northern foods plc
2180 century way
thorpe park
leeds
ls15 8zb
tel 0113 390 0110
fax 0113 390 0211 
wwwnorthernfoodscom
making great tasting food
northern foods plc annual report 200607
northern foods plc annual report 200607 designed and produced by 35 communications
food photography david loftus
people and location photography philip gatward
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central functions
northern foods corporate headquarters
2180 century way thorpe park leeds ls15 8zb
telephone 0113 390 0110
shared service centre
trinity park house fox way wakefield wf2 8ee
telephone 01924 831300
technical services centre
biocity nottingham pennyfoot street nottingham ng1 1gf
tel 0115 912 4424 
chilled division
cavaghan  gray
brunel house brunel way carlisle ca1 3nq
telephone 01228 518200
operations at carlisle and hull
fenland foods
turnpike close earlesfield industrial estate grantham
lincolnshire ng31 7xu
telephone 01476 567733
gunstones bakery
stubley lane dronfield sheffield s18 6pf
telephone 01246 414651
pennine foods
drakehouse crescent waterthorpe sheffield s20 7jg
telephone 0114 247 6864
solway foods
3 godwin road earlstrees industrial estate corby
northants nn17 4ds
telephone 01536 464400
operations at corby and manton wood worksop 
the pizza factory
gateside road lenton lane nottingham ng2 1l7
telephone 0115 986 8204
frozen division
dalepak foods
dale house leeming bar northallerton dl7 9dq
telephone 01677 424111
green isle food group
ida industrial estate naas co kildare ireland
telephone 00 353 45 848000
operations at gurteen longford naas and portumna 
walter hollands
baxenden near accrington bb5 2sa
telephone 01706 213591
bakery division
fox’s biscuits
po box 10 batley wf17 5jg
telephone 01924 444333
operations at batley kirkham and uttoxeter 
matthew walker
heanor gate road heanor derbyshire de75 7rj
telephone 01773 760121
principal operations
contents
01 highlights
02 chairman’s review
04 chief executive’s review
08 performance review
26 corporate responsibility report
32 board of directors and company
secretary
33 report of the directors
35 corporate governance report
40 directors’ remuneration report
52 statement of directors’ responsibilities
53 independent auditors’ report – group
54 consolidated income statement
55 consolidated balance sheet
56 consolidated cash flow statement
57 reconciliation of net cash flow
to movements in net debt
consolidated statement of 
recognised income and expense
consolidated statement of 
changes in equity 
58 notes to the consolidated 
financial statements
83 independent auditors’ report – company
84 company balance sheet
85 company cash flow statement
company statement of 
recognised income and expense
company statement of changes 
in equity
86 notes to the company financial
statements
93 five year record
94 shareholder analysis
95 financial calendar
company information
96 investor information
ibc principal operations
northern foods is in the business of making great tasting 
food from our 19 sites across the uk and ireland we produce
outstanding branded and retailer own brand ready meals
sandwiches  salads pizza biscuits and puddings
our divisions
chilled
£4467m
continuing revenue up 74 
to £4467m 200506 £4161m
frozen
£2445m
revenue up 27 to £2445m
200506 £2381m
bakery
£1 97 3m
continuing revenue declined by 51
to £1973m 200506 £2078m
front cover moroccan cous cous and tortellini with sweetflamed peppers for sainsbury’s operating highlights
 group successfully refocused on attractive market segments
 disposals successfully completed ahead of scheduled time and budget £2112m gross proceeds
 chilled division simplification continues driving improved performance with divisional operating
margin
1
significantly stronger at 50 200506 29
financial highlights
 continuing profit before taxation up 212 at £400m 200506 £330m 
 adjusted eps
2
148 ahead at 652p 200506 568p
 loss for the period £225m 200506 £50m reflecting restructuring costs and completion 
of disposal programme
 strong cash management free cash flow
3
£830m 200506 £306m net debt
4
more than 
halved to £1742m 200506 £3631m
£m 200607 200506
continuing operations
revenue 8885 8620
profit from operations 582 582
profit before taxation 400 330
adjusted earnings per share eps 652p 568p
group
profit before taxation and restructuring items 413 451
free cash flow 830 306
loss per share 460p 103p
dividend per share 425p 425p
3 1
underlying revenue
5
up 31
212
profit before taxation up
212 to £400m
 148
adjusted eps up 148 to 652p
northern foods plc highlights 01
1
operating margin is the ratio of profit from operations before restructuring items for continuing businesses to continuing revenue
2
adjusted earnings per share eps is basic eps for continuing operations before restructuring items and is reconciled to earnings per share in the financial statements 
3
free cash flow is net cash from operating activities adjusted for special pension contributions less net capital expenditure less net interest net capital expenditure is purchase of property
plant  equipment ppe less grants received and proceeds from sale of ppe
4
net debt is defined as total borrowings including both short and long term bank loans bonds loan notes and finance leases less cash equivalents and short term investments
5
underlying revenue excludes the impact of currency rate changes product categories no longer manufactured and discontinued operations
 throughout this statement an asterisk denotes results for continuing operations except where otherwise stated and profit is stated before restructuring items ‘continuing’ operations 
exclude businesses which were sold ‘discontinued’ in 200607 ’restructuring items’ which relate to significant restructuring events and the impact of the fletchers fire in the 52 weeks ended 
31 march 2007 are presented as a separate ‘restructuring items’ column within their relevant consolidated income statement category presentation of these items in a separate column 
helps to provide a better indication of the group’s underlying business performance ‘restructuring items’ include costs or income associated with the restructuring of businesses gains or 
losses on the disposal of businesses and assets and financial instrument gains and impairments arising from the group’s restructuring activities
  02 chairman’s review northern foods plc
chairman’s review
following a year of transition
northern foods is a simpler leaner 
and more competitive business
anthony hobson
chairman northern foods plc chairman’s review 03
overview
this has been a year of transition 
for northern foods a year ago we
set out our plans to create a focused
and competitive company capable
of driving improved shareholder
returns we proposed a radical
restructure of northern foods 
to create a strong financial and
operational platform for future
growth i am pleased to report that
we have made measurable progress
against our stated objectives
our share price has reflected this
progress as we delivered a total
shareholder return of 297 during
the year ended 31 march 2007
in january 2007 we successfully concluded
the disposal of five businesses chilled pastry
cakes speciality bread flour milling and chilled
distribution these businesses represented
40 of the prior year’s group revenue but 
a contributed profit from operations of only
£13m for the year we concluded that these
businesses were not core and that other
owners had a better opportunity to achieve 
an appropriate return the disposals were
achieved ahead of time and in excess of our
£200m target we also delivered the first
benefits from our chilled division simplification
programme we have realised a £9m saving 
in the first twelve months of our two year
central cost reduction programme and
embedded a rigorous culture of cash and
capital management generating £830m 
in free cash flow
northern foods now comprises a portfolio 
of five focused businesses – ready meals
sandwiches  salads frozen biscuits and
puddings – operating across our chilled
frozen and bakery divisions – in both the
retailer own brand rob and branded arenas
each business unit has real potential for future
performance improvement and is led by a
strong management team with a clear vision
and strategy for growth whilst performance 
in some areas particularly biscuits has
disappointed progress in the year particularly
in the chilled division demonstrates the
ability of these teams to create value for 
our customers and shareholders
y our board
significant change in the business has been
accompanied by change in your board your
chief executive since 2004 pat o’driscoll
stepped down from the board on 1 february
2007 she led the business through a period 
of transformation beginning the process 
of transition to a lower cost more effective
and efficient business this culminated 
in the successful delivery of our disposal
programme in january 2007 i would like 
to express my appreciation and that 
of the board to pat for her leadership of
and dedication to northern foods
pat also created a strong management 
team from this team she was succeeded 
as chief executive by stefan barden with
effect from 5 february 2007 stefan joined
northern foods in january 2006 as executive
director of the chilled division latterly
assuming additional responsibility for 
the bakery division stefan has extensive
experience in the food industry most 
recently as managing director of heinz uk
and ireland from 2003 to 2005 since joining
northern foods he has begun the process of
delivering a step change in the performance 
of our chilled business his deep knowledge 
of the food industry combined with his
understanding of northern foods means 
he is well positioned to deliver value for 
our customers and our shareholders alike
we also welcomed tony illsley to the board 
in september 2006 as a nonexecutive
director tony’s experience of the food sector
including roles as president of pepsi cola
international asia pacific and president 
of walkers snack foods has proved of
immense value to the board
summary
northern foods is a simpler leaner and more
competitive business we are building upon 
a solid foundation with a strong focus 
on our retained businesses and a talented
management team in place we have much
work to do but we are totally committed 
to realising the potential of this business 
for our employees our customers and our
shareholders
anthony hobson
30 may 2007
performance
in 200607 we achieved continuing underlying
revenue growth of 31 while continuing
profit before tax rose by 212 the group’s
return on net assets rona increased by
12 as we made good progress in reducing
our asset base and in generating returns from
our investments our pension deficit has 
been substantially reduced and net debt more
than halved creating the capacity to consider
careful and selected future investment
during the past year we have taken decisive
action to focus the group and establish a
strong financial and operational foundation 
on which to build future profitable growth
we have disposed of underperforming and
noncore assets enhanced cash flow rebased
the dividend to reflect the size of the new
group and reduced the burden of corporate
central costs whilst ensuring effective
governance processes lie at the heart of
everything we do the total cost of restructuring
was £554m resulting in a loss for the year 
of £225m
the markets in which we operate remain
fiercely competitive our customers require
exceptional service and product quality and
our cost base is under continual pressure from
rising input prices future progress will depend
on leveraging the heritage innovation and
operational skills of our business to drive
selective growth and better profitability we
have talented people and the right businesses
to deliver on our objectives our focus is on
building performance delivering outstanding
food and excellent customer service introducing
exciting innovation and continuing to deliver
rigorous cash management this will ensure
that we deliver value for our shareholders
dividend
following the rebasing of the final dividend
last year to reflect the scale of the new group
the board is recommending a full year dividend
of 425 pence per share 200506 425 pence
per share including a final dividend of 
275 pence per share
our employees
this has been a year of very significant 
change for our business i would like to extend
the board’s thanks and appreciation to all
northern foods’ employees both those who
continue to work in our retained businesses
and corporate centre as well as those who
have left to work elsewhere the smooth and
efficient transition of our disposed businesses
to new owners has only been possible through
the collective effort of many people the
foundation we have built during the year 
is strong and a credit to the team we now
have in place 04 chief executive’s review northern foods plc
chief executive’s review
we will return northern foods to 
steady top and bottom line growth 
by making great tasting food that
shoppers want to buy again and again
stefan barden
chief executive northern foods plc chief executive’s review 05
delivering our agenda
the past year has been one of 
real progress for northern foods
the strategic review announced in
may 2006 set out our plans to create
a firm foundation on which to build
we set out to
 create a more focused business around
strong brands and growing retailer own 
label relationships through a major 
disposal programme
 simplify our chilled division
 achieve strong positive cash generation 
and effective capital management and
 reduce corporate central costs
i am pleased to report that we have successfully
delivered our disposal programme and have
achieved measurable progress against our
other objectives providing a firm foundation
for future growth across northern foods
creating a foundation for future growth
from this sound foundation i believe we can
deliver operational and revenue improvements
for the future
we have a clear strategy to
 focus on attractive market segments
 partner with customers who require
quality innovation and high levels 
of service
 deliver through a low cost high
performance business model
attractive market segments
we will focus particularly on markets with strong
growth potential which reflect the consumer
drivers of convenience indulgence and a healthy
balanced lifestyle five of our market segments
grew by an average of 9 last year – ready meals
sandwiches salads pizza and christmas puddings –
and in four of these segments we were ranked
number one or two in terms of revenueanother
key market for us is biscuitswhile it is not a major
sales growth opportunity for us we recognise
significant profit improvement potential and 
we remain committed to achieving this
these six segments account for 87 of our
revenuetop line growth will be limited to where
this can be delivered profitably in some areas 
we are capacity constrained but investment 
will be limited to ensure adequate returns are
achieved while we will continue to exit business
which remains unprofitable
partnering selected customers
we partner with customers and invest 
in assets that can give them competitive
advantage in their product ranges since we
focus on the premium tiers in retailer own
brand rob ranges – such as finest extra
special or the best – our products are
disproportionately important in building
retailers’ own brand images we strive to
deliver ‘shopper loyalty’ and above average
sales growth for retailers – not just products
our customers ask for slightly different things
but in general they all agree that they want
 great tasting food
 made safely
 delivered correctly and
 at the right price
success will come from continuing to listen 
to our customers and profitably delivering what
they require better than other manufacturers
and we are working to deliver this success
 independent tests show that many 
of our products taste better than those 
of our competitors repeat purchase rates 
for many of our products are regularly
amongst the best in our markets
 our food safety processes and technologists
are amongst the very best in the country
we are the only food manufacturer with 
a food laboratory that has dual accreditation
from the uk government’s accreditation
service ukas this covers both our food
testing laboratories and on site technical
evaluation activities and means we are 
able to deliver independent third party
audits and assessments we have been
instrumental in codifying many of the
chilled food industry’s hygiene and
manufacturing policies and standards
 our service delivery to customers remains
consistently at the very highest levels
we regularly receive customer accolades
and awards in this area we are building 
a reputation as a ‘can do’ manufacturer
able to respond to customer requests
quickly be it step changes in product
demand or delivering a high quality 
new product brief within days and
 our products are seen as being good value
for money although we do not focus on
lower quality ‘value’ products
low cost operating model
our strategy is being delivered through the
expert management teams we have in place 
in each of our retained businesses each team
has responsibility and accountability for its
own performance each knows its market and
customer base and can respond quickly and
profitably to opportunities and challenges 
in their target market
y ear on y ear
market growth 
ready meals
6
sandwiches
7
salads wet and prepared
8
pizza frozen and chilled
8
christmas puddings
9
biscuits
8
average growth
we are focused on attractive
markets growing at a 
weighted average of 6
6
tns mat 250307
7
tns impulse food on the go mat 250307
8
ac nielsen scantrack mat 240307
9
internal estimate including retail and own brand 
catering events and other
7
13
15
9
1
1
6 06 chief executive’s review northern foods plc
chilled division
our ready meals business competes in 
a market created by northern foods and 
ms in partnership some 30 years ago
this business has been one of our most
challenging in recent years in spite of making
great products we have failed to deliver an
acceptable level of profitability excess market
capacity and a high ‘cost to serve’ operating
model have adversely impacted margins
our chilled simplification programme is
starting to deliver demonstrable improvement
the uk retail ready meals market is now worth
more than £15 billion and is growing at nearly
7 annually
6
 increasingly constrained market
capacity coupled with our complexity
reduction programme should allow margin
recovery ahead of considering new investment
our ready meals revenue continues to
improve and in the last quarter we became
market leader with a 19 value share
10

our great tasting meals reflect the unique
skills of our chefs and production teams
coupled with our ingredient sourcing and
manufacturing capabilities these drive 
high levels of repeat purchase and resultant 
retailer demand on which we are capitalising
concurrently we are working to improve our
margins through correctly pricing our core
business and ensuring we charge fully for 
the value of meeting customers’ additional
requirements
our ready meals recovery programme will
take time to deliver and may not be a smooth
path but we believe we have the right plans in
place to continue this business unit’s recovery
our other chilled business unit is sandwiches
 salads this business requires an exceptional
focus on service due to the very short shelf life
of its chilled products less than 48 hours from
time of manufacture and sometimes even
shorter we have a critical role in helping
retailers maximise their own sales while
minimising waste by delivering their daily
orders exactly as requested this is a real
challenge in the changeable british climate
which causes day to day orders to fluctuate
significantly
the largest market within this business unit is
sandwiches the uk multiple retailer sandwich
market is worth £577m and is growing at 13
annually
7
 consumers are reducing homemade
consumption in favour of quality products in
an ever increasing choice of carriers breads
and fillings northern foods is ranked number
three in this market with a 14
7
share and
our two sandwich customers tesco and ms
are the market leaders offering good growth
potential for us our customers’ summer
product launches will benefit from our strong
innovation capability with many of our breads
and wraps coming directly from our in house
traditional bakery
the wet and prepared salads markets together
are worth £407m and are growing at an
average of 15 annually
8
 healthy living 
and summer eating are driving demand and
northern foods’ market share reached 18 
in 200607
8
 putting us at number two in 
the market again outstanding service and
premium quality credentials underpin our
successwe operate close to capacity in the peak
summer months and have committed to a
£9m expansion of our corby production facility
frozen division
our frozen business produces and markets
strong brands which we continue to expand
and develop in pizza we have the uk’s
number one brand goodfella’s with 315 
of the frozen segment
8
 we are not however
restricted to frozen pizza the total uk pizza
market is valued at nearly £700m and growing
at 9 annually
8
 in addition to goodfella’s
we produce the leading rob chilled pizza
range for tesco we are currently exploring
how best to leverage our market leadership
and technology capability across the combined
frozen and chilled segments at the same time
we continue to grow and consolidate our
leadership in frozen successfully innovating
and refreshing the product range indeed
goodfella’s solos was named the fastest
growing brand in the uk in 2006
11

with frozen pizza representing 51 of
divisional revenue our other frozen food
brands represent valuable parts of our
portfolio both the green isle and donegal
catch brands are market leaders in ireland and
are well placed to capitalise on healthy eating
trends for example our donegal catch fish
business has grown 20 over the past year
through the delivery of healthy innovative
product ranges we see significant scope to
expand our product portfolio through different
routes to the consumer and we will update 
on these programmes when appropriate
meanwhile grassington’s food co our 
meatfree range of vegetable meals and meal
accompaniments has consolidated its position
in the uk our total meatfree market share
has overtaken linda mccartney to become
number two in the market
8
 at the same 
time we are working to resolve our areas of
underperformance within the frozen division
which have been adversely affected by healthy
eating trends the meat and pastry markets
have faced significant challenges in the past
year as consumers change their diets as a
result our dalepak meat grill and holland’s
meat pie brands have disappointed and we are
working hard on plans to improve performance
to meet our strict shareholder return criteria
10
tns 12 weeks ending 250307
11
the grocer january 2007
we manage a portfolio of strong retained businesses
ready meals sandwiches  salads pizza biscuits puddings northern foods plc chief executive’s review 07
bakery division
in biscuits we participate in one of the largest
snacking product markets worth £187 billion
annually but a combination of our limited
market share at 11
12
and annual market
growth of only 1
8
make this a difficult space
in which to operate however after a recent
profit decline we do believe that we have
stabilised the business and that there is good
value to be created through focusing on product
innovation and selected investment our
initiatives focus on simplification automation
and innovation driven top line growth
to deliver this improvement better we have
reorganised our management team around
three segments each of which addresses a
different consumer need requires a different
customer sales pitch and has a different
supply chain structure and assets
 ‘everyday’ biscuits under the fox’s brand
continues to meet consumer needs through
its strong stable of subbrands including
rocky echo and classic and will be
supported by expansion into the ‘indulgent’
and ‘children’s biscuits’ segments where
market growth exists
 in ‘seasonal’ biscuits we enjoy segment
leadership with a portfolio led by the
creations brand and a large range of
bespoke products for retailers production 
is complex and labour intensive and 
will benefit from targeted automation
 in ‘retailer own brand’ biscuits we are a
strong and innovative partner for our retailer
customers and will exploit surplus capacity
from our asset base where a low cost
position can be sustained
overall we look to deliver medium term
improvement in our biscuits business as our
newly installed teams implement their plans
finally our puddings business has good
growth potential over two thirds of all
christmas puddings purchased are made 
by us
9
and we have identified a further
expansion opportunity in the premium
christmas market this year we will test
market a premium matthew walker christmas
pudding drawing on original victorian recipes
this will be the definitive christmas pudding
consumer research has helped develop an
exciting concept from the ‘original’ christmas
pudding maker and retailers will benefit from
the branded price premium
reduced factory complexity costs will result
from offering the brand to many of our
smaller trade customers who currently have
their own bespoke recipes at high cost to both
partners a successful test will result in a full
launch in 2008
outlook
the past year has been one of real progress 
for northern foods as we delivered against
our key objectives successfully completing 
our disposal programme and creating a
focused business for the future
this year will see further progress in the
transition of the group we expect to see
continued opportunities for revenue growth
and improved performance particularly 
in the attractive chilled markets however
challenges remain especially in biscuits
where we are experiencing a sustained
increase in input costs
nonetheless i am confident that our increased
focus and improved financial position mean
we are well placed to deliver steady top 
and bottom line growth and create value 
for shareholders
stefan barden
30 may 2007
ready meals
our great tasting ready meals
which reflect the unique skills of 
our chefs and production teams
are driving market growth
sandwiches
 salads
our customers will benefit from 
our strong innovation capability and 
our outstanding reputation for service
pizza
in pizza we have the uk’s 
number one brand – goodfella’s
we have a strong innovation 
agenda for this year
biscuits
biscuits is a profit not a top line 
growth opportunity for us
puddings
building on our heritage this year 
will see us launch the ‘definitive
christmas pudding’ under 
the matthew walker brand
12
internal estimate combined retail and own brand share
this year will see further progress 
in the transition of the group 08 performance review northern foods plc
performance review
the northern foods operating board trying out 
some new sushi recipes are from left to right
kuldip kular paul kaye kieran carolan graham hunter
jez maiden stefan barden and julian slade
our performance culture is 
driven from the top through 
our five business units and their
experienced management teams northern foods plc performance review 09
performance overview
following a year of transition
in which we successfully completed
the disposal of businesses representing
40 of total annual revenue
northern foods is a simpler leaner
and more competitive business
we are building on a solid foundation
with a strong focus around our 
five businesses and an experienced
management team in place
the continuing business achieved a 212
increase in profit before tax this was driven
by reduced financing costs resulting from 
both the successful disposal programme 
and excellent cash management profit from
operations was maintained at the prior year
level we have made encouraging progress in
improving profitability in our chilled division
with its operating margin markedly improved
to 50 200506 29 corporate centre
costs which are allocated to divisions have
been reduced by over £9m during the year
a significant component of the target savings
identified at the start of the year
these improvements in performance have
been offset by a year on year decline in the
profitability of the frozen and bakery divisions
while we continued to deliver good growth in
pizza driven by our market leading goodfella’s
brand the biscuits business in particular has
continued to underperform
our renewed focus on cash management 
has delivered a strong cash performance with
improved free cash flow and together with
disposal proceeds net debt more than halved
this will allow future growth through cautious
investment in existing capacity and selective
acquisition
the company has reached agreement to 
make a special pension contribution of
£570m funded from disposal proceeds
once the final special pension contribution 
of £220m is made in june 2007 the group’s
post retirement benefits deficit of £86m 
at 31 march 2007 is expected to have been
eliminated measured under international
financial reporting standards ifrs subject
to market conditions no further special
contributions will be required to fund the
principal uk pension scheme
with common systems and service functions
successfully established and delivering
significant cost and synergy benefits we have
adopted a simplified operating structure for
our five retained business units across each
business we have strong leading brands or high
growth retailer own brand rob positions
each business offers opportunities to capitalise
on selective market growth margin
improvement and cost optimisation each
business is led by a dedicated management
team and by devolving decision making 
to these teams while retaining appropriate
corporate governance we are sharpening
decision making improving responsiveness 
to customer needs and streamlining costs
summary financial performance
the group has balanced top line revenue
growth with opportunities to reduce costs
improve margin and generate cash continuing
revenue increased to £8885m 200506
£8620m with underlying revenue up 31
driven by a return to growth in the attractive
chilled market as expected full year operating
margin at 66 was slightly below the prior
year margin of 68 with the second half year
ahead of the first half h2 operating margin
71 200506 72 reflecting our seasonal
bias to the winter period full year profit from
operations was maintained at £582m in line
with prior year 200506 £582m
profit before taxation and restructuring items
for continuing operations improved to £400m
200506 £330m with an effective tax rate
of 203 200506 160 earnings per share
for continuing operations before restructuring
items increased by 148 to 652p 200506
568p with restructuring items for continuing
operations after taxation of £39m 200506
£116m profit for the period for continuing
operations was £280m 200506 £161m
as reported at the first half year contribution
from discontinued businesses was significantly
reduced with profit from operations of £13m
in the period prior to their sale 200506
£121m as a result total group profit before
taxation and restructuring items reduced to
£413m 200506 £451m with significant
restructuring costs in the disposed businesses
including a book loss on disposal the group
had an overall loss for the period of £225m
200506 loss £50m
free cash flow was £830m 200506 £306m
the strong focus on cash generation saw
capital expenditure reduced to £295m
200506 £540m only 52 of depreciation
200506 84 net debt more than halved
to £1742m 200506 £3631m despite
special pension contributions paid of £530m
key programme delivery
in the year we delivered against each of the
four key programmes announced in may 2006
 business disposals completed ahead of 
the targets for both value and timescale
we disposed of five businesses which were
noncore operated in lower relative margin
categories or which required significant
restructuring the sale of nft our chilled
distribution business was concluded in
august 2006 and chilled pastry cakes
speciality bread and flour milling in
january 2007 the disposed businesses’
profit from operations was £13m in the
year up to the date of disposal gross
disposal proceeds were £2112m
£8885m
continuing revenue increased to
£8885m 200506 £8620m
1 55
rona return on net assets
up to 155 200506 143
£830m
free cash flow increased to 
£830m 200506 £306m 10 performance review northern foods plc
 chilled simplification this programme 
has begun to address underperformance 
in this core business as demonstrated 
by an improvement in operating margin
from 29 to 50 a wide range of
initiatives are reducing complexity through
product rationalisation standardisation 
of production between plant facilities
streamlining of low volume production
runs and ongoing overhead cost reduction
 reduced central costs the transition 
to a core focused group has supported 
a £9m reduction in corporate central 
costs during 200607 nonessential 
costs have been eliminated and a number
of nonstrategic services outsourced
the adoption of a flatter business structure
has enabled elimination of the divisional
management tier further cost savings
have been identified once transition
support agreements providing services 
to the divested businesses end allowing
delivery of the total target set of £12m
over two years
 cash and capital management excellent
progress has been made in embedding
rigorous cash management each business
has focused on driving cash flow focusing
on essential capital investment eliminating
excess inventory reducing overdue
receivables optimising supplier terms
and exploring the sale of unrequired assets
this has driven a significant reduction in
working capital capital spend and interest
charges compared to the previous year
key performance indicators
alongside profit and debt the group uses
several financial key performance indicators
kpis to measure progress as follows
kpi 200607 200506
revenue growth 
underlying 31 29
operating margin 66 68
return on net assets 
rona 155 143
free cash flow £830m £306m
debt ratio 18 times 25 times
return on invested 
capital roic 78 84
each kpi is defined and assessed within this
review nonfinancial kpis are featured in 
the corporate responsibility report
revenue
the group pursues selective revenue increase
through targeting market growth and innovation
we pursue growth only in areas where margin
is enhanced unprofitable business is exited
through selective range rationalisation
continuing revenue increased to £8885m
200506 £8620m with underlying revenue
growth of 31 although growth rates varied
markedly by division underlying volumes 
grew by 31 while average sales prices across
the group remained flat the overall market
remained highly competitive and only limited
price increases were delivered to recover 
rising input costs sales to the group’s top five
customers by value represent 76 200506
77 of total revenue
operating margin  rona
profit from operations before restructuring
items for continuing operations was in line
with prior year at £582m 200506 £582m
a strong performance in chilled was offset 
by a decline in frozen and bakery all three
divisions benefited from savings in corporate
central costs and a lower pension charge
operating margin reduced slightly to 66
200506 68 following relatively benign
raw material price volatility conditions
the second half saw a return to rising prices
for several key commodities and ingredients
given very limited input cost recovery through
increased selling prices the group has focused
on improved productivity and commercial
innovation a structured programme of 
value analysis to reduce costs has included
improved sourcing investment in efficiency
orientated capital projects and outsourcing 
of nonstrategic activities
in addition to improving operating margin
each business is targeted to improve its 
asset utilisation the combination of these 
is measured through return on net assets
rona – profit from operations divided 
by average operating assets invested in the
business rona improved from 143 to
155 reflecting a reduction in operating
assets through reduced capital investment 
and working capital
we delivered against each of our four key programmes
 business disposals  reduced central costs
 chilled simplification  cash and capital management northern foods plc performance review 11
profit from continuing operations
net finance costs before restructuring items
decreased by £70m to £182m 200506
£252m reflecting strong cash generation
from the combination of completion of the
disposal programme and successful cash
management across the group as a result
profit before taxation and restructuring items
for continuing operations increased by 212
to £400m 200506 £330m the effective
taxation rate increased to 203 200506
160 with a benefit from the successful
resolution of previous tax computations offset
by an additional provision for tax charges
the charge for restructuring items before
taxation for continuing operations was £56m
200506 £157m reflecting significantly
lower levels of rationalisation within the more
stable retained businesses primarily in central
cost reduction and a reduction in the number
of frozen manufacturing facilities partly
funded by a £25m profit on sale of land
the charge for restructuring items comprised
£36m in cash and £20m in noncash items
profit for the period from continuing
operations was £280m 200506 £161m
profit from discontinued operations
profit before taxation and restructuring items
for the discontinued operations was £13m
200506 £121m the chilled distribution
and flour milling businesses continued 
to perform well however profitability 
was significantly reduced in chilled pastry
cakes and speciality bread the speciality
bread business suffered a major fire at its
sheffield facility in july 2006 with the
resultant loss claim settled with insurers for
£340m including selfinsurance of £40m in
november 2006 of which £300m principally
relating to the reinstatement of the plant 
was transferred to the new owner on disposal
sale of the chilled distribution business
completed in august 2006 for gross proceeds
of £512m including £67m in loan notes
repayable within twelve months disposal of
the remaining four discontinued businesses
completed in january 2007 for £1600m in
cash following shareholder approval
a restructuring charge of £563m 200506
£455m in the discontinued businesses
comprised a profit of £24m 200506 £455m
charge from operations with a £190m net
gain arising from the fire in speciality bread
offset by £166m of rationalisation charges
primarily in chilled pastry and cakes and a
book loss of £587m 200506 nil on the
business disposals the rationalisation charge
comprised £116m in cash and £50m in 
noncash items
the loss for the period from discontinued
operations was £505m 200506 £211m loss
loss for the period
total group loss for the period was £225m
200506 £50m adjusted eps increased 
by 148 to 652 pence 200506 568 pence
including restructuring items and discontinued
operations basic eps was a loss of 460 pence
200506 loss 103 pence
dividend
subject to shareholder approval the final
dividend of 275 pence per share 200506
085 pence per share is payable on 24 august
2007 to shareholders on the register at 27 july
2007 in line with the rebasing of the dividend
last year the total dividend payable in respect
of 200607 is 425 pence per share 200506
425 pence per share this represents adjusted
eps cover of 153 times supported by the
strong cash generation of the group future
dividend growth will be driven by performance
improvement with dividends covered between
15 times and 2 times adjusted eps and fully
covered by free cash flow in the medium term
chilled 503
frozen 275
bakery 222
continuing revenue
by division
chilled 503
frozen 275
bakery 222
chilled 382
frozen 326
bakery 292
profit from operations 
by division
chilled 382
frozen 326
bakery 292 12 performance review northern foods plc
£4467m
continuing revenue up 74 to
£4467m 200506 £4161m
50
continuing operating margin 
50 200506 29
£222m
continuing profit from 
operations up 820 to 
£222m 200506 £122m
chilled
ms nutritionally balanced hoisin duck  noodles northern foods plc performance review 13
13 1
continuing rona more than
doubled to 131 200506 64 
we made encouraging progress in
improving profitability and margin 
in our chilled division 14 performance review northern foods plc
we search the world for great food
ideas and are passionate about the
