout this period. At the 2005 year end interest cover before
goodwill amortisation and exceptional items was satisfactory 
at 4.6 times.
Sales
Continuing sales were up 2.0 per cent at £1,416.1 million. Underlying
sales, excluding the impact of currency, acquisitions, divestments and
the 53rd week last year, grew by 2.7 per cent. Total underlying growth
with our top five retailers was around the same level with strong
progress being made with both Tesco and Asda.
Ambient and Chilled both showed continuing sales growth of 7.5 per cent
and 2.0 per cent respectively. Frozen showed a decline in continuing
sales of 2.2 per cent, mainly because of changes in contracts resulting
from Morrisons’ acquisition of Safeway and lower promotional volumes
in our Dalepak business.
Selling price increases of approximately 1.0 per cent are included 
in the above figures. These were around 0.2 per cent below the level
of input cost inflation experienced within the year.
Operating profit
Operating profit before goodwill amortisation and exceptional items
was down 4.3 per cent at £102.4 million, with continuing businesses
showing a decline of 2.9 per cent. Good performances were achieved
in both Frozen and Ambient, but these were offset by a disappointing
result from Chilled.
Continuing Ambient operating profit before goodwill amortisation 
and exceptional items* increased by £5.2 million to £31.5 million,
a rise of 19.8 per cent. This was achieved through cost savings,
improved efficiencies and increased sales.
Continuing Frozen operating profit before goodwill amortisation 
and exceptional items* was held at £36.1 million, with lower 
volumes being offset by improved efficiencies across the division.
Continuing Chilled operating profit before goodwill amortisation 
and exceptional items* was down 19.2 per cent at £35.0 million.
Relatively weak sales to our largest customer throughout the year
and a poor trading period in the run up to Christmas affected
efficiencies and profitability. Overall efficiency levels were below 
our targets and cost inflation was not fully recovered.
Exceptional items
The group reorganisation and the proposed factory closures resulted 
in a £34.7 million post-tax operating exceptional charge, including
£1.1 million impairment of goodwill. The resulting cash outflow was
£22.9 million. These exceptional costs will continue into next year 
as we finalise the site closures and complete the group reorganisation.
The losses on the sale of Eden Vale Minsterley, Emile Tissot and
Cavaghan & Gray Seafood, which have been treated as discontinued
operations, were £25.9 million, £6.1 million and £2.8 million respectively.
The property at Croydon and the office in Hull were sold for net
proceeds of £13.6 million, resulting in a profit of £9.3 million.
The total post-tax loss from the business and property sales was 
£22.1 million, and included £29.3 million relating to goodwill
previously written off to reserves.
*Analysed in the turnover and segmental analysis
            > Divestments and rationalisation
We realised proceeds of £34.6 million through the sale of the Emile
Tissot frozen foodservice business to Dawn Fresh Foods Limited on 
1 May 2004; the disposal of the Eden Vale Minsterley fresh chilled dairy
products business to Uniq Prepared Foods Limited on 22 May 2004;
and the disposal of the Cavaghan & Gray Seafood chilled and frozen
fish business to IFP Holdings Limited, a subsidiary of Icelandic 
Group Plc, on 4 November 2004.
Previously announced plans to close the Evesham Foods factory 
and the London Road, Carlisle facility of Cavaghan & Gray during
2005 are on plan from both a cost and benefits point of view. The
transfer of their production to other group factories will eliminate
unnecessary duplication and enhance plant utilisation and productivity.
Manufacturing ceased at the London Road site on 31 March 2005 
and at the Evesham site on 14 April 2005.
> Operating exceptional items
The cash outflow from the group reorganisation and the factory
closures was £22.9 million.
Balance sheet
The net result of trading, capital expenditure, acquisitions and
divestments led to a decrease in trading capital employed to 
£659.4 million (2004: £688.7 million). Net debt at the year 
end was £333.3 million (2004: £332.4 million). EBITDA interest 
cover before exceptional items was 7.5 times (2004: 8.1 times).
Adding back goodwill previously written off, our average invested
capital was £901.2 million (2004: £929.1 million). The post-tax return
on average invested capital (ROIC) before goodwill amortisation 
and exceptional items was 8.8 per cent (2004: 9.2 per cent).With the
weighted average cost of capital at 6.6 per cent, we still achieved 
a healthy margin over the cost of funds.
Pensions
We believe that a defined benefit pension scheme is an important
benefit to our employees and is part of the remuneration package
offered to support the recruitment, motivation and retention of high
calibre individuals. Having decided to maintain our final salary scheme in
2002, we increased contributions for all employees from 5 to 7 per cent
and removed a number of company-funded early retirement provisions
for future service. In March 2005 we announced the closure of the
scheme to new entrants and introduced Pension Builder, a new defined
benefit scheme based on a career average principle.
The latest full valuation of the final salary scheme was carried out 
as at 31 March 2002 using a market-based approach. The market
value of the scheme’s assets was £449.9 million which represented 
95 per cent of the value of accrued benefits allowing for assumed
future increases in earnings. The scheme is in the process of being
valued as at 31 March 2005.
The fund is relatively immature with almost twice the level of
contributions going in as pensions paid out, which leaves us able to
take a long term view of investment returns. We continue to charge
pension costs against profits based on SSAP 24 and the latest full
valuation of the scheme. The variation credit due to the amortisation
of past surpluses reduces the pension charge by £0.7 million.
Pre-tax profit
Pre-tax profit before goodwill amortisation and exceptional items 
was £80.2 million, 6.7 per cent lower than last year. After the
exceptional group reorganisation costs, the losses on the sale of 
Eden Vale Minsterley, Emile Tissot and Cavaghan & Gray Seafood, the
profit on the disposal of Croydon and the office in Hull, and goodwill
amortisation of £4.0 million, there was a pre-tax profit of £4.3 million
compared to £75.4 million last year.
T axation
The tax charge on profit before goodwill amortisation and exceptional
items for the year was 21 per cent (2004: 18 per cent). Low Irish tax
rates, settlement of prior year items and tax efficient funding were
the main reasons for the difference between this rate and the basic
rate of UK corporation tax.
Earnings per share
Excluding goodwill amortisation and exceptional items, earnings 
per share fell 6.0 per cent to 12.95 pence. Basic earnings per share 
fell to 0.53 pence (2004: 12.78 pence), reflecting the inclusion of the
exceptional items from the group reorganisation, the factory closures
and the losses on the business disposals.
Dividend
The total dividend for the year is 9.05 pence per share. Dividend 
cover before goodwill amortisation and exceptional items is 1.4 times,
with the cash dividend during the year being £43.8 million.
Change in net debt
Net debt was stable at £333.3 million. The key ratio to consider 
in evaluating our debt capacity is interest cover before goodwill
amortisation and exceptional items, and this remained satisfactory at
4.6 times (2004: 5.0 times). EBITDA interest cover before exceptional
items was 7.5 times (2004: 8.1 times). Tight control of capital
expenditure was offset by higher working capital, mainly caused 
by the movement in the pension prepayment of £33.9 million.
This included the special pension contribution of £20.0 million
announced in March 2005. The movement in net debt is analysed below:
2005 2004
£m £m
Free cash flow 59.8 66.5
Dividends (43.8) (44.9)
Special pension contribution (20.0) –
Cash outflow on exceptional items (22.9) (4.9)
Net business disposals 33.5 18.2
Exceptional asset sales 13.6 –
Share buybacks (24.2) (37.1)
Other cash flows 3.1 (6.6)
Change in net debt (0.9) (8.8)
The change in net debt reflects the following items:
> Capital expenditure
We have held capital expenditure to a level below depreciation 
at £62.6 million. Going forward, we will ensure tight control of 
this spend and keep it in line with depreciation. Within this spend,
we have undertaken a number of strategic projects including the
completion of our installation of SAP and the completion of our 
new pizza facility on the site of the former Savoury Foods factory 
in Nottingham. Work is ongoing to open our new frozen pizza site in
Ireland, and a number of efficiency investments have been undertaken
across the group.
Northern Foods plc Financial review 09
                                            10 Financial review Northern Foods plc
> Currency
The group operates primarily in the UK. Forward foreign exchange
contracts and currency options may be used to hedge foreign
transactional cash flows. Accordingly, any gains and losses on these
contracts are recognised in the profit and loss account when the
underlying transaction is settled. To the extent that a forward foreign
exchange contract is not a hedge, any resulting gain or loss is taken 
to the profit and loss account. The group does not hedge against
translation and all significant derivatives require board approval.
Implementing International Financial Reporting Standards
We are on schedule to implement International Financial Reporting
Standards (IFRS). On 1 June 2005 we released a briefing announcement
on our corporate website indicating the major effects for Northern
Foods. There is no cash impact and the indicative effects on profit
before tax, goodwill amortisation and exceptional items for the year
ended 2005 are:
2005
£m
Pensions (15)
Convertible subordinated bonds (2)
Forward currency contracts (1)
We will report under IFRS for the first time in the six months to
September 2005 and will release a restatement of our March 2005
figures under IFRS in early September 2005. Under IAS 19, we have
indicated a post-tax pension deficit of £118 million which will appear
on the balance sheet of Northern Foods plc, together with the reversal
of the post-tax SSAP 24 prepayment of £67 million.
Ian Ellis
Head of Finance
1 June 2005
The net pension deficit under FRS 17 is estimated to be £116.6 million,
down from £155.7 million last year. This reduction is as a result of the
growth in assets, offset to some extent by the increase in liabilities
resulting from a lower discount rate. It also reflects the £20.0 million
special contribution paid in March 2005 and the removal of the
remaining discretionary benefits in the scheme. Since the year end 
a further £20.0 million has been paid to the scheme to reduce the
deficit further.
Treasury management
The group has a centralised treasury function which operates within 
a policy framework approved and regularly reviewed by the board.
The department is not run as a profit centre and is subject to internal
audit review. Its activities are routinely reported to the board. The
purpose of the centralised treasury function is to manage the main
treasury risks, including liquidity, interest rates and foreign currency.
While each business unit in the group is responsible for its own cash
management, all resulting cash flows and balances are managed 
by the centralised treasury function to minimise borrowings and
interest costs.
The main treasury policies are summarised below:
> Liquidity
The group operates a policy of maintaining certainty of funding 
by a combination of committed floating and fixed rate facilities,
supplemented by uncommitted facilities. The policy is to ensure 
that forecast net borrowings plus reasonable operating headroom 
are covered by committed facilities, which mature at least 12 months 
after the year end.
> Bank facilities
The committed core of our funding arrangements is formed by 
long term facilities currently comprising a £450.0 million five-year
revolving credit facility (2006) and a £91.3 million fixed rate bond (2008).
Short term funding requirements are met through a mix of committed
overdraft facilities of £23.0 million and other uncommitted short term
facilities of £67.0 million.
> Interest rates
The group manages its exposure to interest rate fluctuations on its
borrowings by operating with a mix of fixed and floating rate borrowings.
The objective is to operate with fixed rate borrowings within a range
of 20 to 50 per cent of total borrowings over the medium term,
although the group may operate outside that range during the year.
Board approval is required for use of interest rate derivatives and 
no interest rate derivatives are currently in place.
                         Board of directors
and Company Secretary
Northern Foods plc Board of directors and Company Secretary 11
1
3
2
4
6
5
7
5 Colin Dyer (52) •*†‡
Joined the board in 1997. He is Chief Executive Officer of Jones Lang
LaSalle Inc. He was formerly Chief Executive Officer of Worldwide Retail
Exchange and former Chief Executive Officer of Courtaulds Textiles plc.
He chairs the audit committee.
6 Orna Ni-Chionna (49)
•*†‡
Joined the board in 2002. She is a former partner of McKinsey & Company.
She is a non-executive director of Bank of Ireland UK Holdings plc,
Bristol & West plc and BUPA, and is a trustee of the Soil Association.
7 Carol Williams (47), Company Secretary
Joined Northern Foods in 1990. She is head of the company’s legal
department and was appointed Company Secretary on 11 March 2005.
She is a director of C& I Group Services Limited.
In May 2005 the appointments of David Nish (44) as non-executive
director and Jez Maiden (44) as Finance Director were announced.
David Nish is Executive Director, Infrastructure of Scottish Power plc.
Jez Maiden was formerly Group Finance Director of British Vita plc.
•
Non-executive director
*
Remuneration committee member
†Audit committee member
‡Nomination committee member
1 Peter Blackburn CBE (64), Chairman •*‡
Joined the board in 2001 and became Chairman in February 2002.
He was previously Chairman and Chief Executive of Nestlé UK Limited.
He is a non-executive director of SIG plc and Compass Group PLC,
and is a past President of the Food and Drink Federation. He chairs 
the nomination committee.
2 Anthony Hobson (57), Deputy Chairman •*†‡
Joined the board in 2002. He is a non-executive director of HBOS plc,
Sage Group plc, JLT Group plc and Glas Cymru. He was the Group
Finance Director of Legal & General Group plc from 1987 to 2001.
He chairs the remuneration committee.
3 Pat O’Driscoll (46), Chief Executive
Joined the board on 29 March 2004. She was previously Retail Vice
President of Shell Europe and, prior to joining Shell in 1997, she held
positions with leading UK retailers including Safeway, Tesco and 
Marks & Spencer. She was an Independent Director of Assa Abloy 
AB in Sweden until 2004.
4 Matthew Gribbin (47)
Joined Northern Foods in 1981 and has held a number of senior positions
within the Northern Foods group. He joined the board in 2003. He is 
a Council member of the Federation of Bakers. He is Chairman of
Northern Foods Trustees Limited.
                          Q
+
A
with the Chief Executive:
Pat O’Driscoll answers questions on 
the changes and progress made in 
Northern Foods over the last 12 months
Q. Can you outline the priorities for GET FIT?
A. Our priorities in the short term are to improve performance 
in the Chilled division with a simpler and leaner divisional structure,
to lower overhead costs and to capture category and customer
opportunities. We will also continue to leverage scale through 
central procurement and continuous improvement in manufacturing.
Q. How long will it take? When can we expect 
to see returns?
A. We are committed to a major business transformation over 
three years to 2007. We expect to see benefits coming through 
this year and accelerating next year as the changes gain momentum.
Q. Performance has been in decline for a number 
of years – is the turnaround achievable?
A. Yes it is, and the increasingly tough trading conditions mean 
we have to accelerate the pace of our GET FIT programme delivery.
In our strategic business review we clearly identified our strengths and
weaknesses and now our energy is totally focused on implementing
the strategy for performance and improvement.
Q. How will we know if it is working?
A. The signs of success are already visible in the many changes 
and innovations that are emerging. Tracking that progress is a key
component of the GET FIT programme and we have developed
management information tools which will help us identify successes
and measure performance against defined metrics.
Q. The marketplace is getting tougher. How will you
retain the savings that you expect from the GET FIT
initiatives and will you be able to invest in growth?
A. We will achieve this by accelerating the pace of delivery for sales
growth, lowering competitive costs by improving our Chilled performance,
by pursuing efficiency gains and by building on our successes. We are
continuing to invest in growth and in our customer proposition.
Q. Do you have the right management team 
in place now?
A. I am very pleased with the calibre of our restructured management
team.We have a very strong group board and a dynamic operating board
which combines the right mix of business expertise and functional
excellence. I am confident in the new management team’s ability 
to address the issues we face and achieve our business ambition 
at the pace our shareholders require.
12 Q&A with the Chief Executive Northern Foods plc
               Q. Northern has historically grown through
acquisition. What are your plans in this area 
for the future?
A. We took the strategic decision to sell a number of businesses
where we did not have the scale to compete or where the business
was not focused on our key categories. The approach has freed 
us up to focus with absolute clarity on transforming our current
business. However, we do recognise that a consolidating sector 
such as ours offers opportunities for acquisition. We are therefore
receptive to acquisitions which would help us build or maintain
market leadership in categories that are important to us. We will
consider each opportunity as it arises on the criteria of whether 
it enhances shareholder value.
Q. How are you adding skills to Northern Foods
people to cope with the scale and pace of change 
it is facing?
A. The company is aligning people behind our ambition by asking
them to think and act in different ways – to challenge ideas, identify
opportunities and accept that change is a constant. There is a clear
responsibility on the management team to lead people through this
journey and provide them with the tools and coaching they need 
to succeed. The GET FIT programme includes a number of specific
initiatives to support this need. Examples include the creation of
project working groups at site level to drive continuous improvement,
the roll-out of a leadership development programme and the
introduction of performance-related remuneration. IT solutions are
also being harnessed to support change, providing access to online
learning materials and best practice case studies. Everyone has
potential. It is my responsibility to ensure it can flourish.
Q. Are there more major organisational 
changes to come?
A. An organisation that does not continually ask “How can 
we improve?” is an organisation that will not lead the market.
As we transform Northern Foods we will aggressively pursue 
the optimum operating model and the best people in the market.
Q. How are you addressing the impact 
of business change on your customers?
A. Our mission is to be the ‘supplier of choice to UK and Irish
retailers in added value convenience foods’ and the integration 
of our business underpins the delivery of that mission. By working 
as ‘One Northern’, the company has been able to streamline its
commercial approach and manage key customer relationships more
effectively. That in turn has let us identify new opportunities to
innovate and add value. We are working hard to communicate the
rationale for changes and the positive responses we have received
indicate that we are on the right track. During this period of business
transformation we need to ensure that our high reputation for quality
and delivery is not affected and we are keeping a careful eye on this.
Q. What are your criteria for category focus 
and how will success be achieved?
A. Our strategic business review highlighted consumer demands for
choice and convenience. Within our chosen categories we can provide
convenient, added value meals, snacks and treats. We operate in
categories where we have strong market positions, in either private
label or brands, and we can use our manufacturing scale to achieve
competitive costs. We are clear on the range of category and customer
opportunities we will target.
Q. How are you reflecting the changing 
eating trends of consumers?
A. Three dominant trends drive today’s consumer eating habits:
convenience; a desire for indulgence, taste and quality; and the
fulfilment of healthy eating goals. Northern Foods wide range 
of meals, snacks and treats provides choices in all three areas.
We need to excel in what we do and will succeed by monitoring
changing food trends, capturing consumer feedback and working
closely with our customers to adapt our ranges and develop new
products which support emerging trends.
Q. Can you describe ‘One Northern’ – is it a brand?
A. ‘One Northern’ is the term we use to describe our newly 
integrated approach to running our business. It describes how 
we can address the market more powerfully as a single business,
how we can capitalise on our scale and knowledge by centralising 
key activities and functions, and how we can perform at pace by
planning as a single team and focusing our people on shared goals.
Over time we expect former operating company names to be replaced
with Northern Foods branding to reflect this management shift.
We are committed 
to a major business
transformation 
over three years
Northern Foods plc Q&A with the Chief Executive 13
                  Checking production quality
Steven, bakery operations manager
Yum! White chocolate & lemon mini muffins
Sophie
Enjoying crispy duck
Becky and Liberty
Supplier
of choice:
delivering
great 
taste
14 Business review Northern Foods plc
          regimes, the average consumer does not. We recognised the business
potential of creating a biscuit range that was low in fat but still tasted
great. Officially Low Fat by Fox’s was the result. The range is designed
to help consumers make an educated choice about snacks, with fat
content of less than 3 per cent, and calories clearly indicated on every
pack. The number of consumers buying into the brand has risen rapidly
during the year, with purchases being made by more than 7 per cent of
households. Healthy biscuits are now the second largest biscuit sector
in the category, with year-on-year growth of 10 per cent. Officially
Low Fat has massively outgrown the rest of the sector.
Building customer relationships
It was clear from the review that customers were seeking the
synergies that a better coordinated business could offer. We know
retailers want suppliers that are quick to adapt in a fast-changing and
competitive market. Beyond the supply of great products and leading
edge innovation they want a collaborative approach to category
development, detailed consumer insight and a mutual approach 
to reducing costs.
The review showed that working with Northern Foods was previously
a complex proposition with multiple points of contact for the 
customer and a scattered approach to innovation. We have therefore
organised our customer facing teams to make it easier for customers
to work with us. We know from feedback that the approach is being
well received. We also know that it is creating stronger customer
relationships and opening up new business opportunities. For example,
a client relationship with ASDA in the area of chilled savoury pastry
was shared with colleagues and resulted in a new business win for
fresh chilled cakes. We are also working to develop our existing
‘category champions’ programme, ensuring that our category know-how
is translated into value added propositions for customers.
The opportunities for Northern Foods are clear and we are focused 
on creating a powerful shared agenda with our customers in order 
to grow the business to its full potential.
Business review:
This section describes how Northern Foods is pursuing its goal of
being ‘supplier of choice’. We look at four key areas: our relationships
with consumers and customers; our approach to category management;
our capability within the business; and opportunities for delivering
tighter cost control.
The strategic business review carried out during the year confirmed
the inherent strengths of the business, our scale, our reputation for
quality, our well-invested assets and the skills and professionalism of
our people. The report also confirmed that operating as a collection 
of small businesses meant we were failing to exploit our scale – activity
was fragmented and customer management was uncoordinated.
Meeting consumer needs
The review confirmed the quality, reach and relevance of our
products. Social, economic and demographic changes over the last 
10 years have transformed all our eating habits. Smaller households,
busier lives, the demand for choice, fewer people able or willing 
to cook, the decline of the family sit-down meal and more people 
taking foreign holidays are all factors influencing the kind of food 
that consumers want to buy. As a result, the convenience foods 
sector has outgrown the rest of the UK packaged food sector.
As they juggle busy lives, consumers are looking for food ideas which
are not only convenient but also satisfy their desire for indulgence,
healthy eating and affordability. Northern Foods is well positioned 
to support these needs.
Growth through innovation
These trends also play to the skills and capabilities of Northern Foods,
not least our capacity to innovate. Our work in the healthy eating
sector of the business market demonstrates the point. Consumer
insight indicated that while some people want to follow rigid dietary
the strategic business
review confirmed that
Northern Foods has
considerable strengths
Northern Foods plc Business review 15
             we start with the
advantage of a
strong and attractive
product range
16 Business review Northern Foods plc
Relevant products
Translating superior insight into superior category positions is one 
of the challenges we are addressing at Northern Foods. As we look 
to sharpen our competitive edge, we start with the advantage of 
a strong and attractive product range – one that reflects the kind 
of foods that today’s consumers increasingly want to buy.
With our expertise spread across three major areas of food production:
frozen; ambient; and chilled, the Northern Foods product portfolio 
of branded and own label products includes ready meals, pies and
pastries, pizza, salads, bread, biscuits and cakes – a choice ranging from
savoury to sweet, indulgence to healthier eating and snacks to meals.
Real category scale
Northern Foods operates in market categories which present strong
opportunities for growth. Compared to a 3 per cent growth for the
food market as a whole*, we are seeing an aggregated 5 per cent
growth rate in our core categories.
Within our own label business, we enjoy strong market positions for
all our chosen categories, with all the major retailers. We have wide
and deep customer reach with key strengths in chilled savoury pastry
and ready meals and opportunities to build further on our positions
in other categories.
Our brands enjoy positions of strength. We have market leadership 
in frozen pizza through our Goodfella’s brand, we are number one 
in premium biscuits through our Fox’s brand and we have market
leadership in pork pies with our Pork Farms brand.
Focusing on our strengths
Maintaining market position, through continuous innovation and 
value delivery, presents a major challenge for the entire sector.
It is therefore critical to differentiate Northern Foods products 
in each category in which we operate.
Stronger focus on these chosen categories means getting out of 
those categories where we are not a scale player or where our business
is not focused on our primary UK and Irish markets. This approach 
drove the sale of the Eden Vale Minsterley, Emile Tissot and 
Cavaghan & Gray Seafood businesses.
Driving growth through category development
At the same time, we are applying ever greater rigour to our chosen
categories, using market insight to improve performance. For example,
the Goodfella’s brand team identified an opportunity to create a pizza
with broad family appeal in order to grow incremental sales in the
frozen pizza category.
With the proposition ‘Italian pleasure that brings your family together’,
Goodfella’s Delicia is the most authentic stonebaked thin pizza in the
frozen market. Launched in 2003, the brand has captured an 11 per cent
market share – the highest in its sector.
Our sharper approach to category management has also meant that
we have been able to buck the trend in categories which are perceived
to be stable or in decline. This ability was demonstrated with the
relaunch of Creations, a premium priced biscuit range from Fox’s.
The product is a seasonal one, with a heavy reliance on the Christmas
period. Fox’s recognised that Creations was being bought to satisfy
different consumer needs and was often chosen as a gift. Accordingly,
as part of an overall reformat of the product involving the introduction
of new biscuits and new pack design, the company created a pack size
which was ideal for gifting. Backed by press and poster advertising,
the relaunched range helped Fox’s increase sales of Creations by
nearly 40 per cent against an overall market segment decline of 
4 per cent. It has also helped open up new commercial opportunities
including potential brand extensions.
*UK Packaged food, excludes fresh meat and fish.
Source: TNS; Euromonitor; and Northern Foods estimates
            Anticipating a steak & mushroom pie
Nick
Serving party food
Broghan
Creating new oriental dishes
Dave, development chef
delivering
great 
choice
Northern Foods plc Business review 17
          Decorating 700 cakes an hour
Julie, hand cake decorator
Getting the deliveries organised
Leroy, distribution co-ordinator
Lunch on the go with a BBQ chicken wrap
Marcus
delivering
great 
progress
18 Business review Northern Foods plc
          during the year 
we set out to
simplify and streamline
our operations
Northern Foods plc Business review 19
Pursuing best practice and expanding our capability
During the year Northern Foods set out to simplify and streamline 
its operations. The company moved from working as 15 smaller
operating companies to becoming an integrated business with 
a divisional structure focused on our core competencies of frozen,
ambient and chilled food production. The closure of two production
sites in Evesham and Carlisle allowed us to consolidate the production
of key product categories in the process.
These structural changes have inevitably been painful but, in our
pursuit of best practice, they have been a fundamental part of the
process of focusing and aligning our operations and our people.
Continuous improvement
As we work to build capability, a key area of focus has been the
pursuit of manufacturing excellence and this has been one of the
main GET FIT programme initiatives during the year. A five-step
approach to common standards and continuous improvement has
been established and the programme is benefiting from the greater
involvement of our employees.
The success of the approach is best captured in the words of one 
of our factory managers: “Using daily reviews and action teams is
delivering real benefits to this site, in terms of quantifiable results 
and an improved culture. We started in the sleeve-up and despatch
area and got people involved and working as a team and organising
the area so that it was a safer, better place to work. We tracked
improvements through daily reviews and basic Key Performance
Indicators (KPIs). The turnaround showed us what could be achieved
and we’ve now rolled out the process across the site. Persistent issues
are being tackled with action teams to ensure longer term benefits”.
As we continue to raise operating standards we have also completed
a benchmark survey of all aspects of our supply chain. We are now
responding to its findings through a process of detailed site planning.
Enabling exceptional performance
A major priority for the business is to capture value through 
the development of exceptional people, processes and technology.
We have started to see some great performances by motivating,
developing and rewarding our leadership team to create a culture 
of continuous improvement. We are working hard to infuse specific
leadership skills into the business, adding edge to the considerable
know-how that our people already have. One tool to support this
process has been the introduction of a new Leadership Framework
which sets out several critical behaviour styles. This is being underpinned
by The Learning Zone, an online personal development tool which 
is being regularly accessed by our top managers.
We also recognised that to build a winning culture, characterised by
leadership and accountability, rewarding people for success is key. In
this context, the development of a performance-based remuneration
policy was seen as a priority and this has been put in place for
implementation in 2005/06.
Technology will also play a key role in changing our business. The
successful completion of the SAP rollout and our update to MySAP
during the year means that Northern Foods is now the only chilled
food manufacturer in the UK that successfully operates SAP across 
its supply chain. The challenge now is for Northern Foods to realise
the full benefit from this substantial investment.
         the foundation we
established during the
year means we are in
better shape to perform
20 Business review Northern Foods plc
Managing our costs to optimise our performance
Responding to the changing needs of consumers and the demands 
of retail customers has added complexity – and therefore costs – 
to the Northern Foods way of operating over the past few years.
At the same time, our decentralised business model resulted in 
an unacceptable level of overheads. The inevitable increase in costs
resulted in disappointing financial performances. A major priority 
for the GET FIT programme has therefore been to focus on areas
where we could reduce duplicate costs and manage processes and
operations in a more streamlined manner in order to achieve lower
overall costs.
Leveraging our buying scale
A notable GET FIT success has been our work in the area of
procurement where centralisation of the function has delivered some
impressive results. Under the guidance of new functional leadership
with specialist experience of procurement, we accelerated our savings
by using our scale as one of the UK’s largest buyers of goods and
materials. Results are being achieved through a range of initiatives
including simplification of the buying process, using SAP data to 
speed up decision making and consolidating the number of suppliers
with which we work. The use of online technology to create e-auctions
has also been tested. A range of savings has already been achieved 
in this area and the process has reinforced the benefits of our 
‘One Northern’ buying scale.
Rigorous programme management
To drive the overall change process and ensure that cost savings are
realised, we established a dedicated Programme Office. Using tight
project management disciplines, this team has been specifically charged
with identifying productivity improvements for each of the GET FIT
initiatives. Progress will be tracked on a monthly basis, allowing fast,
corrective action wherever necessary and ensuring that success is
quickly identified and can therefore be shared across the business.
Measuring progress
A further important initiative in the year was the development and
implementation of our MI system which clearly defines group-wide
Key Results Areas and associated KPIs. Developed by the leadership
team, these KPIs have now been cascaded through the business and
provide a framework for focusing employees around key performance
metrics such as waste or labour savings. The KPI metrics, combined
with data from the MI system, enable complete transparency of costs
across the business and are beginning to play a powerful role in
measuring our progress.
Based on the findings of our strategic business review, we also carried 
out more planning during the year as we considered how further
significant cost reductions could be phased across the business. This
analysis compared organisational structure against external best practice
and has now been translated into detailed site implementation plans
which charge the entire supply chain management team with
achieving greater savings.
The strong foundation we have established during the year means 
we are in better shape to perform. The changes being implemented
across the business provide Northern Foods with the platform we
need to achieve our strategic objective of building operating margin
by 100 basis points by 2007.
            Sharing roast vegetable tarts
The Wright family
Dunking a cookie at tea time
Hazel
Creating new Christmas cake ranges
David, Tammie and John, new product developers
delivering
great 
changes
Northern Foods plc Business review 21
          Responding to consumer eating trends
Dounne snacking on a low fat cereal bar
Supporting health & safety requirements
Leroy, tray cleaner
Ensuring food safety
Elizabeth, food tasting panellist
delivering
on CSR
22 Corporate social responsibility review Northern Foods plc
          CSR overview:
Fulfilling its Corporate Social Responsibility (CSR) commitments 
is one of the means by which Northern Foods can demonstrate its
leadership position in the food industry. We have a long-standing
commitment to CSR and recognise that we have a duty to all our
stakeholders including employees, shareholders, customers, consumers,
suppliers, the wider community and the environment.
While the company continues to fulfil its obligations, we view the
shift in our business to an integrated organisation as an opportunity to
revisit and re-scope our activities in this area and to establish common
targets for the business.
To that end, a new CSR Steering Group, chaired by a member of the
operating board, has been set up to explore best practice, review overall
CSR objectives and assess risks and opportunities for the business.
Food safety
Protecting consumers by ensuring the safety of the food we produce 
is a core requirement of the business and our central laboratory
services and site technical audit processes remain accredited to the
highest agreed international standards. Our systems of monitoring
performance at our sites, at our suppliers and in our laboratories,
allow us to assure food safety, encourage continuous improvement
and react very quickly when food hazards such as Sudan 1 arise in 
the food supply chain.
Because of our long-established technical standards, the introduction
of the General Food Regulations 2004 on 1 January 2005 with new
requirements for traceability within the food chain, had no significant
impact on the business. During the year we also centralised our 
risk-assessed supplier audit programme and extended the activities 
of our food safety auditors to reflect new Food Standards Agency (FSA)
guidelines. An online training project was also initiated and is available
to employees through our intranet.
Northern Foods plc Corporate social responsibility review 23
we have a long-standing
commitment to corporate
social responsibility
Food safety measures
Site audits conducted
Supplier audits
Laboratory audits
Trained in HACCP 
(Hazard Analysis and 
Critical Control Points)
Trained in technical audit
2004/05
100%
128
100%
128
73
2003/04
100%
108
100%
101
108
Comments
Audits support the BRC Global
Standards
Suppliers audited on a risk-assessed
basis
Certified to Northern Foods
standards
A rolling process ensures 
multi-disciplinary teams exist 
on all sites
Another rolling process. More than
330 people now trained
Sudan 1
Our food safety systems were put to the test in February 2005
when the Sudan 1 issue emerged. In 2003, surveillance data
identified the potential for Sudan 1 adulteration of some chilli
powders and oils. Our database allowed us to identify potential
‘at risk’ suppliers and alert them to the possible hazard. Therefore,
when the information about a problem began to emerge 
we were able to identify immediately which of our sites had
potentially received the Worcester sauce containing Sudan 1 
and alerted them to begin contingency planning. As information
emerged about the specific batches affected, we were able to
break the supply chain and successfully recall products in line
with our customers’ requirements. The following day, substitute
sources of vegetarian Worcester sauce were already in use at 
our sites. We co-operated throughout with the FSA so when 
the public alert was issued three days later, action had already
been taken on all of our products. As a result, we minimised risk 
to consumers and the financial impact on our business.
                 24 Corporate social responsibility review Northern Foods plc
Employee involvement and participation
In a rapidly changing business environment, we recognise that
employee involvement and participation are key to maintaining a
motivated workforce. Considerable effort has been made to involve
Northern Foods people in continuous improvement activities. There 
is an emphasis on improving communication and consultation, both
within individual sites and across Northern Foods. Regular leadership
events and information cascades have been a feature of the year,
ensuring that employees are informed about major business initiatives.
An agreement between Northern Foods and employee representatives
confirmed that we have met our obligations under the Information
and Consultation of Employees’ Regulations 2004. The Northern Foods
National Forum continued in the year and, to reflect the new
organisation, the company is extending this consultative approach 
by creating new divisional forums. We also hold regular business
reviews with trade unions at national level to update them on
business performance.
Our commitment to employee consultations is producing benefits 
for the company and employees alike. Many innovative answers to
problems have resulted and more efficient ways of working have been
developed and implemented. In addition, the skills of our workforce
have grown as a result of significant investment in their training in
new techniques. There are over 50 working groups now set up and 
we plan to increase this number significantly over the coming year.
Our commitment to adult education also continued through ongoing
support of learning centres which are in place at many of our sites.
Operating models vary, but typically involve financial and resourcing
contributions from the company, a local college and the on-site
union, all helping to set up and resource a dedicated area for learning.
The approach benefits both individuals and the company, contributing
to improved employee participation and engagement.
Health and safety
Northern Foods continues its commitment to industry leadership 
in the area of health and safety and works hard to sustain a positive
health and safety culture, thereby reducing the number of accidents
and associated absences. Health, safety and risk management are
represented at the operating board and we continue to give clear
leadership and guidance to our sites through our dedicated Health
and Safety team. The success of our approach has been recognised
externally. During the year, five sites secured occupational health and
safety awards from RoSPA. Four of these were Gold Awards, and one
was a Gold Medal, reflecting five years of continuous improvement.
Year-on-year performance has been maintained despite the major
business change programme now underway.With a focus on continuous
improvement, we have a system for auditing sites to identify major
priorities and create programmes to drive related improvements.
Slips and trips were identified as a major cause of injury for us and
the food industry as a whole. We have therefore set specific targets
for reducing such accidents in the next financial year.
Environment
As a major food manufacturer, Northern Foods is very aware of its
duty to protect the environment and recognises its role in supporting
long term environmental management initiatives. During the year 
the company continued to enhance its environmental performance 
in line with its dual policy objectives of meeting legal obligations 
and assessing and managing environmental risks. We continue to 
help shape the food sector environment agenda through liaison 
with the policy makers and the regulators.
Northern Foods has exceeded the second energy efficiency 
target for the UK Climate Change Levy Agreement by an amount
equivalent to 11,000 tonnes of carbon emissions saved. It also met 
its obligations related to packaging waste and pollution prevention 
and control legislation.
In anticipation of the full implementation in January 2006 of the
Animal By-Products (England) Regulations 2003, Northern Foods – 
with the help of the Chilled Food Association – has continued to 
work with Defra and the waste management industry to improve 
the infrastructure for the treatment of waste containing animal 
by-products.
Health & safety 
performance measures
Minor accidents
Reportable accidents
Major injuries per 
1,000 employees
Reportable accidents 
per million hours worked
Days lost due to accidents
2004/05
5,618
472
0.92
11.2
10,335
2003/04
6,509
541
0.75
12.3
11,128
Comments
A 14% decrease. Priority 
areas are slips, manual handling
and being struck by objects
A 13% reduction for accidents 
A disappointing increase but 
well below the food industry 
average of 3.0
9% decrease versus an industry 
average rate of 14.5
A reduction of 7%
Employee teamwork drives continued improvement
A key part of the manufacturing excellence programme has 
been the creation of working groups to bring the initiative 
to life and to gain the feedback and support of our employees.
Through the use of daily reviews and KPI tracking, the sites are
able to monitor progress and identify areas for improvement.
The approach is already delivering financial dividends, for example,
one team achieved a 40 per cent saving by focusing on how to
reduce waste on their pizza line. Importantly the approach is also
driving employee involvement. In the words of one of our factory
managers: “People now have ownership and feel accountable 
for the changes taking place. Recognition of a job well done 
has been an important part of the transformation”.
Reducing rack-related accidents
One of our sites recognised that a high number of its accidents
were associated with the manoeuvring of racks. Steps to identify
a better designed castor were taken in conjunction with a supplier
and the Health & Safety Laboratory. The successful trial delivered 
a reduction in rack-related accidents over a two-year period from
41 per cent to 17 per cent.
                     Northern Foods plc Corporate social responsibility review 25
Community involvement and charitable giving
Northern Foods has an active policy of supporting local community
projects and international charities. During the year, we donated
£273,000 (2004: £291,000) in cash to charities and voluntary groups
both in communities where we operate and in the wider world.
Donations remained steady as a proportion of operating profit.
Our main focus is on disadvantaged groups close to our manufacturing
sites and we have made donations to many charities to help the
homeless, the unemployed, young people suffering exclusion, ethnic
minorities, ex-offenders and others. We also support educational
projects in local schools and universities, either in cash or in kind,
through employee involvement in activities such as individual mentoring.
Northern Foods is part of a global supply chain and we recognise 
our responsibility to help the global community. We are one of 
Oxfam’s longest standing corporate partners and we continued that
support in the year by donating £30,000 towards its policy and
advocacy work. The company also pledged £50,000 to support the
creation of two child orphanages in Southern India and Sri Lanka,
following the Tsunami disaster. Our manufacturing sites have raised 
a further £12,000 towards the appeal through local employee
fundraising activities.
Ethical procurement
Northern Foods is one of the UK’s leading buyers of raw goods 
and materials. We source products globally, in line with broadening
consumer tastes and the requirement to purchase at the best 
price available.
The ethical dimension of our procurement strategy is becoming
increasingly important. We need to satisfy growing stakeholder
interest about safe and sustainable sourcing and protect the
employment conditions of the people who produce the goods 
that we buy. The recent appointment of a new group director 
of procurement will deliver progress in this area.
The process of centralising our procurement function has meant 
that progress in registering with SEDEX, a secure web-based system
for companies to maintain data on labour standards at production
sites, has been slower than anticipated. To date,16 Northern Foods
sites are registered and 11 have completed the required self assessment.
Prior to initiatives currently underway to reduce our overall supplier
numbers, 24 Northern Foods suppliers were registered on SEDEX.
We have set a target for all sites to register with SEDEX by the 
end of 2005/06.
Through the Northern Foods Farm Assurance policy, first published 
in 2000, we continued our commitment to ensuring standards 
of animal welfare through the supply chain.
Addressing consumer needs
Three trends dominate today’s consumer eating patterns: convenience;
a desire for indulgence, taste and quality; and a desire for healthy
eating. Our range of meals, snacks and treats provides choices in 
all three areas.
At the same time, the government, through its Health of the Nation
white paper, is seeking to address predicted rises in health provision
costs relating to unhealthy lifestyles. Reducing the salt, sugar and fat
content of prepared food is high on the agenda, alongside labelling,
diet and lifestyle education. It is clear that Northern Foods, as one 
of the UK’s leading food manufacturers, has a role to play in shaping
the debate and in effecting change. We achieve this in three ways:
through the government; through consumers; and through retailers.
Firstly, we continue to work with government and other interested
parties, both directly and via our membership of the Food & Drink
Federation, the Chilled Food Association and the Federation of Bakers.
We are actively working to reduce salt in products in line with the
FSA targets and the FSA has acknowledged our leading contribution
to this work. We have been invited to contribute to setting targets 
for salt reduction in other food categories.
Secondly, we are working to develop products which satisfy consumers’
healthy eating goals and fulfil targeted reductions. Good sales of our
Officially Low Fat range prove that you can achieve both objectives –
the range contains less than 3g of fat per 100g, which constitutes 
low fat according to the official view of the FSA. Range extensions 
are planned in 2005/06.
With much of our business in own label, our activity on salt, sugar
and fat reduction generally takes place in conjunction with our
customers who are equally aware of the health debate. Our third 
area of focus is therefore to work closely with them to develop new
products that reflect both changing tastes and regulatory pressures.
Addressing FSA sodium targets
In October 2004 a cross-functional team in the Frozen division was
set up to address FSA sodium targets. Using pizzas as its model,
the company looked at each individual key component in the
recipe – pizza bases, sauces, cheeses and meats – for opportunities
to reduce sodium. The team identified that reduced sodium pizza
bases, cheeses and meats could be developed. With a low sodium
yeast extract in the pizza sauce, consumer desire for salt and
savoury flavours could still be satisfied. Development is complete
and the new reduced sodium ingredients are now ready for
implementation. Overall, the effect on finished products should
be a 20 per cent reduction in sodium.
          26 Report of the directors Northern Foods plc
The directors of Northern Foods plc present their annual report and
the audited accounts of the company for the year ended 2 April 2005.
Principal activities and business review
Northern Foods plc is one of the UK’s leading food producers, providing
own label and branded products to retailers. This report should be
read in conjunction with the Chairman’s review, the Chief Executive’s
operating review, the Financial review and the Business review, which
together include information about group activities, the financial
performance during the year and likely developments.
Registered office
The company’s registered office changed with effect from 
28 February 2005, when its new corporate headquarters opened in
Leeds. The new address is shown in the Company information section
on page 69.
Results for the year
Pre-tax profit before goodwill amortisation and exceptional items 
was £80.2 million (2004: £86.0 million). After the exceptional group
reorganisation costs, the loss on disposal of businesses, the exceptional
profit on the sale of fixed assets and goodwill amortisation, there was
a pre-tax profit of £4.3 million (2004: £75.4 million).