quality of ingredients we use
tiger prawns – one of the key
ingredients in many of our recipes northern foods plc performance review 15
comprising two continuing
businesses – ready meals and
sandwiches  salads – the division
delivered underlying revenue growth
of 75 on continuing revenue 
of £4467m 200506 £4161m
average selling prices were 10
higher while volumes grew across
both businesses
continuing profit from operations for 
the chilled division increased by 820 to
£222m 200506 £122m this encouraging
improvement in profitability was achieved
through a combination of growth innovation
and cost reduction the division also benefited
most from the reduction in corporate central
costs and pensions the improved profitability
together with greater control over capital
investment and working capital delivered an
improved rona of 131 200506 64
operating margin improved to 50
200506 29 having suffered from 
a high cost to serve in very competitive
market conditions the division has begun 
to target efficiencies rationalise unprofitable
products and deliver better value for 
its superior service and product quality
while these programmes are ongoing
the initial benefits are visible and encouraging
the discontinued businesses – chilled pastry
and chilled distribution – delivered a profit
from operations of £11m 200506 £55m 
prior to disposal on sales of £1755m
200506 £3316m
the ready meals business has made initial
progress in the first year of its simplification
and profit improvement programme it is
addressing a high cost to serve which has
reflected excessive complexity and cost 
across a fragmented product range and
manufacturing base additionally this business
has experienced a long term reduction in its
share of existing customers’ trade the ready
meals team has focused on stabilising sales
volumes securing new customer business
optimising the manufacturing footprint based
around centres of excellence specialising in
individual product areas removing nonvalue
added cost and improving prices where this 
is supportable initial signs are encouraging
underlying revenues increased by 65 in
ready meals with the fourth quarter seeing
growth with all customers regaining our
number one market position an active
innovation programme included the
introduction of a range of nutritionally
balanced ready meals soups and organic
vegetable accompaniments excellent repeat
purchase patterns allow us to demonstrate the
value we deliver to our customers and
consumers alike at the same time the
consolidation of ready meal production onto
the retained sites following the disposals will
allow greater efficiency as well as improved
quality to be delivered from a smaller asset
base once operating performance improves
selective further capacity additions will be
carefully considered
there remains much work to do within this
business including continuing to fulfil
customer needs in a highly competitive and
unconsolidated market but selective growth
demand for high quality premium food and
opportunities to improve manufacturing and
supply chain efficiency bode well for the
ongoing recovery programme
the sandwiches  salads business continued
to perform strongly building on excellent 
sales and improved operational efficiency
underlying revenues rose 81 benefiting
from consumer requirements for convenience
a healthier eating positioning and good
demand during the warm summer period
with further growth as customers expand
their convenience space investment in
selective capacity expansion will occur in 
a careful and targeted way in order to ensure
adequate returns are achieved
in the sandwiches market value for money
ingredient quality and visual perception are
key consumer requirements premium ranges
are also expanding and there is an increasing
drive to maximise freshness across the product
range we continue to drive improved cost
efficiency from our key manufacturing facilities
good sandwich demand was complemented
by growth in both wet and prepared salads
the former including products such as
premium pasta salads and the latter salads 
as meal solutions supported by exemplary
customer service responsive to sudden
improvements in the weather this growing
business focuses on premium products
combining indulgence with the inherently
healthy appeal of the sector this business also
produces rob chilled pizza and sushi with the
uk chilled pizza market overtaking the frozen
pizza market in scale and increased consumer
interest in sushi
sushi
these californian rolls and salmon nigiri 
we make for ms are perfectly aligned 
with healthy eating trends
wraps
this tesco hoisin duck wrap is just one of
the many wraps we make to complement 
our classic ‘triangle’ sandwiches and rolls
soup
we think we make the best tasting soup 
in the market including this ms tomato
and basil soup
markets
 ready meals
 sandwiches  salads 16 performance review northern foods plc
£2445m
revenue up 27 to £2445m
200506 £2381m
7 8
operating margin 78 
200506 96
£190m
profit from operations 
down 170 at £190m 
200506 £229m
frozen
two choices from the goodfella’s solos range speciale left and bbq chicken right northern foods plc performance review 17
154
rona declined to 154
200506 181
we continue to deliver solid 
margins and we see potential for 
growth in sales and profitability 18 performance review northern foods plc
a great topping is at the heart of 
a good pizza vine tomatoes are 
one of our favourite ingredients
vine tomatoes add great flavour to our pizzas northern foods plc performance review 19
with strong brands and leading
positions in several markets the
division delivered steady growth in
the year with revenue of £2445m
200506 £2381m and underlying
revenue up 26 our leadership 
in pizza is supported by strong 
local positions in fish  vegetables
only the pastry and meat grill
categories have disappointed
average selling prices were 05 higher with
overall volumes increasing by 21 continuing
profit from operations for the frozen division
decreased 170 to £190m 200506 £229m
this reflected a reduction in profitability in 
the struggling pastry and meat grill categories
by contrast a robust performance was
delivered in pizza and fish  vegetables
the difficult trading backdrop in pastry and
meat grills impacted the divisional operating
margin which declined to 78 200506
96 also reflecting the impact of increased
volumes through promotional activity and
rona declined to 154 200506 181
pizza continued to achieve good growth with
revenue 75 higher as the goodfella’s brand
successfully built on its market leadership in
the uk and irish market the goodfella’s brand
continued to consolidate its position through
range extension responding to healthier eating
trends by reducing overall fat and salt content
removing hydrogenated vegetable oils hvos
and developing a ‘lighter eat’ while continuing
to deliver superb restaurant quality products
solos continued to grow in the convenient
‘single eat’ segment and was named the fastest
growing brand of 2006 by the grocer magazine
leadership in pizza was supported by the
market leading donegal catch brand in fish
and the green isle vegetable brand donegal
catch drove strong revenue growth in ireland
up 20 with range extensions including
unbreaded fish fillets and recipe ideas as
consumer demand for fish continues to grow
reflecting its healthy attributes delivering
ongoing manufacturing efficiency is also key
and 2006 saw the closure of the boyle facility
in ireland allowing breading operations to be
rationalised onto one site the green isle brand
grew 7 within the irish market
within the division the frozen pastry and
meat grill businesses disappointed holland’s
saw continued decline in sales in the brand’s
core fish shop and frozen retail distribution
channels which were further impacted by 
the hot summer retail margins were impacted
by significant promotional discounting
although some volume was recovered through
the successful launch of the brand into chilled
retail margins are significantly lower in this
channel similarly the own label and copack
pastry business suffered as retailers and
branded producers reduced inventories
the meat  meatfree business continued 
its strategy to move demand progressively
from declining sales of meat products into 
the growing meatfree arena since the launch
of the grassington’s food co brand in january
2006 our meatfree market share has reached
108
8
 nevertheless it will take time for the
meatfree brand to fully replace the decline 
in sales and profitability in the meat grills area
consequently we continue to support product
and brand development in the latter category
grassington’s food co
this vegetable quarter pounder from 
our grassington’s brand is one of 
a range of frozen meatfree snacks
meal accompaniments and main meals
pizza
we worked with the head chef at the 
michelin starred la bottega dei 30 in italy
to create the goodfella’s la bottega range
of premium pizzas
donegal catch
our market leading donegal catch brand
available across ireland brings consumers 
a range of frozen fish ideas including 
100 natural fillets of salmon lightly
dusted in bbq spices
markets
 pizza
 fish  vegetables
 pastry
 meat  meatfree 20 performance review northern foods plc
£197 3m
continuing revenue declined 
by 51 to £1973m 
200506 £2078m
86
continuing operating margin 
declined to 86 
200506 111
£1 7 0m
continuing profit from operations
down 264 to £170m 
200506 £231m
bakery
the matthew walker pudding – perfect for celebrating christmas northern foods plc performance review 21
we are going back to our roots and
investing in our traditional strengths 
and values to reinvigorate our fox’s 
and matthew walker brands
204
continuing rona declined 
to 204 200506 254 22 performance review northern foods plc
great biscuits need great chocolate – 
at fox’s we use lots of it to coat 
our biscuits
smooth milk chocolate – few people can 
resist this most indulgent of ingredients northern foods plc performance review 23
in recent years the bakery division
has been a key profit generator 
for the group however from 
the second half of the prior year
market conditions have been 
difficult for most of the divisional
operations and profitability 
has declined steadily
as a result the division was streamlined 
during the year with the sale of three
businesses including the loss making cakes
business this has allowed management to
focus on stabilising the performance of the
core biscuits business including the key 
fox’s brand and to explore opportunities 
to grow the niche puddings business which
has year round production for the seasonal
christmas market
the continuing businesses experienced 
overall revenue decline to £1973m 200506
£2078m underlying revenue was down 
by 51 in the full year although following 
a drop of 92 in the first half this decline
decelerated in the second half to 18
as market share in the biscuits business was
stabilised and puddings delivered a steady
christmas performance average selling 
prices were 21 lower reflecting the impact 
of heavy promotion in the biscuit market
in spite of increasing commodity prices
continuing profit from operations for the
bakery division declined by 264 to £170m
200506 £231m both businesses suffered
some profit erosion although the largest
impact was in biscuits likewise operating
margin declined to 86 200506 111
impacted by a loss of volume in biscuits
which reduced overall efficiency due to the
high operational leverage of the business and
the impact of increasing commodity costs
action is in hand to reduce costs and improve
promotional spend effectiveness reduced
capital investment helped limit the decline 
in rona to 204 200506 254
the discontinued businesses delivered a profit
from operations of £02m 200506 £66m
prior to disposal on revenue of £1419m
200506 £2446m
biscuits performance gradually stabilised as
the year progressed despite adverse impacts
on volume from the hot summer following 
a weak 200506 exit underlying revenue
declined by 59 in the year reflecting 
a decline in fox’s key sectors of everyday
biscuits and chocolate biscuit bars brand
performance in these core segments improved
during the second half and our share of these
core segments ended the year ahead of prior
year at 96
13

the second half year saw investment 
behind the fox’s brand including new 
product development such as the launch 
of our naturally fox’s range and a new
premium range of delicious cookies these
were supported by prime time tv advertising
and a packaging refresh which successfully
helped to build product trial these initiatives
are helping to offset the impact of continued
aggressive promotional activity in the overall
market and continued increases in raw
material costs particularly impacting flour
cocoa and dairy products production
improvements at the three biscuits sites
included commissioning of a new £5m high
speed automated production line at the batley
facility further small scale capital improvements
are targeted to improve cost efficiency
coupled with overhead cost reduction 
to aid profitability separate management
teams now focus on three different segments
organised around our fox’s branded all year
round products our seasonal ranges best
known under the fox’s creations name and
rob each of these has different consumer
customer and supply chain requirements
our puddings business had another good
christmas and maintained clear market
leadership in this niche sector continued
interest in premium products saw the launch
of a wide range of extremely high quality own
label puddings both for lovers of traditional
recipes and for those seeking alternatives such
as nutfree or glutenfree puddings building
on its strong position christmas 2007 will 
see us test market the matthew walker brand
this will create an exciting premium branded
consumer offering to sit alongside our existing
rob range and the foodservice and export
range of christmas puddings
biscuits – retailer own brand
extremely chocolatey milk and white
chocolate rounds for ms – one of our
most popular retailer own brand lines
naturally fox’s
launched to meet growing consumer
demand for natural wholesome ingredients
this range of traditionally baked biscuit recipes
includes dark chocolate macadamia nut
and wholemeal yorkshire shortbread
matthew walker
this year sees us build on extensive expertise
to create the new premium matthew walker
christmas pudding brand
markets
 biscuits
 puddings
13
internal estimates capital management
embedding a culture of cash and capital
management across the business has required
each business to assess its capital requirements
limited revenue growth combined with
rationalisation of unprofitable products has
enabled a reduced capital programme to be
delivered at just £295m 200506 £540m
while opportunities exist for selective capacity
expansion in growth markets capital expenditure
in existing products and markets is expected
to remain at or below depreciation over the
next two years in addition working capital
levels have been reviewed in inventories
accounts receivable and accounts payable
and working capital reduced by £336m during
the year 200506 £97m increase surplus
unproductive assets were identified and 
£67m of cash was received in addition 
to the business disposal programme
the success of our approach is demonstrated
by the group’s strong ‘free cash flow’ the cash
generated by the business before business
disposals special pension contributions
dividends and financingtrade investment
activities free cash flow generated in the 
year was £830m 200506 £306m
in addition the business disposal programme
generated gross proceeds of £2112m ahead
of the target set in may 2006 principally in
cash on completion with £67m in secured
loan notes due in august 2007 disposal fees
totalled £93m the disposals were made debt
and cash free including adjustment against a
target working capital based on average levels
and with the benefit of the rights to the
insurance proceeds relating to the rebuild 
of the sheffield facility
during the year special pension contributions
were made amounting to £18m relating 
to the existing agreements with the trustee 
of the principal uk scheme £10m on disposal
of nft and an escrow payment of £25m 
on disposal of the other businesses a lower
dividend payment of £115m 200506
£442m resulted from the rebasing of the final
and interim dividends net debt was reduced
by £1889m 200506 £368m increase
balance sheet net debt  roic
as a result of the strong net cash flow the
group’s ‘debt ratio’ being net debt to ebitda
14
calculated under ‘frozen uk gaap’ the
accounting system used when the group’s
current financing facilities were established
improved to 18 times 200506 25 times
net debt reduced significantly to £1742m
200506 £3631m
the disposal of underperforming assets at a net
loss resulted in total equity declining to £1212m
200506 £1521m‘return on invested capital’
roic measuring the pretax return on
shareholders’ invested capital
15
 declined
slightly during the year to 78 200506
84 benefiting from lower average invested
capital as a result of the recent disposal but
reduced by the lower level of group profit
pensions
within its defined benefit pension schemes
northern foods has been working closely with
the trustee to increase protection of member
benefits at an affordable cost for the company
and its shareholders significant progress has
been made towards achieving this as follows
 future service accrual – following closure
of the principal uk scheme to new
entrants in march 2005 the company 
cash contribution rate is 99 of payroll
a cash cost in 200607 of £140m
200506 £216m the future cost 
of delivering benefits is currently under
review in light of current benefit costs 
and the scheme investment strategy
 past service deficit funding – the company
made £18m of previously agreed special
contributions towards funding the past
service deficit in the principal uk scheme
during 200607 following completion 
of the disposal programme the company
agreed to pay a further £35m during the
year 200607 and a further £22m to be
paid in june 2007 thereafter no further
special pension contributions are currently
anticipated or required under the
agreement
16
 this will remain subject 
to periodic review between the company 
and the trustee to assess the ongoing
impact of changes in key assumptions
including interest rates inflation rates
asset performance and mortality
as a result of these actions the deficit 
for total group retirement benefit schemes
calculated under international accounting
standard ias 19 reduced from £902m 
pretax £637m net of tax at 1 april 2006 
to £86m pretax £21m net of tax at 
31 march 2007 the company and the trustee 
are currently conducting a joint investment
review to identify opportunities to reduce
future volatility of the scheme funding position
financing and treasury management
the group has a centralised treasury function
which operates within a policy framework
approved by the board the policy was
reviewed by the board in 200607 and 
the board receives a monthly update on
compliance the principal areas of treasury
management and respective policies cover 
the management of liquidity risk interest 
rate risk and currency risk
liquidity risk management ensures sufficient
debt funding is available for the group’s day 
to day needs board policy is to maintain
reasonable headroom of unused committed
bank facilities in a range of maturities at least
twelve months beyond the year end current
committed facilities are a 2010 £460m
revolving facility and senior loan notes
2012–2017 us155m and £543m private
placement bonds part of the latter is
repayable at face value in 2007 if proceeds
from the business disposals have not 
been reinvested in acquisitions or capital
investment the facilities remain committed
and available subject to certain conditions
which are in line with typical commercial
borrowing arrangementsthe principal
conditions require sufficient coverage of 
the last twelve month ebitda to each of
net debt and interest charge ‘covenants’
which are tested half yearly see debt ratio
under kpis above
interest risk management balances debt
financing as a tool to improve returns
through leverage in the capital structure
with the potential for higher interest rates
to impact profits negatively board policy 
is to operate with fixed rate borrowings
within a range of 20 to 50 of total 
net borrowings over the medium term
although the group may operate outside
this range in the short term as applied 
at year end following the major business
disposals the us private placement bonds
were raised as fixed interest debt at the
year end 81 of the group’s net debt was
fixed in this way board approval is required
for use of any interest rate derivative
‘interest cover’ at year end the ratio of
ebitda to net interest charge measured
under ‘frozen’ uk gaap had improved to
62 times 200506 61 times
currency risk management occurs at a
transactional level for example in purchasing
ingredients in foreign currencies and at a
translational level for example in relation
to irish operations or foreign currency debt
board policy is to hedge transactional
exposures using forward foreign exchange
contracts wherever material and feasible
while translational exposures are generally
unhedged the us private placement debt
has been hedged using currency swaps of
similar maturity subject to a one off right
for the counterparty bank to break the swap
after seven years
risks and uncertainties
the operation of a public company involves
a series of risks and uncertainties across 
a range of strategic commercial operational
and financial areas northern foods has a
robust internal control and risk management
process as outlined in the corporate
governance report which is designed to
provide assurance but which cannot avoid
all risks below we have outlined potential
risks that could impact the company’s
performance causing actual results to 
vary from those experienced previously 
or described in forward looking statements
within this document these risks are
24 performance review northern foods plc
14
ebitda is earnings before interest tax depreciation and
amortisation it is calculated as profit from operations 
before restructuring items plus depreciation and amortisation
15
roic is calculated as adjusted profit from operations 
being profit from operations before restructuring items for
continuing operations adjusted to exclude the nonservice
charge elements of pension costs divided by average
invested capital net equity adjusted to exclude retirement
benefit obligations net of deferred tax and net debt
together with accumulated goodwill previously written off
16
no past service deficit contributions will be required subject
to ongoing achievement of the assumptions underpinning
the companytrustee agreement the ias19 deficit reported
in these accounts would have been eliminated as at 
31 march 2007 if the disposal based special pension
contributions had been completed as of that date monitored on an ongoing basis through 
the company’s risk management processes
additional risks and uncertainties currently
unknown or excluded from the analysis below
may also have an adverse material effect on 
the company
 customer relationships – the company
seeks to manage the risks presented by 
its consolidated customer base and the
highly competitive environment that
characterises the industry through its 
high service high quality low cost model
targeted across a portfolio of markets
where it has strong positions this is
supported by product development
programmes and by maintaining and
developing strong robust relationships 
with customers
 consumer trends – exposure to changing
consumer trends can impact profitability
the company seeks to manage these
through portfolio changes with greater
weight towards growth trends which
include health convenience and indulgence
for example by managing new product
innovation to expand sales in these areas
while managing the exposure to declining
market sectors the company is working
actively with its retail customers both
through its brands and its actions on
healthy eating set out in the corporate
responsibility report
 operational disruption – the short lead
times involved in servicing our customers
can lead to an adverse impact from
disruption of our manufacturing and
distribution facilities for example by fire
health and safety failure problems of supply
information systems failure workforce
action or environmental incident this 
is managed through a process including
systems of standard operating procedure
regulatory compliance dedicated steering
groups monitoring audit consultation 
and multiple sourcing insurance cover 
is maintained where appropriate but 
may not cover all risks and losses
 new legislation regulation and litigation 
– northern foods manages a range 
of regulatory requirements regarding 
the production sale safety labelling
compositioningredients and disposal of 
its products compliance monitoring and
proactive initiatives seek to manage this
risk litigation claims and proceedings 
can have an adverse effect on the
company’s results
 change management recruitment and
retention – ongoing change requires close
management attention and the company
has experience of managing such risks 
and has action plans to mitigate them
including board oversight and project
management processes failure to
implement and complete change 
can impact financial results employee
recruitment and retention with the latter
also subject to the availability of a suitable
pool of domestic and overseas staff
proactive initiatives for this are included 
in the corporate responsibility report
 managing procurement costs – exposure
to price and supply fluctuations for raw
materials and services is managed by 
a central procurement function to better
negotiate with relationship based suppliers
agreeing forward prices where appropriate
the company seeks to pass on costs
where possible to its customers through
price rises but constraints in achieving 
this can affect the company’s results
 food safety – appropriate product
manufacturing storage and avoidance 
of contamination are critical standard
manufacturing and distribution protocols
are in place together with proven product
recall processes for product recovery
widespread food scares can impact
directly through the sale of a contaminated
product or indirectly through lack of
supply or reduced consumer demand
 financing pensions and taxation – 
the company has committed financing in
place which can only be withdrawn in the
event of a breach of financing agreement
such as covenants when the company
might be restricted in its ability to operate
normally and could be required to dispose
of assets to pay down debt and incur
additional costs pension schemes could
require increases in future company funding
and pension regulation could restrict the
freedom of the company to undertake
certain corporate activities including
disposals and return of capital to
shareholders the company has certain 
tax exposures totalling £280m which are
provided for but which in the event of 
an adverse finding by taxation authorities
could result in a substantial payment of cash
key accounting judgements
taking into account this analysis of risks and
uncertainties the key accounting judgements
which could impact future financial
performance include the following
 pensions – movements in equity markets
interest rates and life expectancy could
materially affect the level of surpluses 
and deficits in the pension schemes
the key assumptions used to value
pension liabilities are set out in the 
notes to the financial statements
 tax – the group carries out tax planning
consistent with a group of its size and
makes appropriate provision based on 
best estimates until tax computations 
are agreed with the tax authorities
 impairment – the group has reviewed the
carrying value of goodwill and fixed assets
and from time to time has impaired
certain fixed asset values on a value in 
use basis future changes in performance
or disposals could impact these values
in addition to its key accounting judgements
the group has significant accounting policies
for revenue recognition foreign currencies
property plant and equipment intangible
assets inventories and derivative financial
instruments and hedge accounting which 
are set out in the notes to the consolidated
financial statements
basis of preparation
this financial information has been prepared 
in accordance with ifrs the comparative
information for 200506 has been restated 
to reflect the impact of the business disposals
in 200607
forward looking statements
forward looking statements are made
throughout this annual report including in 
the performance review the report of the
directors and the directors’ remuneration
report these forward looking statements are
based on a number of assumptions concerning
future events and information currently
available the user of these accounts should
not rely unduly on these forward looking
statements which are not a guarantee of
performance and which are subject to a
number of uncertainties and other facts
many of which are outside of the company’s
control and could cause actual events to differ
materially from those in these statements
although northern foods believes that the
expectations reflected in those forward 
looking statements are reasonable it cannot
assure users that those expectations will prove
to be fulfilled in addition to those factors
described under ‘important factors’ could
cause actual results to differ materially from
our expectation including economic and
political conditions changes in laws regulation
and accounting standards customer
relationships and actions effectiveness of
spending and marketing programmes and
unusual weather patterns no guarantee can
be given of future results levels of activity
performance or achievements
comparative statements
in this report northern foods makes 
certain statements with respect to its 
market position or its products’ or its brands’
market positions by comparisons with third
parties or their products or brands these
statements are based on both internal 
sources and independent sources and 
are accurate to the best of the knowledge 
and belief of northern foods
northern foods plc performance review 25 26 corporate responsibility report northern foods plc
at northern foods we are committed 
to making great tasting food in a
responsible way
corporate responsibility report
special ‘sherpascopic’ platforms help 
employees work safely at height northern foods plc corporate responsibility report 27
in 200607 northern foods made
good progress with its corporate
responsibility cr agenda
we are committed to making great food in a
responsible way and our cr programme is built
around three core principles that all activities
should be aligned with our business strategy
that these activities form part of the company’s
approach to managing risk and reputation and
that we comply with legislation and good
governance standards
to fulfil that agenda cr initiatives are managed
under three headlines
 delivering a trusted supply chain 
 building a good and safe place to work
 promoting healthy balanced lifestyles
in 200607 a year in which the food industry
has been under major scrutiny this framework
has stood us in good stead it has helped us
develop and communicate our response to
significant issues such as the obesity debate
consumer concerns about food provenance
carbon emissions food waste and skills
shortages
it is clear that scrutiny of the food industry
will not dissipate the stern review on the
economics of climate change published 
in october 2006 added urgency to the
environmental debate and in march 2007 
the government set out proposals for a 
new climate change bill this bill sets out 
a framework for reducing carbon emissions 
to which northern foods along with the 
rest of the industry is responding
at the same time a growing number of
consumers are considering wider supply 
chain issues when deciding what to eat
they are putting pressure on retailers and
manufacturers to give them answers to
questions such as ‘how healthy is my food’
‘where has it come from’ and ‘has it been
made with minimal environmental impact’
accordingly in reporting on cr activity during
200607 we have described our key cr
initiatives provided commentary on some of
the external drivers affecting our business and
where possible we have provided updates on
targets published at the start of the financial
year some targets are under review reflecting
the new shape of northern foods following
the disposal programme and this is indicated
where appropriate in the report
delivering a trusted supply chain
northern foods manages 
a number of initiatives under 
the trusted supply chain strand 
of its responsibility agenda
these relate firstly to our impact 
on the environment in the key areas 
of energy water and waste and
secondly to our activities around
responsible sourcing
every year we procure over £500m of
ingredients raw materials and services from
over 4000 suppliers we make food in 19
production sites and we deliver to over 1000
supply points by driving efficiencies across 
this supply chain both energy costs and
carbon emissions can be reduced similarly
minimising manufacturing and packaging
waste both reduces costs and environmental
impact
our actions reflect both our statutory
responsibilities and northern foods’ own
initiatives to better manage the resources 
it uses our responses also help us to address
one of the key consumer issues that has
emerged in the last twelve months ‘can you
tell me that my food has been made with
minimal impact on the environment’ it is a
question that we and the industry as a whole
have to answer
overall we have made good progress in 
this area as set out below our previously
published targets for energy water and waste
reduction are being reviewed in light of the
business disposal programme completed in
january 2007 and food industry sustainability
strategy fiss targets suggested in 2006
we await the publication by the department
for environment food and rural affairs defra 
of the fiss champions’ group’s work in
determining the feasibility of these targets
the measures necessary for making progress
and the means of monitoring success
northern foods has chaired the fiss
champions’ group on waste and has positively
contributed to the sustainability agenda
energy
northern foods has continued to meet its
obligations under the uk climate change levy
agreement in meeting our third biannual
milestone target in december 2006 we have
been able to drive a steady reduction in
energy consumption since the 1999 base year
this reduction has been achieved through
concerted energy saving efforts at site
coordinated by on site energy champions
in partnership with the carbon trust we have
been working towards estimation of both the
total carbon footprint for our uk operations
and the potential for minimising individual
product specific carbon footprints the total
carbon footprint study carried out during the
year confirmed the key contributors to our
footprint and will allow further development
of our carbon reduction strategy on individual
product specific carbon footprints we are now
engaging with the carbon trust to consider
in partnership with other food manufacturers
and retailers the development of a single
methodology for determining product specific
contributions as at present no such agreed
methodology exists
saving energy
driving energy savings in the boiler house
derek bailey is one of our on site energy
champions
saving energy responsible sourcing
our long term commitment to transparent
sourcing strategies for our materials has
helped us address consumers’ interest about
the provenance of their food clear policies
and processes provide tangible evidence of 
our commitment and expertise in an area
which is increasingly under the spotlight
for example our industry leading farm
assurance code of practice first published in
2000 was updated in december 2006 and was
relaunched to our supplier base it remains the
case that all products we produce are nongm
we also seek to source products where
possible from the uk and ireland
our integrated farm management approach
minimises reliance on pesticides and our best
in class animal welfare code protects animals
throughout their life cycle and supports the
five basic freedoms freedom from thirst
hunger and malnutrition freedom from
discomfort freedom from pain injury and
disease freedom to express normal patterns of
behaviour and freedom from fear and distress
our commitment to sedex a secure web
based system on which companies maintain
data on labour standards at their production
sites is ongoing we have contributed to the
development of a sedex risk assessment tool
to aid identification by companies of the 
most vulnerable parts of the supply chain
the business will continue to encourage
membership of sedex across its major
suppliers in 200708
case study energy reduction
in a systematic approach to reducing
energy it was recognised that the use 
of monitoring and targeting could help 
support efficiency gains for example by
installing controls in a number of chilling
units at one site we were able to trigger 
the defrost cycle as and when needed
instead of relying on an automatically 
timed defrost cycle elsewhere hot water
clarifiers used in steam generation were
replaced with heat exchangers enabling
more efficient heating and usage of water
whilst a vacuum regeneration desiccant 
drier was installed in the compressed 
air system resulting in a significant 
energy saving
water 
we have continued our programme of driving
efficient water usage through the extension 
of the application of monitoring and targeting
methodology for example our carlisle ready
meals site achieved a reduction of over 24000
cubic metres of water through a unique
metering system that controls the flow of
water to the potato blanchers continual real
time monitoring allowed the minimisation 
of water usage and targeting improvement
resulted in increased efficiency
waste 
our overall objective is to reduce total waste
by reducing waste going to landfill and by
increasing the amount of waste being recycled
to achieve our ambition of diverting all waste
away from landfill we have entered into an
agreement with encycle llp a waste to energy
infrastructure initiative for the conversion of
our nonrecyclable waste into bio fuel which
will then be used to generate green electricity
the first encycle waste to energy plant which
northern foods and others in the food industry
have played a major role in supporting is
expected to ‘go live’ in the next 15 months
once operational this process will allow
northern foods to rapidly reduce waste being
sent to landfill sites to zero in the uk
in a further move to address the waste
agenda northern foods became one of the
first three food manufacturers to sign up to
the courtauld commitment in november
2006 in doing so we joined forces with the
uk’s major retailers in helping deliver the
commitment’s aims of
 designing out packaging waste growth 
by 2008
 delivering absolute reductions in packaging
waste by march 2010
 identifying ways to tackle the problem 
of food waste
we are currently working with the waste
resources action programme wrap to
identify the opportunities for reduction that
will allow us to meet these stated aims
case study improving the segregation 
of waste 
by improving the segregation of waste
gunstones bakery was able to improve
performance to the extent that over 
90 of the total waste generated is now 
diverted away from landfill cardboard 
and plastic waste is recycled separately
where appropriate whilst recyclable food
waste is disposed of to a local incinerator
for energy recovery
charting health and safety
health and safety boards are regularly
updated and visible for all employees to see
dustfree operations
an extraction fan helps ensure the
atmosphere remains clear when 
handling flour
28 corporate responsibility report northern foods plc building a good and safe place 
to work
northern foods’ focus on supporting
its employees is captured in our
good and safe place to work
initiatives these recognise our
responsibilities to our people and
address our need to attract retain
and develop talent in an industry
characterised by skills shortages
for us a good place to work is a safe place 
to work and employee health and safety is
therefore at the top of our agenda we have
focused on driving improvement in this area
and are pleased with progress to date our
approach is diverse ranging from specific
initiatives to tackle issues such as working
safely at height through to ensuring that 
our multicultural workforce is equipped 
with information in the language they need
to work safely
in a sector characterised by a growing skills
gap we believe that a reputation for great
people management is the best way to 
attract and retain talent we want our
employees to benefit from their work with
northern foods whether they are being
encouraged to acquire a new skill on the 
shop floor or they are a manager developing
their career to that end we have continued
our focus on supporting learning and
development and encouraged a culture of
open communication where ideas can be
shared we have also worked hard during the
year to support initiatives which will benefit
the wider industry such as our sponsorship 
of the northern foods foundation for science
and technology a bursary scheme for students
of food science or related degree courses
safety  wellbeing
reducing the accident frequency rate 
in our 200506 annual report we committed
to reducing our accident frequency rate by
30 over three years and significant progress
has been made protecting our employees
through the delivery of a good health and
safety performance is a priority for northern
foods and progress in this area is the first
agenda item at the management team’s
monthly update and on the main board
agenda during 200607 northern foods
revisited many of its health and safety
standards a key outcome of this review was
the introduction of a revised audit protocol
with increased focus on operational risks
this generated detailed improvement plans
where standards were below expectation
this emphasis on wider safety management
improvement has helped us deliver a 28
reduction in the accident frequency rate in 
the 200607 financial year well ahead of the
15 target we set and building on a 21
reduction in 200405 this is a strong result
but we believe an even greater improvement 
is achievable
to deliver sustained improvement all senior
personnel and those with direct operational
responsibility have specific health and safety
objectives as part of their performance
contracts and training packages have been
developed for middle level managers
as part of the group wide focus on operational
risk reduction several initiatives were
implemented to reduce the incidents of
process related fires these included a review
of oven fire suppression standards auditing on
fryer operations and the completion of several
workshop events at which all sites with oven
equipment were represented this process 
was led by the chief executive as a result 
of these initiatives and investment in site
improvements the group has achieved a 
near 50 reduction in process fires and 
a very robust reporting culture is now in place
to further embed a safety first culture into
day to day operations internal best practice
awards were successfully launched this year
the business also achieved six royal society
for the prevention of accident awards further
underlining the commitment to occupational
health and safety across the group
case studyworking safely at height
an initiative across the sandwiches  
salads business unit has helped to reduce
work at height risk and ensure compliance
with the work at height regulations 2005
new sherpascopic platforms which provide
additional legs for stability and a safe work
zone were introduced to replace ladders
users were retrained and improved
inspection procedures were implemented
as a result there have been no accidents 
in this financial period involving employees
working at height employees have
responded positively to the procedures 
and a best practice model for the rest 
of the business has been created
learning and development
northern foods supported a range of initiatives
in this area during the year in october 2006
the company formally signed a unique multi
union multisite national learning agreement
in which it set out its goals to promote
support and monitor learning activities for 
all employees progress is being monitored
quarterly through a joint northern foods and
unions committee
northern foods plc corporate responsibility report 29
creating a safe 
place to work
accident frequency rate 200607
reportable accidents per million hours worked
northern foods has consistently reduced 
its accident frequency rate year on year – 
we’ve made good progress but believe 
an even greater improvement is achievable
123 200304
112 200405
88 200506
56 200607 30 corporate responsibility report northern foods plc
in january 2007 the company launched the
northern foods foundation for science 
technology this charitable body will provide
grants to 30 new students a year throughout
their degree course at three of britain’s leading
food science education establishments leeds
nottingham and reading universities the
scheme which will be available to the
september 2007 intake will raise awareness in
schools of food industry career opportunities
and enhance the number and quality of
applications to food science or related degree
courses
over the year the company also worked
closely with improve the sector skills council
for the food and drink industry in its efforts 
to address the skills gap
northern foods also remains committed to 
the provision of learning centre resources
which provide our workforce with access to 
a wide range of basic skills training such as
english language or it basics however the
business disposal programme affected our
target set last year of doubling these resources
to twelve within three years the company now
operates three centres including one opened
during 200607 and we believe six operational
centres by 200809 is now an appropriate
target planning has begun for two further
centres to open in 200708
open communication
in a year of major transition which saw
employee numbers reduce from over 20000
to 10700 northern foods has placed great
emphasis on communication consultation 
and recognition to ensure that people have
understood the impact or indeed the
opportunities of change accordingly open 
and regular communication has been a
characteristic of the year with key information
cascaded in a timely and consistent manner
backed up by comprehensive support materials
such as detailed qas the communications
process was further supported by the provision
of an independent advice helpline
the company’s formal employee consultation
mechanism the northern foods forum met
twice in the year both at a national and
divisional level to discuss and consult on
employee issues whilst the local site forums
remain an active part of the consultation
mechanism the divisional forum is under
review in line with the company’s adoption 
of a business unit operating structure
also introduced during the year was an
induction pack for all shop floor employees
which is translated into polish portuguese 
and urdu which after english are the most
common languages spoken across the
business this pack means that essential
messages on food safety and health and 
safety can be delivered
case study employee opinion survey
as part of a strategy to increase levels 
of employee communication and
involvement an annual employee opinion
survey is conducted by the sandwiches 
salads business unit a total of 2000
employees were able to participate in the
200607 survey and the process attracted 
a response rate of 80 with responses 
fed into the business planning process
the survey helps the business to highlight
and respond to issues raised and build on
positives this year as a result of feedback
the business unit ran a number of internal
training days for joint consultative
committee members aimed at enhancing
communication processes across the
business also new in 200607 was an
employee support counselling service 
in which volunteers were trained to work
alongside their colleagues to help resolve
any issues they may have both inside and
outside of work
promoting healthy balanced
lifestyles
as one of the uk’s leading food
manufacturers we have a
responsibility to encourage healthy
eating and to help consumers make
informed choices about the food
they eat
our approach in this area is also in line with
the government’s 2004 white paper choosing
health this states that the food industry has 
a role in helping to change the uk’s eating
habits and in helping to tackle diet and 
health issues such as reduction of salt intake
and obesity
during the year we have continued our focus
on ensuring that the food we make includes 
a wide choice of ‘healthy’ options and we are
pleased with the progress we have made
we have also supported initiatives which help
consumers make informed choices about the
food they are eating
providing choice
at the beginning of the financial year we set 
a target of increasing the provision of healthier
eating options in all of our main product
categories over the next three years
a combination of product innovation and
recipe reformulation during 200607 means
that northern foods is now able to provide
healthier eating options across all of its main
categories this successfully builds on a
platform of 40 in 200506 thereby
achieving our target within one year
studying food science
food science and technology students 
at nottingham university one of three
universities involved in a new student
bursary scheme the northern foods
foundation for science  technology
developing 
future talent  northern foods plc corporate responsibility report 31
opinions vary as to the contribution of
individual food products to a healthy diet and
a healthy balanced lifestyle for some it means
taking ingredients out such as reducing salt
content removing hydrogenated vegetable oils
hvos or producing low calorie versions of
classic favourites for others it can mean
putting goodness in for example incorporating
‘super foods’ such as seeds broccoli or berries
into recipes or using only organic ingredients
we define ‘healthier’ foods as those which
offer nutritional benefits over their standard
products we seek to provide consumers with
real options for choosing healthier alternatives
both through innovation and through the
improvement of existing recipes examples of
products introduced during the year include 
a range of nutritionally balanced ready meals
organic soups and an egg salad sandwich with
added omega 3
salt reduction
good progress on salt reduction continues
through ongoing product reformulation across
our branded and own label ranges we have
worked closely with the fsa since 2003 in
support of its target to reduce consumer salt
intake to 6g per day by 2010 and in march
this year we welcomed the fsa’s proposed 
self reporting framework which will allow us 
to report on reductions salt content is shown
on all our products to aid consumer choice
removal of hvos
the company has continued with its planned
removal of hvos the majority of branded
products are now free from hvos with the
remaining hvos to be removed by september
2007 we have also worked closely with our
customers to help them achieve their own
targets for this area
case study naturally fox’s
a range of great tasting biscuits using
simple store cupboard ingredients and
nothing else is the promise of naturally
fox’s the new range of five biscuits
including wholemeal y orkshire shortbread
and dark chocolate and macadamia nut
were successfully launched in january 
2007 to meet growing consumer 
demand for products made with natural
wholesome ingredients with no additives 
or preservatives the ingredients and the
recipes are detailed on the pack to 
reinforce the ‘naturally’ positioning
informing choice
helping the next generation to understand
how to eat more healthily was the driver
behind our continued sponsorship of the
phunkyfoods programme in 200607
phunkyfoods is a curriculum based schools
programme which teaches primary school
children fundamental life skills relating to
nutrition physical activity and food choice
all lesson materials are written and developed
by independent registered nutritionists and
teachers and draw from a wide range of
sources including the british nutrition
foundation the british heart foundation 
and the fsa
as a result of northern foods’ funding over
the last two years 100 schools in yorkshire
have now taken part in the programme
research of the pilot in september 2006
showed that by following the lesson plans
provided children’s ability to identify healthier
food choices increased over a six month
period the success of these early pilots means
that phunkyfoods has now attracted the
support of local education authorities from
across the ukadditionally through northern
foods’ mentoring phunkyfoods has also
attracted further food industry sponsorship
allowing it to be rolled out nationally it is
anticipated that over 375 schools will be
participating in the programme at the start 
of the new school year in september 2007
to further support informed consumer choice
the company also took steps during the year
to introduce front of pack nutritional labelling
across its branded products a process which is
being implemented on a rolling basis over the
next two years we continue to monitor the
debate regarding guideline daily amounts
gdas and ‘traffic lights’ labelling
charity and community involvement
during the year the group funded a number 
of community related programmes these
included ongoing support for phunkyfoods 
and sponsorship of the business in 
the community bitc rural action award
which recognises companies that can
demonstrate the positive impact of their
business in rural areas our work with local
communities is driven primarily at site level
while programmes such as phunkyfoods
demonstrate how an aligned cr programme
can benefit the communities in which we
operate at a wider level in addition to the
above northern foods donated £59600
200506 £89000 to various charities
conclusion
in outlining our cr framework last year we
said that the integration of cr initiatives into
our day to day decision making would help
produce a sustainable approach to our
business that benefits all stakeholders over the
long term in particular many retailers have
made public commitments about cr targets
and suppliers such as ourselves will play an
important role in supporting these targets
we believe we have made good progress
against this objective during 200607 both
through the initiatives outlined above and
through the active role we have played 
behind the scenes in contributing to policy
debate at government and industry level
our overall progress was recognised in may
2007 when northern foods’ approach to 
cr was recognised in the business in the
community ‘100 companies that count’
rankings a business led benchmark of
responsible business practice
continued support for phunkyfoods
encouraging healthy eating through our
continued sponsorship of the phunkyfoods
programme – over 375 schools are expected
to participate from september 2007
promoting healthy
balanced lifestyles  1 anthony hobson
chairman •†‡
joined the board in 2002 and became
chairman in 2005 he is chairman of the
sage group plc and a nonexecutive director
of hbos plc and cenkos securities plc
he was formerly group finance director 
of legal  general group plc from 1987 to
2001 he chairs the nomination committee
4 orna nichionna
senior independent 
nonexecutive director •

†‡
joined the board in 2002 as a nonexecutive
director she was formerly a partner of
mckinsey  company she is a nonexecutive
director of bank of ireland uk holdings plc
bristol and west plc and bupa and is 
a member of the apax partners’ retail 
and consumer advisory board she is 
vice chair of the soil association she is 
the senior independent director and chairs
the remuneration committee
7 tony illsley
nonexecutive director •

†‡
joined the board in 2006 as a nonexecutive
director he was formerly chief executive 
of telewest plc until 2000 and has held roles
with pepsico and colgate palmolive he 
is chairman of plastic logic ltd and of
cachelogic ltd holds a nonexecutive
position with gcap media plc and is 
a trustee of the charity whizzkidz
2 stefan barden
chief executive
joined the board in 2006 as director of the
chilled division and was appointed chief
executive on 5 february 2007 following 
the resignation of pat o’driscoll he was
formerly managing director of heinz uk and
ireland from 2003 to 2005 he has extensive
experience of the food industry having held
roles with iceland mckinsey  company 
and unilever he is a governor of the british
nutrition foundation and also sits on 
the policy issues council of the institute 
of grocery distributors igd
5 david nish
nonexecutive director •

†‡
joined the board in 2005 as a nonexecutive
director he is group finance director of
standard life plc and was formerly executive
director infrastructure of scottish power plc
and prior to that he was group finance
director a position that he held since 
1999 he was formerly a partner with
pricewaterhouse he chairs the audit
committee
8 carol williams
company secretary
joined northern foods in 1990 she is 
head of legal and was appointed company
secretary in march 2005 she is a director 
of ci group services limited
3 jez maiden
chief finance officer
joined the board in 2005 he was formerly
group finance director of british vita plc
a position he held from 2002 prior to that
he was director of finance of britannia
building society and group finance director
of hickson international plc
6 ronnie bell
nonexecutive director •

‡
joined the board in 2005 as a nonexecutive
director he was formerly president of 
kraft foods europe until 2004 he is
chairman of milk link and is a nonexecutive
director of ansell limited and the edrington
group limited
• nonexecutive director

remuneration committee member
† audit committee member
‡ nomination committee member
board of directors and company secretary
1 23
4 56
78
32 board of directors and company secretary northern foods plc report of the directors
the directors of northern foods plc northern foods present their
annual report and the audited financial statements of the company
for the 52 weeks ended 31 march 2007
principal activities 
northern foods is one of the uk’s leading food producers
manufacturing a mix of own label and branded products for retailers
reporting under three divisions chilled frozen and bakery the
business operates in five business units primarily producing chilled
ready meals chilled sandwiches  salads pizza biscuits and puddings
results for the year 
pretax profit before restructuring items for continuing operations was
£400 million 200506 £330 million and for discontinued operations
was £13 million 200506 £121 million pretax restructuring items
for continuing operations was a charge of £56 million 200506
charge £157 million and for discontinued operations was a gain 
of £24 million 200506 charge £455 million the loss on sale 
of discontinued operations was £587 million 200506 £nil
performance review 
a detailed review of the business of the group and its principal
activities including a list of the principal risks and uncertainties facing
the group is set out in the performance review on pages 8 to 25
the performance review and chief executive’s review include details 
of expected future developments of the group
disposals
during the year northern foods successfully completed the disposal
programme which was announced as part of the strategy review on 
31 may 2006
on 31 july 2006 the group entered into a sale agreement to dispose
of the business and assets of nft its chilled distribution business
the disposal completed on 11 august 2006 for a gross consideration
of £512 million comprising £445 million cash together with a
variable rate loan note of £67 million payable to northern foods 
not later than twelve months from completion
on 22 november 2006 northern foods announced that it had
reached agreement for the proposed disposal of its chilled pastry
cakes speciality bread and flour milling businesses for a gross
consideration of £160 million subject to shareholder approval the
resolution was passed at an extraordinary general meeting held on 
9 january 2007 and completion of the sale took place on 13 january
2007 further details of the transaction are contained in the circular 
to shareholders dated 20 december 2007 in the performance review
and in note 11 of the financial statements
dividend 
an interim dividend of 15 pence per share was paid on 30 march
2007 and the directors recommend a final dividend of 275 pence per
share to be paid on 24 august 2007 to shareholders on the register 
on 27 july 2007 under ifrs the final dividend has not been accrued 
in the results to 31 march 2007
directors
the following were directors of the company during the year
s barden
r j s bell
c dyer retired 6 september 2006
a j hobson
a k illsley appointed 2 october 2006
j k maiden
o g nichionna
d t nish
p a o’driscoll resigned 1 february 2007
 nonexecutive directors 
directors’ biographical details are set out on the opposite page
stefan barden who joined the board in january 2006 was appointed
chief executive on 5 february 2007 following the resignation of pat
o’driscoll tony illsley who was appointed to the board on 2 october
2006 retires and as required by the combined code offers himself for
election by shareholders at the annual general meeting in july 2007
being the first annual general meeting following his appointment
under the company’s articles of association and the provisions of the
combined code directors are required to stand for reelection at the
third anniversary of their appointment under these provisions no
director is required to stand for reelection at this year’s annual
general meeting
the executive directors’ service contracts are referred to in the
directors’ remuneration report set out on pages 40 to 51 the executive
directors’ service contracts are terminable by the company giving 
one year’s notice
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
details of the remuneration of individual directors and their interests
in the share capital of the company are shown in the directors’
remuneration report
indemnity of directors and officers
the company’s articles of association include provision for the
indemnity of directors the company secretary and other officers of
the company to the extent permitted by the companies act 1985
this currently permits the company to provide indemnities to cover
defence costs in civil and criminal proceedings the director employee
or officer would still be liable to pay damages and to repay defence
costs to the company if hisher defence was unsuccessful during 2006
the company executed deeds of indemnity for the benefit of each
director of the company in respect of liabilities which may attach 
to them in their capacity as directors of the company or associated
companies these provisions are qualifying third party indemnity
provisions as defined under s310b of the companies act 1985 and
copies are available to shareholders at the company’s registered office
employees and employment policies
northern foods takes its responsibilities to its employees seriously
the group’s policy is to provide opportunities for active participation
and personal development with the goals of motivating individuals
and helping them to enhance their skills and maximise their potential
the group is committed to
 providing equality of opportunity for all existing and potential
employees it aims to treat all of its employees fairly in every
aspect of employment
 ensuring that employees have access to information that enables
them to contribute and participate fully in the group’s
achievement of its objectives
 providing employees with clear and fair terms of employment and
competitive remuneration packages
the company encourages involvement in the company’s performance
in a variety of ways including senior management briefings inhouse
publications and via the company’s intranet the philosophy of
encouraging employees to contribute to the performance of the group
is reinforced by a number of incentive schemes this year will see the
introduction subject to shareholder approval of a new savingsrelated
share option scheme aimed at maximising employees’ involvement
and interest in the success of the company as a whole through share
ownership in addition shareholders will also be asked to approve 
a new performance share plan
northern foods plc report of the directors 33 34 report of the directors northern foods plc
disabled persons
applications for employment by disabled persons are always fully
considered bearing in mind the aptitudes of the applicant concerned
in the event of members of staff becoming disabled every effort 
is made to ensure their employment with the group continues and
appropriate training is arranged it is the policy of the group that
training career development and promotion of disabled persons
should as far as possible be identical to that of other employees
share capital
there were no changes in the company’s share capital during this
financial period details of the share capital are shown in note 30 
in the notes to the financial statements no shares were purchased
during the year under the limited authority granted at the 2006
annual general meeting to make market purchases of up to 10 
of the company’s shares
substantial holders of stock
at the date of this report the company had been notified in
accordance with dtr5 of the disclosure and transparency rules
of holders of shares with 3 or more of the total voting rights 
in the issued share capital of the company from the following
 of total 
voting rights
standard life investments limited 1206
axa sa and its group companies 978
barclays plc and group companies 520
witmer asset management llc 417
grantham mayo van otterloo  co llc 401
allianz se 393
legal  general group plc 325 
corporate responsibility 
northern foods is committed to improving the operational 
and environmental performance of the business details of the
commitments it makes in the marketplace workplace environment
and the community are set out in the corporate responsibility report
on pages 26 to 31
charitable donations
during the year the group donated £59600 200506 £89000 for
charitable purposes it is group policy not to make political donations
and none were made during the financial year
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 were paid on average 44 days 
of receipt of invoice in line with the company’s standard payment
terms 200506 43 days
research and development
throughout the year the company invested across the business in
product development and research further details are set out in the
performance review
financial instruments
information on the group’s financial risk management objectives and
policies and on the exposure of the group to relevant risks in respect
of financial instruments is set out under the heading ‘financing and
treasury management’ on page 24 of the performance review
annual general meeting 
the notice convening the company’s annual general meeting to be
held at 1030am on wednesday 18 july 2007 at the thorpe park hotel
1150 century way leeds ls15 8zb is contained in the circular sent 
to shareholders with this report
auditors 
in the case of each of the persons who are directors of the company
at the date when this report was approved
 so far as each of the directors is aware there is no relevant audit
information as defined in the companies act 1985 of which the
company’s auditors are unaware and
 each of the directors has taken all the steps that heshe ought 
to have taken as a director to make himselfherself aware of any
relevant audit information as defined in the companies act 1985
and to establish that the company’s auditors are aware of 
that information
this confirmation is given and should be interpreted in accordance
with the provisions of section 234a of the companies act 1985
deloitte  touche llp acted as auditors for the 52 weeks ended 
31 march 2007 and have expressed their willingness to continue 
in office as auditors of the company a resolution proposing their
reappointment will be submitted to the company’s annual 
general meeting
by order of the board
carol williams 
company secretary
30 may 2007 
report of the directors
continued northern foods plc corporate governance report 35
compliance
northern foods is committed to high standards of corporate
governance the board has overall responsibility for corporate
governance and is accountable to the company’s shareholders 
for good governance
the directors recognise the importance of this responsibility and can
confirm that the company has complied fully throughout the year
with the provisions set out in section 1 of the combined code on
corporate governance ‘the combined code’ published in 2003 
and the associated turnbull guidance as annexed to the listing rules
this section provides a current view of the company’s governance
policies and explains how the company has applied the main and
supporting principles of the combined code
directors
the board
the board determines the strategic direction of the company and
reviews its operating and financial position it has a schedule of
matters specifically reserved to it which can only be amended by 
the board itself and which is reviewed annually
these matters include approval of the overall group strategy and
financial policy membership of the board and its committees
acquisitions and divestments and major capital expenditure this
schedule is available on the company’s website all other matters
relating to the management of the company are delegated to the
operating board within clearly defined limits of authority the board
monitors the performance of management and aims to ensure that
the strategy policies and procedures adopted are not only in the long
term interest of shareholders but also meet the needs of northern
foods’ customers employees suppliers and the local communities in
which it operates the operating board is responsible to the board for
developing the strategy and the overall performance of the group and
for managing the group’s businesses as defined by the board
the board chaired by anthony hobson has seven directors comprising
two executive directors and five nonexecutive directors the executive
directors are stefan barden who joined the company in january 2006
and was appointed chief executive on 5 february 2007 following the
resignation of pat o’driscoll and jez maiden chief finance officer
orna g nichionna is the senior independent director following 
the resignation of colin dyer in september 2006 tony illsley was
appointed to the board on 2 october 2006 as a nonexecutive
director the nonexecutive directors possess a range of skills and
experience and bring independent judgement to bear on issues of
strategy performance and resources that are vital to the success 
of the group
attendance at board meetings and committees of the board
there were eight board meetings held during the year the chairman
held two separate meetings with the nonexecutive directors without
the executive directors being present these discussions covered board
related issues including board structure and succession planning the
nonexecutive directors also met once without the chairman present
to appraise his performance the board holds meetings in london 
and leeds
the following table shows the number of meetings of the board
audit remuneration and nomination committees held during the year
and the number of meetings attended by each director the directors
attended board and committee meetings wherever possible unless
personal circumstances prevented their attendance as shown
number of 
meetings held
1 april 2006 to board
1
audit
2
remuneration
3
nomination
4
31 march 2007 845 3
number of meetings attended
s barden 88 na na na
r j s bell 88 na 45 13
c dyer
5
44 02 13 01
a j hobson 88 44 45 33
a k illsley
6
44 22 22 11
j k maiden 88 na na na
o g nichionna 88 44 55 33
d t nish 78 44 35 23
p a o’driscoll
7
77 na na na
notes
1 a j hobson is chairman of the board
2 d t nish is chair of the audit committee 
3 o g nichionna is chair of the remuneration committee 
4 a j hobson is chair of the nomination committee 
5 c dyer resigned from the board on 6 september 2006
6 a k illsley was appointed to the board on 2 october 2006
7 p a o’driscoll resigned from the board on 1 february 2007
senior executives below board level are periodically invited to attend
board meetings to make presentations on their areas of responsibility
the chairman is not a member of the remuneration committee but
attends by invitation
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 chairman’s other significant commitments and any changes during
the year and up to the publication of this report are detailed in his
biography on page 32 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
board balance and independence
the company complies with the requirement of the combined code
that there should be a balance of executive and nonexecutives such
that no one individual has unrestricted powers of decision there is 
a succession plan approved by the board to ensure continual review 
of the balance of skills and experience
the board uses criteria to assist in arriving at its decision that the
nonexecutive directors are independent these include
 a deep appreciation of the group’s business and activities so 
that a thorough evaluation of information received can be made
 objective decision making after debate
 objective challenge of management
 a clear and consistent approach demonstrating that heshe has the
good of the group uppermost in hisher behaviour when challenging
others and defending hisher viewpoints
following the annual review of their independence the board is of the
opinion that all of the current nonexecutive directors are independent
by these criteria and are free from any relationship or circumstance
which could affect or appear to affect their independent judgement
influence is balanced within the board by virtue of the strong
independent elements of a nonexecutive senior independent director
and a further three nonexecutive directors whose skills and business
experience are invaluable in constructively challenging and developing
the group’s strategy and direction the board was further enhanced by
corporate governance report 36 corporate governance report northern foods plc
the appointment of tony illsley who brings a wealth of knowledge in 
a variety of roles and relevant experience having held senior positions
within the food industry including at pepsico and walkers snack foods
appointments to the board
appointments to the board are the responsibility of the full board on
the recommendation of the nomination committee there is a formal
rigorous and transparent procedure for the appointment of new
directors which is made on merit and against objective criteria in
october 2006 tony illsley was appointed to the board following such
a process and using external consultants odgers ray  berndtson
the terms and conditions of appointment of nonexecutive directors
are available for inspection at the company’s registered office 
during normal business hours and at the annual general meeting 
for 15 minutes prior to the meeting and during the meeting
information and professional development
all directors have unlimited access to information regarding the
company the advice and services of the company secretary whose
appointment and removal requires the approval of the board and 
they may obtain external advice as required at the expense of 
the company
in the week prior to each scheduled board meeting the chairman and
the company secretary ensure that the directors receive all relevant
papers so that they are properly appraised of the company’s current
performance and information on any other matter which is referred 
to the board for consideration
there is a comprehensive induction process tailored to the needs of
the individual directors which is arranged by the company secretary
this includes meetings with management and external advisors so
that the new director receives an appreciation of the activities of 
the group the key drivers of business performance and the significant
current issues visits to operational sites are encouraged the training
also covers the role of the board and its committees corporate
governance practices and procedures and the duties responsibilities
and liabilities of a director of a public listed company following his
appointment tony illsley has undertaken such an induction process
additional training is arranged by the company secretary on a group
or individual basis as needs arise for example when a nonexecutive
director is appointed to a board committee
during the year in order to assist them in their duties the directors
received presentations on the developments in financial reporting
since march 2006 changes to the regulatory regime following the
implementation of the transparency directive in january 2007 and 
the companies act 2006 and on new abi guidelines issued in
december 2006
board performance evaluation
the performance of the board the chairman and its principal
committees is evaluated annually as in the previous two years this
has taken the form of obtaining completed detailed questionnaires
which have been revised this year from all board members analysing
the responses and providing opportunity for directors to comment 
on any issues not covered directly by the questionnaire the results 
of the evaluation were considered by the board it was agreed that 
the results confirmed the effectiveness of each directors’ contribution
each committee and of the board as a whole
orna g nichionna senior independent director has analysed
responses to a proforma detailed questionnaire designed to evaluate
the performance of the chairman the results of the survey were
discussed with the executive and nonexecutive directors when 
the chairman was not present the outcome of these discussions
confirmed that the performance of the chairman continued 
to be effective and he provides strong leadership to the board
the chairman assesses the independence and performance of 
the nonexecutive directors after consultations with the executive
directors and the senior independent director
reelection of directors
under the company’s articles of association all directors are subject 
to election by shareholders at the first opportunity after their
appointment and then to reelection at intervals of no more than
three years retiring directors may offer themselves for reelection
tony illsley appointed to the board on 2 october 2006 as required
puts himself forward for election by shareholders at the annual general
meeting his biographical details are contained on page 32 of the 
annual report and in the explanatory notes contained in the notice 
of meeting no other director is required to stand for reelection under
the provisions of the company’s articles of association at this year’s
annual general meeting
remuneration
remuneration is covered by the remuneration report on pages 40 
to 51 and the work of the remuneration committee is set out on 
page 38 of this report
accountability and audit
financial reporting
the board is required to present a balanced and understandable
assessment of the company’s position and prospects this
responsibility extends to annual and half year reports and other 
price sensitive reports the company is also required for the first time
to present interim management statements covering the first and 
third quarter trading for the financial year 200708 following
implementation of the transparency directive in january 2007
the board is satisfied that it has met its obligations in presenting 
a balanced and clear assessment of the company’s position and
prospects this assessment is primarily provided in the chairman’s
review the chief executive’s review and the performance review
contained in this report the statements of directors’ responsibilities 
in respect of the financial statements are set out on page 52
internal control and risk management
during the year under review and up to the date of approval of the
annual report the company has complied with principle c2 of the
combined code that the board should maintain a sound system 
of internal control to safeguard shareholders’ investment and the
company’s assets this system is regularly reviewed by the board 
and is prepared in accordance with revised guidance
the board has overall responsibility for the company’s system of
internal controls which covers all aspects of the business key risks 