Dividend
An interim dividend of 3.35 pence per share was paid on 24 March 2005
and the directors recommend a final dividend of 5.70 pence per share
to be paid on 26 August 2005 to shareholders on the register on 
29 July 2005.
Directors
The following were directors of the company during the year:
P H Blackburn*
M S Christie (resigned 22 October 2004)
C Dyer* 
M T Gribbin 
A J Hobson* 
O G Ni-Chionna* 
P A O’Driscoll 
H R Sims (resigned 30 June 2004)
*non-executive directors
Directors’ biographical details are set out on page 11.
P H Blackburn will retire as Chairman following the company’s 
Annual general meeting in July 2005 and A J Hobson will take 
over as Chairman from that date.
Two new appointments to the board will be made. D Nish will join
the board as non-executive director on 1 July 2005 and will also chair
the audit committee. J Maiden has been appointed Finance Director
and will join the board on a date to be agreed. A resolution proposing
the election of D Nish will be put to a shareholder vote at the Annual
general meeting.
In accordance with the company’s articles of association, C Dyer,
M T Gribbin, A J Hobson and O G Ni-Chionna retire and, being eligible,
offer themselves for re-election. The Chairman confirms that, following
formal evaluation, the performance of all the retiring directors
continues to be effective and that they continue to demonstrate
commitment to their roles on the board and the board committees.
C Dyer has been a non-executive director since 1997. By the end 
of the 2005/06 financial year he will have served for nine years as 
a non-executive director since his first election by shareholders. The
board has unanimously agreed that his knowledge and experience
remain invaluable to the business, particularly at this time of major
change, and firmly believes that his judgement and independence 
will not be affected by his continuing in office. The board considers,
therefore, that C Dyer remains an independent director.
The executive directors’ service contracts, including that of M T Gribbin,
the retiring executive director, are referred to in the Directors’
remuneration report. The executive directors’ service contracts 
are terminable by the company giving one year’s notice.
Details of the remuneration of individual directors and of the
remuneration strategy approved by the board are included in the
remuneration report for the year ended 2 April 2005, set out on pages
31 to 40. A resolution will be proposed at the Annual general meeting
to receive and adopt the 2004/05 remuneration report.
The interests of the directors in the share capital of the company at
the year end are shown in the Directors’ remuneration report. Other
than service contracts, no director has a material beneficial interest 
in any contract to which the company, or any of its subsidiaries,
was a party during the year.
Company Secretary
With effect from 11 March 2005, the board announced that Julian Wild
would cease to be Company Secretary. Carol Williams, head of the
company’s legal department, was appointed to the position of
Company Secretary from that date. The change was made following
the relocation of the company’s headquarters to Leeds from Hull,
where Julian Wild had served the business for 26 years.
Employees
Northern Foods takes its responsibilities to its employees seriously.
It is committed to equality and opportunity and aims to treat all 
of its employees fairly in every aspect of employment. It is committed
to giving employees the opportunity to maximise their potential.
Employee share schemes
The company operates savings-related and executive share option
schemes, reference to which is made under the Share capital 
section below.
Share capital
The company was granted authority by shareholders at the Annual
general meeting on 22 July 2004, for a share buyback programme 
of up to 10 per cent of its equity. The latest programme started 
in July 2004 and a total of 10,530,000 ordinary shares have been
bought back under that authority and are being held in Treasury.
Report of the directors
                      Northern Foods plc Report of the directors 27
During the financial year a total of 15,580,000 shares were acquired
at a cost of £24.2 million. Since the programme started in February
2000, a total of £167.8 million has been returned to shareholders
through buybacks.
On 17 December 2004, options over 2,313,123 ordinary shares were
granted under the company’s executive share option scheme at a price
of 169.67 pence per share.
Options have been exercised under the company’s executive and
savings-related share option schemes during the year. As a result,
participants in these schemes were allotted 2,056,542 new ordinary
shares in that period.
Unallotted shares outstanding under the above schemes at the year
end were 14,155,626. From 3 April 2005 to 1 June 2005, 173,639 
new ordinary shares have been allotted on the exercise of options.
Substantial holders of stock
The directors have received notification of an interest of 3 per cent 
or more in the issued share capital of the company from the following:
AXA S.A. 11.02 per cent
Sprucegrove Investment Management Ltd 7.10 per cent
Grantham Mayo Van Otterloo & Co LLC 4.03 per cent
Royal Bank of Scotland Group plc 3.21 per cent
Legal & General Investment Management Limited 3.05 per cent
Disposals
The following disposals took place in the year and are also referred 
to in the Chief Executive’s operating review and the Financial review:
> On 1 May 2004 Cavaghan & Gray Group Limited sold its 
Emile Tissot frozen foodservice business to Dawn Fresh Foods 
for £3.5 million in cash less associated costs of £0.2 million.
> On 22 May 2004 Convenience Foods Limited sold its Eden Vale
fresh chilled dairy business to Uniq Prepared Foods Limited for 
£18.9 million in cash less associated costs of £0.4 million.
> On 4 November 2004 Northern Foods plc sold its Cavaghan & Gray
Seafood chilled and frozen fish business to IFP Holdings Limited,
a subsidiary of Icelandic Group plc, for £12.9 million in cash less
associated costs of £0.1 million.
Corporate social responsibility
The Corporate social responsibility review on pages 22 to 25 gives
details of Northern Foods commitment to: food safety; health and safety;
the environment; employee involvement and participation; consumers;
community involvement and charitable giving; and ethical procurement.
Charitable donations
During the year the group donated £273,000 for charitable purpose.
Donations for the previous financial year totalled £291,000. There were
no political contributions.
Supplier payment policy
It is the company’s policy that payments to suppliers are made 
in accordance with the terms and conditions agreed between the
company and its suppliers, provided that all trading terms and
conditions have been met. Suppliers are paid on average within 
38 days (2004: 32 days) of receipt of invoice.
Annual general meeting
The notice convening the company’s Annual general meeting to 
be held at 10.00 am on Thursday, 21 July 2005 is contained in the
circular sent to shareholders with this report. Shareholders are asked
to note the change of time and venue.
The board regards the Annual general meeting as an opportunity 
to communicate directly with private investors. It is attended by 
all board members. Shareholders are invited to ask questions and 
are able to meet the directors informally. Separate resolutions are
proposed on each substantially separate issue and the number 
of proxy votes cast for and against each resolution, as well as the
number of votes withheld, are announced to the meeting following
voting by a show of hands. A poll would be called on any resolution
where it was appropriate or required. The company offers an electronic
voting capability to investors.
Going concern
The directors have prepared the financial statements on the going
concern basis consistent with their view formed, after making
appropriate enquiries, that the group has adequate resources 
to continue in operational existence for the foreseeable future.
Auditors
Deloitte & Touche LLP have expressed their willingness to continue 
in office as auditors of the company and a resolution proposing 
their re-appointment will be submitted to the company’s Annual
general meeting.
Corporate governance
Compliance
Northern Foods is committed to high standards of corporate
governance. The company has complied throughout the year with 
the provisions of the July 2003 FRC Combined Code on corporate
governance (the Combined Code) and the associated Turnbull
Guidance, as annexed to the Listing Rules.
Directors’ responsibilities for preparing the accounts
United Kingdom company law requires the directors to prepare
accounts for each financial year, which give a true and fair view 
of the state of affairs of the company and the group, and of the 
profit or loss for that period.
In preparing those accounts, the directors are required to:
> select suitable accounting policies and then apply them consistently
> make judgements and estimates that are reasonable and prudent 
> state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in 
the accounts.
The directors are responsible for keeping proper accounting records,
which disclose with reasonable accuracy at any time the financial
position of the company and the group, and enable them to ensure
that the accounts comply with the Companies Act 1985. They are
also responsible for safeguarding the assets of the company and the
group, and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors confirm that the accounts comply with the above
requirements.
                         Report of the directors
continued
The board
The board determines the strategic direction of the company and
reviews its operating and financial position. The board has a formal
schedule of matters specifically reserved for it, which can only be
amended by the board itself and which is reviewed annually.
These matters include responsibility for approving overall group
strategy and financial policy, board membership and board committees,
acquisitions and divestments, and major capital expenditure. The
schedule of matters reserved to the board, together with the terms 
of reference of the board committees, are available on the company’s
website. Senior executives below board level are periodically invited
to attend board meetings to make presentations on their areas 
of responsibility.
The board aims to hold one or more meetings each year at an
operating location. Appropriate training, including social, environmental
and ethical issues, is available to all directors on an ongoing basis.
The board of directors met ten times in the year. All directors attended
every board meeting during the year except that A J Hobson was
unable to attend one meeting. The Chairman also held other meetings
with the non-executive directors without the executives present.
Chairman and Chief Executive
There is a clear, written division of responsibility between the
Chairman and the Chief Executive. The Chairman is responsible 
for leadership of the board, setting the agenda and ensuring its
effectiveness. He is also responsible for ensuring that the directors
receive accurate, timely and clear information, and for effective
communication with shareholders. The Chief Executive is responsible
for operating the business and implementing the board’s strategies
and is supported in these matters by the operating board.
Directors
Under the company’s articles of association all directors are subject to
re-election at intervals of no more than three years. The non-executive
directors stand for re-election each year.
All the non-executive directors are considered by the board to be
independent. They have wide-ranging experience and all currently
occupy, or have occupied, senior positions in industry. They have
access to all information regarding the company, the advice and
services of the Company Secretary, whose appointment and removal
may only be effected with the approval of the board, and, as required,
may obtain external advice at the expense of the company. Their
remuneration consists only of fees. Upon appointment they receive a
range of information about the company and an induction programme
is arranged including site visits.
It was announced on 28 February 2005 that P H Blackburn would
step down as Chairman on conclusion of the Annual general meeting
in July. He will be succeeded by A J Hobson, currently Deputy Chairman
and senior independent director. C Dyer will then become 
Deputy Chairman and O G Ni-Chionna will become senior
independent director.
Succession planning is a clear priority for the board. The succession 
of P H Blackburn by A J Hobson as Chairman of the company was
part of this planning. The decision was unanimously approved by 
the whole board.
Appointments to the board are the responsibility of the full board 
on the recommendation of the nomination committee. New executive
directors have a formal induction programme. The board and directors
are subject to annual appraisal.
Board performance evaluation
The performance of the board and its principal committees was again
evaluated during the course of the year. For consistency, the approach
was largely the same as in the previous year, obtaining completed
detailed questionnaires from all board members, analysing these
responses, and providing opportunity for directors to comment in
their own words on any issues not directly covered by the questionnaire.
The outcome was discussed with individual directors by the Chairman
and then by the board as a whole, with progress on particular issues
from the previous year noted. A J Hobson, as Deputy Chairman 
and senior independent director, conducted an evaluation of the
performance of the Chairman, as previously, which was discussed 
with other board members when the Chairman was not present.
Board committees
There are three committees of the board, each of which has written
terms of reference which define the role and responsibilities of the
committee and which are reviewed annually.
> Audit committee
The audit committee comprises C Dyer (Chairman), A J Hobson and 
O G Ni-Chionna. It met four times in the year, attended by all members.
A J Hobson has significant, recent and relevant financial experience.
C Dyer will resign as Chairman of the audit committee and will be
succeeded by D Nish when he joins the board as a non-executive
director on 1 July 2005.
The committee meets with executive directors and management 
as well as privately with both external and internal auditors.
The committee:
> reviews and advises the board on the company’s interim and
annual financial statements, its accounting policies and the 
content of its financial and business risks 
> reviews the nature and scope of the work to be performed by 
the internal and external auditors, the results of that work and
management’s response
> makes recommendations on the appointment and remuneration 
of the external auditors and the policy for the provision of non-audit
services by the external auditors
> oversees and reviews the company’s policy on ‘whistleblowing’
which provides for confidential disclosure by staff, without fear 
of reprisal.
28 Report of the directors Northern Foods plc
                 The audit committee keeps under review the independence and
objectivity of the in-house internal audit function and external 
audit and reviews the nature, scope and findings of internal audit.
The auditors report to the directors and the audit committee on 
the actions they take to comply with professional and regulatory
requirements and on best practice required to ensure their independence.
Non-audit services to the group are awarded to providers with the
appropriate experience who offer the service at a competitive rate.
This is in accordance with the policy laid down by the audit committee,
which restricts the use of the company’s external auditors if the
nature of the work could present a threat to their independence.
The terms of reference of the committee are available on the
company’s website.
> Remuneration committee
The remuneration committee comprises A J Hobson (Chairman),
P H Blackburn, C Dyer and O G Ni-Chionna. It met six times in the
year, attended by all members except on two occasions when C Dyer
was unavailable, and establishes board policy in respect of all terms 
of employment for executive directors. The Directors’ remuneration
report can be found on pages 31 to 40 and the terms of reference 
of the committee are available on the company’s website.
When A J Hobson succeeds P H Blackburn as Chairman in July 2005,
he will resign from the remuneration committee, which will then be
chaired by O G Ni-Chionna. A J Hobson will attend the committee
meetings by invitation. As A J Hobson has been chairing the
committee for three years he has a great depth of knowledge of
remuneration matters inside Northern Foods, which the company
would like to be available to the new chair.
The Chairman is responsible for the appraisal of the performance 
of the Chief Executive and this is an integral part of the role of the
remuneration committee.
The role of the committee is to determine the broad policy and
framework for the remuneration of executive directors and senior
managers. The committee also determines the nature and scale 
of incentive performance arrangements that encourage enhanced
performance and which reward individuals in a fair and responsible
manner for their contribution to the success of the business. In setting
the remuneration policy for executive directors and senior managers,
the committee also takes into account the reward policies for
managers generally.
> Nomination committee
The nomination committee comprises P H Blackburn (Chairman),
C Dyer, A J Hobson and O G Ni-Chionna. On the retirement of 
P H Blackburn, A J Hobson will chair this committee. The committee
meets as required to review the structure, size and composition 
of the board. Following the appointment in May 2005 of a new
finance director and non-executive director, the board will consist of
three executive directors and four non-executive directors, and this
will be kept under regular review.
The nomination committee selects and recommends suitable
candidates for appointment as directors of the company, after
evaluating the balance of skills, knowledge and experience on the board.
The committee also monitors the need for succession planning and
makes recommendations accordingly.
The committee met twice in the year, attended by all members 
and commenced a thorough search for a new finance director and 
an additional non-executive director to replace A J Hobson when 
he succeeds P H Blackburn as Chairman following the Annual general
meeting in July 2005.
The terms of reference of the committee are available on the
company’s website.
Relations with shareholders
The board attaches great importance to maintaining good relationships
with all shareholders, who are kept informed of significant company
developments. Presentations are made of the interim and preliminary
results, briefings are given to analysts, and other meetings to discuss
company direction are held with institutional shareholders on 
a regular basis.
The Chief Executive and the Head of Finance were closely involved in
investor relations and reported back to the board the views of major
shareholders. Investor meetings are arranged through the company’s
broker, UBS Investment Bank. The Chairman, the senior independent
director and other non-executive directors are available to meet
major shareholders whenever necessary, and regularly do so. The
senior independent director is available to shareholders to address
specific concerns.
Operating board
Northern Foods operating board met monthly and was responsible 
for the management of the group. Chaired by the Chief Executive,
it comprises the divisional directors and functional directors.
Internal control and risk management
The board has overall responsibility for the group’s system of internal
control, which covers all aspects of the business. This includes financial,
operational, compliance control and risk management. The board 
sets policies and seeks regular assurance that the system of internal
control is operating effectively.
Whilst the directors acknowledge their responsibility for the system
of internal control, any such system can provide only reasonable,
and not absolute, assurance against material mis-statement or loss
and is designed to manage, rather than eliminate, the risk of failure 
to achieve business objectives.
The Combined Code requires the directors to review the effectiveness 
of the group’s systems of internal control. The key elements of the
group’s internal control systems and review processes are as follows:
Northern Foods plc Report of the directors 29
             Report of the directors
continued
> Background
The risk culture in the group is based on a local, flexible response to
business issues. Short lines of communication ensure a rapid upward
information flow. This culture has developed from the nature of the
business, focused as it is primarily on short shelf-life foods.
The operating board provides top-down strategic input.Where formality
is necessary, for example on food safety, finance or health and 
safety matters, then policies and procedures are in place to ensure
business conformity.
The following summarises the way the group assesses and mitigates risk:
> Policies
The board sets policy over key areas of risk which are applicable to 
all business units, dealing with controls over food safety, accounting,
treasury, capital expenditure, health and safety, human resources 
and information technology.
> Group organisation and controls
The structure of the group was changed in June 2004 with the
creation of a new operating board, comprising the Chief Executive,
heads of the operating divisions and functional directors with 
group-wide responsibilities.
There are clearly defined lines of authority and accountability and
established policies and procedures, reviewed annually, for all significant
aspects of the business. There is a clear business process for the
identification, evaluation and mitigation of hazard and risk.
Each division prepares detailed annual budgets and strategic plans,
which are reviewed and updated on a regular basis. Weekly and
monthly accounts are prepared for each business unit and performance
is monitored against the original, and any updated budget. The group’s
operating board meets on a formal basis each month to review
divisional performance.
During the year the board established a capital committee, the
responsibilities of which are to set capital expenditure policy, to
oversee the capital expenditure planning and budgeting process, and
to approve capital expenditure up to an agreed level delegated from
the full board. The capital committee meets on a bi-monthly basis.
The business units are supported by a corporate management resource
and by specialist central functions. These specialist functions, which
provide the technical skills to supplement the business units’ own resource
and provide assurance over the major areas of risk, are as follows:
> Internal audit: reviews the standard of internal financial control 
and the accuracy of financial reporting through a rolling cycle 
of audit visits under a programme of activity approved by the 
audit committee.
> Technical services: provides risk management in the areas of food
safety, food quality, fire prevention and approval of contractors
providing building, engineering and professional services.
> Food technology: assesses and approves raw material suppliers,
audits the quality management systems in the group, provides
guidance on compliance with food-related and environmental
legislation, sets technical standards and offers expertise on a 
wide range of food science and technology.
> Engineering: sets standards for building construction and fire risk
management, maintains a database of approved contractors,
provides an expert consultancy for the acquisition, management
and disposal of physical assets, as well as assessing and approving
suppliers of capital equipment and non-saleable revenue items.
> Health and safety: provides professional advice on best practice 
and also audits health and safety procedures.
> Legal: provides and obtains advice on a full range of legal issues
across the group, and ensures good title to properties and 
intangible assets.
> Insurance: provides adequate cover for major losses with appropriate
levels of deductible, through a group programme with external
insurance brokers. This cover is reviewed and negotiated annually.
> Human resources: through its management resources review,
ensures the adequacy of existing management and plans succession.
> Procurement: identifies and manages key suppliers on a 
group-wide basis.
The audit committee oversees both internal and external audit
procedures and monitors executive response to any significant 
control issues raised.
The company regularly evaluates social, environmental and ethical
(SEE) risks and ensures that there are effective systems in place 
for managing such risks. Information on SEE risks and opportunities 
for company value is provided in the Corporate social responsibility
review on pages 22 to 25.
> Review process
The management of business risks continues to be an essential 
part of ensuring that the group and each business unit meets its
objectives and delivers value for shareholders.
The formal process for reviewing business risks has been embedded 
in the budget process. Each business unit is required to carry out 
a formal review to assess business risks in terms of impact and
likelihood, and the controls in place to manage those risks. Divisions
are required to formulate action plans where appropriate to improve
controls. Progress of these plans is reviewed by the operating board
and the internal auditors.
The board is therefore able to confirm that there is an ongoing
process for identifying, evaluating and managing the significant 
risks faced by the group, that it has been in place for the year under
review and up to the date of approval of these accounts, and that it 
is regularly reviewed by the board and accords with Turnbull guidance.
Divisions and specialist functions report by exception on any matters
arising during the year to the monthly meetings of the operating
board. The results of the formal half yearly reviews are taken forward
to the audit committee.
By order of the board
Carol Williams
Company Secretary
1 June 2005
30 Report of the directors Northern Foods plc
               Directors’ remuneration report
1 Introduction
The board has prepared this report in accordance with the requirements
of Schedule 7A to the Companies Act 1985. The report also meets 
the relevant requirements of the Combined Code annexed to the
Listing Rules issued by the Financial Services Authority, and is prepared
to the accounting year end of 2 April 2005.
This report to shareholders sets out the remuneration policy and explains
the policy under which our executive and non-executive directors and
management team were remunerated for the year ended 2 April 2005.
It also provides details of the salary, incentives, share and pension
interests of all the directors for the year. A resolution to approve the
report will be proposed at the Annual general meeting of the company.
The auditors are required to report to the company’s members 
on the audited element of the Directors’ remuneration report and 
to state whether, in their opinion, that part of the report has been
properly prepared in accordance with the Companies Act 1985.
2 Remuneration committee
The remuneration committee is a committee of the board and the
members during the year were A J Hobson (Chairman), P H Blackburn,
C Dyer and O G Ni-Chionna. There were six meetings during the year
and with the exception of C Dyer, who missed two meetings, all the
members attended all the meetings. At the invitation of the Chairman
of the committee, the Chief Executive and Group Director of HR attend
committee meetings to provide background and context on matters
relating to executive remuneration, but do not attend when their 
own remuneration or contracts are discussed.
The role of the remuneration committee is to approve, implement,
and keep under review the remuneration policy and practice of the
group and specifically to:
> agree with the board the framework and the value of remuneration
of executive directors and senior managers
> agree the terms of the executive directors’ service contracts 
and remuneration
> determine the nature and scale of long and short term performance
incentive arrangements that encourage enhanced performance 
and reward individuals in a fair and reasonable manner for their
contribution to the success of the group.