are identified in the performance review on pages 8 to 25 and include
strategic commercial operational and financial risks these risks 
are managed through a comprehensive internal control and risk
management system as outlined below
underlying this process is the board’s aim to safeguard shareholders’
investments and the company’s assets it also aims to ensure that
proper accounting records are maintained and that the financial
information used within the business and for publication is accurate
reliable and fairly presents the financial position of the company and
results of its business operations
corporate governance report
continued northern foods plc corporate governance report 37
in line with the turnbull report internal control guidance for directors
on the combined code turnbull the directors regularly review the
effectiveness of the group’s system of controls and risk management
the directors believe that the company maintains an effective
embedded system of internal controls and complies with turnbull
the system is designed to provide reasonable not absolute assurance
of effective operations and compliance with laws and regulations
as part of its review process the board considers new and emerging
risks and also considers key external business drivers such as market
trends and competitive activity the board also plays an important 
role in driving continuous improvement in the management of risk 
by encouraging the sharing of best practice across the business
a summary of the principal control structure and processes in place
across the group is set out below
control structure and processes
the board assesses key areas of internal control and risk management
and sets policy accordingly it tasks each business unit to identify and
document each significant risk and to implement appropriate controls
for that risk the board also requires the business units to manage
monitor and report on the effectiveness of these controls
the business units are supported by appropriate corporate
management resource which provides the technical skills and expertise
needed to supplement the business units’ own resource and to provide
overall assurance for the major areas of risk there are clearly defined
lines of authority and accountability
both the internal and external auditors have reviewed the overall
approach adopted by the company towards its risk management
activities
the audit committee oversees both internal and external audit
procedures and monitors response to any significant control 
issues raised
roles and responsibilities for each area of identified risk are outlined
below
 strategic delivery through its regular meetings the board
assesses performance against objectives in doing so it considers
performance data and also considers external dynamics such as
shifting customer and consumer trends that could affect the delivery
of these objectives
 health and safety a central team provides professional advice on
best practice audits health and safety procedures and coordinates 
the investigation of all major reportable incidents
a dedicated risk management steering group identifies and
manages fire risk through site audit and implementation 
of recommendations and standards together with sharing 
of best practice
 t alent management and human resources a central team
ensures the adequacy of existing management and plans
succession through its organisational capability review
 food safety and quality the technical services team 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
that expertise and governance is reflected in the independent
accreditation of the team as ukas certification body no199 
and ukas testing laboratory no 2087
 asset management and engineering the engineering team
approves contractors in respect of building engineering and
professional services it also provides an expert consultancy 
for the acquisition management and disposal of physical assets
as well as assessing and approving suppliers of capital equipment
and nonsaleable revenue items
 procurement the central procurement team identifies and
manages key suppliers on a group wide basis
 finance each business unit 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 budget and
updated forecasts the group’s chief executive and chief finance
officer meet on a formal basis each month to review the
performance of each business unit with its managing director
during the year a capital committee met every two months 
to set policy to oversee the capital expenditure planning and
budgeting process and to approve expenditure up to an agreed
level delegated by the full board
the internal audit function 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
the central finance function obtains advice and provides adequate
insurance cover for major losses with appropriate levels of
deductibles through a group programme with external insurance
brokers this cover is reviewed and negotiated annually
financial and treasury management oversee the principal areas 
of treasury risk including liquidity interest and currency risk
 information technology the information services function
provides appropriate infrastructure and back up services to 
the business
 legal provides and obtains advice on a full range of legal issues
across the group and ensures good title to properties and
intangible assets
 corporate responsibility there are effective systems in place 
for evaluating and managing social environmental and ethical
see risks further information is provided in the corporate
responsibility report on pages 26 to 31
review process 
an ongoing review process includes an assessment of internal controls
in particular internal financial controls it also includes reports from
the internal audit function as well as the external auditor on matters
identified in the course of its statutory audit work
business units and specialist functions report by exception on any
matters arising during the year to the monthly performance review
meetings the results of the formal half yearly reviews are taken
forward to the audit committee
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 financial statements and that it is
regularly reviewed by the board and accords with turnbull guidance 38 corporate governance report northern foods plc
audit committee and auditors
a principle of the combined code is that the board should establish
formal and transparent arrangements for considering how it should
apply the financial reporting and internal control principles and for
maintaining an appropriate relationship with the external auditors
deloitte  touche llp these responsibilities are delegated to and are
discharged by the audit committee whose work is described below
relations with shareholders
dialogue 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 half year and full year 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 chief finance officer are closely involved in
investor relations and report back to the board the views of major
shareholders investor meetings are arranged through the company’s
broker ubs investment bank and others the chairman the senior
independent director and other nonexecutive directors are available
to meet major shareholders whenever necessary and the chairman
regularly did so during the year
all material information reported to the regulatory news services 
is simultaneously published on the company’s website affording 
all shareholders full access to company announcements in addition
the group has introduced an electronic communication facility to
allow shareholders to receive information more quickly and in a
manner more convenient for them the company is also proposing 
to take advantage of provisions under the companies act 2006 which
allow the use of the website to communicate with shareholders as 
an alternative to receiving hard copies a resolution to this effect will 
be proposed at the company’s annual general meeting and further
information is contained in the notice of meeting
constructive use of the annual general meeting
the board regards the annual general meeting as an opportunity 
to communicate directly with private investors wherever possible
all directors attend the annual general meeting tony illsley will not 
be attending this year’s annual general meeting due to a previous
engagement to which he was committed prior to his appointment
a presentation is made at the annual general meeting to facilitate
greater awareness of the group’s activities 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 facility to investors
details of proxy voting by shareholders including votes withheld are
announced through the london stock exchange and are also placed
on the company’s website
board committees
each board committee has written terms of reference which define
the role and responsibilities of the committees and are reviewed
annually the terms of reference of each committee are available from
the company secretary or can be viewed on the company’s website
appointments to the committees are made on the recommendation
of the nomination committee but subject to board approval those 
to the audit committee are for periods of up to three years normally
extendable by no more than two additional three year periods
appointments to the remuneration committee and nomination
committee are reviewed annually as part of the board performance
review the company secretary acts as secretary to the board
committees
nomination committee 
a j hobson chair
r j s bell
c dyer resigned 6 september 2006
a k illsley appointed 2 october 2006
o g nichionna
d t nish
the committee meets as required to review the structure size and
composition of the board during 200607 the committee met four
times when the need for a new director is identified the criteria in
respect of the background and competencies of potential candidates
are approved by the board before the search is started this specification
is drawn up after consideration of the skills knowledge and experience
of existing board members the committee also ensures that candidates
have enough time available to devote to the position search consultants
have been used extensively in the identification of new board
appointments and during the year tony illsley was recruited using 
the services of odgers ray  berndtson
the committee also reviews annually the need for succession
planning particularly for the chairman chief executive and other 
key board positions and makes recommendations accordingly
remuneration committee 
o gnichionna chair
rjs bell
c dyer resigned 6 september 2006
a k illsley appointed 2 october 2006
d t nish
the remuneration committee which is chaired by the senior
independent director determines the broad policy and framework 
for the remuneration of executive directors and senior managers
no director is permitted to be present when hisher own remuneration
is being discussed nor to vote on hisher own remuneration
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
an integral part of the role of the remuneration committee is to carry
out an appraisal of the performance of the chief executive
audit committee
d t nish chair
c dyer resigned 6 september 2006
a j hobson
a k illsley appointed 2 october 2006
o g nichionna
corporate governance report
continued northern foods plc corporate governance report 39
the main duties of the committee set out in its terms of reference
are to
 make recommendations on the appointment and remuneration 
of external auditors and to monitor their performance
 approve and monitor the policy for nonaudit services provided 
by the external auditors to ensure that the independence of the
auditors is not compromised
 review and advise the board on the company’s financial statements
its accounting policies and on the control and mitigation of its
financial and business risks
 review the nature and scope of the work to be performed by the
external and internal auditors the results of their audit work and 
of the response of management
 review and advise the board on the effectiveness of the company’s
internal control environment including its ‘whistleblowing’ procedures
d t nish took over the chair of the committee on his appointment 
to the board he is a member of the institute of chartered accountants
of scotland and is group finance director of standard life plc he is
considered to have the recent and relevant financial experience required
by the provisions of the combined code the other members of 
the committee have a wide range of business experience which 
is evidenced by their biographical summaries on page 32
meetings
the committee invites executive directors management external and
internal auditors to attend meetings as it considers appropriate for the
matters being discussed
work of the committee
during 200607 the audit committee met on four occasions and
reported its conclusions to the board it met privately with the internal
and external auditors without executives present it also met with
senior managers and executive directors
the committee discharged its obligations in respect of 200607 
as follows
financial reporting
during the year the committee reviewed the half year and annual
financial statements the committee received a report from the
external auditors setting out the accounting or judgemental issues
which required its attention the auditors’ reports were based on 
a full audit annual report and a high level review interim report
respectively
the committee has also advised the board on accounting policies
disclosure and controls
internal controls and risk management 
the committee considers reports at the half year and year end from
internal audit on the operation of and issues arising from the group’s
internal control procedures together with observations from the
external auditors the committee monitored the effectiveness of the
group’s risk management process which considers the key risks both
financial and nonfinancial facing the group and the effectiveness of
the group’s controls to manage and reduce the impact of those risks
internal audit
it is the role of internal audit to advise management and the board 
on the extent to which systems of internal control are effective and 
to provide independent and objective assurance that the processes 
by which significant risks are identified assessed and managed 
are appropriate and effectively applied the internal audit plan
which covers the scope authority and resources of the function
is determined through a structured process of risk assessment and 
is approved by the audit committee
the nature and scope of the work of the internal audit team 
was reviewed and approved the reports of results received and 
the responses of management considered the plan set out at the
beginning of the year was achieved and the outcome of the work was
in line with expectations to ensure the independence of the internal
audit function the senior internal auditor has the right of direct access
to the chair of the committee and to the chairman of the board
this right was not invoked in the year under review
external audit
the committee reviews auditor independence annually the committee
also monitors the cost effectiveness and objectivity of the external
auditors to assist in ensuring independence the appointment of 
the senior audit partner on the audit is rotated every five years the
provision of nonaudit services by the external auditors is considered
in line with the committee’s terms of reference during the year
the auditors also provided tax advice amongst other services in
addition the auditors report annually on the actions taken to comply
with professional and regulatory requirements and on current best
practice required to ensure independence
operating board 
during the year in line with the simplification of the business the
northern foods’ operating board was restructured it now comprises
the chief executive the chief finance officer and five managing
directors with responsibility for the individual business units
going concern 
the directors are satisfied that the company has adequate resources
to continue in business for the foreseeable future accordingly the
financial statements for the 52 weeks ended 31 march 2007 have
been prepared on the going concern basis
by order of the board
carol williams 
company secretary
30 may 2007 40 directors’ remuneration report northern foods plc
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 revised combined code on corporate
governance issued by the financial reporting council ‘the combined
code’ and is prepared for the 52 weeks ended 31 march 2007
this report to shareholders sets out the remuneration policy and
explains the policy under which the executive and nonexecutive
directors and management team were remunerated for the year 
ended 31 march 2007 it also provides details of the salary incentives
share and pension interests of all the directors for the year and
subject to ongoing review by the remuneration committee outlines
remuneration policy for the forthcoming and subsequent years
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
unaudited information
the information in this following section of the remuneration report
has not been audited by the company’s external auditors
2 remuneration committee
the remuneration committee is a committee of the board and 
the members all of whom are independent during the year were 
o g nichionna chair r j s bell d t nish c dyer resigned 6 september
2006 and a k illsley appointed 2 october 2006 details of attendance 
for the committee are provided in the corporate governance report on
page 35at the invitation of the chair of the committee the chief executive
and corporate services director attend committee meetings to provide
background and context on matters relating to executive remuneration
the corporate services director attended the committee meetings until 
he left the company in march 2007 s brooker group hr director now
attends the committee’s meetingsa j hobson chairman of the board
is not a member but attends the committee by invitationthe secretary 
to the committee is c williams company secretary
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 the remuneration
of the chairman executive directors and senior managers
 agree the terms of the executive directors’ and company secretary’s
service contracts and remuneration
 determine the nature and scale of short and long 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
the committee has been formally delegated the authority by the
board to establish policy in respect of all terms of employment for
executive directors no director plays a part in any discussion about
his or her remuneration
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 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 ltd who are the appointed scheme 
actuary to the principal northern foods uk pension schemes
continued to provide advice to the committee on matters of
remuneration policy during the year
the committee also retained a m judes as its independent adviser
throughout 2006 for the period from 1 january 2006 to 5 july 2006
he was retained under a letter of engagement between the committee
and his then employer hewitt bacon  woodrow thereafter the
committee appointed a m judes through his own consultancy
strategic remuneration the committee retained dla piper uk llp 
as solicitors to advise on matters relating to directors’ contracts and
specific employment law advice new bridge street consultants llp
who have provided no other services to the company during the year
were retained to provide advice relating to the development of its
long term incentive arrangements the committee appointed pinsent
masons to design a new savingsrelated share option scheme
the committee identified no conflict in the nature of the services
provided by its advisers the terms of business of hewitt bacon 
woodrow strategic remuneration dla piper uk llp new bridge
street consultants llp and pinsent masons are available from the
company secretary
in determining executive directors’ remuneration for the year
and in considering proposals for the future the committee consulted 
a j hobson chairman p a o’driscoll chief executive until her
resignation from the board on 1 february 2007 and s barden
who was appointed as chief executive on 5 february 2007
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 such high calibre employees
remuneration is considered within the context of the sector of which
the company is a part and the wider ftse 350 community where 
the company competes for talent the sector includes companies
operating as fast moving consumer goods fmcg companies
the committee reviewed the company’s remuneration policy in
200405 this review detailed in the annual report for that year
set the objectives such that the remuneration of executive directors
and senior executives should be directly linked to the delivery 
of strategic objectives which are closely aligned with the interests 
of shareholders the policy 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 this practice of linking pay to performance was
implemented for the first time in 200506 and continued in 200607
in spring 2007 the committee again reviewed elements of its strategy
and following consultation with major shareholders together with the
abi and napf is submitting to shareholders for approval a new long
term incentive arrangement a performance share plan the proposals
are set out below and in appendix 1 to the notice of meeting
the policy continues to be to reward employees at the relevant 
midmarket 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 significant proportion of total
remuneration being dependent upon individual and group performance
as salaries were determined prior to northern foods’ restructuring
the company’s market dimensions have changed and consequently
the committee is reviewing the salary structure the policy for
directors is described in more detail below
directors’ remuneration report northern foods plc directors’ remuneration report 41
5 remuneration policy for nonexecutive directors
nonexecutive 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 nonexecutive directors’
letters of engagement the dates 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
r j s bell 1 sep 05 1 sept 05 31 aug 08
a j hobson 28 may 02 28 may 05 27 may 08
a k illsley 2 oct 06 2 oct 06 1 oct 09
o g nichionna 28 may 02 28 may 05 27 may 08
d t nish 1 jul 05 1 jul 05 30 jun 08
the appointments of the chairman and the nonexecutive directors
may be terminated by the company on six months’ notice and by 
the chairman and the nonexecutive directors on three months’ notice
no compensation is payable by the company on termination of an
appointment with due notice
fees for the nonexecutive directors are reviewed regularly on the
recommendation of the executive directors and are then subject to
approval by the board fees are set with regard to a range of external
information for equivalent companiesthere are no other emoluments for
nonexecutive directors except where the company meets authorised
expenses incurred on the company’s 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 fees were last
increased as of 1 october 2005 the next assessment in june 2007 
will determine the fees to be paid
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 particularly during a time of change the
approach is designed to ensure that the company is managed effectively
to the benefit of shareholders and will create real increases in
shareholder value
the committee also takes account of and seeks to align this remuneration
with management remuneration throughout northern foods the
committee continues to aim for a structured and balanced remuneration
package by looking at each element of reward 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 accordingly
a rigorous approach has been adopted to the assessment of individual
performance facilitating differentiation in awards whereby significant
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 closely with shareholder interests
the four main components of the ongoing remuneration package 
for executive directors and senior management in 200708 are
 basic annual salary targeted at market median 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 group and individual strategic objectives
described in performance contracts
 participation in long term incentive plans based upon the
performance of the group and the individual 
 pension and other benefits
the balance of the fixed and variable pay at current value for 200708
exclusive of pension benefits and assuming that the new performance
share plan psp is approved by shareholders is illustrated below 
for the two executive directors the table is a theoretical model and
assumes that on target group performance is achieved for short term
incentives and the director’s individual performance and that long
term incentives are valued at an expected value of 55 of the initial
value at the time of grant it also ignores the value of s barden’s
matching shares as that was a one off arrangement negotiated 
on his promotion
basic salary annual bonus long term
as a proportion as a proportion incentives as a
of target of target proportion of target
performance remuneration  remuneration  remuneration 
s barden on target 410 250 340
maximum 285 285 430
j k maiden on target 410 250 340
maximum 285 285 430
61 salary
salaries of executive directors are reviewed annually taking into account
information from independent sources 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 basic salary is the only pensionable remuneration
the executive directors’ salaries effective as at 1 april 2007 are
basic salary as at 1 april 2007
s barden £450000
j kmaiden £317000
for j k maiden this represents an increase of 3 reflecting inflation
for s barden the increase is higher reflecting the change in his role 
and is considered to be no higher than a market median level for his
new role and was set at a lower level than that of his predecessor 42 directors’ remuneration report northern foods plc
62 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 annual incentive plan drives differentiation in the level of award
based upon the individual’s contribution to group performance the
target incentive for an executive director is 60 of basic salary for on
target performance in the case of exceptional individual performance
and group results significantly above expectations the incentive
payment increases up to a maximum of 100 of basic salary
under the annual incentive plan 80 of annual bonus opportunity 
is linked to specific financial targets including targets for profit from
operations and profit before tax both measured before restructuring
items the other 20 is directly related to the committee’s
assessment of the directors’ individual performance against their
personal performance contract set at the start of the financial year
which contains six individual performance targets these are
considered appropriately stretching by the committee
of any annual incentive earned in 200607 20 will be paid as
deferred shares through the company’s share bonus plan shares
acquired through the share bonus plan are 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 leave prior to the third
anniversary unless exceptional conditions prevail during this retention
period the participants will be entitled to dividends on the shares and
to instruct the trustee how to vote
in determining the annual bonus payments for executive directors
the committee considered the scale of the restructuring accomplished
during the year the shareholder value added and the results of each
division and the group as a whole against the achievements of the
targets that had been set at the beginning of the year as recalibrated
to reflect restructuring
in reviewing performance against these targets for 200607 the
committee believes that these executives met the targets set these
include profit in relation to continuing operations as discussed in 
the highlights and performance review within this annual report further
the committee is satisfied that other individual performance measures
were exceeded profit was chosen as the target for the year because 
it was felt to be an appropriate measure of stabilisation and recovery
the targets set for 200708 are made up of financial business and
individual performance measures the financial element includes 
group profit performance the business element is related to specific
targets for group profitability 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
63 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 committee believes that a significant element of
executive remuneration should be linked to the delivery of long term
returns for shareholders
previously long term incentives have been provided to executive
directors in the form of share options and performance shares while
the committee acknowledges that option schemes can be successful
in certain circumstances as part of the company’s regular ongoing
incentive arrangements they are currently considered inappropriate
the committee also notes that option schemes are now falling out 
of favour in the market generally for many reasons for example
accounting and share usage inefficiencies and the lack of a clear link
between performance and reward at the same time the company’s
existing long term incentive plan ltip which was introduced in 
july 1997 will shortly expire and it is therefore proposed subject 
to shareholder approval at the forthcoming annual general meeting
that the ltip will be replaced with the psp in which executive directors
other senior executives and senior managers of up to approximately
80 participants in total will participate this will be the only long term
incentive used on an annual basis the executive share option plan 
will be retained for use in exceptional circumstances for example
on recruitment a summary of the rationale behind the introduction 
of the psp is set out in 633 with full details of its principal terms
contained in the notice of meeting
631 executive share option plan 2004
participation in the company’s executive share option plan is at the
discretion of the committee the plan comprises an inland revenue
approved section and an unapproved section options are generally
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 should an employee leave the organisation by virtue of
redundancy or retirement the requirement under the performance
condition remains in place company performance is measured on 
a prorated basis to assess the extent to which it has been met
the performance condition for awards requires that for grants with 
a market value of up to one times salary the real growth in adjusted
earnings per share is greater than 3 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 proportion of the award above this level that 
will vest is assessed by reference to a vesting scale detailed below
 4 real growth in earnings per share allocations between 
100–149 of salary vest
 5 real growth in earnings per share allocations between 
150–199 of salary vest
 6 real growth in earnings per share allocations at 200 
of salary vest
the performance will be assessed by comparing the adjusted earnings
per share growth to the growth in the retail price index rpi over 
the three year performance period if the performance condition 
is not met at the end of three years there is no facility for retesting
632 long term incentive plan 1997
under the ltip the committee awarded shares in the company to
senior management conditional upon the achievement of corporate
performance targets over a fixed period of three years
vesting of the ltip is triggered by achieving two independent sets 
of performance conditions with 50 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 a
selected group of comparable companies from the constituents 
of the ftse food producers index and
 a return on capital measure used as an absolute measure of
company performance the committee determined return on capital
as a strategic priority for realising growth in shareholder value
directors’ remuneration report
continued northern foods plc directors’ remuneration report 43
6321 total shareholder return
vesting of 50 of the ltip 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 a selected group of comparable
companies from the ftse food producers all share index
the committee selected relative tsr as a measure that reflects
corporate performance relative to companies with similar
characteristics and subject to similar market conditions
the comparable group companies chosen by the remuneration
committee for the award in july 2006 were
arla foods plc rhm plc
cranswick plc robert wiseman dairies plc
dairy crest plc uniq plc
premier foods plc
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 of the conditional award being available when the company is
placed at the median and the maximum of 50 of the award being
available where the company is placed in the upper quartile
6322 return on invested capital 
the proportion of the award that will vest is assessed by reference 
to a vesting scale potential vesting of this proportion of the ltip 
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 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 75 of the conditional award being
available if the company achieves growth of 100 basis points and a
maximum of 50 of the award being available where the company
achieves growth of 200 basis points
for the purpose of determining any reward return on invested capital
roic is defined as profit from operations before restructuring items
adjusted to exclude the nonservice charge element of pension costs
divided by average invested capital average invested capital is calculated
as net equity adjusted to exclude retirement benefit obligations net 
of deferred tax and net debt together with accumulated goodwill
previously written off
in response to any significant events including material trading 
events the committee may at its discretion amend the performance
conditions to reflect these changes
shares awarded under the ltip 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 employees from the northern foods
employee share ownership trust esot
633 performance share plan 2007 
the proposed introduction of the psp is the result of a review 
of the group’s senior executive incentive strategy that has been
undertaken recently by the committee following the appointment of
a new chief executive the committee considered that this represented
an appropriate time to review the incentive arrangements for the
senior executives including the executive directors and to ensure
that the long term incentives were in line with current best practice
as well as an efficient use of company resources in terms of cost and
share dilution
full details of the principal terms of the psp are set out in appendix 1
to the notice of meeting subject to shareholder approval the initial
awards will be granted shortly after the annual general meeting 
and annually thereafter will normally vest three years after grant
subject to ongoing employment and the satisfaction of preset
performance conditions
in terms of quantum participants may be granted annual awards 
over shares in the company worth no more than 200 of base salary
in practice the committee intends to operate within a limit of 150
of salary for the initial awards made under the psp for executive
directors with a lower limit applying to other participants
the committee believes that the performance conditions for the 
psp align the interests of senior executives with those of shareholders
the benefits available to senior management participating in the psp
will only accrue to them when the company has delivered significant
benefits to shareholders over a three year period accordingly the
committee has decided that awards will vest three years after grant
subject to the extent to which demanding performance conditions
have been achieved by the end of a single three year period
two performance conditions will determine the vesting of awards
these will be based on growth in the company’s roic and its tsr
performance each will determine the vesting of one half of each award
6331 return on invested capital 
the proportion of the award that will vest is assessed by reference 
to a vesting scale as follows
percentage of the total number
growth in roic over the of performance shares under
performance period an award that will vest 
less than 100 basis points 0
100 basis points 75
between 100 basis points straight line vesting between
and 200 basis points 75–50
200 basis points or more 50
as under the current ltip for the purpose of determining any reward
roic is defined as profit from operations before restructuring items
adjusted to exclude the nonservice charge element of pension costs
divided by average invested capital average invested capital is
calculated as net equity adjusted to exclude retirement benefit
obligations net of deferred tax and net debt together with
accumulated goodwill previously written off 44 directors’ remuneration report northern foods plc
in response to any significant events including material trading 
events the committee may at its discretion amend the performance
conditions to reflect these changes in addition the roic element will
only vest if the committee is satisfied that the investment level over
the performance period was appropriate for ensuring the business’
long term growth
the base roic for measuring performance for the first awards 
under the psp will be set at a higher level than the group achieved 
as a whole reflecting the roic achieved last year by the ongoing
businesses in the group in order to ensure that the targets are 
suitably challenging
6332 total shareholder return
in order to focus executives on delivering outstanding returns to
shareholders the committee has decided to set the tsr targets in
terms of improvement measured from the company’s share price
averaged over the three months immediately prior to the beginning 
of the 200708 financial year the targets for the first awards under
the psp are as follows
growth in tsr percentage of the total number
at the end of the of performance shares under
performance period an award that will vest 
less than 30 growth from nil
an effective base of £124 this 
is equivalent to a share price 
plus dividends of £161
30 growth 75
between 30 growth and straight line vesting between
80 growth 75 and 50 
growth of 80 or more 50
equivalent to a share price 
plus dividends of £223 or more
the tsr will be calculated using the closing return indices over the
final three months of the performance period
in addition the tsr element will only vest to the extent that the
committee is satisfied that the company’s tsr over the period is
reflective of the underlying financial performance of the company
awards vest on a change of control or cessation of employment under
‘good leaver’ provisions subject to the performance conditions having
been met and are normally reduced to reflect the shortened
performance period
as the implementation of this proposal requires the consent of the
company’s shareholders the relevant resolution seeking that consent
is set out in the notice of meeting no awards under the company’s
existing long term incentive arrangements have yet been granted in
200708 provided that the required resolutions are duly passed by 
the company’s shareholders the first set of awards under the psp 
will be granted in july 2007 immediately following the annual general
meeting no further awards will be made under the company’s 
long term incentive plans or the dsbp although in exceptional
circumstances such as recruitment shares may be awarded under 
the executive share option plan
634 award of matching shares to s barden
as part of the terms of his recruitment as chief executive the
committee offered s barden the opportunity to commit to hold 
shares in the company worth up to 100 of his salary and in return
receive an award of matching shares of up to three shares for every
one share purchased the matching award will be granted pursuant to 
the exemption from the need for prior shareholder approval contained 
in listing rule 942 the matching award has yet to be granted due 
to regulatory restrictions the matching award will be nonpensionable
and nontransferable other than on death half of the matching
award will vest on the third anniversary of grant with the other half
vesting on the fourth anniversary of grant to the extent that the