In undertaking this role, the committee considers remuneration policy
and rewards across the company and not just at board level.
No director plays a part in any discussion about his or her pay. The
remuneration committee has been formally delegated the authority
by the board to establish policy in respect of all terms of employment
for executive directors.
The board believes that a properly constituted remuneration committee
is essential in establishing a system of remuneration which clearly
aligns the interests of executive directors and senior managers with
those of shareholders, and links incentives for executives and other
managers to improvements in the absolute performance and relative
competitiveness of the company. The committee’s terms of reference
are published on the company’s website.
3 Advisers to the remuneration committee
Hewitt Bacon & Woodrow has continued to provide advice to the
committee on matters of remuneration policy during the year, has
been scheme actuary to the Northern Foods Pension Scheme, and
provides advice to the company on general remuneration matters.
The committee saw no conflict in the nature of the services provided
to the committee.
The committee appointed DLA to advise on matters relating to
directors’ contracts. DLA also provides specific employment law
advice to the company.
In determining directors’ remuneration for the year and in considering
proposals for the future, the committee consulted P A O’Driscoll,
Chief Executive and N Pickavance, Group Director of HR. The secretary
to the committee from April to September 2004 was E Cockburn,
Personnel Executive and from October 2004 was R Cooper, Director
Performance & Reward, both of whom also provided information on
pay practice in respect of executive directors and senior management.
4 Remuneration policy
To deliver its objective of creating real increases in shareholder value
relative to its peers, the company needs to attract and retain the most
capable and committed people and create the right employment
conditions and reward opportunities for them.
The company’s remuneration policy is designed to support the
recruitment, motivation and retention of high calibre employees.
Remuneration is considered within the context of the sector of which
the company is a part, and with which the company competes for
talent, within the geography in which it operates, employing people 
in the UK and Ireland. This sector includes UK food producers,
UK divisions and subsidiaries within FMCG.
Following the appointment of P A O’Driscoll as Chief Executive, the
committee has completed a strategic review of its remuneration policy.
The objective was to ensure that the remuneration of executive
directors and senior executives is directly linked to the delivery of
strategic objectives that are closely aligned with the interests of
shareholders. The GET FIT agenda which describes our business strategy
is set out earlier in the Chief Executive’s operating review. The policy
for 2005/06 includes the introduction of differentiated rewards, according
to performance, based on the introduction of rigorous individual
performance measures against the delivery of these strategic objectives.
The new policy reflects the change from smaller autonomous
operating companies to a ‘One Northern’ corporate structure.
The policy continues to reward employees at the relevant mid-market
level for on-target performance, whilst delivering competitive rewards
for outstanding performers with a package designed to align their
interests with those of shareholders. In the case of senior executives,
this includes a reasonable proportion of total remuneration being
dependent upon individual and group performance. The policy 
for directors is described in more detail below.
Northern Foods plc Directors’ remuneration report 31
           Directors’ remuneration report
continued
5 Remuneration policy for non-executive directors
Non-executive directors are appointed for an initial term of three
years with the expectation that, subject to satisfactory performance,
they will be invited to serve a second and third three-year term.
The dates of the Chairman’s and current non-executive directors’
letters of engagement, the date on which their appointment took
effect and the current expiry dates are as follows:
Date of Effective date Expiry date
commencement of current term of current term
P H Blackburn 13 Nov 01 1 Feb 05 31 Jan 06
C Dyer 1 Jan 97 28 May 05 28 May 08
A J Hobson 28 May 02 28 May 05 28 May 08
O G Ni-Chionna 28 May 02 28 May 05 28 May 08
In February 2005 P H Blackburn announced his intention to retire
from the board of Northern Foods on the conclusion of the Annual
general meeting in July 2005 and will be succeeded by A J Hobson,
currently Deputy Chairman.
C Dyer will reach the conclusion of his ninth year of office on 
31 December 2005. With the recent changes in board membership,
the board believes that it is in the interests of the company, the
board and shareholders, that C Dyer remains on the board for a final
three-year term as an independent director. His independence will be
considered annually by the board and his appointment will be subject
to an annual vote at the Annual general meeting.
The appointments of the Chairman and the non-executive directors
may be terminated by either party on three months’ notice.
No compensation is payable by the company on termination 
of an appointment.
Fees for the non-executive directors are reviewed annually in
September on the recommendation of the executive directors and
then approved by the board. Fees are set with regard to a range of
external information for equivalent companies. There is no other
remuneration for non-executives, except where the company meets
authorised expenses incurred on Northern Foods activities. They are
not eligible for pension scheme membership and do not participate 
in any of the company’s annual or long term incentive schemes.
6 Remuneration policy for executive directors
The remuneration committee aims to ensure that the company’s
executive directors are fairly rewarded for their individual contributions
to the group’s performance. The committee’s policy is to offer
differentiated remuneration packages, dependent upon performance,
which are capable of attracting, retaining and motivating executive
directors of high calibre, to ensure that the company is managed
effectively to the benefit of shareholders and will create real increases
in shareholder value relative to its industry sector.
The committee, in setting the remuneration of the executive directors,
also takes account of and seeks to align this remuneration with the
management remuneration throughout Northern Foods. The committee
continues to aim for a structured and balanced remuneration package
by looking at each element, as well as the package as a whole.
The committee believes that a significant proportion of the total
remuneration of a director should be performance-related. The
proportion of potential reward dependent upon group and individual
performance has been significantly increased for 2005/06.
A more rigorous approach has been adopted to the assessment 
of individual performance, leading to greater differentiation in awards
whereby greater emphasis is placed upon the individual’s contribution
to the group’s overall performance. This is to ensure that the
remuneration package for executive directors is aligned even more
closely with shareholder interests. Two-thirds of the Chief Executive’s
and two-fifths of other executive directors’ total remuneration package,
exclusive of pension benefits, is dependent upon achieving clearly
defined performance targets.
The four main components of the remuneration package for executive
directors and senior management in 2005/06, are:
> basic annual salary is targeted at market median for the sector,
but it is recognised that it may be necessary to pay above this 
to attract sufficiently high calibre executives
> an annual incentive plan, based upon the delivery of annual
operating plans for the company and individual strategic objectives
described in performance contracts
> participation in long term incentive plans based upon the performance
of the group and individual. The long term incentive plans are
geared so that outstanding individual performance generates 
a higher level of reward
> pension and other benefits.
The balance of the fixed and variable pay at current value for 2005/06,
exclusive of pension benefits, is illustrated below for the two executive
directors. The table is a theoretical model and assumes that on-target
group performance is achieved for both short and long term incentives
and that the director’s individual performance is rated as satisfactory.
The value of the share options is calculated using Black-Scholes
methodology.
Basic salary as a Annual bonus as a Long term incentives
proportion of target proportion of target as a proportion of
remuneration (%) remuneration (%) target remuneration (%)
M T Gribbin 66.6 16.7 16.7
P A O’Driscoll 55.2 17.2 27.6
6.1 Salary
Salaries of executive directors are reviewed annually taking into account
information from independent sources on salaries for comparable
roles in the industry and in other selected quoted companies.
Reviews also reflect the individual’s responsibilities, performance 
and development, and the group’s performance. The remuneration
committee’s objective is, and will continue to be, to maintain salaries
at around the median level of the relevant employment market,
although it may be necessary to pay above the median for a high
calibre individual. Salary is the only pensionable remuneration.
6.2 Annual incentive plan
The remuneration committee believes that achieving annual
performance targets is a high priority for the executive directors.
Incentive targets for executive directors are set each year by the
committee to take account of current business plans.
The committee has modified the current annual incentive plan 
in 2005/06 to allow for greater differentiation in incentive award
dependent upon the individual’s contribution to group performance.
The target incentive for an executive director is reduced to 25 per cent
of basic salary for satisfactory performance. In the case of exceptional
individual performance and group results significantly above
expectations, the incentive payment increases up to a maximum 
of 100 per cent of basic salary.
32 Directors’ remuneration report Northern Foods plc
             75 per cent of the maximum annual incentive is dependent upon 
a combination of individual and group performance and requires the
minimum achievement of specific financial targets for 2005/06
before payment of this element can be made.
25 per cent of the maximum annual incentive is directly related to
the committee’s assessment of the director’s individual performance
against their personal performance contract, set at the start of the
financial year, which contains six individual and business performance
targets including targets for return on average invested capital (ROIC)
and free cash flow, which are considered appropriately stretching 
by the committee.
One-fifth of any annual incentive earned will be paid as deferred
shares through the company’s Share bonus plan. Shares acquired
through the Share bonus plan will be purchased in the market and
held in trust for the executive for a period of three years. These shares
will be forfeited should the executive director leave prior to the third
anniversary. During this retention period the participants will be entitled
to dividends on the shares and to instruct the trustee how to vote.
The targets set for 2005/06 are made up of financial, business and
individual performance measures. The financial element includes
profit performance. The business element is related to specific targets
for ROIC and free cash flow and a number of commercially sensitive
strategic objectives for each individual and the executive team. The
performance targets selected are considered appropriately stretching
by the committee.
6.3 Long term incentive share plans
The company’s long term incentive policy has been developed to
reflect market practice and to provide long term management focus and
motivation. The remuneration committee believes that a significant
element of executive remuneration should be linked to the delivery 
of above average long term returns for shareholders.
Executives’ interest in both relative and absolute share price
performance is important, and this is facilitated by share schemes 
and the encouragement to build a significant personal shareholding 
in the company. The company is developing a policy for directors’
shareholdings which will be implemented from 1 April 2006.
Long term incentives are provided to executive directors in the form
of performance shares and share options. Executive directors will be
eligible to receive an annual grant of options and performance shares,
provided that the combined expected value of awards made under
both plans in any one year does not exceed 100 per cent of basic
salary. The value of share options is calculated using the Black-Scholes
methodology. The level of grant for both options and performance
shares will be subject to individual performance as determined by 
the remuneration committee’s assessment of progress against the
strategic objectives set out in the director’s performance contract.
These two long term incentive share plans are described below.
6.3.1 Executive share options
Participation in the Share option plan is at the discretion of the
remuneration committee. The plan comprises an Inland Revenue
approved part and an unapproved part. Under the unapproved part
the company will have the right to direct that a share settled exercise
takes place. Options will generally be exercisable in the seven-year
period following the third anniversary of grant and before the tenth
anniversary, provided that the executive remains in employment 
and subject to satisfaction of the performance condition.
Consistent with best practice, it is the committee’s intention that
grants will continue to be made annually to executive directors 
in the future.
The performance condition for awards requires that for grants with 
a market value of up to one times salary the real growth in earnings
per share is greater than 3 per cent per annum over the three-year
performance period before the options can be exercised. In the event
that the committee makes grants with a market value of greater than
one times salary, the performance condition for grants in excess of
one times salary would require that the real growth in earnings per
share is greater than 6 per cent per annum before the options can 
be exercised. If the performance condition is not met at the end of
three years there is no facility for retesting. The performance will be
assessed by comparing the adjusted earnings per share growth to the
growth in the RPI over the three-year performance period.
The committee believes that the performance condition for the 
long term incentive arrangements should align the interests of
directors with those of shareholders. The committee also believes 
that real growth in earnings per share will only be achieved through
the delivery of both the commercial and financial objectives of the
company. Furthermore, executives will only benefit from the plan 
if real growth in the earnings per share target is achieved and there 
is growth in the share price.
6.3.2 Performance share plan
The committee believes that the performance conditions for the
Performance share plan (PSP) should align the interests of directors
with those of shareholders. The benefits available to senior management
participating in the plan will only accrue to them if the company 
has delivered significant benefits to shareholders over a three-year
period. Participation in this plan is at the discretion of the
remuneration committee.
Under the plan, the committee awards shares in the company to
senior management conditional upon the achievement of corporate
performance targets over a period of three years. The number of 
shares conditionally awarded to each participant is determined by the
committee. The market value of shares which may be conditionally
awarded to a participant in any year will be limited to a maximum 
of 75 per cent of salary.
Vesting of the plan is triggered by achieving two independent sets of
performance conditions, with 50 per cent of the vesting conditional
upon each set as follows:
> a measure of the company’s relative market performance as
assessed by growth in total shareholder return (TSR) against 
the FTSE Food Producers Index, and
> a return on capital measure, used as an absolute measure of
company performance. The committee has determined return 
on capital as a current strategic priority for realising growth in
shareholder value. In future years it is envisaged that the strategic
priorities will change.
6.3.2.1 Total shareholder return
Vesting of 50 per cent of the PSP is triggered by comparing the
growth in TSR, in terms of share price growth and dividends, to that
of the TSR of the companies comprising the FTSE Food Producers
Index, excluding Unilever.
Northern Foods plc Directors’ remuneration report 33
           34 Directors’ remuneration report Northern Foods plc
Directors’ remuneration report
continued
The proportion of the award that will vest is assessed by reference 
to a vesting scale. If the group’s performance is ranked below the
median, this part of the conditional award will lapse. Where the
company is placed at the median or above, the maximum number of
shares available for vesting will be calculated on a straight line basis
with 20 per cent of the conditional award being available when the
company is placed at the median and the maximum of 50 per cent 
of the award being available where the company is placed in the 
top quartile.
The committee selected the relative TSR, compared with companies
in the FTSE Food Producers Index, excluding Unilever, as a measure
that reflects corporate performance relative to companies with
similar characteristics and subject to similar market conditions.
Unilever is excluded from the comparator group on the basis of 
size and product diversity.
The companies currently comprising the FTSE Food Producers Index,
excluding Unilever, are:
ABF Premier
Arla Richmond
Cadbury Robert Wiseman
Cranswick Sygen
Dairy Crest Tate & Lyle
Devro Uniq
Northern Foods
6.3.2.2 Return on capital
The proportion of the award that will vest is assessed by reference to
a vesting scale. Vesting of 50 per cent of the PSP is triggered by the
achievement of a minimum growth in return on capital of 100 basis
points over three years, measured against a base year of 2004/05.
If the minimum target is not achieved this part of the conditional
award will lapse.
The maximum number of shares available for vesting will be calculated
on a straight line basis with 7.5 per cent of the conditional award
being available if the company achieves growth of 100 basis points,
and a maximum of 50 per cent of the award being available where
the company achieves growth of 200 basis points.
For the purpose of determining any reward, return on capital is
defined as operating profit divided by average invested capital 
(being trading capital employed plus accumulated goodwill written off).
This will be calculated under IFRS with the exception of the impact 
of the changes relating to pensions under IAS 19.
In response to any significant events, including material trading
events, the remuneration committee may at its discretion amend 
the performance conditions to reflect these changes.
Shares awarded under the plan are retained in trust on behalf of the
participants for a further two years. During this retention period the
participants will be entitled to dividends on the shares and to instruct
the nominee how to vote. At the end of the retention period, the shares
will be transferred to participants from the trust.
6.4 All employee share scheme 
An approved savings-related share option scheme is open to all
eligible employees in the UK and overseas and, as it is an all employee
plan, no performance conditions apply.
6.5 Benefits
In addition to basic salary all the executive directors receive certain
benefits, principally a car or car allowance, private medical insurance
and a pension.
6.5.1 Pensions
Executive directors are members of the company pension scheme.
Their dependants are eligible for dependants’ pensions and the
payment of a lump sum in the event of death in service.
The pension arrangements for directors appointed prior to 22 March
2005, provide for a pension on retirement at age 60 of two-thirds 
of basic annual salary after 20 or more years’ eligible service, subject
to Inland Revenue limits.
During the year the committee undertook a complete review of the
company’s pension arrangements. The decision was taken to close 
the final salary scheme (Northern Foods Pension Scheme) to new
members with effect from 22 March 2005 and introduce a new
career average, revalued earnings (CARE) scheme called Pension
Builder, with effect from 1 May 2005.
For all employees, including directors, appointed after 22 March 2005,
the pension arrangements provide for pension on retirement at age
65 based upon a career average accrual of either:
> 1.25 per cent of annual salary per annum revalued at RPI up to 
5.0 per cent, with an employee contribution of 6.0 per cent; or
> 1.0 per cent of annual salary per annum revalued at RPI up to 
5.0 per cent, with an employee contribution of 4.5 per cent.
The Pension Builder scheme has an optional salary sacrifice
arrangement. No other payments to directors are pensionable.
Currently the only director whose benefits under the scheme are
restricted by the Inland Revenue earnings cap is P A O’Driscoll.
Benefits above the Inland Revenue earnings cap will be provided
through an unfunded unapproved retirement benefits scheme.
None of the other directors’ benefits from the company scheme 
are restricted by current Inland Revenue limits.
Following the removal of the pensions earnings cap and the
introduction of the lifetime allowance under the Finance Act 2004,
with effect from April 2006, it is intended to offer directors and 
senior managers who have exceeded the lifetime allowance the
following options:
> continue to accrue pension under the scheme
> have benefits provided through an unfunded unapproved
retirements benefit scheme
> accept a cash alternative.
6.6 Additional directorships
Executive directors are encouraged to hold one non-executive
directorship in a listed business in a non-competing sector.
Fees for such directorships are retained by the executive director.
6.7 Directors’ contracts
It is the company’s policy that executive directors should have 
secure agreements, providing for a maximum of one year’s notice.
All executive directors have contracts which are subject to one 
year’s notice by either party.
                 Northern Foods plc Directors’ remuneration report 35
In the event of early termination, the directors’ contracts provide 
for compensation up to a maximum of basic salary, company car,
private medical insurance and pension for the notice period.
The details of the contracts are summarised in the table below:
Date of contract Notice period
M S Christie (resigned 22 Oct 2004) 1 Apr 96 12 months
M T Gribbin 1 Apr 03 12 months
P A O’Driscoll 29 Mar 04 12 months
H R Sims (resigned 30 Jun 2004*) 1 Apr 03 12 months
*H R Sims resigned as a director on 30 June 2004 and retired from the company on 
31 December 2004.
To protect the interests of the company and its shareholders, the
directors’ contracts contain restrictive covenants, the principal terms
of which prevent the directors:
> undertaking work for direct competitors, either during their
employment with Northern Foods or within six months of 
their employment terminating, without the express permission 
of the board
> enticing away from the group individuals or customers with whom
the directors had dealt in the 12 months prior to termination 
> enticing away from the group or employing senior or middle
managers from within the business with whom the directors had
direct contact or knowledge in the 12 months prior to termination.
 
Total shareholder return 1 April 2000 to 2 April 2005
2000 2001 2002 2003 2004 2005
250
200
150
100
50
0
TSR (re-based to 100 at 1 April 2000)
Northern Foods
FTSE 250 Index
Financial year end
100.0
137.5
175.0
212.5
250.0
8 Directors’ remuneration and pension entitlements
The information in section 8 of the remuneration report has been audited by the company’s external auditors.
8.1 Emoluments
Table 1 shows an analysis of the salary, benefits and bonus elements of remuneration for the individual directors holding office during the year
ended 2 April 2005. Pension entitlements are shown in Table 2 and interests under share options and long term incentive arrangements are
disclosed in sections 8.3 and 8.4.
Accrued Compensation
Salary/ annual for loss
fees Benefits bonus of office Total Total
2005 2005
2
2005
3
2005
4
2005 2004
3
T able 1 – Directors’ remuneration Notes £££££ £
Executive directors
M S Christie (resigned 22 October 2004) 1 180,865 12,558 – 315,032 508,455 296,845
M T Gribbin 233,000 14,568 – – 247,568 238,866
P A O’Driscoll (appointed 29 March 2004) 1 470,000 14,218 – – 484,218 12,916
H R Sims (resigned 30 June 2004) 1 58,250 3,505 – – 61,755 238,828
A J Stewart (resigned 3 September 2003) 1 – –– –– 640,875
Non-executive directors
P H Blackburn – Chairman fee 5 134,000 – – – 134,000 127,500
– Additional fee –– ––– 37,917
C Dyer 5 37,000 – – – 37,000 33,000
A J Hobson 5 47,000 – – – 47,000 43,000
O G Ni-Chionna 5 32,000 – – – 32,000 30,500
1,192,115 44,849 – 315,032 1,551,996 1,700,247
Notes to T able 1
Note 1
Figures for directors are pro-rated to reflect the date of appointment or resignation as a director.
7 Performance graph
In accordance with the requirements of Schedule 7A to the
Companies Act 1985, the graph shows the company’s five-year
performance measured by TSR, compared with the performance 
of the FTSE 250 Index also measured by TSR.
The FTSE 250 Index has been selected as an appropriate comparison
because it represents a broad equity market index, of which 
Northern Foods is a constituent.
TSR measures share price growth with any dividends deemed to be
reinvested gross on the ex-dividend date. The TSR shown is based on
daily spot prices.
                                              36 Directors’ remuneration report Northern Foods plc
Directors’ remuneration report
continued
Notes to T able 1 continued
Note 2
Benefits include medical insurance and company car or car allowance.
Note 3
No annual bonus has been awarded by the remuneration committee in respect of 2004/05 or 2003/04.
Note 4
M S Christie resigned on 22 October 2004. As part of his contractual entitlement he received compensation for loss of office amounting 
to £315,032. This comprises one year’s salary and the cost of life assurance, permanent health insurance, private medical insurance and car
allowance. In addition to this, M S Christie was entitled to have his pension augmented by an additional one year’s service as shown in section
8.2. Also included in his compensation for loss of office are legal costs of £1,500 paid on his behalf in connection with his resignation, and
outplacement costs of £10,000.
Note 5
From 1 October 2004 the fee payable to non-executive directors was increased to £33,000 per annum. An additional annual fee of £5,000 is
payable to the chair of the audit committee. The fee of the Chairman was increased to £138,000 per annum and that of the Deputy Chairman 
to £48,000 per annum, which includes an annual fee of £5,000 for acting as chair of the remuneration committee.
8.2 Pension benefits
Transfer value
of real Increase in
Accrued Additional Accrued increase in Transfer Transfer transfer
pension at Real pension pension at year less value at value at value less
31 March increase earned 2 April directors’ 31 March 2 April directors’
T able 2
2004 in year Inflation in year 2005
2
contributions 2004
3
2005
3
contributions
Directors’ pension entitlements Notes £ £ £ £ ££ £ £ £
Executive directors
M S Christie 
(resigned 22 October 2004) 4 110,539 8,975 3,427 12,402 122,941 78,276 1,001,442 1,177,051 164,293
M T Gribbin 89,781 4,945 2,783 7,728 97,509 37,730 796,045 1,021,740 209,385
P A O’Driscoll 6 – 15,667 – 15,667 15,667 156,902 – 172,202 156,902
H R Sims (resigned 30 June 2004) 5 136,014 3,879 4,216 8,095 144,109 56,457 1,995,050 2,481,995 474,713
Notes to T able 2
Note 1
The company provides executive directors with a pension, which is payable at age 60, equal to two-thirds base salary, reduced where service 
to age 60 is less than 20 years. Member contributions are 7 per cent of base salary each year, subject to Inland Revenue limits. Death in service
cover is a lump sum of four times pensionable earnings. On the death of a director or a retired director, a spouse’s pension of 50 per cent 
would be payable.
Early retirement may be granted with the consent of the company and the trustees of the scheme from age 50 but benefits are reduced by 
4 per cent per annum for ages 50 up to 59 years. Once in payment, pensions are increased in line with inflation up to a ceiling of 3 per cent 
per annum in respect of pensionable service accrued to 31 March 1997 and inflation up to a ceiling of 5 per cent per annum on service accrued
thereafter. The trustees, with the consent of the company, have discretion to apply such greater increase as they consider appropriate.
Note 2
The accrued pension at 2 April 2005 is the pension which the director would have been entitled to receive based on completed pensionable
service to 2 April 2005, payable from normal pension date (age 60) and subject to revaluation increases between leaving and retirement.
Note 3
The transfer values are based on the accrued pensions at 31 March 2004 and at 2 April 2005 and are calculated as at 31 March 2004 and 
2 April 2005 respectively based on actuarial factors. The transfer values are the lump sums which would have been paid to another pension
scheme for the benefit of the director if they left service at the respective dates. A transfer value cannot be paid to a director personally.
Note 4
M S Christie resigned from the company on 22 October 2004 and his entitlements are calculated at the date of his resignation. The accrued 
pension figure shown for him is that payable after the augmentation of £61,353 (equivalent to one year’s service) granted to him at leaving.
Note 5
H R Sims resigned from the board on 30 June 2004 and retired from the company on 31 December 2004. He elected to draw his pension 
from 1 January 2005, and his entitlements are calculated as at his date of retirement. The accrued pension figure shown for him is that 
payable before reduction for early payment. The transfer value figure shown for him is the transfer value of his reduced early retirement 
pension (prior to commutation) and has been calculated on the cash equivalent basis for pensioner members.
                                                             Northern Foods plc Directors’ remuneration report 37
Note 6
P A O’Driscoll joined the pension scheme on 1 April 2004. Her contributions are limited to 15 per cent of the Inland Revenue earnings cap.
She is the only executive director affected by the earnings cap and her pension entitlement above the cap is provided by an unfunded unapproved
retirement benefits scheme. Life cover above the earnings cap is secured under a supplementary life assurance scheme.
Note 7
There were no contributions by the group to any money purchase pension arrangements in respect of any director.
8.3 Share options
Details of grants, exercises and lapses of options for individual directors under the executive share option scheme (Table 3) and the Savings-related
share option scheme (Table 4) are as follows:
Date Balance at Exercised Granted Balance at
from 31 March during during 2 April
Date of Option which Expiry 2004 year year 2005
1
T able 3 – Executive share options grant price (p) exercisable date Key (number) (number) (number) (number)
M S Christie (resigned 22 October 2004) 15 Jul 94 145.60 15 Jul 97 14 Jul 04 A 35,285 35,285 – –
3 Aug 95 133.20 3 Aug 98 21 Apr 05 B 31,051 – – 31,051
17 Jul 96 128.00 17 Jul 99 21 Apr 05 B 100,921 – – 100,921
19 Nov 01 157.17 23 Oct 04 19 May 05 C 19,087 – – 19,087
19 Nov 01 157.17 23 Oct 04 19 May 05 D 130,913 – – 130,913
2 Dec 02 168.08 23 Oct 04 2 Jun 06 D 150,000 – – 150,000
19 Dec 03 137.00 23 Oct 04 19 Jun 07 D 200,729 – – 200,729
667,986 35,285 – 632,701
M T Gribbin 3 Aug 95 133.20 3 Aug 98 2 Aug 05 B 12,702 – – 12,702
17 Jul 96 128.00 17 Jul 99 16 Jul 06 B 25,406 – – 25,406
19 Nov 01 157.17 19 Nov 04 18 Nov 11 C 19,087 – – 19,087
19 Nov 01 157.17 19 Nov 04 18 Nov 11 D 60,913 – – 60,913
2 Dec 02 168.08 2 Dec 05 1 Dec 12 D 80,000 – – 80,000
19 Dec 03 137.00 19 Dec 06 18 Dec 13 D 164,233 – – 164,233
17 Dec 04 169.67 17 Dec 07 16 Dec 14 G – – 102,994 102,994
362,341 – 102,994 465,335
P A O’Driscoll 29 Mar 04 159.16 29 Mar 07 28 Mar 14 E 18,848 – – 18,848
29 Mar 04 159.16 29 Mar 07 28 Mar 14 F 424,102 – – 424,102
17 Dec 04 169.67 17 Dec 07 16 Dec 14 G – – 138,504 138,504
442,950 – 138,504 581,454
H R Sims (resigned 30 June 2004) 19 Nov 01 157.17 19 Nov 04 18 Nov 11 C 19,087 – – 19,087
19 Nov 01 157.17 19 Nov 04 18 Nov 11 D 60,913 – – 60,913
2 Dec 02 168.08 2 Dec 05 1 Dec 12 D 80,000 – – 80,000
19 Dec 03 137.00 19 Dec 06 18 Dec 13 D 164,233 – – 164,233
324,233 – – 324,233
Key:
A The options listed were originally granted under the company’s Approved share option scheme 1984. There was no performance condition
attached to this grant of options.
B These options were granted under the company’s Executive share option scheme 1994. These options were subject to a performance 
target measured by reference to a total shareholder return. The company met the performance condition by finishing above the median 
point against the comparator group of companies.
C These options were granted under the company’s approved Company share option plan 1998. These options are subject to a performance
target measured by reference to earnings per share. The target requires that the real growth in earnings per share over the three-year
performance period is greater than 3 per cent per annum compound. The performance condition allows for retesting after years 
4 and 5 against the full period from grant. The performance condition has not been met after three years and is subject to retesting 
on 19 November 2005.
D These options were granted under the company’s Executive share option plan 1994. These options are subject to a performance target
measured by reference to earnings per share. The target requires that the real growth in earnings per share over the three-year performance
period is greater than 3 per cent per annum compound. The performance condition allows for retesting after years 4 and 5 against the 
full period from grant. The performance condition for the options granted on 19 November 2001 has not been met after three years and 
is subject to retesting on 19 November 2005.
E These options were granted under the company’s approved Company share option plan 1998 on recruitment and in recognition of benefits
accrued at Shell Europe and are therefore not subject to a performance condition.
F These options were granted under the company’s Executive share option plan 1994 on recruitment and in recognition of benefits accrued 
at Shell Europe and are therefore not subject to a performance condition.
G These options were granted under the company’s Share option plan 2004 and are subject to a performance condition measured 
by reference to earnings per share. The performance condition does not allow for retesting.
                                                                  38 Directors’ remuneration report Northern Foods plc
Directors’ remuneration report
continued
Notes to T able 3
Note 1
Balance at 2 April 2005 or at date of resignation.
Note 2
Whilst a director of the company, M S Christie exercised an option on 28 June 2004 over 35,285 shares at an option price of 145.6 pence.
The mid-market price on the date of exercise was 165.25 pence.
Note 3
The remuneration committee granted M S Christie permission to exercise his executive share options granted in 1995 and 1996 within 
six months from the date of resignation. The performance period for options granted in 2001, 2002 and 2003 had not ended, and the 
committee therefore waived the performance condition and allowed M S Christie 42 months from the date of grant to exercise these
outstanding executive share options. Since resigning from the board, M S Christie exercised on 4 January 2005 31,051 shares at an option 
price of 133.2 pence and 100,921 shares at an option price of 128.0 pence.
Note 4
H R Sims resigned from the board on 30 June 2004 but did not retire from the company until 31 December 2004. At the time of his retirement,
the performance period for options granted in 2001, 2002 and 2003 had not ended and the committee therefore waived the performance
condition on all unapproved options, and granted H R Sims six months in which to exercise these options. The performance condition was 
not waived in respect of approved options and the committee granted H R Sims 42 months from the date of grant in which to exercise stating 
that if the performance condition is not achieved, the option is to lapse. This option has now lapsed. H R Sims exercised on 13 January 2005
164,233 shares at an option price of 137.0 pence.
Note 5
The mid-market price of the company’s shares was 161.0 pence at 31 March 2004 and 154.0 pence at 2 April 2005. During the year, the market
price ranged between 173.0 pence and 144.5 pence.
Note 6
There were no lapses during the year.
Date Balance at Balance at
from 31 March 2 April
Date of which Expiry Option 2004 2005
1
T able 4 – Savings-related share options Notes grant exercisable date price (p) (number) (number)
M S Christie (resigned 22 October 2004) 1 14 Aug 00 1 Oct 05 31 Mar 06 94.0 10,771 –
H R Sims (resigned 30 June 2004) 1 14 Aug 00 1 Oct 05 31 Mar 06 94.0 10,771 10,771
Notes to T able 4
Note 1
Balance at 2 April 2005 or at date of resignation.
M S Christie’s Savings-related option lapsed on the date of resignation.
H R Sims resigned from the board on 30 June 2004, but did not retire from the company until 31 December 2004 at which time his option lapsed.
Note 2
There were no options granted or exercised during the year.
Note 3
The options listed were granted at 80 per cent of the prevailing middle market share price under the company’s Savings-related share option 
scheme 1996.
                                 Northern Foods plc Directors’ remuneration report 39
8.4 Long term incentive plans
8.4.1 Performance share plan
The committee awarded shares under the PSP conditional upon the achievement of corporate performance targets over a period of three years.
Performance is assessed against two criteria: by comparing the growth in TSR, in terms of share price growth and dividends, to that of the TSR of 
the FTSE Food Producers Index, excluding Unilever; and by assessing the underlying performance of Northern Foods by reference to the real growth
in earnings per share over the same period.
Vesting of the PSP is triggered by real growth in earnings per share in excess of 3 per cent per annum over a three-year period. If this condition 
is met the proportion of the award vesting is assessed by comparing the growth in TSR, in terms of share price growth and dividends, to that 
of the TSR of the companies comprising the FTSE Food Producers Index, excluding Unilever.
The TSR performance is assessed by reference to a vesting scale, whereby for the full award to qualify for vesting, the total return to the
company’s ordinary shareholders during the three-year performance period places it in the top quartile of the comparator group. If the group’s
performance is ranked at 50 per cent or lower, all of the conditional awards will lapse. Where the company is placed between 50 per cent and 
the top quartile, the maximum number of shares available for vesting will be calculated on a straight line basis with 25 per cent of the award
being available when the company is placed at 51 per cent and the entire award being available where the company is placed in 
the top quartile.
The companies comprising the comparator group at the start of the performance period were:
ABF Northern Foods
Arla Richmond
Cadbury Robert Wiseman
Cranswick Sygen
Dairy Crest Tate & Lyle
Devro Uniq
Geest
Shares Maximum
Beneficial released by potential award Beneficial Conditional
interest at the nominee granted interest at interest at
31 March 26 July 17 December 2 April 2 April
2004
1
2004
2
2004
4
2005
5
2005
4
T able 5 – Performance share plan Notes (number) (number) (number) £ (number)
M S Christie (resigned 22 October 2004) 53,450 26,962 – 26,488 –
M T Gribbin 3 28,273 14,396 – 13,877 –
P A O’Driscoll 4 – – 173,130 – 173,130
H R Sims (resigned 30 June 2004) 3 34,358 17,481 – 16,877 –
116,081 58,839 173,130 57,242 173,130
Notes to T able 5
Note 1
The interest in shares at 31 March 2004 comprised vested shares in respect of the awards made on 9 September 1999 and 7 September 2000 
held by the nominee for the two-year retention period.
Note 2
Shares awarded under the PSP are retained in trust on behalf of the participants for a further two years after vesting. During the retention 
period the participants are entitled to dividends on the shares and to instruct the nominee how to vote.
The awards made in 1999 were released by the nominee on 26 July 2004, at the end of the two-year retention period.
Note 3
At the time the awards were made, M T Gribbin and H R Sims were not directors of the company.
Note 4
A conditional award was made to P A O’Driscoll on 17 December 2004. The share price at the time of award was 169.67 pence.
The performance condition for this award is described above.
Note 5
The interest in shares at 2 April 2005 comprised vested shares in respect of the award made in 2000, held by the nominee for the two-year
retention period.
No other monies were paid or receivable by directors under long term incentive schemes in respect of qualifying services.
                                40 Directors’ remuneration report Northern Foods plc
Directors’ remuneration report
continued
8.4.2 Deferred share plan
No grants were made to executive directors under this scheme in the year 2004/05.
8.5 Directors’ aggregate remuneration
The total amounts of directors’ remuneration and other benefits were as follows:
2005 2004
T able 6 – Directors’ aggregate remuneration £ £
Emoluments 1,551,996 1,700,247
Gains on exercise of options 6,933 3,292
Total 1,558,929 1,703,539
8.6 Directors’ interests in shares
The interests of the directors in the share capital of the company at 31 March 2004 and 2 April 2005 are detailed below.
Ordinary shares
2
Share options PSP: conditional awards
(number) (number) (number)
Description 2 Apr 31 Mar 2 Apr 31 Mar 2 Apr 31 Mar
T able 7 – Directors’ interests in shares of interest 2005
1
2004 2005
1
2004 2005 2004
Executive directors
M S Christie (resigned 22 October 2004) Beneficial 97,116 97,116 632,701 678,757 – –
M T Gribbin Beneficial 431,476 431,170 465,335 362,341 – –
P A O’Driscoll Beneficial 81,453 81,453 581,454 442,950 173,130 –
H R Sims (resigned 30 June 2004) Beneficial 55,772 55,772 335,004 335,004 – –
Non-executive directors 
P H Blackburn Beneficial 40,000 40,000
C Dyer Beneficial 10,000 10,000
A J Hobson Beneficial 8,000 8,000
O G Ni-Chionna Beneficial 15,000 15,000
Notes to T able 7
Note 1
Balance as at 2 April 2005 or at date of resignation.
Note 2
Balance includes beneficial interests in ordinary shares, together with interests under long term incentive plans.
The company’s register of directors’ interests, which is available for inspection in accordance with the provisions of the Companies Act 1985,
contains full details of directors’ shareholdings, options and PSP awards.
At 2 April 2005 the executive directors of Northern Foods plc, as potential beneficiaries of the Northern Foods Employee share ownership trust,
were interested in 3,114,793 ordinary shares held by the trustee.
By order of the board
Anthony Hobson
Chairman
Remuneration committee
1 June 2005
                                                                             Northern Foods plc Independent auditors’ report 41
Independent auditors’ report
To the members of Northern Foods plc
We have audited the accounts of Northern Foods plc for the 52 weeks
ended 2 April 2005 which comprise the Consolidated profit and loss
account, the balance sheets, the Consolidated cash flow statement,
the Consolidated statement of total recognised gains and losses and the
related notes 1 to 30, together with the Reconciliation of net cash flow
to movement in net debt, the Reconciliation of movements in equity
shareholders’ funds and Accounting policies. These accounts have been
prepared under the accounting policies set out therein.We have also
audited the information in the part of the Directors’ remuneration report
that is described as having been audited.
This report is made solely to the company’s members, as a body, in
accordance with section 235 of the Companies Act 1985. Our audit
work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditors’
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 and the company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As described in the statement of directors’ responsibilities, the company’s
directors are responsible for the preparation of the Annual report and 
the accounts in accordance with applicable UK law and accounting
standards. They are also responsible for the preparation of the other
information contained in the Annual report including the Directors’
remuneration report. Our responsibility is to audit the accounts and 
the part of the Directors’ remuneration report described as having 
been audited in accordance with relevant UK legal and regulatory
requirements and auditing standards.
We report to you our opinion as to whether the accounts give a true
and fair view and whether the accounts and the part of the Directors’
remuneration report described as having been audited have been
properly prepared in accordance with the Companies Act 1985.
We also report to you if, in our opinion, the Report of the directors 
is not consistent with the accounts, if the company has not kept proper
accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law
regarding directors’ remuneration and transactions with the company
and other members of the group is not disclosed.
We review whether the Corporate governance statement reflects the
company’s compliance with the nine provisions of the July 2003 FRC
Combined Code specified for our review by the Listing Rules of the
Financial Services Authority, and we report if it does not.We are not
required to consider whether the board’s statements on internal control
cover all risks and controls, or form an opinion on the effectiveness of the
group’s corporate governance procedures or its risk and control procedures.
We read the Report of the directors and the other information contained
in the Annual report for the above year as described in the contents
section, including the unaudited part of the Directors’ remuneration report,
and consider the implications for our report if we become aware of any
apparent mis-statements or material inconsistencies with the accounts.
Basis of audit opinion
We conducted our audit in accordance with UK auditing standards
issued by the Auditing Practices Board. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in
the accounts and the part of the Directors’ remuneration report described
as having been audited. It also includes an assessment of the significant
estimates and judgements made by the directors in the preparation of
the accounts and of whether the accounting policies are appropriate to
the circumstances of the company and the group, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the accounts
and the part of the Directors’ remuneration report described as having
been audited are free from material mis-statement, whether caused 
by fraud or other irregularity or error. In forming our opinion, we also
evaluated the overall adequacy of the presentation of information in 
the accounts and the part of the Directors’ remuneration report described
as having been audited.