performance conditions are met and providing s barden retains the
purchased shares and remains employed by the group to the extent
that the award vests the relevant shares will be delivered free of
charge but to the extent that it does not vest in part or in full
it will lapse
the performance conditions attached to the matching award will be
the same as those that will apply to the initial psp awards proposed to 
be granted shortly after the annual general meeting as set out above
save that threshold vesting of the tsr element will not occur unless
the company achieves growth in tsr of 35 over the relevant period
the committee feels that since this award is a one off the targets
applying to vesting at threshold should be more demanding
if s barden ceases employment with the group before the fourth
anniversary of grant the outstanding part of the matching award will
lapse unless he leaves in certain ‘good leaver’ situations in this event
it will vest on cessation or if the committee so decides the normal
vesting dates to the extent the performance condition is met at the
relevant time this would be subject to time prorating to reflect the
period of time between the date of grant and the date of cessation
rounded up to the next whole year relative to the period of three
years unless the committee concludes in its discretion that it is not
appropriate to apply the prorata reduction on a change of control 
or winding up of the company the award will vest early to the extent
that the performance conditions are met at that time and again
unless the committee decides otherwise subject to time prorating 
to reflect the period between the grant date and the relevant event 
on the basis set out above the award may also vest on this basis in
the event of a demerger special dividend or other similar event which
in the committee’s opinion materially affects the price of the
company’s shares
the award will not unless the committee decides otherwise
vest on an internal reorganisation but will instead be exchanged 
for an equivalent award over shares in the new holding company
the award will not confer any shareholder rights on s barden until 
it vests except that he will be entitled to a payment in cash andor
shares at the discretion of the committee shortly after vesting to
reflect the dividends that would have been paid on those shares
assuming such dividends were reinvested in further shares at the
closing price on the relevant exdividend dates in the event of any
variation of the company’s share capital or any other event which
materially affects the price of the company’s shares the award may 
be adjusted as the committee sees fit the terms of the award may 
be amended in such manner as he and the committee may agree
provided that amendments to his benefit may only be made with 
the prior consent of shareholders the committee confirms that 
the matching award was considered to be necessary to facilitate 
his recruitment as chief executive and to honour commitments 
made to him on such recruitment
directors’ remuneration report
continued northern foods plc directors’ remuneration report 45
64 deferred share plans 
641 deferred share bonus plan 2004
a deferred share plan was established in january 2004 to facilitate 
the recruitment of p a o’driscoll as chief executive participation in
the scheme was restricted to p a o’driscoll and on 29 march 2004 
an award of 81453 shares was made in recognition of benefits
accrued at shell europe these shares were not subject to a performance
condition and were transferred to her on 29 march 2007 following a
three year retention period
642 deferred share bonus plan 2006
a strategic restructuring plan was agreed by the board and comprised
specific structural changes linked to qualitative and financial milestones
to support that strategy a one off deferred share bonus plan dsbp
was introduced in june 2006 so as to incentivise and retain the key
talent necessary to drive the specific performance improvements
required this dsbp provided approximately 40 senior executives 
with an award of shares with a value up to 100 of base salary
at the prevailing market price of 8175 pence per share on the date 
of award these shares will be satisfied by the transfer of existing
shares held in trust after the vesting date in july 2009
performance was to be assessed against key milestones over the
twelve month period to 31 may 2007 these four key milestones
related to improving free cash flow and reducing net debt as at 
1 april 2006 by £125m reducing the run rate for central costs by 
£12 million per annum compared to 200506 and the successful
resolution of the pension deficit these milestones have all been
achieved or are expected to be achieved in addition share awards 
for the executive directors and the then operating board were also
subject to a share price condition such that a minimum share price of
92 pence per share needed to be attained for five consecutive business
days over the twelve month performance period this minimum price
condition was met if the share price over a period of five consecutive
business days during the performance period was at least 120 pence
per share the requirement to satisfy the key milestones would not
apply this condition was also met
the executives now need to remain in the employment of the group
for a further two year period before any share awards vest during 
this time awards will be subject to normal forfeiture policies however
awards may be retained under ‘good leaver’ provisions although 
shares will not transfer until july 2009 awards include a dividend
equivalent which will be paid on vesting no further awards can be
made under this plan
65 savingsrelated share option scheme
the company is also proposing a hm revenue  customs approved
savingsrelated share option scheme for all employees at the
forthcoming annual general meeting the sharesave scheme will 
be open to all employees subject to eligibility including executive
directors options are normally exercisable after either three five or
seven years from the date of grant the price at which options would
be offered is not less than 80 of the middle market price on the dealing
day immediately preceding the date of invitation in accordance with
hm revenue  customs requirements there are limits on the number
of shares which can be issued under the scheme in addition the use
of new issue shares under the scheme is limited to 10 of the issued
share capital of the company taking account of shares issued or to 
be issued under any other company employee share schemes over 
the previous ten year period the group intends to invite employees 
to participate in the scheme following the announcement of the 
half year results further details are set out in appendix 2 of the
notice of meeting
66 executive shareholding
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 has introduced a policy requiring the executive directors
to build a significant level of shareholding it is the view of the
committee that the act of building and maintaining a substantial
shareholding in the company creates a strong alignment of interest
between shareholders and executives
661 minimum shareholding requirements
subject to the approval of the psp at the forthcoming annual general
meeting the minimum shareholding requirements are detailed below
 300 of basic salary for the chief executive
 200 of basic salary for other executive directors
the executive would retain all shares acquired through share option
plans long term incentive plans or deferred share plans other than
those sold to meet income tax and nic liabilities until the required
minimum shareholding is achieved
the numbervalue of shares required as the target will be fixed for 
a year no purchases are required to respond to share price falls
67 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
671 pensions
until her departure from the company p a o’driscoll remained a
member of the northern foods pension scheme current executive
directors are members of the northern foods pension builder scheme
‘pension builder’ their dependants are eligible for dependants’ pensions
and the payment of a lump sum in the event of death in service
for all employees including the executive directors appointed after 
22 march 2005 the pension arrangements provided by pension builder
for pension on retirement at age 65 are based upon a career average
accrual of either
 125 of annual salary per annum revalued before retirement
by inflation up to 50 with an employee contribution of 60 or
 10 of annual salary per annum revalued before retirement by
inflation up to 50 with an employee contribution of 45
this scheme has an optional salary sacrifice arrangement no other
payments to directors are pensionable
following the removal of the pension’s earnings cap and the
introduction of the lifetime allowance under the finance act 2004
with effect from 6 april 2006 the company provides executives who
hold pension benefits in excess of the lifetime allowance with the
following options
 continue to accrue pension under pension builder subject to the
recovery charge or
 a cash alternative paid on a monthly basis reflecting the company’s
long term contribution rate to pension builder the cash alternative
for executive directors who are members of pension builder will be
10 of basic salary 46 directors’ remuneration report northern foods plc
68 additional directorships
executive directors are encouraged to hold one nonexecutive
directorship in a listed business in a noncompeting sector fees 
for such directorships are retained by the executive director
currently the executive directors do not hold any such directorships
69 directors’ contracts
it is the company’s policy that executive directors should have 
secure agreements providing for a maximum of one year’s notice
the contract of j k maiden is and that of p a o’driscoll was subject 
to one year’s notice by either party s barden’s contract is terminable
upon six months notice by him one year’s notice by the company
in the event of early termination the contract of j k maiden provides
and that of p a o’driscoll provided for compensation up to a maximum
basic salary company car private medical insurance outstanding holiday
and pension for the notice period in the event of early termination
the contract of s barden provides for compensation up to a maximum 
of basic salary car allowance private medical insurance and outstanding
holiday pension benefits are not included in the payment
the details of the contracts are summarised in the table below
t able 1 date of contract notice period
s barden 30 may 07 12 months
1
j k maiden 5 september 05 12 months
p a o’driscoll
2
29 march 04 12 months
1
12 months by the company and 6 months by s barden
2
resigned 1 february 2007
to protect the interests of the company and its shareholders
the executive directors’ contracts contain restrictive covenants
the principal terms of which prevent the executive directors
 undertaking work for direct competitors either during their
employment with the company or within six months nine months 
in the case of s barden of their employment terminating without 
the express permission of the board
 enticing away from the group individuals or customers with whom 
the executive directors had dealt in the twelve months prior to
termination 
 enticing away from the group or employing senior or middle 
managers from within the business with whom the executive 
directors had direct contact or knowledge in the twelve months 
prior to termination
p a o’driscoll resigned from the board on 1 february 2007 but 
remained employed by the company and continued to receive salary 
and benefits until 30 april 2007 the board agreed that she would not
have to work the full period of her notice and in accordance with the
agreed terms of her cessation of employment she received a payment 
of £316367 equivalent to six months salary and pension in may 2007
in the event that she has not secured new employment on or before 
1 november 2007 she will be entitled to receive a further payment 
of £158183 equivalent to three months salary and pension all of 
the above amounts are subject to deduction of income tax and national
insurance contributions
in addition she received a payment of £25000 as a severance payment
this payment is not subject to income tax or national insurance
she will continue to enjoy the use of a company car and receive 
private medical benefits until 1 february 2008 or the date she obtains
alternative employment if earlier in order to assist with finding new
employment she will receive outplacement assistance up to a value 
of £10000
in accordance with the rules of the executive share option scheme 
1994 and the company’s share option plan 1998 she will be able to
exercise any outstanding share options previously awarded to her until
30 october 2007 the award of 81453 shares made under the deferred
share plan on 29 march 2004 was transferred to her on 29 march 2007
the shares granted under these three schemes were awarded on
recruitment and in recognition of benefits accrued at shell europe and
were not subject to a performance condition all shares awarded under
the company’s share option plan 2004 the ltip and the dsbp lapsed 
on the cessation of her employment on 30 april 2007
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 exdividend date the tsr shown is based on 
daily spot prices
audited information
the information in the following section of the remuneration report 
has been audited by the company’s external auditors
directors’ remuneration report
continued
tsr performance index comparison
northern foods tsr compared to ftse 250
1 april 2002 to 2 april 2007
tsr
225
200
175
150
125
100
75
50
25
0
2002 2003 2004 2005 2006 2007
financial period end
northern foods
ftse 250 index 8 directors’ remuneration and pension entitlements
81 emoluments
table 2 shows an analysis of the salary benefits and bonus elements of remuneration for the individual directors who held office during the year
ended 31 march 2007 pension entitlements are shown in table 3 and interests under the company’s long term incentive plans and deferred share
plans are disclosed in the sections covering share awards on pages 49 to 51
accrued compensation
salary annual for loss
fees benefits bonus of office total total
200607 200607
3
200607
4
200607 200607 200506
t able 2 – directors’ remuneration
1
£ ££££ £
executive directors
s barden
6
318212
7
864 207500 – 526576 52022 
m t gribbin resigned 28 feb 2006 –– ––– 230984
j k maiden
6
350550 24731 184500 – 559781 256795
p a o’driscoll
2
resigned 1 feb 2007 404003 11151 – 341367 756521 486822
nonexecutive directors
5
r j s bell 35000 – – – 35000 20250
p h blackburn retired 21 july 2005 –– ––– 42462
c dyer resigned 1 sept 2006 22500 – – – 22500 42468
a j hobson
5
142000 – – – 142000 112423
a k illsley appointed 2 oct 2006 17500 – – – 17500 –
o g nichionna 43000 – – – 43000 39355
d t nish 41000 – – – 41000 29718
1373765 36746 392000 341367 2143878 1313299
notes to t able 2
note 1
figures for directors reflect the date of appointment or resignation as a director
note 2
the figures for p a o’driscoll reflect her remuneration to the date of her resignation as a director she remained in the employment of the company
until 30 april 2007 and received a total of £496048 salary and benefits for the year ended 31 march 2007
note 3
benefits include medical insurance and company car
note 4
the accrued annual bonus for s barden comprises £166000 in cash and deferred bonus shares to the value of £41500 the accrued annual bonus
for j k maiden comprises £147600 in cash and deferred bonus shares to the value of £36900 of the bonus paid 80 was settled in cash and
20 in deferred shares
note 5
from 1 october 2005 the fee payable to nonexecutive directors was increased to £35000 with an additional annual fee of £6000 to the chairs 
of the audit and remuneration committees and of £2000 to the senior independent director on that date the annual fee for the chairman was
increased to £142000 no change was made in 200607
note 6
the salaries are net of salary sacrifice in relation to pension builder membership the salary paid to j k maiden includes a nonpensionable
contribution in lieu of pension contribution of £61500 where a cash car allowance is taken in lieu of company car this is included as salary
note 7
the figures for s barden include the increase in his salary between the date of his recruitment as chief executive on 5 february 2007 and 
31 march 2007
northern foods plc directors’ remuneration report 47 48 directors’ remuneration report northern foods plc
82 pension benefits
transfer
value of real increase in
accrued additional accrued increase in transfer transfer transfer
pension as at real pension pension at year less value at value at value less
t able 3
1 april increase earned 31 march directors’ 1 april 31 march directors’
directors’ pension 
2006 in year inflation in year 2007
3
contributions 2006
4
2007
4
contributions
entitlements notes £ £££ £ £ £ ££
s barden 1 625 3728 22 3750 4375 41137 6571 48276 41705
j k maiden 1 1875 3777 67 3844 5719 44068 21884 66727 44843
p a o’driscoll 2 31333 15479 1128 16607 47940 161688 414415 587372 144992
resigned 1 feb 2007
notes to t able 3
note 1
the company provides executive directors who are members of pension builder with a pension which is payable at age 65 the accrual rates and
member contributions for the scheme are set out in 671 death in service cover is a lump sum of three times annual earnings on the death of 
a director or a retired director a spouse’s pension of 50 would be payable
early retirement may be granted with the consent of the company and the trustee of the scheme from age 55 but benefits are reduced by 
4 per annum for ages 55 up to 64 years once in payment pensions are increased in line with retail price index inflation up to a ceiling 
of 25 per annum the trustee with the consent of the company has discretion to apply such greater increase as it considers appropriate
note 2
the company provided executive directors who were members of the northern foods pension scheme 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 this scheme is no longer applicable to any of the current
executive directors
note 3
the accrued pension at 31 march 2007 is the pension which the director would have been entitled to receive based on completed pensionable
service to 31 march 2007 payable from normal pension date age 60 or 65 as appropriate and subject to revaluation increases between leaving
and retirement
note 4
the transfer values are based on the accrued pensions at 1 april 2006 and at 31 march 2007 and are calculated as at 1 april 2006 and at 
31 march 2007 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 heshe left service at the respective dates a transfer value cannot be paid to a director personally
directors’ remuneration report
continued northern foods plc directors’ remuneration report 49
83 long term incentive plans
831 share options
details of grants exercises and lapses of options for individual executive directors under the executive share option scheme detailed in section
631 are as follows
date balance at exercised granted balance at
from 1 april during during 31 march
t able 4
date of option which expiry 2006 year year 2007
executive share options notes grant price p exercisable date number number number number
s barden 1 04 jul 06 7967 04 jul 09 03 jul 16 – – 37655 37655
1 04 jul 06 7967 04 jul 09 03 jul 16 – – 376554 376554
414209 414209
j k maiden 1 14 dec 05 15333 14 dec 08 13 dec 15 19565 – – 19565
1 14 dec 05 15333 14 dec 08 13 dec 15 151634 – – 151634
1 04 jul 06 7967 04 jul 09 03 jul 16 – – 414209 414209
171199 414209 585408
p a o’driscoll 2 29 mar 04 15916 29 mar 07 28 mar 14 18848 – – 18848
resigned 1 feb 2007 3 29 mar 04 15916 29 mar 07 28 mar 14 424102 – – 424102
1 17 dec 04 16967 17 dec 07 16 dec 14 138504 – – 138504
1 14 dec 05 15333 14 dec 08 13 dec 15 613057 – – 613057
1 04 jul 06 7967 04 jul 09 03 jul 16 – – 1168068 1168068
1194511 – 1168068 2362579
notes to t able 4
note 1
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 as set out in section 631 the performance condition does not allow for retesting shares awarded to p a o’driscoll under
this plan lapsed upon the cessation of her employment from the company on 30 april 2007
note 2
these options were granted under the company share option plan 1998 on recruitment and in recognition of benefits accrued at shell europe 
and are not subject to a performance condition under the terms of p a o’driscoll’s cessation of employment from the company on 30 april 2007
she has six months in which to exercise these shares if not exercised by 30 october 2007 these options will lapse
note 3
these options were granted under the company’s executive share option scheme 1994 on recruitment and in recognition of benefits accrued 
at shell europe and are not subject to a performance condition under the terms of p a o’driscoll’s cessation of employment from the company
on 30 april 2007 she has six months in which to exercise these shares if not exercised by 30 october 2007 these options will lapse
note
the midmarket price of the company’s shares at 31 march 2007 was 12375p 1 april 2006 9750p and the range during the year was 
7750p to 13225p 50 directors’ remuneration report northern foods plc
832 long term incentive plan
the committee has awarded shares under the ltip conditional upon the achievement of corporate performance targets in accordance with 
section 632 as follows
conditional
interest at
shares maximum 31 march or
beneficial conditional released by potential award market beneficial or at date of
interest at interest at the nominee granted price of the interest at resignation
1 april 1 april during the 4 july share at date 31 march as a director
t able 5 – executive long term incentive plan 2006 2006 year 2006 of grantp 2007
1
2007
1
s barden – – – 93750 8000 – 93750
j k maiden – 34426 – 93750 8000 – 128176
p a o’driscoll
2
resigned 1 feb 2007 – 358048 – 323125 8000 – 681173
– 392474 – 510625 – 903099
notes to t able 5
note 1
the interest in shares at 31 march 2007 is comprised of awards made on 17 december 2004 12 december 2005 and 4 july 2006 the shares 
will vest after three years from the date of grant subject to performance conditions and will be retained in trust on behalf of the participants 
for a further two year retention period
note 2
shares awarded to p a o’driscoll under the ltip lapsed upon cessation of her employment on 30 april 2007
note
shares awarded under the ltip 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 performance measurement date 
is the three year period from the commencement of the financial year in which the award was made
no other monies were paid or receivable by executive directors under long term incentive schemes in respect of qualifying services
84 deferred share plans
841 deferred share plan 2004
details of awards to individual executive directors under the deferred share plan are detailed in table 6 below
awards balance at
beneficial awards transferred by awards 31 march 2007
interest at granted the nominee lapsed or at date of
1 april during during during resignation
t able 6 – deferred share plan 2004 2006 the year the year the year as a director
s barden – ––– –
j k maiden – – – – –
p a o’driscoll
1
resigned 1 feb 2007 81453 – 81453 – –
81453 – 81453 – –
note to t able 6
note 1
shares awarded to p a o’driscoll on 29 march 2004 in recognition of benefits accrued at shell europe are not subject to a performance condition
these shares were transferred to p a o’driscoll on 29 march 2007 less an amount to satisfy tax and ni liabilities
842 deferred share bonus plan 2006
this table relates to the dsbp introduced in june 2006 which was subject to a one year performance period full details are set out in 
section 642
awards balance at
beneficial awards transferred by awards 31 march 2007
interest at granted the nominee lapsed or at date of
1 april during during during resignation
t able 7 – deferred share bonus plan 2006 2006 the year the year the year as a director
s barden – 366972 – – 366972
j k maiden – 376146 – – 376146
p a o’driscoll
1
resigned 1 feb 2007 – 586422 – – 586422
– 1329540 – – 1329540
note to t able 7
note 1
shares awarded to p a o’driscoll under this plan lapsed upon cessation of her employment from the company on 30 april 2007
directors’ remuneration report
continued northern foods plc directors’ remuneration report 51
85 directors’ aggregate remuneration
the total amount of directors’ remuneration and other benefits was as follows
200506 200607
t able 8 – directors’ aggregate remuneration £ £
emoluments 1313299 2143878
gains on exercise of options and award of performance share plan shares 14065 –
1327364 2143878
86 directors’ interests in shares
the interests of the directors in the share capital of the company at 1 april 2006 and 31 march 2007 are detailed below
ordinary shares
2
share options ltip conditional dsbp conditional 
number number awards number awards number
t able 9
description 1 april 31 march 1 april 31 march 1 april 31 march 1 april 31 march
directors’ interests in shares
1
of interest 2006 2007 2006 2007 2006 2007 2006 2007
executive directors
s barden beneficial 48038 172528 – 414209 – 93750 – 366972
j k maiden beneficial 8720 27470 171199 585408 34426 128176 – 376146
p ao’driscoll beneficial127240 127240 1194511 2362579 358048 681173 – 586422
resigned 1 feb 2007
nonexecutive directors
r j s bell beneficial – – – – – – – –
c dyer resigned 6 sept 2006 beneficial 10000 – – – – – – –
a j hobson beneficial 8000 18000 – – – – – –
a k illsley appointed 2 oct 2006 – – – – – – – – –
o gnichionna beneficial15000 25000 – – – – – –
d t nish –– – – – – – – –
notes to t able 9
note 1
at 1 april 2006 or date of appointment and at 31 march 2007 or date of resignation as a director shares held by p a o’driscoll under the 
deferred share plan 2004 transferred to her on 29 march 2007
note 2
this includes beneficial interests in ordinary shares together with conditional interests under the deferred share plan 2004 and shares held under
the share bonus plan
the company’s register of executive directors’ interests which is available for inspection in accordance with the provisions of the companies act
1985 contains full details of executive directors’ shareholdings options ltip and dsbp awards
at 31 march 2007 the executive directors of northern foods as potential beneficiaries of the northern foods esot were interested in 2951142
200506 3114793 ordinary shares held by the trustee
by order of the board
orna nichionna
chair
remuneration committee
30 may 2007 52 statement of directors’ responsibilities in relation to the financial statements northern foods plc
the following statement which should be read in conjunction with 
the auditors’ responsibilities set out in their report is made with a
view to distinguishing for shareholders the respective responsibilities of
the directors and of the auditors in relation to the financial statements
the directors are responsible for preparing the annual report and the
financial statements the directors are required to prepare financial
statements for the group in accordance with international financial
reporting standards ifrs company law requires the directors 
to prepare such financial statements in accordance with ifrs
the companies act 1985 and article 4 of the ias regulation
international accounting standard 1 requires that financial statements
present fairly for each financial period the company’s financial
position financial performance and cash flows this requires the
faithful representation of the effects of transactions other events and
conditions in accordance with the definitions and recognition criteria
for assets liabilities income and expenses set out in the international
accounting standards board’s ‘framework for the preparation and
presentation of financial statements’ in virtually all circumstances
a fair presentation will be achieved by compliance with all applicable
international financial reporting standards the directors are also
required to
 properly select and apply accounting policies
 present information including accounting policies in a manner
that provides relevant reliable comparable and understandable
information and
 provide additional disclosures when compliance with specific
requirements in ifrs is insufficient to enable users to understand
the impact of particular transactions other events and conditions
on the entity’s financial position and financial performance
the directors consider that in preparing the financial statements the
company and the group have used appropriate accounting policies
consistently applied and supported by reasonable and accounting
judgements and estimates and that all accounting standards which
they consider to be applicable have been followed the directors are
also responsible for taking reasonable steps for the prevention and
detection of fraud and other irregularities and for the preparation 
of a directors’ report and directors’ remuneration report which 
comply with the requirements of the companies act 1985
the 2007 financial statements will be published on the company’s
website in addition to the paper version the directors are responsible
for the maintenance and integrity of this electronic version of the
financial statements to the same extent as for the paper version
statement of directors’ responsibilities in relation 
to the financial statements northern foods plc independent auditors’ report – group financial statements 53
to the members of northern foods plc
we have audited the group financial statements of northern foods plc
for the 52 weeks ended 31 march 2007 which comprise the
consolidated income statement the consolidated balance sheet
the consolidated cash flow statement the consolidated statement 
of recognised income and expense the consolidated statement of
changes in equity the reconciliation of net cash flow to movements 
in net debt and the related notes 1 to 38 these group financial
statements have been prepared under the accounting policies 
set out therein
the corporate governance report and the directors’ remuneration
report are included in the individual company annual report of
northern foods plc for the 52 weeks ended 31 march 2007 we have
reported separately on the individual company financial statements 
of northern foods plc for the 52 weeks ended 31 march 2007 and 
on the information in the directors’ remuneration report included 
in the individual company annual 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
the directors’ responsibilities for preparing the annual report and 
the group financial statements in accordance with applicable law 
and international financial reporting standards ifrs as adopted 
by the european union are set out in the statement of directors’
responsibilities
our responsibility is to audit the group financial statements in
accordance with relevant legal and regulatory requirements and
international standards on auditing uk and ireland
we report to you our opinion as to whether the group financial
statements give a true and fair view whether the group financial
statements have been properly prepared in accordance with the
companies act 1985 and article 4 of the ias regulation we also
report to you whether in our opinion the information given in the
report of the directors is consistent with the group financial statements
in addition we report to you if in our opinion we have not received 
all the information and explanations we require for our audit
or if information specified by law regarding directors’ transactions 
is not disclosed
we review whether the corporate governance report reflects 
the company’s compliance with the nine provisions of the 2003
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 other information contained in the annual report for 
the above 52 weeks as described in the contents section and consider
whether it is consistent with the audited group financial statements
we consider the implications for our report if we become aware of
any apparent misstatements or material inconsistencies with the
group financial statements our responsibilities do not extend to 
any further information outside the annual report
basis of audit opinion
we conducted our audit in accordance with international standards
on auditing uk and ireland issued by the auditing practices board
an audit includes examination on a test basis of evidence relevant 
to the amounts and disclosures in the group financial statements
it also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the group
financial statements and of whether the accounting policies are
appropriate to the group’s circumstances 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 group financial statements are free from material misstatement
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 group financial statements
opinion
in our opinion
 the group financial statements give a true and fair view in
accordance with ifrs as adopted by the european union of the
state of the group’s affairs as at 31 march 2007 and of its loss 
for the 52 weeks then ended
 the group financial statements have been properly prepared in
accordance with the companies act 1985 and article 4 of the 
ias regulation and
 the information given in the report of the directors is consistent
with the group financial statements
deloitte  touche llp
chartered accountants and registered auditors 
leeds
30 may 2007
notes an audit does not provide assurance on the maintenance and integrity of the website
including controls used to achieve this and in particular on whether any changes may have
occurred to the financial statements since first published these matters are the responsibility 
of the directors but no control procedures can provide absolute assurance in this area
legislation in the united kingdom governing the preparation and dissemination of financial
statements differs from legislation in other jurisdictions
independent auditors’ report – group financial statements consolidated income statement
for the 52 weeks ended 31 march 2007
before before
restructuring restructuring restructuring restructuring
items items total items items total
2007 2007 2007 2006 2006 2006
notes £m £m £m £m £m £m
continuing operations
revenue 34 8885 – 8885 8620 – 8620
profitloss from operations 4567 582 56 526 582 69 513
finance income 39 14 – 14 04 – 04
finance expense 69 196 – 196 256 88 344
profitloss before taxation 400 56 344 330 157 173
t axation 10 81 17 64 53 41 12
profitloss for the period from 
continuing operations 319 39 280 277 116 161
discontinued operations
revenue 34 3174 – 3174 5762 – 5762
profitloss from operations 4567 13 24 37 121 455 334
loss on sale of discontinued operations 6 – 587 587 –– –
t axation 10 03 48 45 19 142 123
profitloss for the period from 
discontinued operations 10 515 505 102 313 211
profitloss for the period 329 554 225 379 429 50
the result for the period is all attributable to equity holders of the parent
earningsloss per share pence
from continuing operations
basic 13 572 330
diluted 13 566 330
from continuing and discontinued operations
basic 13 460 103
diluted 13 455 102
54 consolidated income statement northern foods plc consolidated balance sheet
as at 31 march 2007
31 march 1 april
2007 2006
notes £m £m
noncurrent assets
goodwill 14 450 654
other intangible assets 15 35 68
property plant and equipment 16 3210 5607
deferred taxation assets 29 94 –
3789 6329
current assets
inventories 17 458 697
trading investments 18 49 96
trade and other receivables 20 1143 1753
cash and cash equivalents 21 483 407
2133 2953
total assets 5922 9282
current liabilities
trade and other payables 23 1898 2310
provisions 24 77 –
current taxation liabilities 278 250
bank loans and overdrafts 25 04 14
2257 2574
noncurrent liabilities
revolving credit facility 2010 25 850 2700
senior loan notes 20122017 25 1326 1429
derivative financial instruments 27 65 16
retirement benefit obligations 36 86 902
deferred taxation liabilities 29 – 12
accruals and deferred income 126 128
2453 5187
total liabilities 4710 7761
net assets 1212 1521
equity
share capital 30 1286 1286
share premium account 31 651 651
capital redemption reserve 31 236 236
reserve for own shares 31 384 386
hedging and translation reserve 31 49 26
other reserves 31 42 33
retained earnings 31 668 325
total equity 1212 1521
the financial statements were approved by the board of directors and authorised for issue on 30 may 2007 they were signed on its behalf by
s barden j k maiden
director director
30 may 2007 30 may 2007
northern foods plc consolidated balance sheet 55 consolidated cash flow statement
for the 52 weeks ended 31 march 2007
2007 2006
notes £m £m
net cash from operating activities 32 506 570
investing activities
interest received 09 04
purchase of property plant and equipment 295 540
proceeds of sale of property plant and equipment 67 65
proceeds from settlement of insurance claim 300 –
purchase of trading investments 34 54
disposal of trading investments 81 56
disposal of discontinued operations net of disposal costs working capital and debt adjusters 11 1710 –
cash balances disposed of with discontinued operations 11 300 –
grants received 13 07
net cash fromused in investing activities 1551 462
financing activities
dividends paid 12 115 442
decrease in amounts drawn on revolving credit facility 2010 25 1850 –
repayment of borrowings 02 63
repayment of convertible subordinated bonds 2008 – 913
issue of senior loan notes 20122017 net of issue costs 26 – 1420
issue of equity share capital 3031 – 38
net cash used infrom financing activities 1967 40
net increase in cash and cash equivalents 90 148
net cash and cash equivalents
total group at start of period – all continuing operations 393 242
effect of foreign exchange rates 04 03
cash and cash equivalents at end of period 479 393
cash and cash equivalents comprise
cash and cash equivalents 483 407
bank loans overdrafts and loan notes due within one year 04 14
479 393
disposal of discontinued operations
proceeds from disposal of discontinued operations are shown net of disposal costs working capital and debt adjusters the disposals were 
made debt free and cash free including an adjustment against target working capital based on average levels further information is disclosed 
in note 11
56 consolidated cash flow statement northern foods plc reconciliation of net cash flow to movements in net debt
for the 52 weeks ended 31 march 2007
2007 2006
notes £m £m
net increase in cash and cash equivalents 90 148
decrease in trading investments 18 47 02
decrease in amounts drawn on revolving credit facility 2010 25 1850 –
decreaseincrease in borrowings 02 501
1895 355
effect of foreign exchange rates 04 03
amortisation of convertible subordinated bonds 2008 – 17
other movements 02 01
movements in net debt in period 1889 368
net debt at start of period 3631 3263
net debt at end of period 28 1742 3631
consolidated statement of recognised income and expense
for the 52 weeks ended 31 march 2007
2007 2006
notes £m £m
currency translation differences on overseas investment 31 30 21
actuarial lossesgains on defined benefit pension schemes 3136 05 550
taxation on actuarial lossesgains taken directly to equity 29 01 161
fair value movement on cash flow hedge 31 50 16
transfer to profit or loss on cash flow hedge 31 103 08
net income recognised directly in equity 19 386
profit for the period from continuing operations 280 161
loss for the period from discontinued operations 505 211
total recognised income and expense for the period 206 336
total recognised income and expense for the period is all attributable to equity holders of the parent
consolidated statement of changes in equity
for the 52 weeks ended 31 march 2007
2007 2006
notes £m £m
total recognised income and expense for the period 206 336
equity dividends 1231 115 442
new equity share capital subscribed 3031 – 38
equity settled incentive schemes 2931 11 02
deferred taxation on equity settled incentive schemes taken directly to equity 29 01 –
equity movement on convertible subordinated bonds 2008 redemption – 31
movements in total equity in the period 309 35
total equity at start of period 1521 1556
total equity at end of period 1212 1521
northern foods plc reconciliation of net cash flow to movements in net debt consolidated statement of recognised income and expense consolidated statement of changes in equity 57 58 notes to the consolidated financial statements northern foods plc