Opinion
In our opinion:
> the accounts give a true and fair view of the state of affairs of 
the company and the group as at 2 April 2005 and of the profit 
of the group for the 52 weeks then ended; and
> the accounts and the part of the Directors’ remuneration report
described as having been audited have been properly prepared 
in accordance with the Companies Act 1985.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
Leeds
1 June 2005
              Consolidated profit and loss account
for the 52 weeks ended 2 April 2005
Before Before
goodwill Goodwill goodwill Goodwill
amortisation amortisation amortisation amortisation
and and and and
exceptional exceptional exceptional exceptional
items items Total items items Total
52 weeks 52 weeks 52 weeks 53 weeks 53 weeks 53 weeks
2005 2005 2005 2004 2004 2004
Notes £m £m £m £m £m £m
Group turnover
Continuing 1,416.1 – 1,416.1 1,387.7 – 1,387.7
Discontinued 32.7 – 32.7 154.4 – 154.4
Group turnover 1 1,448.8 – 1,448.8 1,542.1 – 1,542.1
Cost of sales 2 (1,065.0) (28.8) (1,093.8) (1,142.2) (1.5) (1,143.7)
Gross profit 383.8 (28.8) 355.0 399.9 (1.5) 398.4
Net operating expenses 2 (281.4) (21.6) (303.0) (292.9) (20.5) (313.4)
Operating profit
Continuing 102.6 (50.4) 52.2 105.7 (18.7) 87.0
Discontinued (0.2) – (0.2) 1.3 (3.3) (2.0)
Operating profit 1/3 102.4 (50.4) 52.0 107.0 (22.0) 85.0
Share of associated undertakings 4 –– – 0.4 (0.2) 0.2
(Loss)/profit on disposal of businesses 5 – (34.8) (34.8) – 11.6 11.6
Profit on sale of fixed assets 5 – 9.3 9.3 –– –
Profit on ordinary activities before interest 1 102.4 (75.9) 26.5 107.4 (10.6) 96.8
Net interest payable 6 (22.2) – (22.2) (21.4) – (21.4)
Profit on ordinary activities before taxation 80.2 (75.9) 4.3 86.0 (10.6) 75.4
Taxation on profit on ordinary activities 7 (16.8) 15.1 (1.7) (15.5) 5.5 (10.0)
Profit on ordinary activities after taxation 8 63.4 (60.8) 2.6 70.5 (5.1) 65.4
Equity dividends 9 (43.6) – (43.6) (44.6) – (44.6)
Retained (loss)/profit for the year 24 19.8 (60.8) (41.0) 25.9 (5.1) 20.8
Basic earnings per ordinary share 10 12.95p 0.53p 13.77p 12.78p
Diluted earnings per ordinary share 10 0.53p 12.56p
Dividend per ordinary share 9.05p 8.90p
Average number of shares (million) 489.6 511.8
Analysis of earnings before interest, tax, depreciation and amortisation (EBITDA)
Operating profit before goodwill amortisation
and exceptional items 102.4 107.0
Add:
Associate – 0.4
Depreciation 65.0 65.9
EBITDA before exceptional items 167.4 173.3
42 Consolidated profit and loss account Northern Foods plc
                                                                                                 Consolidated balance sheet
as at 2 April 2005
2 April 3 April
2005 2004
(as restated)
Notes £m £m
Fixed assets
Intangible fixed assets 11 61.4 64.3
Tangible fixed assets 12 617.8 672.4
679.2 736.7
Current assets
Stocks 14 65.1 78.2
Debtors: amounts falling due within one year 15 171.3 168.7
Debtors: amounts falling due after more than one year 15 95.2 61.3
Investments 16 9.8 14.9
Cash at bank and in hand 25.5 35.0
366.9 358.1
Creditors: amounts falling due within one year 17 (277.9) (296.9)
Net current assets 89.0 61.2
Total assets less current liabilities 768.2 797.9
Creditors: amounts falling due after more than one year
Convertible subordinated bonds 2008 (90.8) (90.6)
Loans and other creditors (278.8) (281.5)
17 (369.6) (372.1)
Provisions for liabilities and charges 22 (72.5) (69.5)
Net assets 326.1 356.3
Capital and reserves
Called up share capital 23 127.6 127.1
Share premium account 24 62.3 60.0
Revaluation reserve 24 3.5 3.7
Capital redemption reserve 24 23.6 23.6
Reserve for treasury shares 24 (38.6) (14.4)
Other reserves 24 6.7 6.7
Profit and loss account 24 141.0 149.6
Equity shareholders’ funds 326.1 356.3
P A O’Driscoll Director
M T Gribbin Director
1 June 2005
Northern Foods plc Consolidated balance sheet 43
                                                                            Consolidated cash flow statement
for the 52 weeks ended 2 April 2005
52 weeks 53 weeks
2005 2004
Notes £m £m
Net cash inflow from operating activities 19 98.3 154.9
Returns on investments and servicing of finance:
Interest received 0.3 19.7
Interest paid on finance leases – (0.3)
Other interest paid (22.6) (39.7)
Net cash outflow from returns on investments and servicing of finance (22.3) (20.3)
T axation (1.4) 2.1
Capital expenditure and financial investment:
Purchase of tangible fixed assets (62.6) (76.9)
Sale of tangible fixed assets 4.0 1.3
Exceptional sale of tangible fixed assets 13.6 –
Grants received 0.9 0.5
Net cash outflow from capital expenditure and financial investment (44.1) (75.1)
Acquisitions and disposals:
Cash outflow on acquisitions 28 (1.1) (32.7)
Cash inflow on disposals 28 34.6 50.9
Net cash inflow from acquisitions and disposals 33.5 18.2
Equity dividends paid (43.8) (44.9)
Cash inflow before management of liquid resources and financing 20.2 34.9
Management of liquid resources:
Decrease/(increase) in current asset investments 5.1 (4.3)
Financing:
Revolving credit facility 10.0 70.0
Repayment of other borrowings (24.4) (58.6)
Capital element of finance lease rental payments – (6.7)
(14.4) 4.7
Repurchase of shares (24.2) (37.1)
Issue of equity share capital net of costs 2.8 3.4
Net cash outflow from financing (35.8) (29.0)
(Decrease)/increase in cash in the year (10.5) 1.6
44 Consolidated cash flow statement Northern Foods plc
                                                                         Reconciliation of net cash flow to movement in net debt
for the 52 weeks ended 2 April 2005
52 weeks 53 weeks
2005 2004
Notes £m £m
(Decrease)/increase in cash in the year (10.5) 1.6
Cash (inflow)/outflow from movement in liquid resources (5.1) 4.3
Increase in revolving credit facility (10.0) (70.0)
Repayment of other borrowings 24.4 58.6
Capital element of finance lease rental payments – 6.7
Changes in net debt resulting from cash flows (1.2) 1.2
Loans acquired with subsidiary – (7.4)
Loan notes issued on acquisition of subsidiary – (2.0)
Exchange adjustments 0.5 (0.5)
Amortisation of bond and financing costs (0.2) (0.1)
Movement in net debt in the year (0.9) (8.8)
Net debt at start of year (332.4) (323.6)
Net debt at end of year 20 (333.3) (332.4)
Consolidated statement of total recognised gains 
and losses
for the 52 weeks ended 2 April 2005
52 weeks 53 weeks
2005 2004
£m £m
Profit attributable to equity shareholders 2.6 65.4
Currency translation differences 2.9 (2.7)
Total recognised gains and losses for the year 5.5 62.7
Reconciliation of movements in equity shareholders’ funds
for the 52 weeks ended 2 April 2005
52 weeks 53 weeks
2005 2004
(as restated)
Notes £m £m
Profit attributable to equity shareholders 2.6 65.4
Currency translation differences 2.9 (2.7)
Total recognised gains and losses for the year 5.5 62.7
Equity dividends 9 (43.6) (44.6)
New share capital subscribed (net of costs) 23/24 2.8 3.4
Repurchase of shares 23/24 (24.2) (37.1)
Vesting of shares – 1.6
Goodwill previously written off included in retained (loss)/profit for the year 28 29.3 10.2
Movement in equity shareholders’ funds (30.2) (3.8)
Opening equity shareholders’ funds (as previously reported) 360.7 366.1
Prior year adjustment 25 (4.4) (6.0)
Opening equity shareholders’ funds (as restated) 356.3 360.1
Closing equity shareholders’ funds 326.1 356.3
Reconciliation of net cash flow to movement in net debt,
Northern Foods plc Consolidated statement of total recognised gains and losses, Reconciliation of movements in equity shareholders’ funds 45
                                                                                        Company balance sheet
as at 2 April 2005
2 April 3 April
2005 2004
(as restated)
Notes £m £m
Fixed assets
Tangible fixed assets 12 225.3 244.5
Investments 13 771.6 789.5
996.9 1,034.0
Current assets
Debtors: amounts falling due within one year 15 856.5 475.6
Debtors: amounts falling due after more than one year 15 95.2 61.3
Cash at bank and in hand 7.0 20.8
958.7 557.7
Creditors: amounts falling due within one year 17 (823.2) (712.4)
Net current assets/(liabilities) 135.5 (154.7)
Total assets less current liabilities 1,132.4 879.3
Creditors: amounts falling due after more than one year
Convertible subordinated bonds 2008 (90.8) (90.6)
Loans and other creditors (270.0) (272.2)
17 (360.8) (362.8)
Provisions for liabilities and charges 22 (32.3) (23.7)
Net assets 739.3 492.8
Capital and reserves
Called up share capital 23 127.6 127.1
Share premium account 24 62.3 60.0
Revaluation reserve 24 3.5 3.7
Capital redemption reserve 24 23.6 23.6
Reserve for treasury shares 24 (38.6) (14.4)
Profit and loss account 24 560.9 292.8
Equity shareholders’ funds 739.3 492.8
P A O’Driscoll Director
M T Gribbin Director
1 June 2005
46 Company balance sheet Northern Foods plc
                                                                       Accounting policies
Basis of accounting
The accounts are prepared under the historical cost convention except
for the revaluation of properties which is incorporated in the accounts.
The accounts are prepared in accordance with applicable UK
accounting standards.
During the year ended 2 April 2005 the group has adopted UITF
Abstract 38 ‘Accounting for ESOP trusts’. This requires a company’s
own shares in an ESOP trust to be shown as a deduction in shareholders’
funds rather than as an asset. Prior year comparatives have been
restated to comply with UITF Abstract 38 as explained in note 25.
A summary of the more important group accounting policies, applied
consistently, is set out below:
Basis of consolidation
Accounts of all subsidiary undertakings are consolidated for the
periods during which they were members of the group. All principal
companies in the group prepared accounts to 2 April 2005. Associated
undertakings are dealt with on an equity accounting basis.
Turnover
Turnover consists of sales to third parties net of trade discounts 
and excluding VAT and sales related taxes. Sales are recognised 
as products are despatched.
Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange
at the date of transaction, or if hedged, at the forward contract rate.
Monetary assets and liabilities in foreign currencies are expressed 
in sterling at the rates of exchange ruling at the balance sheet date,
or if hedged, at the forward contract rate.
Results of overseas subsidiary undertakings are translated at an
average rate for the year and the balance sheet translated at the 
rates ruling at the balance sheet date. All exchange differences arising
on consolidation are taken directly to reserves. Any other exchange
differences are dealt with in the profit and loss account.
Stocks
These are valued at the lower of cost and net realisable value. Cost
includes an addition for production overheads where appropriate.
Goodwill
Goodwill, being the excess of the consideration over the fair value of
the separable net tangible assets at the date of acquisition of newly
acquired businesses or subsidiary undertakings, is recorded as an
intangible fixed asset under FRS 10 ‘Goodwill and Intangible Assets’.
In the absence of indications to the contrary, purchased goodwill is
amortised over 20 years. Prior to the implementation of FRS 10, the
group’s policy was to write off all goodwill directly to reserves. On
disposal or closure of a previously acquired business, the attributable
amount of goodwill previously written off to reserves is included in
determining the profit or loss on disposal.
Fixed assets
Fixed assets are valued at cost or valuation, less any provision for
impairment, with subsequent additions at cost. Surpluses arising 
from the revaluation of properties are taken directly to reserves.
Net revaluation surpluses realised in respect of properties sold 
are transferred from the revaluation reserve to retained earnings.
The group has taken advantage of the transitional provisions of 
FRS 15 ‘Tangible Fixed Assets’ and retained the book amounts of certain
freehold properties which were revalued prior to implementation 
of that standard. The properties were last revalued in 1978 and the
valuations have not subsequently been updated.
Assets acquired under finance leases are capitalised as tangible 
fixed assets and the outstanding instalments, exclusive of interest,
are included in creditors. Interest is charged to the profit and loss
account in proportion to the outstanding amount.
Interest incurred on borrowings to finance construction of fixed 
assets is capitalised up to the date of commissioning.
Operating lease rentals are charged to the profit and loss account 
on a straight line basis over the lease term.
Depreciation
Freehold land is not depreciated. Other fixed assets are generally
written off in equal annual instalments over their expected useful
lives as follows:
Buildings 20-50 years
(or over the remaining life of the lease 
if shorter)
Plant & equipment 5-15 years
Motor vehicles 4-10 years
Northern Foods plc Accounting policies 47
                   Accounting policies
continued
Government grants
Government grants in respect of capital expenditure are credited 
to deferred income and are released to the profit and loss account 
over the expected useful lives of the relevant assets by equal annual
instalments. Grants of a revenue nature are credited to the profit 
and loss account so as to match them with the expenditure to which 
they relate.
T axation
Current tax, including UK corporation tax and overseas tax, is provided
at amounts expected to be paid or recovered using the tax rates and
laws that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is recognised in respect of all timing differences that 
have originated but not reversed at the balance sheet date, where
transactions or events that result in an obligation to pay more tax 
in the future, or a right to pay less tax in the future have occurred 
at the balance sheet date. Timing differences are differences between 
the group’s taxable profits and its results as stated in the accounts
that arise from the inclusion of gains and losses in tax assessments 
in periods different from those in which they are recognised in 
the accounts.
Deferred tax is not recognised when fixed assets are revalued unless,
by the balance sheet date, there is a binding agreement to sell the
revalued assets and the gain or loss expected to arise on sale has
been recognised in the accounts. Neither is deferred tax recognised
when fixed assets are sold and it is more likely than not that the
taxable gain will be rolled over, being charged to tax only if and 
when the replacement assets are sold.
Deferred tax is measured at the average tax rates that are expected 
to apply in the periods in which the timing differences are expected 
to reverse, based on tax rates and laws that have been enacted 
or substantively enacted by the balance sheet date. Deferred tax is
measured on a discounted basis to reflect the time value of money
over the period between the balance sheet date and the dates on
which it is estimated that the underlying timing differences will
reverse. The discount rates used reflect the post-tax yields to maturity
that can be obtained on government bonds with similar maturity
dates and currencies to those of the deferred tax liabilities.
Pension benefits
The costs of providing pensions and other post-retirement benefits 
are charged to the profit and loss account on a consistent basis over 
the service lives of employees. Such costs are calculated by reference 
to actuarial valuations and variations from such regular costs are 
spread over the remaining service lives of the current employees.
Associates
In the group accounts, investments are accounted for using the equity
method. The consolidated profit and loss account includes the group’s
share of associates’ profits less losses, while the group’s share of net
assets of the associates is shown in the consolidated balance sheet.
Goodwill arising on the acquisition of associates is accounted for in
accordance with the policy set out above. Any unamortised balance of
goodwill is included in the carrying value of investments in associates.
Financial instruments
Forward foreign exchange contracts and currency options are used to
hedge foreign transactional cash flows and accordingly any gains and
losses on these contracts are recognised in the profit and loss account
when the underlying transaction is settled.
To the extent that a forward foreign exchange contract is not 
a hedge, any resulting gain or loss is taken to the profit and loss
account. The company does not hedge against translation.
Amounts payable or receivable in respect of any interest rate swap
agreements used to manage interest rate exposures are recognised 
as adjustments to interest expense over the period of the contracts.
48 Accounting policies Northern Foods plc
               Notes to the accounts
1 Turnover and segmental analysis 
Operating Operating
profit before profit before
goodwill goodwill Profit on Profit on
amortisation amortisation ordinary ordinary
and and activities activities Net Net
exceptional exceptional before before operating operating
Turnover Turnover items items interest interest assets assets
2005 2004 2005 2004 2005 2004 2005 2004
(as restated)
Area of activity £m £m £m £m £m £m £m £m
Continuing operations
Chilled 764.6 749.8 35.0 43.3 (4.5) 35.6 392.9 402.4
Frozen 344.2 352.0 36.1 36.1 30.9 30.5 205.3 193.0
Ambient 307.3 285.9 31.5 26.3 29.0 21.1 176.1 171.5
1,416.1 1,387.7 102.6 105.7 55.4 87.2 774.3 766.9
Discontinued operations
Chilled 32.2 96.8 (0.1) (3.1) (28.8) (4.1) – 33.0
Frozen 0.5 8.7 (0.1) 0.2 (6.2) 0.2 – 3.5
Ambient – 48.9 – 4.2 6.1 13.5 – –
32.7 154.4 (0.2) 1.3 (28.9) 9.6 – 36.5
Total group 1,448.8 1,542.1 102.4 107.0 26.5 96.8 774.3 803.4
Goodwill amortisation of £1.8m (2004: £1.3m) relates to Chilled, £2.0m (2004: £1.9m) relates to Frozen and £0.2m (2004: £0.3m) relates 
to Ambient. This includes £nil (2004: £0.1m) relating to discontinued operations. Operating exceptional items of £39.5m (2004: £9.8m) relates 
to Chilled, £4.0m (2004: £3.7m) relates to Frozen and £2.9m (2004: £5.0m) relates to Ambient. This includes £nil (2004: £3.2m) relating to
discontinued operations. Further details of discontinued operations are set out in note 28.
Interest of £22.2m (2004: £21.4m) cannot be allocated to a segment.
2005 2004
(as restated)
Analysis of net assets £m £m
Fixed assets 679.2 736.7
Stocks 65.1 78.2
Debtors 266.5 230.0
Creditors (236.5) (241.5)
Net operating assets 774.3 803.4
Current taxation (14.7) (17.3)
Deferred taxation (72.5) (69.5)
Dividend payable (27.7) (27.9)
Trading capital employed 659.4 688.7
Net borrowings (333.3) (332.4)
Net assets 326.1 356.3
Geographical area – by origin
The directors have not presented an analysis by geographical area as this is considered to be seriously prejudicial.
Northern Foods plc Notes to the accounts 49
                                                                                                                                                           Notes to the accounts
continued
2 Analysis of profit and loss account
Before Goodwill Before Goodwill
goodwill amortisation goodwill amortisation
amortisation and amortisation and
and exceptional exceptional and exceptional exceptional
items items Total items items Total
2005 2005 2005 2004 2004 2004
£m £m £m £m £m £m
Cost of sales 1,065.0 28.8 1,093.8 1,142.2 1.5 1,143.7
Net operating expenses:
Distribution costs 184.0 1.4 185.4 197.9 (1.2) 196.7
Administrative expenses 99.0 20.2 119.2 97.2 21.7 118.9
Other operating income (1.6) – (1.6) (2.2) – (2.2)
Total net operating expenses 281.4 21.6 303.0 292.9 20.5 313.4
The above includes cost of sales of £29.1m (2004: £130.6m), distribution costs of £2.2m (2004: £15.1m) and administrative expenses of £1.6m 
(2004: £10.7m) relating to discontinued operations.
Administrative expenses includes £4.0m (2004: £3.5m) of goodwill amortisation.The exceptional items are explained in note 5.
3 Operating profit
2005 2004
£m £m
This is stated after charging/(crediting):
Depreciation 65.0 65.9
Exceptional provision for impairment of tangible fixed assets 15.0 10.5
Amortisation of goodwill 4.0 3.5
Exceptional provision for impairment of intangible fixed assets 1.1 –
Profit on sale of tangible fixed assets (1.4) (0.5)
Auditors’ remuneration:
Audit services 0.3 0.3
Non-audit services – 0.1
Directors’ remuneration 1.6 1.7
Operating lease charges:
Plant and machinery 13.2 14.8
Land and buildings 3.9 3.4
Information concerning individual directors’ remuneration, pension entitlements, shareholdings and share options is shown in the Directors’
remuneration report.
4 Share of associated undertakings
2005 2004
£m £m
Income from interest in associated undertakings – 0.4
Goodwill amortisation of associated undertakings – (0.2)
– 0.2
50 Notes to the accounts Northern Foods plc
                                                               5 Exceptional items
2005 2004
£m £m
Operating exceptional items
Restructuring costs (46.4) (18.5)
Non-operating exceptional items
(Loss)/profit on disposal of businesses (34.8) 11.6
Profit on sale of fixed assets 9.3 –
Operating exceptional items
The restructuring costs primarily relate to the group reorganisation and the factory closures at Evesham Foods and London Road, Carlisle.
This includes tangible fixed asset impairment of £15.0m. The tax effect of operating exceptional items is a credit of £11.7m.
Non-operating exceptional items
The loss on disposal of businesses relates to a £25.9m loss on sale of Eden Vale Minsterley, a £6.1m loss on sale of Emile Tissot and a £2.8m loss 
on sale of Cavaghan & Gray Seafood. The profit on sale of fixed assets relates to the disposals of the Croydon property and the office in Hull.
The tax effect of non-operating exceptional items is a credit of £3.4m.
6 Net interest payable
2005 2004
£m £m
Bank interest receivable (0.3) (0.3)
Interest payable on convertible subordinated bonds 6.2 6.3
Interest payable on bank loans, overdrafts and other loans 16.3 15.2
Interest payable on finance leases – 0.2
22.2 21.4
Northern Foods plc Notes to the accounts 51
                                  Notes to the accounts
continued
7 T axation on profit on ordinary activities
2005 2004
£m £m
Current taxation:
UK corporation tax at 30% 6.7 6.7
Overseas tax 1.3 1.5
Exceptional items (9.2) (2.4)
(1.2) 5.8
Deferred taxation:
UK deferred tax 8.8 7.1
Overseas tax – 0.2
Exceptional items (5.9) (3.1)
2.9 4.2
T axation on profit on ordinary activities 1.7 10.0
Deferred taxation relates to origination and reversal of timing differences and includes a £0.8m credit in respect of prior years. All tax on exceptional
items relates to the UK.
The corporation tax charge for the year is lower than the standard UK corporation tax rate of 30 per cent. The differences are explained below:
2005 2004
£m £m
Profit on ordinary activities before taxation 4.3 75.4
Taxation on profit on ordinary activities at the standard UK corporation tax rate of 30% 1.3 22.6
Factors affecting the charge:
Capital allowances in excess of depreciation (0.3) (2.1)
Short term timing differences – pension prepayment (10.1) (4.2)
Lower tax rates on overseas earnings (4.3) (4.8)
Adjustments to tax charge in respect of previous periods (0.8) (2.4)
Goodwill not deductible for tax purposes 1.0 1.1
Net exceptional charges/(credits) not deductible 12.0 (0.3)
Tax relief on loss on exchange (0.1) (0.1)
Timing differences – (1.4)
Other 0.1 (2.6)
Current taxation (credit)/charge for year (1.2) 5.8
Factors affecting future current tax charges are as follows:
The group’s tax rate is lower than the standard UK rate primarily due to the profits earned by the Irish subsidiary. No significant changes are
expected in the Irish tax rates.
52 Notes to the accounts Northern Foods plc
                                                       8 Profit for the financial year 
Of the profit for the financial year, a profit of £311.5m (2004: £54.5m) has been dealt with in the accounts of the parent company. In accordance
with the exemptions allowed by Section 230(3) of the Companies Act 1985, the parent company has not presented its own profit and loss account.
9 Equity dividends
2005 2004
£m £m
Ordinary:
Interim paid: 3.35p per share (2004: 3.30p per share) 15.9 16.7
Final proposed: 5.70p per share (2004: 5.60p per share) 27.7 27.9
43.6 44.6
10 Earnings per ordinary share
2005 2004
£m £m
Profit on ordinary activities after taxation 2.6 65.4
Add: taxation on profit on ordinary activities 1.7 10.0
Profit on ordinary activities before taxation 4.3 75.4
Add:
Goodwill amortisation 4.0 3.7
Operating exceptional items 46.4 18.5
Loss/(profit) on disposal of businesses 34.8 (11.6)
Profit on sale of fixed assets (9.3) –
80.2 86.0
Less: taxation excluding tax relating to goodwill amortisation and exceptional items (16.8) (15.5)
Earnings used for calculation of earnings per ordinary share before goodwill amortisation and exceptional items 63.4 70.5
Earnings used for basic earnings per ordinary share 2.6 65.4
Interest saved on conversion of debt – 4.3
Earnings used for diluted earnings per ordinary share 2.6 69.7
2005 2004
No of No of
shares shares
million million
Weighted average number of shares in issue 509.2 515.9
Less:
Shares held in treasury (16.5) (0.6)
Shares owned in Employee share ownership trust (3.1) (3.5)
Weighted average number of shares 489.6 511.8
Add dilutive effect of:
Savings-related share options 1.3 2.0
Executive share options 0.5 0.2
Long term incentive plans 0.1 0.4
Deferred share plan 0.1 –
Convertible subordinated bonds – 40.6
Weighted average number of shares used for calculation of diluted earnings per ordinary share 491.6 555.0
2005 2004
pence pence
Basic earnings per ordinary share – after goodwill amortisation and exceptional items 0.53 12.78
Adjusted earnings per ordinary share – before goodwill amortisation and exceptional items 12.95 13.77
Diluted earnings per ordinary share 0.53 12.56
The adjusted earnings per ordinary share figure has been calculated to provide a clearer understanding of the trading performance of the group.
Northern Foods plc Notes to the accounts 53
                                                                                  Notes to the accounts
continued
11 Intangible fixed assets
Goodwill
Group £m
Cost:
At start of year 74.3
Additions (note 28) 1.9
Disposals (0.2)
Exchange differences 0.5
At end of year 76.5
Amortisation:
At start of year 10.0
Charge for the year 4.0
Exceptional provision for impairment 1.1
At end of year 15.1
Net book amounts:
At end of year 61.4
At start of year 64.3
12 T angible fixed assets
Plant
Freehold Long Short fixtures &
property leases leases vehicles Total
Group £m £m £m £m £m
Cost or valuation:
At start of year 293.9 56.7 41.6 943.2 1,335.4
Additions 1.0 3.9 – 58.0 62.9
Disposals (0.4) – (2.7) (6.0) (9.1)
Exceptional disposals (5.3) – – – (5.3)
Disposal of businesses (19.8) (0.8) – (95.9) (116.5)
Reclassifications 0.4 – – (0.4) –
Exchange differences 0.9 – – 3.4 4.3
At end of year 270.7 59.8 38.9 902.3 1,271.7
Analysis:
Valuation – 1978 6.7 5.6 – – 12.3
Cost 264.0 54.2 38.9 902.3 1,259.4
270.7 59.8 38.9 902.3 1,271.7
Depreciation:
At start of year 68.8 15.6 7.4 571.2 663.0
Charge for the year 5.5 1.0 1.4 57.1 65.0
Exceptional provision for impairment 7.4 – – 7.6 15.0
Disposals (0.4) – (0.3) (5.0) (5.7)
Exceptional disposals (1.0) – – – (1.0)
Disposal of businesses (4.1) (0.2) – (79.9) (84.2)
Reclassifications 0.1 – – (0.1) –
Exchange differences 0.1 – – 1.7 1.8
At end of year 76.4 16.4 8.5 552.6 653.9
Net book amounts:
At end of year 194.3 43.4 30.4 349.7 617.8
At start of year 225.1 41.1 34.2 372.0 672.4
The original cost of the group’s tangible fixed assets was £1,264.5m and the depreciation thereon £650.2m (2004: £1,328.2m and £659.5m
respectively).
54 Notes to the accounts Northern Foods plc
                     12 T angible fixed assets continued
Plant 
Freehold Long Short fixtures &
property leases leases vehicles Total
Company £m £m £m £m £m
Cost or valuation:
At start of year 231.1 46.8 38.2 14.8 330.9
Additions 0.7 3.8 – 12.9 17.4
Disposals (0.3) – – – (0.3)
Exceptional disposals (5.3) – – – (5.3)
Disposal of businesses (19.2) (0.2) – – (19.4)
Group transfers 0.2 – – (5.7) (5.5)
At end of year 207.2 50.4 38.2 22.0 317.8
Analysis:
Valuation – 1978 6.7 5.6 – – 12.3
Cost 200.5 44.8 38.2 22.0 305.5
207.2 50.4 38.2 22.0 317.8
Depreciation:
At start of year 51.3 13.5 7.3 14.3 86.4
Charge for the year 4.2 0.9 1.4 0.5 7.0
Exceptional provision for impairment 4.1 – – – 4.1
Disposals (0.2) – – – (0.2)
Exceptional disposals (1.0) – – – (1.0)
Disposal of businesses (4.1) – – – (4.1)
Group transfers 0.1 – – 0.2 0.3
At end of year 54.4 14.4 8.7 15.0 92.5
Net book amounts:
At end of year 152.8 36.0 29.5 7.0 225.3
At start of year 179.8 33.3 30.9 0.5 244.5
The original cost of the company’s tangible fixed assets was £310.6m and the depreciation thereon £88.8m (2004: £323.7m and £82.9m respectively).
Northern Foods plc Notes to the accounts 55
            Notes to the accounts
continued
13 Fixed asset investments
2005 2004
(as restated)
Company £m £m
Subsidiary undertakings:
Shares at cost
At start of year 952.5 605.0
Cost of shares acquired 25.5 342.1
Reclassification from associated undertakings – 16.1
Cost of shares disposed – (10.7)
At end of year 978.0 952.5
Long term loans due from subsidiary undertakings 131.0 160.7
Long term loans due to subsidiary undertakings (337.4) (323.7)
771.6 789.5
Principal operating subsidiary undertakings at the year end:
Convenience Foods Limited*
F W Farnsworth Limited
Fletchers Bakeries Limited*
Northern Foods Grocery Group Limited*
NFT Distribution Limited*
Green Isle Foods Limited (Ireland)
Cavaghan & Gray Group Limited
Cavaghan & Gray Limited
Solway Foods Limited
*Directly owned by Northern Foods plc
The above subsidiary undertakings are wholly owned (ordinary shares), operate and are incorporated in the UK except where otherwise stated.
All are engaged in food manufacture and distribution.
14 Stocks
Group Group
2005 2004
£m £m
Raw materials 28.2 36.8
Work in progress 4.4 4.5
Finished goods 32.5 36.9
65.1 78.2
15 Debtors
Group Group Company Company
2005 2004 2005 2004
£m £m £m £m
Amounts falling due within one year:
Trade debtors 152.2 145.4 – –
Corporation tax – – 12.6 7.9
Other debtors 10.9 15.9 2.7 5.3
Other prepayments 8.2 7.4 2.2 1.0
Amounts due from subsidiary undertakings – – 839.0 461.4
171.3 168.7 856.5 475.6
Amounts falling due after more than one year:
Pension prepayment 95.2 61.3 95.2 61.3
56 Notes to the accounts Northern Foods plc
                                                                                   16 Current asset investments
Group Group
2005 2004
£m £m
At start of year 14.9 10.6
Purchased during the year 16.4 330.6
Sold during the year (21.5) (326.3)
(5.1) 4.3
At end of year 9.8 14.9
Analysis of investments:
Listed investments 9.8 11.7
Other investments – 3.2
9.8 14.9
The listed investments, all of which are quoted on recognised stock exchanges, are shown at the lower of cost and market value. There is no material
difference between cost and market value.
17 Creditors
Group Group Company Company
2005 2004 2005 2004
£m £m £m £m
Amounts falling due within one year:
Bank overdrafts 1.3 0.8 29.1 13.8
Bank loans 6.0 0.6 6.0 –
Loan notes (note 21) 0.5 2.1 0.5 2.1
Other loans – 16.0 – 16.0
Total borrowings falling due within one year (note 18) 7.8 19.5 35.6 31.9
Trade creditors 108.1 130.8 0.6 5.8
Other creditors including social security 38.4 35.2 10.6 11.0
Accruals and deferred income 81.2 66.2 11.5 5.8
Corporation tax 14.7 17.3 – –
Proposed dividend 27.7 27.9 27.7 27.9
Amounts due to subsidiary undertakings – – 737.2 630.0
277.9 296.9 823.2 712.4
Amounts falling due after more than one year:
Revolving credit facility 2006 (note 21) 270.0 260.0 270.0 260.0
Convertible subordinated bonds 2008 (note 21) 90.8 90.6 90.8 90.6
Other loans – 12.2 – 12.2
Total borrowings falling due after more than one year (note 18) 360.8 362.8 360.8 362.8
Accruals and deferred income 8.8 9.3 – –
369.6 372.1 360.8 362.8
Northern Foods plc Notes to the accounts 57
                                                                                                                Notes to the accounts
continued
18 Analysis of borrowings
Group Group Company Company
2005 2004 2005 2004
Total borrowings £m £m £m £m
Repayable within one year:
Bank overdrafts 1.3 0.8 29.1 13.8
Bank loans 6.0 0.6 6.0 –
Loan notes (note 21) 0.5 2.1 0.5 2.1
Other loans – 16.0 – 16.0
Amounts falling due within one year 7.8 19.5 35.6 31.9
Repayable after more than one year:
Revolving credit facility 2006 (note 21) 270.0 260.0 270.0 260.0
Convertible subordinated bonds 2008 (note 21) 90.8 90.6 90.8 90.6
Other loans – 12.2 – 12.2
Amounts falling due after more than one year 360.8 362.8 360.8 362.8
368.6 382.3 396.4 394.7
Group Group 
2005 2004
£m £m
Borrowings falling due within one year 7.8 19.5
Borrowings falling due after more than one year 360.8 362.8
Total group borrowings 368.6 382.3
Cash at bank and in hand (25.5) (35.0)
Current asset investments (note 16) (9.8) (14.9)
Net borrowings 333.3 332.4
Liquidity risk
The group operates a policy of maintaining certainty of funding over the medium term by a combination of committed floating and fixed rate
facilities supplemented by uncommitted facilities. The policy is to ensure that forecast net borrowings plus reasonable operating headroom 
are covered by committed facilities which mature at least 12 months after the year end. At the year end £180.0m (2004: £190.0m) remained
undrawn on the revolving credit facility.
Maturity of financial liabilities
The maturity profile of the group’s financial liabilities at the year end was as follows:
Group Group Company Company
2005 2004 2005 2004
£m £m £m £m
In one year or less, or on demand 7.8 19.5 35.6 31.9
In more than one year but not more than two years 270.0 12.2 270.0 12.2
In more than two years but not more than five years 90.8 350.6 90.8 350.6
Total borrowings 368.6 382.3 396.4 394.7
Further details of the group’s facilities are set out in note 21.
Interest rate risk
The group manages its exposure to interest rate fluctuations on its borrowings by operating with a mix of fixed and floating rate borrowings.
The objective is to operate with fixed rate borrowings within a range of 20 to 50 per cent of total borrowings over the medium term, although 
the group may operate outside that range during the year.
The group’s fixed rate debt is based principally on the £91.3m 6.75 per cent convertible subordinated bonds 2008 detailed in note 21. No interest
rate derivatives are currently in place.
58 Notes to the accounts Northern Foods plc
                                                                                                             18 Analysis of borrowings continued
Interest rate risk profile of financial assets
Group Group
2005 2004
Assets held as part of the financing arrangements of the group £m £m
Cash at bank and in hand:
Sterling 15.3 30.6
Euro 10.2 4.2
Other currencies – 0.2
Current asset investments 9.8 14.9
35.3 49.9
The euro deposits comprise floating rate deposits at 1.6 per cent (2004: 1.7 per cent).
Current asset investments comprise a single floating rate investment fund. In 2004 current asset investments comprised fixed rate sterling deposits
and securities of £14.9m with a weighted average interest rate of 6.0 per cent and a weighted average period to maturity of 1.9 years.
Interest rate risk profile of financial liabilities
Floating rate Fixed rate Floating rate Fixed rate
financial financial financial financial
liabilities liabilities Total liabilities liabilities Total
2005 2005 2005 2004 2004 2004
Currency £m £m £m £m £m £m
Sterling 277.8 90.8 368.6 291.7 90.6 382.3
The fixed rate financial liabilities relate to the convertible subordinated bonds 2008.
Fixed rate liabilities
Weighted Weighted
Weighted average Weighted average
average period for average period for
interest which rate interest which rate
rate is fixed rate is fixed
2005 2005 2004 2004
Currency % years % years
Sterling 6.8 3.3 6.8 4.3
The floating rate liabilities comprise amounts drawn on the revolving credit facility, bank loans and overdrafts and loan notes bearing interest by
reference to market rates.
Fair values of financial assets and financial liabilities
The book value of the convertible subordinated bonds 2008 was £90.8m (2004: £90.6m) and the fair value was £92.2m (2004: £92.9m) based on
the quoted market price at the year end. The fair value of forward foreign exchange contracts by reference to market exchange rates at the year end 
was £nil (2004: gain of £1.3m). The book value of other financial assets and liabilities approximates to fair value due to their short maturities.
Currency exposure
The group operates primarily in the UK with a functional currency of sterling. The functional currency of the overseas companies is euros,
giving rise to foreign currency exposure. The average and closing rates used in the accounts to translate euro to sterling were ¤1.467 = £1 
and ¤1.457= £1 respectively (2004: ¤1.440 = £1 and ¤1.507 = £1 respectively).
Northern Foods plc Notes to the accounts 59
                                                    Notes to the accounts
continued
18 Analysis of borrowings continued
The monetary assets and liabilities of the group that are not denominated in the functional currency of the relevant operating companies involved
were as follows:
Net foreign currency assets/(liabilities)
Other Other
Sterling currencies Total Sterling currencies Total
2005 2005 2005 2004 2004 2004
Functional currency of group operating companies £m £m £m £m £m £m
Sterling – 0.4 0.4 – (0.3) (0.3)
Euro 15.3 – 15.3 17.4 – 17.4
15.3 0.4 15.7 17.4 (0.3) 17.1
19 Reconciliation of operating profit to net cash inflow from operating activities
2005 2004
£m £m
Operating profit per profit and loss account 52.0 85.0
Adjust for non-cash items:
Depreciation 65.0 65.9
Exceptional provision for impairment of tangible fixed assets 15.0 10.5
Profit on sale of tangible fixed assets (1.4) (0.5)
Amortisation of goodwill 4.0 3.5
Exceptional provision for impairment of intangible fixed assets 1.1 –
Amortisation of bond and financing costs 0.2 0.1
Government grants (1.7) (1.4)
134.2 163.1
Operating working capital movements:
Stock decrease/(increase) 2.6 (2.0)
Debtors increase (44.4) (21.4)
Creditors increase 5.9 15.2
(35.9) (8.2)
Net cash inflow from operating activities 98.3 154.9
The debtors increase includes £20.0m in respect of the special pension contribution.
20 Analysis of net debt
At start Cash Other non- Exchange At end 
of year flow cash changes movement of year
£m £m £m £m £m
Cash at bank and in hand 35.0 (10.0) – 0.5 25.5
Bank overdrafts (0.8) (0.5) – – (1.3)
Net cash 34.2 (10.5) – 0.5 24.2
Debt due after more than one year (362.8) 2.2 (0.2) – (360.8)
Debt due within one year (18.7) 12.2 – – (6.5)
Current asset investments 14.9 (5.1) – – 9.8
Net debt (332.4) (1.2) (0.2) 0.5 (333.3)
60 Notes to the accounts Northern Foods plc
                                                                         21 Financing
Convertible subordinated bonds 2008
The bonds are in issue, in registered form in amounts of £1,000 or multiples thereof, or in bearer form in denominations of £1,000 and £50,000 and,
unless previously redeemed, purchased or converted, will be redeemed at their principal amount by 8 August 2008. Interest is payable at the rate 
of 6.75 per cent per annum semi-annually on 8 February and 8 August each year. The bonds were originally convertible into ordinary shares of 
the company at 326p per ordinary share. Following the demerger of the Dairy business in March 1998, the conversion price was adjusted to 225p 
in accordance with the trust deed. The company has had the option, since 31 August 1998, to redeem the bonds in multiples of £10.0m at their
principal price.
Revolving credit facility 2006
The five-year syndicated revolving credit facility for £450.0m was entered into in September 2001. At the year end borrowings under this facility were
£270.0m (2004: £260.0m). These borrowings are repayable in periods of up to one year but are capable of being immediately refinanced as part of the
committed revolving credit facility.
Loan notes
Loan notes due within one year total £0.5m. This comprises £0.4m which bear interest at 1.0 per cent below the base rate, and can be redeemed in
amounts of £20,000 or multiples thereof at their nominal principal amount semi-annually on 30 June and 31 December each year. Loan notes not
previously redeemed will be redeemed at their nominal amount by 30 June 2008. Other loan notes of £0.1m bear interest at 1.0 per cent below 
the base rate, and can be redeemed in amounts of £10,000 or multiples thereof at their nominal principal amount semi-annually on 30 June and 
31 December each year. Loan notes not previously redeemed will be redeemed at their nominal amount by 30 June 2005.
Other facilities and interest rates
The group had in place committed facilities of £23.0m (2004: £23.0m) and uncommitted facilities of £67.0m (2004: £57.0m). The group’s borrowings
under the revolving credit and uncommitted facilities bear interest at rates which generally fluctuate in line with market rates.
22 Provisions for liabilities and charges
Deferred 
taxation
Group £m
At start of year 69.5
Charged to profit and loss account 2.9
Other movements 0.1
At end of year 72.5
Company
At start of year 23.7
Charged to profit and loss account 8.6
At end of year 32.3
Deferred tax liabilities are analysed as follows:
Group Group Company Company
2005 2004 2005 2004
£m £m £m £m
Amounts provided in respect of:
Accelerated capital allowances 56.3 64.1 10.4 12.6
Other timing differences 28.7 18.6 28.7 18.6
Undiscounted provision for deferred tax 85.0 82.7 39.1 31.2
Discount (12.5) (13.2) (6.8) (7.5)
Provision for deferred taxation 72.5 69.5 32.3 23.7
Northern Foods plc Notes to the accounts 61
                                                Notes to the accounts
continued
23 Share capital
2005 2005 2004 2004
Number Amount Number Amount
million £m million £m
Authorised ordinary shares of 25p each 760.0 190.0 760.0 190.0
Allotted, called up and fully paid ordinary shares of 25p each:
At start of year 508.5 127.1 523.2 130.8
Shares issued for cash under company share option schemes 2.0 0.5 3.4 0.8
Repurchase of shares – cancelled –– (18.1) (4.5)
At end of year 510.5 127.6 508.5 127.1
During the year 15.6m ordinary shares of 25p each were purchased by the group in the market at a cost of £24.2m including stamp duty,
commission and levies. These shares are held in treasury, bringing the total number of shares held in treasury to 21.9m.
Details of movements in share capital are shown in the Report of the directors. At the year end options were outstanding on 14,155,626 ordinary
shares, exercisable at various dates to December 2014 at subscription prices ranging from 94.0p to 169.67p.
24 Reserves
Share Capital Reserve Profit
premium Revaluation redemption for treasury Other and loss 
account reserve reserve shares reserves account
Group £m £m £m £m £m £m
At start of year (as previously reported) 60.0 3.7 23.6 (10.0) 6.7 149.6
Prior year adjustment (note 25) – – – (4.4) – –
At start of year (as restated) 60.0 3.7 23.6 (14.4) 6.7 149.6
Retained loss for the year – – – – – (41.0)
Premiums on shares issued under company share option schemes 2.3 – – – – –
Repurchase of shares – – – (24.2) – –
Goodwill previously written off included in retained loss for the year – – – – – 29.3
Other movements – (0.2) – – – 0.2
Exchange differences – –– –– 2.9
At end of year 62.3 3.5 23.6 (38.6) 6.7 141.0
The accumulated amount of goodwill written off against consolidated reserves prior to the implementation of FRS 10 was £197.7m (2004: £227.0m).
The Employee share ownership trust (ESOT) holds shares which are primarily used to satisfy awards made under long term incentive plans. At the 
year end the ESOT held 3,114,793 (2004: 3,114,793) shares with a market value of £4.8m (2004: £5.0m). The ESOT has waived its right to dividends
on unallocated shares.
Share Capital Reserve Profit
premium Revaluation redemption for treasury and loss
account reserve reserve shares account
Company £m £m £m £m £m
At start of year (as previously reported) 60.0 3.7 23.6 (10.0) 292.8
Prior year adjustment (note 25) – – – (4.4) –
At start of year (as restated) 60.0 3.7 23.6 (14.4) 292.8
Retained profit for the year – – – – 267.9
Premiums on shares issued under company share option schemes 2.3 – – – –
Repurchase of shares – – – (24.2) –
Other movements – (0.2) – – 0.2
At end of year 62.3 3.5 23.6 (38.6) 560.9
25 Prior year adjustment
During the year ended 2 April 2005, the group has complied with UITF Abstract 38 ‘Accounting for ESOP trusts’. This has resulted in a reduction 
in opening fixed asset investments of £4.4m, with a corresponding reduction in shareholders’ funds. There has been no impact on the current 
or prior year profit and loss account.
62 Notes to the accounts Northern Foods plc
                             26 Pensions
The pension costs principally relate to the Northern Foods Pension Scheme (the Scheme) which is a defined benefit scheme providing members 
with benefits based on pay and service. The assets of the Scheme are held in trustee administered funds separate from the finances of the group.
The group also operates a number of other schemes, none of which are considered to be material.
In March 2005 the company announced the closure of the Scheme and removed all remaining company-funded early retirement provisions.
Pension Builder was introduced for new employees, and is a defined benefit scheme based on a career average principle.