notes to the consolidated financial statements
1 general information
northern foods plc northern foods is a company incorporated 
in the united kingdom under the companies act 1985 the address 
of the registered office is included within the company information
section the nature of the group’s operations and its principal
activities are set out in the segmental reporting note and in 
the performance review
the financial statements are presented in pounds sterling because
that is the currency of the primary economic environment in which
the group operates overseas operations are included in accordance
with the accounting policies
2 significant accounting policies
basis of accounting
the financial statements have been prepared in accordance with
international financial reporting standards ifrs these financial
statements have also been prepared in accordance with ifrs adopted
by the european union and therefore the group financial statements
comply with article 4 of the eu international accounting standards
ias regulations
the financial statements have been prepared on the historical cost
basis except for the revaluation of certain financial instruments
northern foods’ management considers the following to be the 
most important accounting policies for the group in applying these
accounting policies management makes certain judgements and
estimates that affect the reported amounts of assets and liabilities 
at the period end date and the reported revenues and expenses
during the financial year the financial statements have been prepared
in accordance with the group’s accounting policies described below
key accounting judgements and sources of estimation uncertainty 
taking into account this analysis of risks and uncertainties the key
accounting judgements which could impact future finance
performance include the following
pensions – movements in equity markets interest rates and life
expectancy could materially affect the level of surpluses and deficits
in the pension schemes the key assumptions used to value pension
liabilities are set out in the notes to the financial statements
tax – the group carries out tax planning consistent with a group 
of its size and makes appropriate provision based on best estimates
until tax computations are agreed with the taxation authorities
impairment – the group has reviewed the carrying value of goodwill
and fixed assets and from time to time has impaired certain fixed
asset values on a value in use basis future changes in performance 
or disposals could impact this value
basis of consolidation
the consolidated financial statements incorporate the financial
statements of the company and entities controlled by the company
its subsidiaries made up to 31 march 2007 together known as 
the group control is achieved where the company has the power 
to govern the financial and operating policies of an investee entity 
so as to obtain benefits from its activities
on acquisition the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition
any excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill any deficiency
of the cost of acquisition below the fair values of the identifiable net
assets acquired ie discount on acquisition is credited to the
consolidated income statement during the period of any acquisition
the results of subsidiaries and businesses acquired or disposed of
during the period are included in the consolidated income statement
from the effective date of acquisition or up to the effective date 
of disposal as appropriate
where necessary adjustments are made to the financial statements
of subsidiaries to bring the accounting policies used into line with
those used by the group
all intragroup transactions balances income and expenses are
eliminated on consolidation
disposal groups
disposal groups classified as held for sale are measured at the lower
of carrying value and fair value less costs to sell
disposal groups are classified as held for sale if their carrying amount
will be recovered primarily through a sale transaction rather than through
continuing use this condition is regarded as met only when the sale
is highly probable and the disposal group is available for immediate
sale in its present condition management must be committed to 
the sale which should be expected to qualify for recognition as 
a completed sale within one year from the date of classification
revenue recognition
revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services
provided in the normal course of business net of discounts vat and
other sales related taxes
a sales of goods
sales of goods are recognised when goods are delivered and title 
has passed
b sales of services
sales of services are recognised on completion of the service
c finance income
interest income is accrued on a time basis by reference to the
principal outstanding and at the effective interest rate applicable
which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to that 
asset’s net carrying amount
foreign currencies
a functional and presentation currency
the individual financial statements of each group company are
presented in the currency of the primary economic environment 
in which it operates its functional currency for the purpose of 
the consolidated financial statements the results and financial
position of each group company are expressed in pounds sterling
which is the functional currency of the company and the presentation
currency for the consolidated financial statements
b transactions and balances
in preparing the financial statements of the individual companies
transactions in currencies other than pounds sterling are recorded 
at the rates of exchange prevailing on the dates of the transactions
at each balance sheet date monetary assets and liabilities that 
are denominated in foreign currencies are retranslated at the rate
prevailing on the balance sheet date nonmonetary assets and
liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when 
the fair value was determined exchange differences arising on 
the settlement of monetary items and on the retranslation of
monetary items are included in net profit or loss for the period goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity
and are translated at the closing rate
c group companies
on consolidation the assets and liabilities of the group’s overseas
operations are translated at exchange rates prevailing on the balance
sheet date income and expense items are translated at the average
exchange rates for the period exchange differences arising if any are
classified as equity and transferred to the group’s translation reserve
such translation differences are recognised as income or an expense
in the period in which the operation is disposed of
leases
leases are classified as finance leases whenever the terms of the lease
involve the substantial transfer of all the risks and rewards of ownership
to the lessee all other leases are classified as operating leases
assets held under finance leases are recognised as assets of the group
at their fair value or if lower at the present value of the minimum
lease payments each determined at the inception of the lease
the corresponding liability to the lessor is included in the balance
sheet as a finance lease obligation lease payments are apportioned
between finance charges and reduction of the lease obligation so 
as to achieve a constant rate of interest on the remaining balance 
of the liability finance charges are charged directly against income
unless they are directly attributable to qualifying assets in which 
case they are capitalised in accordance with the group’s general
policy on borrowing costs see below
rentals payable under operating leases are charged to income on 
a straight line basis over the term of the relevant lease benefits
received and receivable as an incentive to enter into an operating
lease are also spread on a straight line basis over the lease term
t axation
the tax expense represents the sum of the tax currently payable and
deferred tax
the tax currently payable is based on the taxable profit or loss for the
period taxable profit differs from net profit as reported in the income
statement because it excludes items of income and expense that are
taxable or deductible in other periods and it further excludes items
that are never taxable or deductible the group’s liability for current
tax is calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date
deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the
computation of taxable profit and is accounted for using the balance
sheet liability method
deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised such assets
and liabilities are not recognised if the temporary differences arise from
the initial recognition of goodwill or from the initial recognition other
than in a business combination of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting profit
deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries except where 
the group is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in
the foreseeable future
the carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow 
all or part of the assets to be recovered
deferred tax is calculated at the tax rates that have been enacted 
or substantively enacted by the balance sheet date deferred tax is
charged or credited to the income statement except where it relates
to items charged or credited directly to equity in which case the
deferred tax is also dealt with in equity
deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the group intends to settle its current tax
assets and liabilities on a net basis
property plant and equipment
property plant and equipment held for use in the production or
supply of goods or for administrative purposes are stated in the
balance sheet at historical cost or deemed cost less depreciation
historical cost includes the expenditure that is directly attributable 
to the acquisition of the items deemed cost includes surpluses
arising on the revaluation of certain properties to their fair values
prior to the date of transition to ifrs land is not depreciated
subsequent costs are included in the asset’s carrying amount 
or recognised as a separate asset as appropriate only when it is
probable that future economic benefits associated with the item 
will flow to the group and the cost of the item can be measured
reliably all other repairs and maintenance costs are charged to 
the income statement during the financial period in which they 
are incurred
assets in the course of construction are carried at cost less any
recognised impairment loss cost includes professional fees which 
are capitalised in accordance with the group’s accounting policy
depreciation of these assets commences when the assets are ready
for their intended use
depreciation is charged so as to write off the cost or valuation 
of assets over their estimated useful lives using the straight line
method on the following bases
property 20–50 years
or over the remaining life of the lease if shorter
plant and equipment 5–15 years
motor vehicles 4–10 years
assets held under finance leases are depreciated over their expected
useful lives on the same basis as owned assets or where shorter
over the term of the relevant lease the gain or loss arising on the
disposal or retirement of an asset is determined as the difference
between the sale proceeds and the carrying amount of the asset 
and is recognised in the income statement
intangible assets
a goodwill
goodwill arising on consolidation represents the excess of the cost of
acquisition over the group’s interest in the fair value of the identifiable
assets and liabilities of a subsidiary at the date of acquisition
goodwill is initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses goodwill
which is recognised as an asset is reviewed for impairment at least
annually any impairment is recognised immediately in profit or loss
and is not subsequently reversed
northern foods plc notes to the consolidated financial statements 59 2 significant accounting policies continued
on disposal of a subsidiary the attributable amount of goodwill 
is included in the determination of the profit or loss on disposal
goodwill arising on acquisitions before the date of transition 
to ifrs has been retained at the previous uk generally accepted
accounting principles gaap amount subject to being tested for
impairment at that date goodwill written off to reserves under 
uk gaap prior to 1998 has not been reinstated and is not included 
in determining any subsequent profit or loss on disposal
b computer software
computer software that is not integral to an item of property plant
or equipment is classified as an intangible asset and is held on the
balance sheet at cost these costs are amortised over their estimated
useful lives of ten years
impairment of tangible and intangible assets excluding goodwill
at each balance sheet date the group reviews the carrying amounts
of its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss
if any such indication exists the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss 
if any where the asset does not generate cash flows that are
independent from other assets the group estimates the recoverable
amount of the cash generating unit cgu to which the asset belongs
recoverable amount is the higher of fair value less costs to sell and
value in use in assessing value in use the estimated future cash flows
are discounted to their present value using a post tax discount rate
that reflects current market assessment of the time value of money
and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted
if the recoverable amount of an asset or cgu is estimated to be less
than its carrying amount the carrying amount of the asset or cgu is
reduced to its recoverable amount an impairment loss is recognised
as an expense immediately
with the exception of goodwill where an impairment loss
subsequently reverses the carrying amount of the asset or cgu is
increased to the revised estimate of its recoverable amount but so
that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss
been recognised for the asset or cgu in prior years a reversal of 
an impairment loss is recognised as income immediately
inventories
inventories are stated at the lower of cost and net realisable value
cost comprises direct materials and where applicable direct labour costs
and those overheads that have been incurred bringing the inventories
to their present location and condition net realisable value represents
the estimated selling price less all estimated costs of completion and
costs to be incurred in marketing selling and distribution
cash and cash equivalents
cash and cash equivalents includes cash in hand deposits held at call
with banks and other short term highly liquid investments with
original maturities of three months or less
bank overdrafts are shown within borrowings in current liabilities on
the balance sheet
retirement benefit costs
a pension obligations
the group operates a number of defined benefit retirement benefit
schemes a defined benefit scheme is one where the amount of
pension benefit an employee will receive on retirement is dependent
on age years of service and compensation
for defined benefit retirement benefit schemes the cost of providing
benefits is determined using the projected unit credit method with
actuarial valuations being carried out at each balance sheet date
actuarial gains and losses are recognised in full in the period in which
they occur they are recognised outside profit and loss and presented
in the statement of recognised income and expense all pension
movements that go to the income statement are included within
operating expenses
the retirement benefit obligation recognised in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognised past service costs and as reduced by the
fair value of the scheme assets any asset resulting from this calculation
is limited to the past service cost plus the present value of the
available refunds and reductions in future contributions to the scheme
past service cost is recognised immediately to the extent that the
benefits are already vested and otherwise is amortised on a straight
line basis over the average period until the benefits become vested
b post retirement healthcare
the group provides post retirement healthcare benefits to eligible
retired employees an employee is eligible if granted the benefit and 
if retirement occurred on or before 31 march 1999 employees who
were granted the benefit but retired after 31 march 1999 will not
receive this benefit in retirement post 31 march 1999 the benefit
was not granted to any employees
the expected cost of this benefit has been computed using an
accounting methodology similar to that for defined benefit pension
schemes actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are recognised 
in full in the period in which they occur they are recognised outside
profit and loss and presented in the statement of recognised income
and expense these obligations are valued annually by independent
qualified actuaries
financial instruments
a trade receivables
trade receivables do not carry any interest and are stated at their
nominal value as reduced by appropriate allowances for estimated
irrecoverable amounts
b trade payables
trade payables are not interest bearing and are stated at their
nominal value
c trading investments
the trading investments are available for sale financial assets and are
valued at fair value at the balance sheet date any gains and losses
arising from changes in fair value are included in net profit or loss 
for the period
financial liabilities and equity
financial liabilities and equity instruments are classified according 
to the substance of the contractual arrangements entered into
an equity instrument is any contract that evidences a residual
interest in the assets of the group after deducting all of its liabilities
bank borrowings
interest bearing bank loans and overdrafts are recorded at the
proceeds received net of direct issue costs finance charges including
premiums payable on settlement or redemption and direct issue
costs are accounted for on an accrual basis in profit or loss using 
the effective interest rate method they are added to the carrying
amount of the instrument to the extent that they are not settled 
in the period in which they arise
60 notes to the consolidated financial statements northern foods plc
notes to the consolidated financial statements
continued derivative financial instruments and hedge accounting
the group’s activities expose it primarily to the financial risks of
changes in foreign currency exchange rates and interest rates the
group uses foreign exchange forward contracts and interest rate swap
contracts to hedge these exposures the group does not use derivative
financial instruments for speculative purposes
the use of financial derivatives is governed by the group’s policies
approved by the board of directors which provides written principles
on the use of financial derivatives further information on currency
and interest rate management is provided in the performance review
changes in the fair value of derivative financial instruments that are
designated and effective as hedges of future cash flows are recognised
directly in equity the ineffective portion is recognised immediately in
the income statement if the cash flow hedge of a firm commitment 
or forecasted transaction results in the recognition of an asset or 
a liability then at the time the asset or liability is recognised the
associated gains or losses on the derivative that had been previously
recognised in equity are included in the initial measurement of the
asset or liability for hedges that do not result in the recognition of 
an asset or a liability amounts deferred in equity are recognised in
the income statement in the same period in which the hedged item
affects net profit or loss
changes in the fair value of derivative financial instruments that 
do not qualify for hedge accounting are recognised in the income
statement as they arise
hedge accounting is discontinued when the hedging instrument
expires or is sold terminated or exercised or no longer qualifies for
hedge accounting at that time any cumulative gain or loss on the
hedging instrument recognised in equity is retained in equity until 
the forecasted transaction occurs if a hedging transaction is no
longer expected to occur the net cumulative gain or loss recognised
in equity is transferred to net profit or loss for the period
the company has cross currency interest rate swaps to provide 
a cash flow hedge against currency and interest rate movements 
on the us1550m senior loan notes 20122017
provisions
provisions are recognised when the group has a present obligation 
as a result of a past event and it is probable that the group will 
be required to settle that obligation provisions are measured at 
the directors’ best estimate of the expenditure required to settle 
the obligation at the balance sheet date
share based payments
the group has applied the requirements of ifrs 2 ‘share based
payments’ in accordance with the transitional provisions ifrs 2 has
been applied to all grants of equity instruments after 7 november
2002 that were unvested at 1 january 2005
the group issues equity settled share based payments to certain
employees equity settled share based payments are measured at fair
value excluding the effect of nonmarket based vesting conditions
at the date of grant the fair value determined at the grant date of
the equity settled share based payments is expensed on a straight
line basis over the vesting period based on the group’s estimate of
shares that will eventually vest and adjusted for the effect of non
market based vesting conditions
fair value is measured by use of the blackscholes model the
expected life used in the model has been adjusted based on
management’s best estimate for the effects of nontransferability
exercise restrictions and behavioural considerations
government grants
government grants in respect of capital expenditure are credited to
deferred income and are released to profit over the expected useful
lives of the relevant assets by equal annual instalments grants of 
a revenue nature are credited to the income statement so as to
match them with the expenditure to which they relate
equity instruments
equity instruments issued by the company are recorded at the
proceeds received net of direct issue costs
accounting standards in issue but not yet effective
at the date of approval of these financial statements the following
standards and interpretations considered relevant to the group
were in issue but not yet effective and have not been applied in 
these financial statements
ifric 8 scope of ifrs 2
ifric 10 interim financial reporting and impairment
ifric 11 ifrs 2 group and treasury share transactions
ifrs 7 financial instruments disclosures
ifrs 8 operating segments
the directors anticipate that the adoption of these standards and
interpretations in future periods will have no material impact on the
financial statements of the group except for additional disclosures on
capital and financial instruments and operating segments when the
relevant standards come into effect for periods commencing on or
after 1 january 2007
nongaap measures
definitions of nongaap measures used by northern foods are
shown below
a net debt
net debt is not a defined term under ifrs and may not therefore 
be comparable with other similarly titled nonifrs debt measures
reported by other companies the group adopts this measure because
it is used in calculating the banking covenants it is also the measure
used for internal debt analysis in addition the net debt balance
provides an indication of the net borrowings on which the company
is required to pay interest
b underlying revenue
underlying revenue excludes the impact of currency rate changes
product categories no longer manufactured and discontinued operations
c restructuring items
items which relate to significant restructuring events and the impact
of the fire in the 52 weeks ended 31 march 2007 are presented 
as a separate column within their relevant consolidated income
statement category presentation of these items in a separate column
helps to provide a better indication of the group’s underlying business
performance restructuring items include costs or income associated
with the restructuring of businesses gains or losses on the disposal 
of businesses and asset and financial instruments impairments and
gains arising from the group’s restructuring activities
northern foods plc notes to the consolidated financial statements 61 62 notes to the consolidated financial statements northern foods plc
3 revenue
the analysis of the group’s revenue is as follows
2007 2006
continuing operations £m £m
sale of goods 8885 8620
revenue 8885 8620
finance income 14 04
other operating income 19 16
8918 8640
discontinued operations
sale of goods and services 3174 5762
revenue 3174 5762
other operating income 48 –
3222 5762
total 12140 14402
4 segmental reporting
business segments
for management purposes the group is organised into three operating divisions chilled frozen and bakery these divisions are the basis on 
which the group reports its primary segment information the continuing operating divisions are as follows
division major product category
chilled ready meals sandwiches  salads
frozen pizza fish  vegetables pastry meat  meatfree products
bakery biscuits puddings
segment information
the segment information is as follows
chilled frozen bakery total
2007 2006 2007 2006 2007 2006 2007 2006
underlying revenue £m £m £m £m £m £m £m £m
revenue 6222 7477 2445 2381 3392 4524 12059 14382
less revenue from 
discontinued operations 1755 3316 – – 1419 2446 3174 5762
revenue from continuing 
operations 4467 4161 2445 2381 1973 2078 8885 8620
less product categories no 
longer manufactured – 05 – – – – – 05
foreign exchange – – 03 – – – 03 –
underlying revenue 4467 4156 2442 2381 1973 2078 8882 8615
external revenue profit from operations
2007 2006 2007 2006
£m £m £m £m
continuing operations
chilled 4467 4161 222 122
frozen 2445 2381 190 229
bakery 1973 2078 170 231
8885 8620 582 582
net finance costs 182 252
profit before taxation 400 330
t axation 81 53
profit for the period from continuing operations 319 277
discontinued operations
chilled 1755 3316 11 55
bakery 1419 2446 02 66
profit before taxation 3174 5762 13 121
t axation 03 19
profit for the period from discontinued operations 10 102
profit for the period 329 379
 before restructuring items
notes to the consolidated financial statements
continued 4 segmental reporting continued
during the period the group made disposals in line with the business review announced on 31 may 2006 as a result the prior period figures
have been restated for the reclassification of these disposals from continuing to discontinued operations for further information on disposals
see note 11 the prior period figures have also been restated for the transfer of la baguette doree from the chilled division to the bakery
division on 2 april 2006 la baguette doree had external sales of £86m and an operating loss of £10m in the 52 weeks ended 1 april 2006
continuing restructuring items from operations of £56m 200506 £69m comprise chilled £27m 200506 £50m frozen £17m 200506
£09m and bakery £12m 200506 £10m intersegmental sales are charged at prevailing market prices continuing intersegmental sales were
chilled £nil 200506 £nil frozen £nil 200506 £nil and bakery £01m 200506 £03m
continuing profit from operations after restructuring items was chilled £195m 200506 £72m frozen £173m 200506 £220m and
bakery £158m 200506 £221m
discontinued restructuring items from operations was a gain of £24m 200506 loss £455m this comprised chilled loss £152m 200506
£307m and bakery gain £176m 200506 loss £148m discontinued intersegmental sales were chilled £04m 200506 £09m and bakery
£66m 200506 £95m
the discontinued result from operations after restructuring items was chilled loss £141m 200506 loss £252m and bakery profit £178m
200506 loss £82m loss on the sale of the discontinued operations was £587m
2007 2006
assets liabilities total assets liabilities total
total assetsliabilities £m £m £m £m £m £m
chilled 2396 875 1521 4057 994 3063
frozen 1638 526 1112 1830 480 1350
bakery 1110 340 770 2824 673 2151
operating assetsliabilities 5144 1741 3403 8711 2147 6564
unallocated corporate assets
cash at bank and in hand 483 – 483 407 – 407
trading investments 49 – 49 96 – 96
loan note from nft business disposal 67 – 67 –– –
corporate other receivables 85 – 85 68 – 68
deferred taxation assets 94 – 94 –– –
unallocated corporate liabilities
total borrowings – 2180 2180 – 4143 4143
derivative financial instrument – 65 65 – 16 16
retirement benefit obligation – 86 86 – 902 902
deferred taxation liabilities –– – – 12 12
current taxation liabilities – 278 278 – 250 250
corporate other payables – 360 360 – 291 291
total assetsliabilities 5922 4710 1212 9282 7761 1521
the prior period figures have been restated for the transfer of la baguette doree from the chilled division to the bakery division on 2 april 2006
which had assets of £20m
chilled frozen bakery group
other information – 2007 £m £m £m £m
capital additions
continuing 121 52 32 205
discontinued 36 – 40 76
depreciation
continuing 178 109 119 406
discontinued 82 – 79 161
amortisation of other intangible assets
continuing 03 01 01 05
discontinued 02 – 02 04
impairment of property plant and equipment
discontinued 50 – – 50
northern foods plc notes to the consolidated financial statements 63 64 notes to the consolidated financial statements northern foods plc
4 segmental reporting continued
chilled frozen bakery group
other information – 2006 £m £m £m £m
capital additions
continuing 158 151 65 374
discontinued 117 – 62 179
depreciation
continuing 178 101 90 369
discontinued 142 – 130 272
amortisation of other intangible assets
continuing 03 01 02 06
discontinued 02 – 02 04
impairment of property plant and equipment
discontinued 250 – 140 390
geographical segments
the group operates in two main geographical areas the united kingdom and the republic of ireland the chilled and bakery divisions operate 
in the united kingdom while the frozen business operates in both the united kingdom and the republic of ireland the following table provides
an analysis of the group’s sales by geographical market irrespective of the origin of the goodsservices
revenue
2007 2006
£m £m
united kingdom 11315 13654
other 744 728
12059 14382
revenue from the group’s discontinued operations was derived principally from the united kingdom 200607 £3158m 200506 £5714m
and other 200607 £16m 200506 £48m
the following is an analysis of the carrying amount of segment assets and additions to property plant and equipment and intangible assets
analysed by geographical area in which the assets are located
additions to property
plant and equipment 
segment assets and intangible assets
2007 2006 2007 2006
£m £m £m £m
united kingdom 4384 7663 243 427
republic of ireland 1538 1619 38 126
5922 9282 281 553
5 analysis of consolidated income statement
before before
restructuring restructuring restructuring restructuring
items items total items items total
2007 2007 2007 2006 2006 2006
£m £m £m £m £m £m
continuing operations
revenue 8885 – 8885 8620 – 8620
cost of sales 7017 24 7041 6587 08 6595
gross profitloss 1868 24 1844 2033 08 2025
distribution costs 578 03 581 602 – 602
administrative expenses 727 29 756 865 61 926
other operating income 19 – 19 16 – 16
profitloss from operations 582 56 526 582 69 513
discontinued operations
revenue 3174 – 3174 5762 – 5762
cost of sales 2330 70 2260 3970 390 4360
gross profitloss 844 70 914 1792 390 1402
distribution costs 662 01 663 1298 02 1300
administrative expenses 217 45 262 373 63 436
other operating income 48 – 48 – – –
profitloss from operations 13 24 37 121 455 334
notes to the consolidated financial statements
continued 6 restructuring items
2007 2006
£m £m
continuing operations
restructuring items from operations 56 69
restructuring items from financing – 88
t axation 17 41
39 116
discontinued operations
restructuring items from operations 24 455
loss on sale of discontinued operations 587 –
t axation 48 142
515 313
total 554 429
restructuring items from continuing operations comprise primarily £45m in respect of central cost reduction initiatives including information
services is outsourcing and headcount reduction and £11m relating to the rationalisation of breading facilities in the frozen division the
restructuring charge in the frozen division is net of a gain on sale of land which was used to fund the restructuring
restructuring items from discontinued operations include a net gain of £190m in respect of the asset reinstatement following the fire in 
the speciality bread category offset by a charge of £152m in respect of the simplification of chilled pastry and a charge of £14m relating 
to the exit from the cream cake market the net charge in respect of the chilled pastry category primarily relates to the closure of trafford park
bakery and includes a £100m asset impairment which is partly offset by a £50m reduction in a previous impairment of other operations in 
this category
the loss on sale of discontinued operations relates to the disposal of the trade and assets of nft distribution and the statutory entity of the
speciality bread company and the trade and assets of the chilled pastry cakes and flour milling businesses further information is disclosed 
in note 11
items which relate to significant restructuring events and the impact of the fire in the 52 weeks ended 31 march 2007 are presented as a
separate column within their relevant consolidated income statement category presentation of these items in a separate column helps to
provide a better indication of the group’s underlying business performance restructuring items include costs or income associated with the
restructuring of businesses gains or losses on the disposal of businesses and asset and financial instrument impairments and gains arising from
the group’s restructuring activities
7 profitloss from operations
profitloss from operations has been arrived at after chargingcrediting the restructuring items in note 6 and the items below
2007 2006
£m £m
depreciation of property plant and equipment
continuing 406 369
discontinued 161 272
impairment of property plant and equipment
discontinued 50 390
amortisation of other intangible assets
continuing 05 06
discontinued 04 04
staff costs note 8
continuing 2420 2425
discontinued 1266 1850
auditors’ remuneration for audit services
continuing 02 03
discontinued 01 01
government grants
continuing 19 16
cost of inventories recognised as expense
continuing 7017 6587
discontinued 2330 3970
profit on disposal of property plant and equipment
continuing 15 06
profit on disposal of property plant and equipment included within restructuring items was £266m 200506 £21m
northern foods plc notes to the consolidated financial statements 65 7 profitloss from operations continued
a more detailed analysis of auditors’ remuneration is provided below
2007 2006
deloitte  deloitte 
touche llp touche llp
£’000 £’000
audit services
fees payable to the company’s auditors for the audit of the group’s annual report 
including in 200506 £53000 relating to ifrs conversion 80 148
fees payable to the company’s auditors and their associates for the audit of the 
company’s subsidiaries pursuant to legislation 185 230
265 378
other services
other services supplied pursuant to such legislation – interim review 30 27
other services supplied pursuant to legislation – reporting accountants 265 –
other 2 41
297 68
t ax services
advisory services 153 –
compliance 130 8
283 8
fees payable to the company’s auditors in respect of the associated pensions schemes audit – 9
total 845 463
deloitte  touche llp were appointed sole group auditors for both the current and the prior periods
8 staff costs
the average monthly number of employees including executive directors was
2007 2006
number number
continuing operations
production 9111 9299
distribution 622 935
administration 1113 1199
10846 11433
discontinued operations
production 4897 6849
distribution 678 1616
administration 300 333
5875 8798
total 16721 20231
aggregate remuneration comprised
2007 2006
£m £m
continuing operations
wages and salaries 2241 2168
social security costs 173 179
other pension cost 06 78
2420 2425
discontinued operations
wages and salaries 1127 1634
social security costs 85 138
other pension cost 54 78
1266 1850
in addition to the staff costs disclosed above redundancy costs were £169m 200506 £93m
66 notes to the consolidated financial statements northern foods plc
notes to the consolidated financial statements
continued 9 net finance costs
2007 2006
£m £m
bank interest receivable 09 04
other interest receivable 05 –
interest on subordinated convertible bonds 2008 – 69
interest on senior loan notes 20122017 78 22
interest on bank overdrafts and loans 118 165
net finance costs before restructuring item 182 252
restructuring item – fair value loss on early redemption of subordinated convertible bonds 2008 – 88
182 340
10 t axation
continuing discontinued total
2007 2006 2007 2006 2007 2006
£m £m £m £m £m £m
current taxation
uk corporation tax 49 101 02 58 51 159
overseas tax 25 14 – – 25 14
tax on restructuring items – uk 19 27 25 25 44 52
tax on restructuring items – overseas 02 – – – 02 –
57 88 23 33 34 121
deferred taxation
uk deferred tax 13 68 01 39 14 107
overseas tax 06 06 – – 06 06
tax on restructuring items – uk – 14 23 117 23 131
07 76 22 156 15 232
t ax chargecredit for the period 64 12 45 123 19 111
uk corporation tax is calculated at 300 200506 300 of the estimated assessable profit or loss for the period taxation in the republic of
ireland is calculated at 100 200506 100
a deferred tax credit of £01m 200506 £nil was taken to equity relating to equity settled incentive schemes
deferred tax credit of £01m 200506 charge £161m was taken to equity relating to the actuarial gains and losses on the retirement benefit
obligation
the charge for the year can be reconciled to the profitloss per the consolidated income statement as follows
2007 2007 2006 2006
£m  £m 
profitloss before taxation
continuing operations 344 1670 173 1075
discontinued operations 37 180 334 2075
loss on sale of discontinued operations 587 2850 ––
total loss before taxation 206 1000 161 1000
taxation at the uk corporation tax rate of 300 62 300 48 300
effect of lower overseas tax rates 44 214 46 286
adjustment to tax charge in respect of prior periods
corporation tax 43 209 82 512
deferred tax 05 24 119 739
expenses not deductible in determining taxable profit and other items 52 252 05 31
utilisation and creation of losses not recognised as deferred tax assets 121 587 ––
other –– 15 93
t ax chargecredit and effective tax rate for the period 19 92 111 689
the adjustments in respect of prior periods relate to resolutions of previous years’ tax computations and a switch from current to deferred tax
with respect to capital allowance disclaimers
northern foods plc notes to the consolidated financial statements 67 11 discontinued operations
on 31 july 2006 the group entered into a sale agreement to dispose of the trade and assets of nft distribution which carried out the group’s
chilled distribution operations the disposal was completed on 11 august 2006 on which date control of the trade and assets passed on to 
the acquirer
on 22 november 2006 the group entered into a sale agreement to dispose of its speciality bread chilled pastry cakes and flour milling
businesses together called ‘the assets’ the disposal was completed on 13 january 2007 on which date control of the statutory entity 
of the speciality bread company fletchers bakeries limited and the trade and assets of all other businesses passed on to the acquirer
the results of the discontinued operations included in the consolidated income statement were as follows
2007 2006
£m £m
revenue 3174 5762
expenses 3161 5641
profit from operations before restructuring items 13 121
restructuring items 24 455
profitloss from operations after restructuring items 37 334
loss on disposal of discontinued operations 587 –
t axation 45 123
net loss attributable to discontinued operations 505 211
during the period nft distribution and the assets contributed £200m 200506 £323m to the group’s net operating cash flows contributed £199m