SSAP 24
The pension costs relating to the Scheme are assessed in accordance with the advice of an independent qualified actuary, Hewitt Bacon & Woodrow,
using the projected unit method. For the purposes of determining pension costs the most significant assumptions adopted were as follows:
Rate of increase in pensionable earnings 3.9 per cent per annum
Rate of increase to pensions in payment 2.8 per cent per annum
Rate of investment return 7.3 per cent per annum
The most recent actuarial valuation of the Scheme was carried out as at 31 March 2002 using a market-based approach. The market value of the
Scheme’s assets was £449.9m which represented 95 per cent of the value of accrued benefits allowing for assumed future increases in earnings 
on the basis of the assumptions adopted for that valuation.
As required by SSAP 24, the figures included in the accounts in respect of the group’s pension schemes are based on actuarial valuations carried out
at 31 March 2002. This does not take into account any impact of the fall in general stock markets since that date. Any such impact will be reflected
in the next triennial valuation, based upon which subsequent pension costs will be determined.
The contribution rate for the year was 12.7 per cent of pensionable earnings. In addition the company made a special contribution of £20.0m 
during the year.
FRS 17
Additional disclosures regarding the group’s defined benefit scheme are required under the transitional provisions of FRS 17.
The actuarial valuation described above has been updated at the year end by an independent qualified actuary, Hewitt Bacon & Woodrow,
using revised assumptions that are consistent with the requirements of FRS 17. Investments have been valued for this purpose at fair value.
For the purposes of determining the Scheme liabilities under FRS 17 the most significant assumptions adopted were as follows:
2005 2004 2003
% %%
Rate of increase of salaries 3.7 3.9 3.6
Rate of increase to pensions in payment 2.6 2.8 2.5
Rate of increase to deferred pensions 3.0 3.0 3.0
Discount rate 5.4 5.5 5.9
Inflation assumption 2.7 2.9 2.6
The fair value of the assets in the Scheme, together with those of the overseas scheme, the present value of the liabilities and the expected rate 
of return as at the year ends 2005, 2004 and 2003 were as follows:
2005 2004 2003
Long term Long term Long term
expected rate expected rate expected rate
of return 2005 of return 2004 of return 2003
%£m %£m %£m
Equities 8.3 428.2 8.3 374.4 8.3 264.7
Bonds 5.0 129.7 5.0 103.0 5.0 103.7
Other 4.0 6.2 4.0 6.0 4.0 29.0
Total fair value of assets 564.1 483.4 397.4
Present value of scheme liabilities (729.3) (705.1) (600.9)
Deficit in scheme (165.2) (221.7) (203.5)
Related deferred tax asset 48.6 66.0 60.0
Net pension deficit (116.6) (155.7) (143.5)
Northern Foods plc Notes to the accounts 63
                                                Notes to the accounts
continued
26 Pensions continued
If the group had adopted FRS 17, the group’s profit and loss account reserve would have been restated as follows:
2005 2004
£m £m
Group profit and loss account reserve excluding pension deficit 141.0 149.6
Net pension deficit (116.6) (155.7)
SSAP 24 prepayment (95.2) (61.3)
Deferred tax on SSAP 24 prepayment 28.6 18.4
Group profit and loss account reserve (42.2) (49.0)
The amounts charged to operating profit under FRS 17 would have been as follows:
2005 2004
£m £m
Current service cost (21.9) (18.7)
Net operating charge (21.9) (18.7)
The amounts (charged)/credited to net finance charge under FRS 17 would have been as follows:
2005 2004
£m £m
Expected return on pension scheme assets 36.8 28.3
Interest on pension scheme liabilities (39.0) (34.8)
Net finance charge (2.2) (6.5)
The amounts included within the group’s statement of total recognised gains and losses under FRS 17 would have been 
as follows:
2005 2004
£m £m
Difference between actual and expected return on scheme assets 14.2 51.9
Experience gains and losses arising on scheme liabilities (0.7) 0.5
Effects of changes in assumptions underlying the present value of scheme liabilities 24.5 (74.5)
Total actuarial gains and losses recognised in the group’s statement of total recognised gains and losses 38.0 (22.1)
Deferred tax movement (11.9) 6.6
Total actuarial gains and losses recognised in the group’s statement of total recognised gains and losses 
net of deferred tax 26.1 (15.5)
The movement in deficit during the year under FRS 17 would have been as follows:
2005 2004
£m £m
Deficit in scheme at start of year (221.7) (203.5)
Movement in year:
Disposal of scheme – 4.3
Current service cost (21.9) (18.7)
Contributions 42.7 24.7
Net finance charge (2.2) (6.5)
Exchange adjustments (0.1) 0.1
Actuarial gain/(loss) 38.0 (22.1)
Deficit in scheme at end of year (165.2) (221.7)
Related deferred tax asset 48.6 66.0
Net pension deficit at end of year (116.6) (155.7)
64 Notes to the accounts Northern Foods plc
                                                                               26 Pensions continued
The experience gains and losses under FRS 17 would have been as follows:
2005 2004 2003
Difference between the expected and actual return on scheme assets:
Amount (£m) 14.2 51.9 (127.9)
Percentage of scheme assets (%) 2.5 10.7 (32.2)
Experience gains and losses on scheme liabilities:
Amount (£m) (0.7) 0.5 7.0
Percentage of the present value of scheme liabilities (%) (0.1) 0.1 1.2
Total actuarial gains and losses recognised in the group’s statement of total recognised 
gains and losses:
Amount (£m) 38.0 (22.1) (143.9)
Percentage of the present value of scheme liabilities (%) 5.2 (3.1) (23.9)
27 Financial commitments
Capital expenditure authorised by the directors and to which the group and the company are contracted amounted to £16.7m and £nil respectively
(2004: £4.7m and £nil respectively).
Annual commitments under non-cancellable operating leases are analysed as follows:
Group Group Company Company
2005 2004 2005 2004
£m £m £m £m
Leases relating to land and buildings which expire:
Within one year 0.7 0.3 – –
In the second to fifth years inclusive 1.1 1.2 – –
In more than five years 2.2 1.8 0.8 0.3
4.0 3.3 0.8 0.3
Leases relating to plant and machinery which expire:
Within one year 2.3 3.1 0.3 0.3
In the second to fifth years inclusive 6.9 9.9 0.7 0.7
In more than five years 0.4 – – –
9.6 13.0 1.0 1.0
28 Acquisitions and disposals
Acquisitions
On 21 June 2004 the group paid an amount of £1.1m to the Irish grants agency, Forfas, under an arrangement that existed with 
Green Isle Food Group Limited prior to its acquisition by the group in July 1995. This resulted in goodwill on acquisition of £1.1m.
During the year the group made an adjustment to the fair value on acquisition of Solway Foods Holdings Limited, acquired in June 2003.
This resulted in additional goodwill on acquisition of £0.8m. There were no cash flows in respect of this transaction.
Disposals
The group made the following disposals of non-core businesses, all of which have been treated as discontinued operations, during the year.
These reflect previously announced plans to focus on the group’s core strengths, being the supply of chilled, ambient and frozen foods to 
leading retailers:
On 1 May 2004 the group sold the Emile Tissot frozen foodservice business to Dawn Fresh Foods Limited for a cash consideration of £3.5m 
less associated costs of £0.2m. This resulted in a loss on sale of £6.1m after deducting £3.5m of goodwill previously written off to reserves.
On 22 May 2004 the group sold the Eden Vale Minsterley fresh chilled dairy business to Uniq Prepared Foods Limited for a cash consideration 
of £18.9m less associated costs of £0.4m. This resulted in a loss on sale of £25.9m after deducting £24.0m of goodwill previously written off 
to reserves.
On 4 November 2004 the group sold the Cavaghan & Gray Seafood chilled and frozen fish business to IFP Holdings Limited, a subsidiary of
Icelandic Group Plc for a cash consideration of £12.9m less associated costs of £0.1m. This resulted in a loss on sale of £2.8m after deducting
£1.8m of goodwill previously written off to reserves.
Northern Foods plc Notes to the accounts 65
                                                                          Notes to the accounts
continued
29 Contingent liabilities
Contingent liabilities existed in relation to guarantees given by the parent company on behalf of subsidiary undertakings, together with contingencies
in the normal course of the group’s business. The parent company has guaranteed the overdrafts of subsidiary undertakings amounting to £nil
(2004: £nil).
A subsidiary undertaking is party to a letter of credit issued by Barclays Bank plc for £9.8m (2004: £9.8m) secured against the assets of the
subsidiary undertaking.
Various group undertakings are also parties to litigation, none of which is considered to be material.
30 Employees
2005 2004
Group Number Number
Average number employed during the year:
Production 18,312 19,587
Distribution 1,577 1,582
Administration 1,790 1,939
21,679 23,108
2005 2004
£m £m
Remuneration:
Wages and salaries 396.3 403.7
Social security costs 32.3 34.1
Other pension costs 9.6 11.7
438.2 449.5
66 Notes to the accounts Northern Foods plc
                               Five-year record
Profit and loss account 2001 2002 2003 2004 2005
Turnover:
Continuing £m 1,139.8 1,197.3 1,260.0 1,387.7 1,416.1
Discontinued £m 238.1 261.9 161.2 154.4 32.7
Total £m 1,377.9 1,459.2 1,421.2 1,542.1 1,448.8
Operating profit*:
Continuing £m 111.8 116.9 110.9 105.7 102.6
Discontinued £m 11.1 8.2 4.7 1.3 (0.2)
Total £m 122.9 125.1 115.6 107.0 102.4
% of turnover % 8.9 8.6 8.1 6.9 7.1
Share of associated undertakings £m 1.4 0.4 1.4 0.4 –
Net interest payable £m (20.2) (24.5) (19.5) (21.4) (22.2)
Profit before taxation* £m 104.1 101.0 97.5 86.0 80.2
Profit after taxation* £m 79.2 77.4 79.6 70.5 63.4
Exceptional items after taxation £m 5.5 (10.1) 24.2 (1.4) (56.8)
Goodwill amortisation £m (2.1) (2.9) (3.1) (3.7) (4.0)
Profit after taxation £m 82.6 64.4 100.7 65.4 2.6
Earnings per share:
Before goodwill amortisation and exceptional items p 13.71 13.91 14.81 13.77 12.95
After goodwill amortisation and exceptional items p 14.30 11.57 18.73 12.78 0.53
Dividend per share p 7.70 8.20 8.70 8.90 9.05
Dividend cover* times 1.8 1.7 1.7 1.5 1.4
Asset analysis
Operating assets £m 686.8 799.8 784.8 803.4 774.3
Other liabilities and provisions £m (96.2) (105.5) (101.1) (114.7) (114.9)
Trading capital employed £m 590.6 694.3 683.7 688.7 659.4
Accumulated goodwill written off £m 308.2 308.5 246.6 239.2 215.0
Total invested capital £m 898.8 1,002.8 930.3 927.9 874.4
Net borrowings £m (324.4) (413.7) (323.6) (332.4) (333.3)
Total equity funds invested £m 574.4 589.1 606.7 595.5 541.1
Equity shareholders’ funds £m 266.2 280.6 360.1 356.3 326.1
Net gearing % 121.9 147.4 89.9 93.3 102.2
Interest cover* times 6.2 5.1 6.0 5.0 4.6
Capital expenditure £m 78.3 123.6 79.4 71.3 62.9
Shareholder value analysis
Profit before interest* £m 124.3 125.5 117.0 107.4 102.4
Attributable taxation* £m (31.0) (30.9) (23.8) (21.9) (23.5)
Normalised operating profit after tax (NOPAT)* £m 93.3 94.6 93.2 85.5 78.9
Return on average invested capital (ROIC)* % 10.7 9.9 10.1† 9.2 8.8
Weighted average cost of capital (WACC) % 7.3 7.3 6.3 6.9 6.6
Margin over cost of funds* % 3.4 2.6 3.8 2.3 2.2
Post-tax return on average equity funds invested* % 13.9 13.3 13.3 11.7 11.2
*Stated before goodwill amortisation and exceptional items.
†
Stated after reducing the 2002 invested capital by £87.0m to reflect the sale of the Ski and Munch Bunch brands and associated assets 
on 2 April 2002.
The years ended 2001 to 2004 have been restated to comply with UITF Abstract 38 ‘Accounting for ESOP trusts’. The year ended 2001 
has been restated to comply with FRS 19 ‘Deferred tax’.
Northern Foods plc Five-year record 67
                                                                               Shareholder analysis
at 20 May 2005
Holders Shares held
% of Number % of
Number holders ’000s capital
By classification
Individuals 39,865 94.77 56,229 11.01
Banks and nominees 1,898 4.51 414,750 81.23
Corporate shareholders* 241 0.57 29,328 5.75
Investment companies 18 0.04 173 0.03
Insurance companies 29 0.07 2,146 0.42
Pension funds 18 0.04 7,953 1.56
42,069 100.00 510,579 100.00
By size of holding
1-100 6,720 15.97 312 0.06
101-500 14,769 35.11 3,898 0.76
501-1,000 7,122 16.93 5,340 1.05
1,001-2,000 5,671 13.48 8,386 1.64
2,001-5,000 4,974 11.82 16,027 3.14
5,001-50,000 2,405 5.72 27,981 5.48
50,001-100,000 126 0.30 9,019 1.77
100,001 and over 282 0.67 439,616 86.10
42,069 100.00 510,579 100.00
*This includes 21.9m shares held in treasury.
68 Shareholder analysis Northern Foods plc
         Financial calendar
2005
Final results announcement 1 June
Annual report issued 21 June
Latest date for receipt of forms of proxy 19 July
Annual general meeting 21 July
Shares quoted ex-dividend 27 July
Record date for final dividend 29 July
Half-yearly interest payment on 
convertible subordinated bonds 8 August 
Final dividend payment on ordinary shares 26 August
Interim results announcement November
2006
Half-yearly interest payment on
convertible subordinated bonds 8 February
Interim dividend payment on ordinary shares March
Financial year end 1 April
Registered office
2180 Century Way
Thorpe Park 
Leeds LS15 8ZB
Telephone: 0113 390 0110
Facsimile: 0113 390 0211
Website: www.northernfoods.com
Registered in England and Wales
No 471864
Auditors
Deloitte & Touche LLP
Merchant bankers
N M Rothschild & Sons Limited
Stockbrokers
UBS Investment Bank 
Registrar to the ordinary shareholders
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Telephone: 0870 702 0134
Email: web.queries@computershare.co.uk
Website: www.computershare.com
Principal paying and conversion agent and
registrar to the convertible bond holders
J P Morgan Chase Bank
1 Chaseside 
Bournemouth BH7 7DA
Company information
Northern Foods plc Financial calendar, Company information 69
                       Shareholder services and helpline
Shareholders who change address, or who want to have their
dividends paid directly into their bank account should write to 
the Registrar, Computershare Investor Services PLC, at The Pavilions,
Bridgwater Road, Bristol, BS99 7NH. If they require some other
information about their holding, shareholders can contact the
Registrar, Computershare Investor Services PLC on the dedicated
Northern Foods shareholder information telephone line: 0870 702 0134
or email their enquiry, indicating that they are a Northern Foods
shareholder, to web.queries@computershare.co.uk.
Shareholder information on the internet
The Northern Foods website: www.northernfoods.com provides access
to shareholder information, including our annual and interim reports,
share price and recent share price trends, financial highlights and
results presentations to analysts, as well as a link to the Registrar,
Computershare Investor Services PLC at www.computershare.com.
The link to our Registrar allows shareholders to access their individual
shareholder details. These details are protected and shareholders will be
required to pass an identity check to access their personal information.
This link also allows shareholders to download stock transfer, dividend
mandate and change of address forms.
Electronic proxy voting
Shareholders wishing to appoint a proxy electronically via the internet
should refer to the instructions contained in the circular sent to
shareholders with this report.
Dividend mandates
Shareholders may choose to have dividends paid electronically into
their UK bank or building society account, using the BACS system.
This process ensures that the amount of the dividend is passed
directly into their account, as cleared funds, on the date the payment
is due. Confirmation of payment is contained in a dividend tax voucher
which is posted to shareholders’ registered addresses at the time 
of payment. This voucher should be kept safely for future reference.
Any shareholder wishing to adopt this method of payment should
complete a dividend mandate form, which can be found attached 
to the last dividend warrant. Alternatively, a form can be downloaded
from the Registrar’s website or requested by calling the above
telephone helpline on 0870 702 0134.
Capital gains tax
The base cost of a Northern Foods ordinary share at 31 March 1982
for capital gains tax purposes is 75.8 pence. This figure is the adjusted
price to reflect the effect of the rights issue in January 1992, the 
one-for-one capitalisation issue in August of the same year, and 
the demerger of Express Dairies plc (now Arla Foods UK plc) on 
30 March 1998.
Any gain arising on disposal may also need to be adjusted to take
account of indexation allowances and, since these adjustments will
depend on individual circumstances, shareholders are recommended 
to consult their financial advisers.
Investor information
70 Investor information Northern Foods plc
              Central functions
Northern Foods Corporate Headquarters
2180 Century Way, Thorpe Park, Leeds LS15 8ZB
Telephone: 0113 390 0110
Technical Services Centre
Farnsworth House, Lenton Lane, Nottingham NG7 2NS
Telephone: 0115 986 8231
Shared Service Centre
Trinity Park House, Fox Way,Wakefield WF2 8EE
Telephone: 01924 831300
Ambient division
Fox’s Biscuits
PO Box 10, Batley WF17 5JG
Telephone: 01924 444333
Operations at Batley, Kirkham and Uttoxeter 
Park Cakes
Ashton Road, Oldham OL8 2ND
Telephone: 0161 633 1181
Operations at Oldham and Bolton
Matthew Walker
Heanor Gate Road, Heanor, Derbyshire DE75 7RJ
Telephone: 01773 760121
Frozen division
Green Isle Foods
I.D.A. Industrial Estate, Naas, Co Kildare, Ireland
Telephone: 00 353 45 848000
Operations at Naas, Boyle, Gurteen, Portumna and Longford
Dalepak Foods
Dale House, Leeming Bar, Northallerton DL7 9DQ
Telephone: 01677 424111
Walter Hollands
Baxenden, near Accrington BB5 2SA
Telephone: 01706 213591
Fletchers Kara Grain D’Or
Claywheels Lane, Sheffield S6 1LY
Telephone: 0114 234 8171
Operations at Fletchers Bakeries, Sheffield; Kara, Manchester;
and Grain D’Or, Harlesden
Smiths Flour Mills
PO Box 3, Eastgate,Worksop S80 1QY
Telephone: 01909 472216
Operations at Worksop, Langley Mill and Holbeach 
Chilled division
Palethorpes
Maer Lane, Market Drayton TF9 3AW
Telephone: 01630 652271
Pork Farms Bowyers
Queens Drive, Nottingham NG2 1LU
Telephone: 0115 986 6541
Operations at Nottingham; Trowbridge; Dorset Chilled Foods,
Shaftesbury; and Binghams, Sheffield
Trafford Park Bakery
Ashburton Road West, Trafford Park, Manchester M17 1QX
Telephone: 0161 873 7724
The Pizza Factory
Gateside Road, Lenton Lane, Nottingham NG2 1LT
Telephone: 0115 986 8204
Solway Foods
3 Godwin Road, Earlstrees Industrial Estate, Corby,
Northants NN17 4DS
Telephone: 01536 464400
Operations at Corby; and Manton Wood,Worksop 
NFT Distribution
Azalea Close, Clover Nook Industrial Estate, Somercotes,
Alfreton DE55 4QX
Telephone: 01773 523523
Operations throughout the country
Cavaghan & Gray
Brunel House, Brunel Way, Carlisle CA1 3NQ
Telephone: 01228 518200
Operations at Carlisle and Hull
Gunstones Bakery
Stubley Lane, Dronfield, Sheffield S18 6PF
Telephone: 01246 414651
Operations at Dronfield; and La Baguette Doree, Barnsley
Riverside Bakery
Crossgate Drive, Nottingham NG2 1LW
Telephone: 0115 986 6462
Pennine Foods
Drakehouse Crescent,Waterthorpe, Sheffield S20 7JG
Telephone: 0114 247 6864
Fenland Foods
Turnpike Close, Earlesfield Industrial Estate, Grantham,
Lincolnshire NG31 7XU
Telephone: 01476 567733
Principal operations
Northern Foods plc Principal operations 71
                                                    72 Notes Northern Foods plc
Notes
    Design and production: 35
Photography: Bill Robinson
Print: St Ives Westerham Press
Northern Foods is one of the 
UK’s leading food producers. 
With a proven reputation 
for quality and innovation, 
our mission is to be the 
supplier of choice to UK 
and Irish retailers in added 
value convenience foods.
Contents
01 Financial highlights
02 Chairman’s review
04 Chief Executive’s operating review
08 Financial review
11 Board of directors and Company Secretary
12 Q&A with the Chief Executive
14 Business review
22 Corporate social responsibility review
26 Report of the directors
31 Directors’ remuneration report
41 Independent auditors’ report
42 Consolidated profit and loss account
43 Consolidated balance sheet
44 Consolidated cash flow statement
45 Reconciliation of net cash flow
to movement in net debt
Consolidated statement of 
total recognised gains and losses
Reconciliation of movements 
in equity shareholders’ funds
46 Company balance sheet
47 Accounting policies
49 Notes to the accounts
67 Five-year record
68 Shareholder analysis
69 Financial calendar
Company information
70 Investor information
71 Principal operations
       Northern Foods plc Annual report 2005
Supplier 
ofchoice
Northern Foods plc
Annual report 2005
Northern Foods plc
2180 Century Way
Thorpe Park
Leeds
LS15 8ZB 
Tel: 0113 390 0110
Fax: 0113 390 0211 
www.northernfoods.com