200506 paid £167m in respect of investing activities and paid £nil 200506 £nil in respect of financing activities the contribution of £199m
in 200607 from investing activities is net of £300m receipt from the settlement of the fire insurance claim in the speciality bread category
taxation of £03m 200506 £19m was charged to the income statement on the profit from discontinued operations before restructuring
items taxation of £48m 200506 £142m was credited to the income statement in respect of restructuring items including business disposals
relating to discontinued operations
a profit of £190m arose on the disposal of nft distribution and a loss of £777m arose on the disposal of the assets
the aggregate net assets of the disposed businesses at their respective dates of disposal and at 1 april 2006 were as follows
nft distribution the assets
at 11 august at 13 january
2006 2007 total 1 april 2006
£m £m £m £m
noncurrent assets 
goodwill – 201 201 201
other intangible assets 02 22 24 29
property plant and equipment 334 1619 1953 2152
current assets 
inventories 04 161 165 182
trade and other receivables 107 488 595 676
cash and cash equivalents – 300 300 –
current liabilities 
trade and other payables 119 577 696 771
noncurrent liabilities 
accruals and deferred income – 14 14 14
deferred taxation liabilities – 88 88 36
328 2112 2440 2419
net cost of disposal 02 12 14 –
working capital and debt adjusters 08 253 245 –
profitloss on disposal of discontinued operations 190 777 587 –
gross consideration 512 1600 2112 –
satisfied by
cash 445 1600 2045 –
deferred consideration 67 – 67 –
512 1600 2112 –
net cash inflow arising on disposal
cash consideration 445 1600 2045 –
costs of disposal 13 77 90 –
working capital and debt adjusters 08 253 245 –
440 1270 1710 –
cash and cash equivalents disposed of – 300 300 –
440 970 1410 –
 cash and cash equivalents disposed of relates to the proceeds from the settlement of the fire insurance claim in the speciality bread category
68 notes to the consolidated financial statements northern foods plc
notes to the consolidated financial statements
continued 11 discontinued operations continued
the deferred consideration relating to the disposal of the trade and assets of nft distribution is repayable in full by the purchaser on or before
11 august 2007
cash costs of disposal are professional fees incurred to complete the business disposals
costs incurred in disposing of trade and assets of nft distribution comprise professional fees of £13m dilapidation provisions of £10m offset 
by a curtailment gain on the northern foods pension scheme of £21m
costs incurred in disposing of the assets comprise professional fees of £80m an adjustment relating to the final settlement of the fire insurance
claim in the speciality bread category of £50m an operating loss in the period from classifying the assets as held for resale to completion 
of £08m redundancy and other costs relating to the cessation of ready meals at the riverside site of £36m in accordance with the sale and
purchase agreement and payments of £28m to management of the discontinued operations offset by a curtailment gain on the northern
foods pension scheme of £190m
the impact of the discontinued operations on the group’s results in the current and prior periods and their effect on segmental results is
disclosed in note 4
further information on the curtailment gains is disclosed in note 36
12 dividends
2007 2006
equity dividends on ordinary shares £m £m
amounts recognised in the period
final dividend for the 52 weeks ended 1 april 2006 of 085p 200405 570p 42 277
interim dividend for the 52 weeks ended 31 march 2007 of 150p 200506 340p 73 165
115 442
proposed final dividend for the 52 weeks ended 31 march 2007 275p 200506 085p 135 42
the proposed final dividend is subject to approval by shareholders at the annual general meeting and accordingly has not been included as 
a liability in these financial statements
13 earningsloss per share
earningsloss earningsloss
earningsloss per share earningsloss per share 
2007 2007 2006 2006
earningsloss and earningsloss per share £m pence £m pence
continuing operations
earnings used for calculation of basic earnings per share 280 572 161 330
restructuring items 39 080 116 238
earnings used for calculation of basic earnings per share before restructuring items 319 652 277 568
earnings used for calculation of diluted earnings per share 280 566 161 330
discontinued operations
loss used for calculation of basic earnings per share 505 1032 211 433
restructuring items 515 1052 313 642
earnings used for calculation of basic earnings per share before restructuring items 10 020 102 209
loss used for calculation of diluted earnings per share 505 1021 211 432
continuing and discontinued operations
loss used for calculation of basic loss per share 225 460 50 103
restructuring items 554 1132 429 880
earnings used for calculation of basic earnings per share before restructuring items 329 672 379 777
loss used for calculation of diluted loss per share 225 455 50 102
2007 2006
number of shares number m number m
weighted average number of shares 5142 5123
own shares held 219 219
shares held in employee share ownership trust esot 27 31
weighted average number of shares used for calculation of basic earnings 
per share and earnings per share before restructuring items 4896 4873
savingsrelated share options – 06
executive share options 04 02
long term incentive plans 13 02
deferred share plan 34 01
weighted average number of shares used for calculation of diluted earnings per share 4947 4884
northern foods plc notes to the consolidated financial statements 69 14 goodwill
£m
cost
at start and end of prior period 765
at start of period 765
restructuring disposals 263
exchange movements 04
at end of period 498
accumulated impairment losses
at start and end of prior period 111
at start of period 111
restructuring disposals 62
exchange movements 01
at end of period 48
carrying amount
at end of period 450
at start of period 654
impairment tests for goodwill
goodwill acquired in a business combination is allocated at acquisition to the group’s cgus that are expected to benefit from that business
combination the cgus have been defined as the operating business to which the goodwill relates the carrying amount of goodwill has been
allocated as follows
2007 2006
£m £m
solway foods 301 301
fletchers – 172
green isle 149 152
park cakes – 29
450 654
the disposals of goodwill relate to the sale of the assets on 13 january 2007 for further details see note 11
the group tests for impairment of goodwill at least annually
the recoverable amounts of the cgus are determined from value in use calculations the key assumptions for the value in use calculations 
are those regarding the discount rates growth rates and expected changes to selling prices and direct costs during the period management
estimates discount rates using the group’s weighted average cost of capital
the group prepares cash flow forecasts derived from the most recent financial plans approved by management for the next five years and
extrapolates these cash flows in perpetuity using growth assumptions relevant for the business sector the growth rate used is not more than
30 200506 not more than 30 and is not considered to be higher than the average long term industry growth rate
the rate used to discount the forecast cash flows for all cgus is the group’s post tax weighted average cost of capital of 70 200506 70
this approximates to applying a pretax discount rate to pretax cash flows
15 other intangible assets
software licences
£m
cost
at start and end of prior period 103
at start of period 103
restructuring disposals 44
at end of period 59
accumulated amortisation
at start of prior period 25
charge for the period 10
at start of period 35
charge for the period 09
restructuring disposals 20
at end of period 24
carrying amount
at end of period 35
at start of period 68
70 notes to the consolidated financial statements northern foods plc
notes to the consolidated financial statements
continued 16 property plant and equipment
freehold leasehold plant fixtures
property property  vehicles total
£m£m£m£m
cost or valuation
at start of prior period 2707 1001 8920 12628
additions 56 10 487 553
disposals 04 – 30 34
restructuring disposals 150 – 86 236
reclassifications 02 – 02 –
exchange movements 04 – 19 23
at start of period 2611 1011 9312 12934
additions 05 – 276 281
disposals – 05 27 32
restructuring disposals 943 725 3983 5651
reclassifications 15 10 05 –
exchange movements 09 – 33 42
at end of period 1679 271 5540 7490
accumulated depreciation and impairment losses
at start of prior period 764 254 5501 6519
charge for the period 56 26 559 641
restructuring provision for impairment 51 – 339 390
disposals – – 27 27
restructuring disposals 121 – 84 205
exchange movements – – 09 09
at start of period 750 280 6297 7327
charge for the period 48 19 500 567
restructuring provision for impairment 20 – 30 50
disposals – 03 25 28
restructuring disposals 278 232 3107 3617
reclassifications 06 02 04 –
exchange movements 01 – 18 19
at end of period 545 62 3673 4280
carrying amount
at end of period 1134 209 1867 3210
at start of period 1861 731 3015 5607
at the period end the group had entered into contractual commitments for the purchase of property plant and equipment amounting to 
£16m 200506 £30m
the carrying amount of the group’s leasehold property includes an amount of £nil 200506 £09m in respect of assets held under finance leases
impairment – discontinued operations 
a net £50m impairment charge was incurred during the period relating to discontinued operations as part of its business review management
identified impairment losses of £100m relating to the closure of the trafford park bakery this impairment was partly offset by a £50m
reduction in a previous impairment of other operations within the chilled pastry category the impaired assets have been sold during the period
as part of the sale of the assets therefore the impairment has been included within discontinued operations
the impairment losses identified represent the difference between the carrying amounts of property plant and equipment and their recoverable
amount the recoverable amounts are determined from value in use calculations unless management is committed to closing or selling the
business if the value of the business is to be recovered through sale or closure then the recoverable amount is the fair value less costs to sell
the key assumptions for the value in use calculations are those regarding the discount rates growth rates and expected changes to selling prices
and direct costs during the period management estimates discount rates using the group’s weighted average cost of capital
the group prepares cash flow forecasts derived from the most recent financial plans approved by management for the next five years and
extrapolates these cash flows in perpetuity using growth assumptions relevant for the business sector the growth rate used is not more than
30 200506 not more than 30 and is not considered to be higher than the average long term industry growth rate
the rate used to discount the forecast cash flows for all cgus is the group’s post tax weighted average cost of capital of 70 200506 70
this approximates to applying a pretax discount rate to pretax cash flows
northern foods plc notes to the consolidated financial statements 71 notes to the consolidated financial statements
continued
17 inventories
2007 2006
£m £m
raw materials 176 288
work in progress 38 46
finished goods 244 363
458 697
the directors consider that the replacement value of inventory is not materially different to the value shown above
18 trading investments
trading investments stated at fair value represent investments in listed equity securities that present the group with opportunity for return
through dividend income and trading gains they have no fixed maturity or coupon rate the fair values of these securities are based on quoted
market prices
2007 2006
£m £m
trading investments at fair value 49 96
19 subsidiaries
a list of the significant subsidiary investments including the name country of incorporation and proportion of ownership interest is given in
note 44 to the company’s separate financial statements
20 trade and other receivables 
2007 2006
£m £m
trade receivables 887 1542
other receivables 146 132
other prepayments 43 79
loan note 67 –
1143 1753
the average credit period taken for trade receivables is 39 days 200506 41 days
the loan note is deferred consideration on the disposal of the trade and assets of nft distribution during the period interest is accruing at 
a variable rate the loan note is repayable in full by the purchaser on or before 11 august 2007 further information about the disposal is given 
in note 11
the directors consider that the carrying amount of trade and other receivables approximates to their fair value the directors consider the
maximum credit risk at the balance sheet date is equivalent to the carrying value of trade and other receivables
21 cash and cash equivalents
cash and cash equivalents comprise cash held by the group and short term bank deposits with an original maturity of three months or less 
and bank overdrafts the directors consider that the carrying amount of these assets and liabilities approximates to their fair value
22 credit risk 
the group’s principal financial assets are cash and cash equivalents trade and other receivables and trading investments
the group’s credit risk is primarily attributable to its trade receivables the amounts presented in the balance sheet are net of allowances for
doubtful trade receivables estimated by the group’s management based on prior experience and their assessment of the current economic
environment the group’s top five customers all leading uk retailers represent more than 75 of the group’s revenue these customers have
favourable credit ratings and consequently reduce the credit risk for the group’s overall trade receivables the credit risk on liquid funds and
derivative financial instruments is limited because the counterparties are banks with good credit ratings assigned by international credit rating
agencies the amount written off in respect of credit risk was £03m 200506 £01m
72 notes to the consolidated financial statements northern foods plc 23 trade and other payables
2007 2006
£m £m
trade payables 1036 1280
accruals and deferred income 620 748
other payables including social security 242 282
1898 2310
trade payables principally comprise amounts outstanding for trade purchases and ongoing costs the average credit period taken for trade
payables is 44 days 200506 43 days
the directors consider that the carrying amount of trade payables approximates to their fair value
24 provisions
£m
at start of period –
restructuring provisions – charge for the period 80
utilised in period 03
at end of period 77
all of the £77m provisions are included within current liabilities
the restructuring provisions made during the period of £80m comprises £42m in respect of central cost reduction initiatives including 
is outsourcing and headcount reduction and £38m of redundancy and other costs relating to the cessation of ready meals production 
at the riverside site
25 financial liabilities – borrowings
2007 2006
current £m £m
bank loans and overdrafts due within one year or on demand 04 12
loan notes – 02
04 14
2007 2006
noncurrent £m £m
revolving credit facility 2010 850 2700
senior loan notes 20122017 1326 1429
2176 4129
borrowings are repayable as follows
2007 2006
£m £m
within one year or on demand 04 14
in the second year – –
in the third to fifth years inclusive 850 2700
after five years 1326 1429
2180 4143
bank loans and overdrafts are analysed by currency as follows
sterling us dollars total
2007 £m £m £m
bank loans and overdrafts due within one year or on demand 04 – 04
revolving credit facility 2010 850 – 850
senior loan notes 20122017 543 783 1326
1397 783 2180
2006
bank loans and overdrafts due within one year or on demand 12 – 12
revolving credit facility 2010 2700 – 2700
loan notes 02 – 02
senior loan notes 20122017 543 886 1429
3257 886 4143
northern foods plc notes to the consolidated financial statements 73 notes to the consolidated financial statements
continued
25 financial liabilities – borrowings continued
the average interest rates paid on bank loans and overdrafts were as follows
2007 2006
 
bank overdrafts 582 559
bank loans 536 514
convertible subordinated bonds 2008 – 675
senior loan notes 20122017 550 550
where market values are not available fair values of financial assets and financial liabilities have been calculated by discounting expected 
future cash flows at prevailing interest rates and by applying period end exchange rates the carrying amounts of short term borrowings 
and the revolving credit facility 2010 approximate to fair value
the fair value of the senior loan notes 20122017 is disclosed below
2007 2007 2006 2006
carrying value fair value carrying value fair value
£m£m £m£m
senior loan notes 20122017 1326 1320 1429 1429
at the period end the group had available £3750m 200506 £1900m of undrawn committed facilities on the revolving credit facility 2010 
and £146m bank overdrafts 200506 £188m in respect of which all conditions precedent had been met
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 euros to sterling were ¤1464  £1 
and ¤1474  £1 respectively 200506 ¤1466  £1 and ¤1433  £1 respectively
26 financing
bank overdrafts
all bank loans and overdrafts are unsecured and repayable on demand and are arranged at floating rates thus exposing the group to cash flow
interest rate risk the interest rate on bank overdrafts is 10 200506 10 above the bank of england base rate
revolving credit facility 2010
the group holds a five year syndicated revolving credit facility of £4600m at the period end the amounts due under the facility were £850m
200506 £2700m the amount drawn down is repayable in periods of up to one year but is capable of being immediately refinanced as part
of the committed revolving credit facility 2010 the rate of interest fluctuates in line with market rates thus exposing the group to cash flow
interest rate risk
senior loan notes 20122017
the company has approximately £1427m of senior guaranteed loan notes in the us private placement debt market notes are in both us dollars
usd 1550m and pounds sterling £543m the notes are fixed rate and unsecured part of the senior loan notes 20122017 will be repayable
at face value during 200708 to the extent that a proportion of the proceeds from the business disposals have not been reinvested in acquisitions
or capital investment
the maturity profile of the senior loan notes 20122017 is as follows
tranche maturity amount m rate
series a december 2012 350 563
series b december 2015 825 577
series c december 2017 375 587
series d december 2012 £285 547
series e december 2015 £258 547
all us dollar cash flows are hedged using cross currency swaps northern foods will receive each 20 december and 20 june the bond interest
payment dates fixed usd sufficient to fully cover interest due to holders of the usd denominated bonds in exchange for payment of fixed pounds
sterling on the same date the weighted average interest rate payable in pounds sterling by the company is approximately 55 additionally the
swap contracts provide for an exchange of the principal amounts at maturity at the same rate of exchange as the initial principal was translated
£1  us1752
loan notes
the loan notes were all redeemed during the period 200506 £02mthe loan notes bore interest at 10 below the base rate and could be
redeemed at amounts of £20000 or multiples thereof at their nominal principal amount half yearly on 30 june and 31 december each year
loan notes not previously redeemed would have been redeemed at their nominal amount on 30 june 2008
74 notes to the consolidated financial statements northern foods plc northern foods plc notes to the consolidated financial statements 75
27 derivative financial instruments 
cross currency interest rate swaps
the company has cross currency interest rate swaps to provide a cash flow hedge against currency and interest rate movements on the
us1550m loan notes swap contracts with nominal value of us1550m £885m have fixed sterling interest payments at an average rate 
of 55 for periods up to 2017 and have fixed usd interest receipts at an average rate of 576 as at the period end swaps had a negative 
fair value of £65m 200506 £16m
other currency derivatives
from time to time the group has entered into foreign currency forward contracts to manage its exchange rate exposure the instruments
purchased are denominated in euros the total notional value of outstanding foreign currency forward contracts that the group has committed 
is £nil 200506 £nil
the fair value of the group’s currency derivatives is estimated to be approximately £nil 200506 £nil these amounts are based on market
values of equivalent instruments at the balance sheet date
changes in the fair value of nonhedging currency derivatives amounting to £nil have been charged to the income statement in the year
200506 £nil
28 analysis of net debt
references to net debt refer to the total borrowings of the group including both short term and long term bank loans bonds loan notes and
finance leases after offsetting the cash and cash equivalents of the business and short term investments net debt will also include the proportion
of the fair value of the currency swaps hedging the balance sheet value of the group’s dollar denominated loan notes
the table below reconciles net debt to the corresponding balance sheet captions
2007 2006
£m £m
cash and cash equivalents 483 407
trading investments 49 96
bank loans overdrafts and loan notes due within one year 04 14
revolving credit facility 2010 850 2700
senior loan notes 20122017 1326 1429
currency element of fair value of swaps hedging the group’s dollar denominated loan notes 94 09
net debt 1742 3631
net debt
net debt is not a defined term under ifrs and may not therefore be comparable with other similarly titled nonifrs debt measures reported by
other companies the group adopts this measure because it is used in calculating the banking covenants it is also the measure used for internal
debt analysis in addition the net debt balance provides an indication of the net borrowings on which the company is required to pay interest
29 deferred taxation assetliability
retirement other accelerated convertible
benefit employee tax bond equity revaluation
obligation benefits depreciation component of buildings total
£m £m £m £m £m £m
at start of prior period 505 15 573 20 11 84
creditedcharged to income statement in prior period 79 – 174 06 – 101
restructuring items – – 117 14 – 131
charged to equity 161 – – – – 161
exchange differences – – 01 – – 01
at start of period 265 15 281 – 11 12
chargedcredited to income statement 63 03 52 – – 08
restructuring items 138 – 161 – – 23
disposal of discontinued operations – – 88 – – 88
charged to equity 01 01 – – – 02
exchange differences – – 01 – – 01
at end of period 65 19 21 – 11 94
at the balance sheet date the aggregate amount of temporary differences associated with undistributable earnings of subsidiaries for which
deferred tax liabilities have not been recognised is £43m 200506 £109m no liability has been recognised in respect of these differences
because the group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences
will not reverse in the foreseeable future
a deferred tax asset has not been recognised in respect of losses of £40m incurred by northern foods insurance limited relating to the fire 
in the speciality bread category the losses will be carried forward for future offset but it is unclear as to when the asset will be realised notes to the consolidated financial statements
continued
30 share capital
2007 2007 2006 2006
number m £m number m £m
authorised ordinary shares of 25p each 7600 1900 7600 1900
allotted called up and fully paid ordinary shares of 25p each
at start of period 5142 1286 5105 1276
issue of equity shares – – 37 10
at end of period 5142 1286 5142 1286
during the period the company issued nil shares 200506 37m shares for a consideration of £nil 200506 £38m
31 reserves
share capital reserve hedging and
premium redemption for own translation equity other retained
account reserve shares reserve reserve reserves earnings
£m£m£m£m£m£m£m
at start of prior period 623 236 386 29 124 92 438
net loss for the period – – – – – – 50
dividends – – – – – – 442
premium arising on issue of equity shares 28 – – – – – –
actuarial gains on defined benefit pension schemes 
net of deferred tax – – – – – – 389
equity settled incentive schemes – – – – – 02 –
exchange differences – – – 21 – – –
decrease in fair value of hedging derivatives – – – 16 – – –
transfer to profit or loss on cash flow hedge – – – 08 – – –
redemption of bond – – – – 124 – 155
other movements – – – – – 61 61
at start of period 651 236 386 26 – 33 325
net loss for the period – – – – – – 225
dividends – – – – – – 115
actuarial losses on defined benefit pension schemes 
net of deferred tax – – – – – – 04
equity settled incentive schemes net of deferred tax – – 02 – – 10 –
exchange differences – – – 30 – – –
decrease in fair value of hedging derivatives – – – 50 – – –
transfer to profit or loss on cash flow hedge – – – 103 – – –
other movements – – – – – 01 01
at end of period 651 236 384 49 – 42 668
share capital
the company has one class of ordinary shares which carry no right to fixed income
share premium account
the share premium account represents amounts received in excess of the nominal value of shares on issue of new shares
capital redemption reserve
the capital redemption reserve arose on the repurchase and cancellation of ordinary shares
reserve for own shares
the reserve for own shares held by the group represents the shares in the company held in treasury and by the esot
the esot holds shares which are primarily used to satisfy awards made under the long term incentive plans
hedging and translation reserve
the hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged
transactions that have not yet occurred
the translation element of the reserve records exchange differences arising from the translation of the financial statements of foreign subsidiaries
other reserves
other reserves primarily represent the equity component of share based payment arrangements and the remaining revaluation reserve from when 
the group accounted under uk gaap
in the prior period other movements comprise a transfer of undistributable to distributable reserves in respect of grants received
retained earnings
retained earnings include net profit or loss for the year
76 notes to the consolidated financial statements northern foods plc northern foods plc notes to the consolidated financial statements 77
32 reconciliation of net cash from operating activities
2007 2006
notes £m £m
profit from operations – continuing operations 5 526 513
profitloss from operations – discontinued operations 5 37 334
563 179
adjustments for
depreciation of property plant and equipment and amortisation of other intangible assets 1516 576 651
impairment of property plant and equipment 16 50 390
profit on disposal of property plant and equipment 281 27
increase in provisions 24 77 –
decrease in retirement benefit obligation excluding special pension contributions 80 60
equity settled incentive scheme 09 –
grants and other noncash movements 15 17
operating cash flow before movement in working capital and special pension contributions 899 1116
special pension contributions 530 200
operating cash flow before movement in working capital 369 916
movement in working capital 336 97
cash from operations 705 819
interest paid 195 230
net taxation paid 04 19
net cash from operating activities 506 570
33 contingent liabilities
a number of subsidiary companies and northern foods plc are guarantors in respect of the senior loan notes 20122017 whereby they
absolutely and unconditionally guarantee the principal of and interest on the senior loan notes 20122017 additionally the same subsidiary
companies are cross guarantors in respect of the five year syndicated revolving credit facility 2010
a subsidiary undertaking is party to a letter of credit issued by barclays bank plc for £22m 200506 £43m secured against the assets of the
subsidiary undertaking
northern foods plc is the guarantor in respect of the obligations of several subsidiary undertakings with allied irish bank as at 31 march 2007
northern foods plc guaranteed £nil 200506 £nil
various group undertakings are also parties to litigation none of which is considered to be material
34 operating lease commitments
outstanding commitments for future minimum lease payments under noncancellable operating leases fall due as follows
2007 2006
£m £m
within one year 34 69
in the second to fifth years inclusive 77 170
after five years 67 254
178 493
the group leases various offices and warehouses under noncancellable operating lease agreements the leases have various terms escalation
clauses and renewal rights the group also leases plant and machinery and vehicles under noncancellable operating lease agreements
35 share based payments
equity settled share option plan
the group has applied the requirements of ifrs 2 ‘share based payments’ in accordance with the transitional provisions ifrs 2 has been applied
to all grants of equity instruments after 7 november 2002 that were unvested at 1 january 2005
the company operates executive share option schemes for executive directors and senior management within the group options are granted
with a fixed exercise price options lapse when an employee leaves the group subject to certain ‘good leaver’ provisions notes to the consolidated financial statements
continued
35 share based payments continued
the fair value per option granted and the assumptions used in the calculations are as follows
executive share options
grant of grant of grant of grant of grant of
share options share options share options share options share options
date of grant 3 august 1995 17 july 1996 19 november 2001 2 december 2002 19 december 2003
number of instruments granted 1728949 2282288 3751500 3883500 3375195
exercise price pence 1332 1280 1572 1681 1370
share price at date of grant pence 1419 1315 1630 1720 1350
contractual life years 10 10 10 10 10
performance conditions note b note b note c note c note c
settlement equity equity equity equity equity
expected volatility na na 42 38 37
expected option life at 
grant date years na na 5 5 5
risk free interest rate na na 466 473 478
expected dividend dividend yield na na 522 515 679
fair value per granted instrument 
determined at the grant date pence na na 430 423 275
valuation model na na blackscholes blackscholes blackscholes
grant of grant of grant of grant of
share options share options share options share options
date of grant 29 march 2004 17 december 2004 14 december 2005 4 july 2006
number of instruments granted 442950 2313123 2059231 4218455
exercise price pence 1592 1697 1533 797
share price at date of grant pence 1590 1665 1535 840
contractual life years 10 10 10 10
performance conditions note a note d note d note d
settlement equity equity equity equity
expected volatility 35 33 30 30
expected option life at grant date years 5 5 55
risk free interest rate 474 444 430 470
expected dividend dividend yield 584 525 600 540
fair value per granted instrument determined 
at the grant date pence 339 360 264 153
valuation model blackscholes blackscholes blackscholes blackscholes
other arrangements
deferred deferred share long term long term
share plan bonus plan incentive plan incentive plan share bonus plan
date of grant 29 march 2004 13 july 2006 12 december 2005 4 july 2006 4 july 2006
number of instruments granted 81453 4928287 474442 1013523 408809
exercise price pence 1600 818 1525 800 797
share price at date of grant pence 1590 7725 1537 840 840
contractual life years 3 3 5 5 3
performance conditions note a note g note e note e note f
settlement equity equity equity equity equity
expected volatility na 30 30 30 30
expected option life at grant date years na 3 3 3 3
risk free interest rate na 470 430 470 470
expected dividend dividend yield na 540 600 540 540
fair value per granted instrument 
determined at the grant date pence na 409 1281 611 610
valuation model na blackscholes blackscholes blackscholes blackscholes
expected volatility was determined by calculating the historical volatility of the group’s share price over the previous three years this will 
continue to be reviewed in the future the expected life used in the model has been adjusted based on management’s best estimate for the
effects of nontransferability exercise restrictions and behavioural considerations it was assumed that the employees would exercise the options
after vesting date
78 notes to the consolidated financial statements northern foods plc northern foods plc notes to the consolidated financial statements 79
35 share based payments continued
performance conditions – notes
a no performance condition attached
b performance condition measured by reference to total shareholder return tsr the company met the performance condition by finishing
above the median point against the comparator group of companies
c performance condition 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 annum compound the performance condition allows for retesting after years four
and five against the full period from the grant
d performance condition 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 annum compound the performance condition does not allow for retesting
e the ltip has two performance conditions
tsr the total number of shares that will vest will be up to 50 dependent on how the tsr in relation to an ordinary share of northern foods
over the relevant performance period compares with tsr in relation to the ordinary shares of the companies in the comparator group in the
same periodwhere the tsr of northern foods over the performance period places it between the median and the upper quartile the number
of shares will be calculated on a straight line basis with 20 of the shares being received when northern foods is placed above median and
50 being received where northern foods is placed in the upper quartilewhere northern foods’ growth in tsr places it below median no
shares will vest in relation to this element of the award
return on invested capital roic 50 of the total award vests on achievement of a minimum growth in roic over the performance period
growth in roic over the period has to be 100 or more basis points the number of shares that each participant receives is calculated on a
straight line basis with 75 of the shares being received if northern foods achieves growth of 100 basis points and maximum of 50 being
received if the company achieves growth of 200 basis points
f under the share bonus plan 80 of annual bonus opportunity is linked to specific financial targets the other 20 is directly related 
to individual performance against personal performance contracts set at the start of the financial year which contain six individual 
and business performance targets which are considered appropriately stretching
g the deferred share bonus plan dsbp was introduced in june 2006 so as to incentivise and retain the key talent necessary to drive the
specific performance improvements required this dsbp provided approximately 40 senior executives with an award of shares with a value
up to 100 of base salary at the prevailing market price of 8175 pence per share on the date of award these shares will be satisfied by 
the transfer of existing shares held in trust after the vesting date in july 2009 for further information see 642 in the remuneration report
on page 45
details of movements in share options during the period are as follows
weighted weighted
average average
options exercise price options exercise price
2007 2007 2006 2006
number £ number £
outstanding at start of period 8806337 158 11071483 157
granted during the period 4218455 080 2059231 153
forfeited during the period 3453602 189 1507577 112
exercised during the period – – 1139128 138
expired during the period 1037739 157 1677672 160
outstanding at end of period 8533451 123 8806337 158
exercisable at end of period 8533451 123 8806337 158
forfeiture arises when the employee leaves within the vesting period expiration of shares occurs when the last date for exercise has passed and
the option has not been exercised
the range of exercise prices for share options exercised during the period was £nil 200506 £128 – £170 the options outstanding had 
a weighted average remaining contractual life of 822 years 200506 862 years the weighted average fair value of the share options
outstanding is £025 200506 £038
the group recognised total expenses of £09m 200506 £02m in the period relating to equity settled share based payment transactions 80 notes to the consolidated financial statements northern foods plc
notes to the consolidated financial statements
continued
36 retirement benefit obligations 
defined benefit schemes
the group operates a number of defined benefit schemes for qualifying employees principally the northern foods pension scheme ‘the scheme’
and northern foods pension builder ‘pension builder’ in the united kingdom and the green isle foods group retirement and death benefit plan
‘the plan’ in the republic of ireland under the scheme pension builder and the plan employees are entitled to retirement benefits based on pay
and service the scheme pension builder and the plan are funded schemes whilst there is a post retirement medical scheme which is unfunded
the scheme and the plan are final salary schemes the assets of the scheme pension builder and the plan are held in trustee administered funds
separate from the finances of the group
on 22 march 2005 the company announced the closure of the scheme to new entrants and withdrew its agreement to allow early retirement on
an enhanced basis pension builder was introduced on 1 may 2005 and is available to all uk based employees pension builder is a defined benefit
scheme based on the career average principle
the most recent valuation of the scheme for the purpose of the financial statements and the present value of defined benefit obligations was
carried out at 31 march 2007 by an independent qualified actuary pricewaterhousecoopers llp the present value of the defined benefit
obligation the related current service cost and past service cost was measured using the projected unit credit method the principal assumptions
used for the purpose of the actuarial valuation of the scheme and pension builder are detailed below
valuation date
2007 2006
rate of increase in salaries 40 37
rate of increase to pensions in payment 29 27
rate of increase to deferred pensions 30 30
discount rate 53 49
inflation assumption 30 28
sensitivities
the mortality assumptions used are based on mortality experience of the scheme and anticipated mortality experience the assumptions 
are below the national average reflecting the socioeconomic make up of the scheme membership for the valuation at 31 march 2007
the company has adopted the short cohort principle for the scheme and pension builder if life expectancy is increased or decreased by one year
liabilities are estimated to increase or decrease by £200m respectively the impact of a 01 increase or decrease in the discount rate would
decrease or increase liabilities by £150m respectively
the life expectancy in years for a member aged 65 are as follows
valuation date
2007 2006
y ears years
current pensioner – male 177 166
– female 198 187
future pensioner – male 184 175
– female 205 197
post retirement medical benefit scheme
until 31 march 1999 the group operated a post retirement medical benefit scheme the method of accounting assumptions and the frequency
of valuations are similar to those used for defined benefit pension schemes detailed above the main actuarial assumptions are the underlying
medical cost inflation of 50 per annum 200506 50 and the discount rate of 53 per annum 200506 49
if the assumed rate of underlying medical cost inflation increased or decreased by 10 per annum then the valuation of the liabilities 
is estimated to increase or decrease by approximately £04m 200506 £05m respectively
amounts recognised in the income statement in respect of the group’s defined benefit schemes and post retirement medical benefit scheme are
as follows
post retirement total retirement
defined benefit schemes medical benefit scheme benefit schemes 
2007 2006 2007 2006 2007 2006
£m £m £m £m £m £m
current service cost 186 187 – – 186 187
past service cost 01 – – – 01 –
interest on obligation 397 393 02 03 399 396
expected return on scheme assets 524 424 – – 524 424
60 156 02 03 62 159
curtailment gain due to business disposals 211 – – – 211 –
151 156 02 03 149 159
 included within restructuring items
the charge for the period has been included within cost of sales distribution costs and administrative expenses actuarial gains and losses have
been reported in the consolidated statement of recognised income and expense northern foods plc notes to the consolidated financial statements 81
36 retirement benefit obligations continued
impact of business disposals on the scheme
during the period a curtailment gain of £21m arose on the sale of the trade and assets of nft distribution and a gain of £190m arose on 
the disposal of the trade and assets of the speciality bread chilled pastry cakes and flour milling businesses the curtailment gains have been
included in the profit or loss on disposal of the businesses a curtailment gain reflects reduced liabilities of the scheme due to removing the
salary link when formerly active members of the scheme become deferred members further information on the disposal of these businesses 
is disclosed in note 11
as a result of the disposal programme announced in may 2006 special pension contributions of £570m will be made to the scheme
as at 31 march 2007 special contributions of £350m had been made with the remaining £220m to be paid in june 2007
overall special pension contributions during 200607 to the scheme were £530m being £100m in april 2006 completing the company’s
previous £500m programme of special pension contributions a further £80m paid in october 2006 on an interim basis prior to the completion
of the disposal programme and £350m from the disposal programme
the amounts recognised in the consolidated balance sheet in respect of the group’s defined benefit schemes and post retirement medical
benefit scheme are as follows
post retirement total retirement
defined benefit schemes medical benefit scheme benefit schemes 
2007 2006 2007 2006 2007 2006
£m £m £m £m £m £m
present value of obligations 8054 8130 47 50 8101 8180
fair value of scheme assets 8015 7278 – – 8015 7278
39 852 47 50 86 902
the table above does not include the related deferred tax assets and liabilities
movements in the present value of obligations are as follows
post retirement total retirement
defined benefit schemes medical benefit scheme benefit schemes 
2007 2006 2007 2006 2007 2006
£m £m £m £m £m £m
at start of period 8130 7293 50 48 8180 7341
current service cost 186 187 – – 186 187
past service cost 01 – – – 01 –
interest on obligation 397 393 02 03 399 396
curtailment gain due to business disposals 211 – – – 211 –
actuarial gainslosses 147 444 03 02 150 446
contributions from scheme members 92 107 – – 92 107
benefits paid 391 295 02 03 393 298
exchange differences 03 01 – – 03 01
at end of period 8054 8130 47 50 8101 8180
movements in the fair value of scheme assets are as follows
defined benefit schemes 
2007 2006
£m £m
at start of period 7278 5629
expected return on scheme assets 524 424
actuarial lossesgains 155 996
contributions from sponsoring companies 670 416
contributions from scheme members 92 107
benefits paid 391 295
exchange differences 03 01
at end of period 8015 7278 82 notes to the consolidated financial statements northern foods plc
36 retirement benefit obligations continued
the fair value of scheme assets and the expected rate of return is analysed as follows
2007 2006 2007 2006
£m £m  
defined benefit schemes
equity 5859 5606 805 79
bonds 1865 1653 53 48
other 291 19 53 45
8015 7278
the expected return on individual classes of pension scheme assets are determined by reference to external indices and taking advice from
external experts the overall expected rate of return is the weighted average of the returns above allowing for anticipated balances held 
in each asset class according to the scheme’s investment strategy the actual return on scheme assets was £366m 200506 £1420m
the history of experience adjustments is as follows
2007 2006 2005
£m £m£m
defined benefit schemes
present value of obligations 8054 8130 7293
fair value of scheme assets 8015 7278 5629
deficit in the scheme 39 852 1664
experience adjustments on scheme liabilities
amount lossgain £m – 302 07
percentage of scheme liabilities – 37 01
experience adjustments on scheme assets
amount lossgain £m 155 996 142
percentage of scheme assets 19 137 25
the cumulative effect of the experience adjustments on scheme liabilities as shown in the consolidated statement of recognised income 
and expense is a gain of £295m 200506 gain of £295m
the group expects to make ongoing contributions of approximately £92m to its defined benefit scheme in 200708
37 events after the balance sheet date
other than the proposed final dividend note 12 there are no post balance sheet events
38 related party transactions
transactions between the company and its subsidiaries which are related parties have been eliminated on consolidation and are not 
disclosed in this note
remuneration of key management personnel
the remuneration of the directors who are the key management personnel of the group is set out below in aggregate for each of the 
categories specified in ias 24 ‘related party disclosures’ further information about the remuneration of individual directors is provided 
in the audited part of the directors’ remuneration report
2007 2006
£m £m
salaries and other short term employee benefits 17 13
post employment benefits 02 05
compensation for loss of office 03 –
share based payments 03 02
25 20
notes to the consolidated financial statements
continued northern foods plc independent auditors’ report – company financial statements 83
to the members of northern foods plc
we have audited the individual company financial statements 
of northern foods plc for the 52 weeks ended 31 march 2007 
which comprise the company balance sheet the company cash flow
statement the company statement of recognised income and
expense the company statement of changes in equity and the
related notes 39 to 58 these individual company financial
statements have been prepared under the accounting policies set 
out therein we have also audited the information in the directors’
remuneration report that is described as having been audited
we have reported separately on the group financial statements 
of northern foods plc for the 52 weeks ended 31 march 2007
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
the directors’ responsibilities for preparing the annual report the
directors’ remuneration report and the individual company financial
statements in accordance with applicable law and international
financial reporting standards ifrs as adopted by the european
union are set out in the statement of directors’ responsibilities
our responsibility is to audit the individual company financial
statements and the part of the directors’ remuneration report
described as having been audited in accordance with relevant legal
and regulatory requirements and international standards on auditing
uk and ireland
we report to you our opinion as to whether the individual company
financial statements give a true and fair view and whether the
individual company financial statements and the part of the
directors’ remuneration report described as having been audited have
been properly prepared in accordance with the companies act 1985
and article 4 of the ias regulation we also report to you whether
in our opinion the information given in the report of the directors 
is consistent with the individual company financial statements
in addition we report to you if in our opinion 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 other transactions is not disclosed
we also report to you if in our opinion the company has not
complied with any of the four directors’ remuneration disclosure
requirements specified for our review by the listing rules of the
financial services authority these comprise the amount of each
element in the remuneration package and information on share
options details of long term incentive schemes and money purchase
and defined benefit schemes we give a statement to the extent
possible of details of any noncompliance
independent auditors’ report – company financial statements
we review whether the corporate governance report reflects 
the company’s compliance with the nine provisions of the 
2003 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 other information contained in the annual report 
as described in the contents section and consider whether it is
consistent with the audited individual company financial statements
we consider the implications for our report if we become aware 
of any apparent misstatements or material inconsistencies with 
the parent company financial statements our responsibilities 
do not extend to any further information outside the annual report
basis of audit opinion
we conducted our audit in accordance with international standards
on auditing uk and ireland issued by the auditing practices board
an audit includes examination on a test basis of evidence relevant 
to the amounts and disclosures in the individual company financial
statements and the part of the directors’ remuneration report
described as having been audited it also includes an assessment 
of the significant estimates and judgments made by the directors 
in the preparation of the parent company financial statements
and of whether the accounting policies are appropriate to the
company’s circumstances 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 individual company financial statements and the part of the
directors’ remuneration report described as having been audited are
free from material misstatement 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 parent
company financial statements
opinion
in our opinion
 the individual company financial statements give a true and fair
view in accordance with ifrs as adopted by the european union 
as applied in accordance with the provisions of the companies act
1985 of the state of the company’s affairs as at 31 march 2007
 the individual company financial statements and the part of the
directors’ remuneration report described as having been audited
and have been properly prepared in accordance with the
companies act 1985 and article 4 of the ias regulation and
 the information given in the report of the directors is consistent
with the individual company financial statements
deloitte  touche llp
chartered accountants and registered auditors
leeds
30 may 2007 84 company balance sheet northern foods plc
company balance sheet
as at 31 march 2007
31 march 1 april
2007 2006
notes £m £m
noncurrent assets
property plant and equipment 43 981 2223
investments in subsidiaries 44 8130 8485
deferred taxation assets 51 56 150
9167 10858
current assets
trade and other receivables 45 6478 8898
current taxation assets – 106
cash and cash equivalents 46 264 224
6742 9228
total assets 15909 20086
current liabilities
trade and other payables 47 7046 9083
provisions 48 40 –
current taxation liabilities 182 –
bank loans and overdrafts 49 03 413
7271 9496
noncurrent liabilities
revolving credit facility 2010 49 850 2700
senior loan notes 20122017 49 1326 1429
derivative financial instruments 50 65 16
retirement benefit obligations 54 45 865
accruals and deferred income – 06
2286 5016
total liabilities 9557 14512
net assets 6352 5574
equity
share capital 52 1286 1286
share premium account 53 651 651
capital redemption reserve 53 236 236
reserve for own shares 53 384 386
hedging reserve 53 29 24
other reserves 53 33 26
retained earnings 53 4501 3785
total equity 6352 5574
the financial statements were approved by the board of directors and authorised for issue on 30 may 2007 they were signed on its behalf by
s barden j k maiden
director director
30 may 2007 30 may 2007 northern foods plc company cash flow statement company statement of recognised income and expense company statement of changes in equity 85
company cash flow statement
for the 52 weeks ended 31 march 2007
2007 2006
notes £m £m
net cash from operating activities 55 1167 58
investing activities
interest received 06 02
purchase of property plant and equipment 40 97
proceeds from disposal of property plant and equipment 34 29
business disposal proceeds net of disposal costs working capital and debt adjusters 1250 –
net cash fromused in investing activities 1250 66
financing activities
dividends paid 12 115 442
decrease in amounts drawn on revolving credit facility 2010 25 1850 –
repayment of borrowings 02 63
repayment of subordinated convertible bonds 2008 – 913
issue of senior loan notes 20122017 net of issue costs 26 – 1420
issue of equity share capital 52 – 38
net cash used infrom financing activities 1967 40
net increase in cash and cash equivalents 450 32
cash and cash equivalents at start of period 189 221
cash and cash equivalents at end of period 261 189
cash and cash equivalents comprise
cash and cash equivalents 264 224
bank overdrafts 03 413
261 189
company statement of recognised income and expense
for the 52 weeks ended 31 march 2007
2007 2006
notes £m £m
actuarial lossesgains on defined benefit pension schemes 5354 04 537
taxation on actuarial lossesgains taken directly to equity 5153 01 161
fair value movement on cash flow hedge 53 50 16
transfer to profit or loss on cash flow hedge 53 103 08
net income recognised directly in equity 50 352
profit for the period 833 100
total recognised income and expense for the period 883 452
total recognised income and expense for the period is all attributable to the equity holders
company statement of changes in equity
for the 52 weeks ended 31 march 2007
2007 2006
notes £m £m
total recognised income and expense for the period 883 452
equity dividends 1253 115 442
new equity share capital subscribed 52 – 38
equity settled incentive schemes 5153 09 02
deferred taxation on equity settled incentive schemes taken directly to equity 51 01 –
equity movement on convertible subordinated bonds 2008 – 31
movement in total equity in the period 778 81
total equity at start of the period 5574 5493
total equity at end of the period 6352 5574 86 notes to the company financial statements northern foods plc
notes to the company financial statements
39 significant accounting policies
the separate financial statements of the company are presented as required by the companies act 1985 as permitted by that act the separate
financial statements have been prepared in accordance with ifrs
the principal accounting policies adopted are the same as those detailed in note 2 of the consolidated financial statements except as set out below
investments in subsidiaries are stated at cost less any provision for impairment
40 profit for the financial year
of the profit for the financial year a profit of £833m 200506 £100m has been dealt with in the accounts of the parent company in accordance
with the exemptions allowed by section 2303 of the companies act 1985 the parent company has not presented its own income statement
41 profit from operations 
a detailed analysis of auditors’ remuneration is provided below
2007 2006
deloitte  deloitte 
touche llp touche llp
£’000 £’000
audit services
fees payable to the company’s auditors for the audit of the group’s annual report 
including in 200506 £53000 relating to ifrs conversion 80 148
80 148
other services
other services supplied pursuant to such legislation – interim review 30 27
other services supplied pursuant to legislation – reporting accountants 265 –
other 2 41
297 68
t ax services
advisory services 153 –
compliance 130 8
283 8
fees payable to the company’s auditors in respect of the associated pensions schemes audit – 9
total 660 233
deloitte  touche llp were appointed sole group auditors for both current and the prior periods
42 staff costs
the average monthly number of employees including executive directors was
2007 2006
number number
administration 397 446
aggregate remuneration comprised
2007 2006
£m £m
wages and salaries 135 166
social security costs 14 16
other pension costs 11 14
160 196 northern foods plc notes to the company financial statements 87
43 property plant and equipment
freehold leasehold plant fixtures
property property and vehicles total
£m £m £m £m
cost or valuation
at start of prior period 2072 886 220 3178
additions 26 – 80 106
disposals 04 – – 04
restructuring disposals 54 – 02 56
reclassifications 02 – 02 –
group transfers 10 – 20 10
at start of period 2048 886 280 3214
additions 04 – 13 17
disposals – 05 06 11
restructuring disposals 872 710 34 1616
reclassifications 15 10 05 –
group transfers 64 – 02 66
at end of period 1131 161 246 1538
accumulated depreciation and impairment losses
at start of prior period 544 231 150 925
charge for the period 39 23 07 69
restructuring provision for impairment 51 – – 51
restructuring disposals 54 – – 54
at start of period 580 254 157 991
charge for the period 39 18 17 74
restructuring provisions for impairment 20 – – 20
disposals – 03 05 08
restructuring disposals 269 227 16 512
group transfers 08 – – 08
reclassifications 09 05 04 –
at end of period 371 37 149 557
carrying amount
at end of period 760 124 97 981
at start of period 1468 632 123 2223
at the period end the company had entered into contractual commitments for the purchase of property plant and equipment amounting 
to £nil 200506 £nil
impairment – discontinued operations
a £20m impairment loss was incurred during the period as part of its business review management identified the impairment losses of £20m
relating to the closure of the trafford park bakery the impaired assets have been sold during the period as part of the sale of the assets therefore
the impairment has been included within discontinued operations
the impairment losses identified represent the difference between the carrying amount of property plant and equipment and their recoverable
amount the recoverable amounts are determined from value in use calculations unless management is committed to closing or selling the
business if the value of the business is to be recovered through sale or closure then the recoverable amount is the fair value less costs to sell
the key assumptions for the value in use calculations are those regarding the discount rates growth rates and expected changes to selling prices
and direct costs during the period management estimates discount rates using the group’s weighted average cost of capital
the company prepares cash flow forecasts derived from the most recent financial plans approved by management for the next five years and
extrapolates these cash flows in perpetuity using growth assumptions relevant for the business sector the growth rate does not exceed 30
200506 does not exceed 30 and is not considered to be higher than the average long term industry growth rate
the rate used to discount the forecast cash flows for all cgus is the group’s post tax weighted average cost of capital of 70 200506 70
this approximates to applying a pretax discount rate to pretax cash flows 88 notes to the company financial statements northern foods plc
notes to the company financial statements
continued
44 investments in subsidiaries
the company’s principal subsidiaries at the period end are as follows
directly owned
convenience foods limited
northern foods grocery group limited
indirectly owned
f w farnsworth limited
green isle foods limited
cavaghan  gray group limited
cavaghan  gray limited
solway foods limited
the above companies are all wholly owned ordinary shares and their principal activities are food manufacture all are incorporated in the uk
except for green isle foods limited which is incorporated in the republic of ireland
2007 2006
subsidiary undertakings £m £m
at start of period 9477 9477
cost of shares acquired 86 –
impairment of investments 87 –
disposals 581 –
at end of period 8895 9477
long term loans due from subsidiary undertakings 1718 2652
long term loans due to subsidiary undertakings 2483 3644
8130 8485
the shares acquired relate to the recapitalisation of fletchers bakeries limited the investments impaired are those in subsidiary undertakings which
disposed of trade and assets during the period the disposal is the disposal of fletchers bakeries limited
45 trade and other receivables
2007 2006
£m £m
receivables from subsidiary undertakings 6367 8839
other receivables 97 38
other prepayments 14 21
6478 8898
the directors consider that the carrying amount of trade and other receivables approximates to their fair value the directors consider that the
maximum credit risk at the balance sheet date is equivalent to the carrying value of trade and other receivables
46 cash and cash equivalents
cash and cash equivalents comprise cash held by the company short term bank deposits with an original maturity of three months or less and
bank overdrafts the directors consider that the carrying amount of these assets and liabilities approximates to their fair value
47 trade and other payables
2007 2006
£m £m
trade payables 63 39
payables to subsidiary undertakings 6766 8793
other payables including social security 144 106
accruals and deferred income 73 145
7046 9083
trade payables principally comprise amounts outstanding for trade purchases and ongoing costs the average credit period taken for trade payables
is 33 days 200506 34 days
the directors consider that the carrying amount of trade payables approximates to their fair value northern foods plc notes to the company financial statements 89
48 provisions
£m
at start of period –
restructuring provisions – charge for the period 42
utilised in period 02
at end of period 40
all of the £40m provisions are included within current liabilities
the restructuring provisions made during the period of £42m relate to central cost reduction initiatives including is outsourcing and 
headcount reduction
49 financial liabilities – borrowings
current
2007 2006
£m £m
bank loans and overdrafts due within one year or on demand 03 411
loan notes – 02
03 413
noncurrent
2007 2006
£m £m
revolving credit facility 2010 850 2700
senior loan notes 20122017 1326 1429
2176 4129
borrowings are repayable as follows
2007 2006
£m £m
within one year or on demand 03 413
in the second year – –
in the third to fifth years inclusive 850 2700
after five years 1326 1429
2179 4542
bank loans and overdrafts are analysed by currency as follows
sterling us dollars total
2007 £m £m £m
bank loans and overdrafts due within one year or on demand 03 – 03
revolving credit facility 2010 850 – 850
senior loan notes 20122017 543 783 1326
1396 783 2179
2006
bank loans and overdrafts due within one year or on demand 411 – 411
revolving credit facility 2010 2700 – 2700
loan notes 02 – 02
senior loan notes 20122017 543 886 1429
3656 886 4542
for further detail regarding the bank loans see notes 25 and 26 within the group disclosure notes
50 derivative financial instruments
for further detail regarding the derivative financial instruments see note 27 within the group disclosure notes 90 notes to the company financial statements northern foods plc
notes to the company financial statements
continued
51 deferred taxation assetliability
retirement other accelerated convertible
benefit employee tax bond equity revaluation
obligation benefits depreciation component of buildings total
£m£m£m£m£m£m
at start of prior period 500 – 114 20 11 355
chargedcredited to income statement 77 – 03 20 – 60
restructuring items – – 16 – – 16
charged to equity 161 – – – – 161
at start of period 262 – 101 – 11 150
chargedcredited to income statement 65 03 04 – – 66
restructuring items 138 – 108 – – 30
charged to equity 01 01 – – – 02
at end of period 60 04 03 – 11 56
52 share capital
for further detail regarding the share capital see note 30 within the group disclosure notes
53 reserves
share capital reserve
premium redemption for own hedging equity other retained
account reserve shares reserve reserve reserves earnings
£m £m £m £m £m £m £m
at start of prior period 623 236 386 – 124 25 3595
net profit for the period –– –––– 100
dividends – – – – – – 442
premium arising on issue of equity shares 28 – – – – – –
actuarial gains on defined benefit pension schemes 
net of deferred tax – – – – – – 376
equity settled incentive schemes – – – – – 02 –
decrease in fair value of hedging derivatives – – – 16 – – –
transfer to profit or loss on cash flow hedge – – – 08 – – –
redemption of bond – – – – 124 – 155
other movements – – – – – 01 01
at start of period 651 236 386 24 – 26 3785
net profit for the period – – – – – – 833
dividends ––––––115
actuarial losses on defined benefit pension schemes 
net of deferred tax – – – – – – 03
equity settled incentive schemes net of deferred tax – – 02 – – 08 –
decrease in fair value of hedging derivatives – – – 50 – – –
transfer to profit or loss on cash flow hedge – – – 103 – – –
other movements – – – – – 01 01
at end of period 651 236 384 29 – 33 4501
for further detail regarding reserves see note 31 within the group disclosure note retained earnings include £1924m 200506 £1924m of
undistributable reserves northern foods plc notes to the company financial statements 91
54 retirement benefit obligations
the amounts recognised in the company balance sheet in respect of the company’s defined benefit schemes and post retirement medical
benefit scheme are as follows
post retirement total retirement
defined benefit schemes medical benefit scheme benefit schemes 
2007 2006 2007 2006 2007 2006
£m £m £m £m £m £m
present value of obligations 7907 7997 47 50 7954 8047
fair value of scheme assets 7909 7182 – – 7909 7182
02 815 47 50 45 865
the table above does not include the related deferred tax assets and liabilities
movements in the present value of obligations are as follows
post retirement total retirement
defined benefit schemes medical benefit scheme benefit schemes 
2007 2006 2007 2006 2007 2006
£m £m £m £m £m £m
at start of period 8004 7180 50 48 8054 7228
current service cost 176 178 – – 176 178
interest on obligation 391 388 02 03 391 391
curtailment gain due to business disposals 211 – – – 211 –
actuarial gainslosses 152 441 03 02 155 443
contributions from scheme members 89 103 – – 89 103
benefits paid 390 293 02 03 390 296
at end of period 7907 7997 47 50 7954 8047
movements in the fair value of scheme assets are as follows
defined benefit schemes 
2007 2006
£m £m
at start of period 7187 5563
expected return on scheme assets 519 421
actuarial lossesgains 159 980
contributions from the sponsoring companies 663 408
contributions from scheme members 89 103
benefits paid 390 293
at end of period 7909 7182
for further detail on the retirement benefit obligations see note 36 within the group disclosure notes the group disclosure includes information
on the scheme pension builder the plan and the post retirement medical benefit scheme the scheme pension builder and the post retirement
medical benefit scheme are included within the company financial statements 92 notes to the company financial statements northern foods plc
55 reconciliation of net cash from operating activities
2007 2006
notes £m £m
profitloss from operations 723 63
adjustments for
depreciation of property plant and equipment 43 74 69
impairment of property plant and equipment 43 20 51
profit on disposal of property plant and equipment 15 23
increase in provisions 40 –
decrease in retirement benefit obligations excluding special contributions 83 63
equity settled incentive schemes 07 –
operating cash flow before movement in working capital and special pension contributions 766 29
special pension contributions 530 200
operating cash flow before movement in working capital 236 229
movement in working capital including movement on intercompany balances 1108 516
cash from operations 1344 287
interest paid 195 230
taxation recovered 18 01
net cash from operating activities 1167 58
56 operating lease commitments
outstanding commitments for future minimum lease payments under noncancellable operating leases fall due as follows
2007 2006
£m £m
within one year 11 10
in the second to fifth years inclusive 43 40
after five years 60 51
114 101
57 share based payments
for further detail regarding share based payments see note 35 within the group disclosure notes
58 related party transactions
transactions with subsidiaries 
details of transactions which comprise group recharges and net interest receivable on intercompany balances between the company and its
subsidiary undertakings are set out below
2007 2006
£m £m
group recharges 548 310
net interest receivable 75 159
623 469
the group recharges include special pension contributions of £255m 200506 £nil
a summary of the balances outstanding at the period end is shown below
2007 2006
£m £m
receivables from subsidiary undertakings due in less than one year 6367 8839
long term loans due from subsidiary undertakings 1718 2652
8085 11491
payables due to subsidiary undertakings in less than one year 6766 8793
long term loans due to subsidiary undertakings 2483 3644
9249 12437
total 1164 946
remuneration of key management personnel 
the remuneration of the directors who are the key management personnel of the company is set out within note 38
notes to the company financial statements
continued northern foods plc five year record 93
five year record
uk gaap ifrs
2003 2004 2005 2006 2007
continuing operations
consolidated income statement
revenue £m 7411 8441 8789 8620 8885
profit from operations £m 723 867 664 582 582
operating margin  98 103 76 68 66
share of associated undertakings £m 14 04 – – –
net finance costs £m 195 214 236 252 182
profit before taxation £m 542 657 428 330 400
profit after taxation
†
£m 442 539 347 277 319
earnings per share
before restructuring items
†
pence 823 1053 708 568 652
return on operating assets
average net operating assets £m 4073 3756
return on net assets  143 155
return on invested capital
‡
continuing profit from operations £m 582
add interest on retirement benefit schemes £m 399
less expected return on scheme assets £m 524
adjusted profit from operations £m 457
average invested capital £m 4482
return on continuing average invested capital  102
discontinued operations
consolidated income statement
revenue £m 6801 6980 5699 5762 3174
profit from operations £m 433 203 194 121 13
continuing and discontinued operations as reported
earnings per share
before restructuring items pence 1481 1377 1027 777 672
after restructuring items pence 1873 1278 466 103 460
dividend per share pence 870 890 905 425 425
dividend cover times 17 15 11 18 16
ebitda debt times 18 19 20 25 18
capital expenditure £m 794 713 622 553 281
invested capital
net equity £m 3601 3563 1556 1521 1212
add back deficit on retirement benefit schemes £m – – 1712 902 86
less deferred tax on retirement benefit schemes £m – – 504 264 65
adjusted net equity £m 3601 3563 2764 2159 1233
net debt £m 3236 3324 3263 3631 1742
trading capital employed £m 6837 6887 6027 5790 2975
accumulated goodwill written off £m 2466 2392 2110 2110 1166
total invested capital £m 9303 9279 8137 7900 4141
total invested capital excluding net debt £m 6067 5955 4874 4269 2399
return on invested capital
profit from operations £m 1156 1070 858 703 595
add interest on retirement benefit schemes £m – – 393 396 399
less expected return on scheme assets £m – – 361 424 524
adjusted profit from operations £m 1156 1070 890 675 470
average invested capital £m 9666 9291 8401 8019 6021
return on average invested capital  120 115 106 84 78
 stated before goodwill amortisation and restructuring items for uk gaap and before restructuring items for ifrs
† the effective taxation rate for continuing operations for each period has been assumed to be the same as that for the group
‡ continuing return on invested capital is calculated using continuing profit from operations adjusted for the nonservice cost element of the ias 19 pension charge divided by continuing average invested
capital continuing average invested capital has been calculated using a 13 month average
 stated after reducing the 2002 invested capital by £870m to reflect the sale of the ski and munch bunch brands and associated assets on 2 april 2002
the periods ended 2003 and 2004 have been restated to comply with urgent issue t ask force uitf abstract 38‘accounting for esop trusts’
the amounts disclosed for 2003 and 2004 are stated on the basis of uk gaap because it is not practicable to restate amounts for periods prior to the date of transition to ifrsthe principal differences between
uk gaap and ifrs are explained in the published financial statements for northern foods plc for the 52 weeks ended 1 april 2006these are available from the company’s website at wwwnorthernfoodscom 94 shareholder analysis northern foods plc
shareholder analysis
at 20 may 2007
holders shares held
 of number  of
number holders ’000s capital
by classification
individuals 33719 9577 46388 902
banks and nominees 1263 359 431276 8389
corporate shareholders 191 054 32075 624
investment companies 14 004 179 003
insurance companies 12 003 81 002
pension funds 9 003 4125 080
35208 100 514124 100
by size of holding
1100 5944 1688 272 005
101500 12188 3462 3200 062
5011000 5750 1633 4334 084
10012000 4941 1403 7303 142
20015000 4120 1170 13219 257
500150000 1881 534 22167 431
50001100000 118 034 8368 163
100001 and over 266 076 455261 8856
35208 100 514124 100
 this includes 219m shares held in treasury
percentage of shareholders
individuals – 9577
other – 423
percentage of shares held
individuals – 902
other – 9098 financial calendar
2007
full year results announcement 30 may
annual report issued 15 june
half yearly interest payment on senior loan 
notes 20122017 20 june
latest date for receipt of forms of proxy 16 july
annual general meeting 18 july
first interim management statement 18 july
shares quoted exdividend 25 july
record date for final dividend 27 july
final dividend payment on ordinary shares 24 august
half year results announcement 13 november 
half yearly interest payment on senior loan 
notes 20122017 20 december
2008
second interim management statement 15 january
interim dividend payment on ordinary shares march
financial year end 29 march
registered office
2180 century way
thorpe park 
leeds ls15 8zb
telephone 0113 390 0110
facsimile 0113 390 0211
website wwwnorthernfoodscom
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 webqueriescomputersharecouk
website wwwukcomputersharecominvestor
company information
northern foods plc financial calendar company information 95 96 investor information northern foods plc
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 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 webqueriescomputersharecouk
shareholder information on the internet
the northern foods website wwwnorthernfoodscom provides 
access to shareholder information including our annual and 
half year reports share price and recent share price trends
financial highlights and results presentations to analysts as well 
as a link to our registrar computershare investor services plc
at wwwukcomputersharecominvestor
this 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 the link also allows shareholders to download stock
transfer dividend mandate and change of address forms
in addition shareholders can also register online with the investor
centre through this link on registering shareholders will receive 
a unique user name and password this site enables shareholders 
to view and update their portfolio in all companies maintained 
by computershare and to view those held by other registrars
electronic communications
shareholders may also now receive reports electronically by 
logging onto the computershare investor centre at the link above
and following the instructions or simply following the link from 
the northern foods website if you have any problems registering 
or would like further information please contact the computershare
helpdesk on 0870 702 0134
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 united kingdom 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 telephone
helpline on 0870 702 0134
the following share dealing services are available through our
registrars computershare investor services plc
internet share dealing
please note that at present this service is only available to
shareholders in certain european jurisdictions please refer to the
website for an up to date list of these countries this service provides
shareholders with an easy way to buy or sell northern foods plc
ordinary shares on the london stock exchange the commission is
05 subject to a minimum charge of £15 in addition stamp duty
currently 05 is payable on purchases there is no need to open an
account in order to deal real time dealing is available during market
hours in addition there is a facility to place orders outside of market
hours up to 90 day limit orders are available for sales to access the
service log on to wwwcomputersharecomdealinguk shareholders
should have their shareholder reference number srn available
the srn appears on share certificates a bank debit card will be
required for purchases
telephone share dealing
please note this service is at present only available to shareholders
resident in the uk and ireland the commission is 10 subject to 
a minimum charge of £15 in addition stamp duty currently 05
is payable on purchases the service is available from 800am to
430pm monday to friday excluding bank holidays on telephone
number 0870 703 0084 shareholders should have their shareholder
reference number srn ready when making the call the srn
appears on share certificates a bank debit card will be required for
purchases detailed terms and conditions are available on request by
telephoning 0870 702 0134
these services are offered on an execution only basis and are subject
to the applicable terms and conditions this is not a recommendation
to buy sell or hold shares in northern foods plc shareholders who
are unsure of what action to take should obtain independent financial
advice share values may go down as well as up which may result in 
a shareholder receiving less than originally invested
capital gains tax
the base cost of a northern foods ordinary share at 31 march 1982
for capital gains tax purposes is 758 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 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 designed and produced by 35 communications
food photography david loftus
people and location photography philip gatward
printed at st ives westerham press ltd iso14001 and carbonneutral® 
this report is printed on regency satin paper this paper comprises of virgin wood free pulp
from wellmanaged forests it is manufactured at a mill that has been awarded the 
iso14001 certificate for environmental management the mill uses pulps that are elemental
chlorine free ecf and the inks used are all vegetable oil basedthis paper is totally recyclable
central functions
northern foods corporate headquarters
2180 century way thorpe park leeds ls15 8zb
telephone 0113 390 0110
shared service centre
trinity park house fox way wakefield wf2 8ee
telephone 01924 831300
technical services centre
biocity nottingham pennyfoot street nottingham ng1 1gf
tel 0115 912 4424 
chilled division
cavaghan  gray
brunel house brunel way carlisle ca1 3nq
telephone 01228 518200
operations at carlisle and hull
fenland foods
turnpike close earlesfield industrial estate grantham
lincolnshire ng31 7xu
telephone 01476 567733
gunstones bakery
stubley lane dronfield sheffield s18 6pf
telephone 01246 414651
pennine foods
drakehouse crescent waterthorpe sheffield s20 7jg
telephone 0114 247 6864
solway foods
3 godwin road earlstrees industrial estate corby
northants nn17 4ds
telephone 01536 464400
operations at corby and manton wood worksop 
the pizza factory
gateside road lenton lane nottingham ng2 1l7
telephone 0115 986 8204
frozen division
dalepak foods
dale house leeming bar northallerton dl7 9dq
telephone 01677 424111
green isle food group
ida industrial estate naas co kildare ireland
telephone 00 353 45 848000
operations at gurteen longford naas and portumna 
walter hollands
baxenden near accrington bb5 2sa
telephone 01706 213591
bakery division
fox’s biscuits
po box 10 batley wf17 5jg
telephone 01924 444333
operations at batley kirkham and uttoxeter 
matthew walker
heanor gate road heanor derbyshire de75 7rj
telephone 01773 760121
principal operations
contents
01 highlights
02 chairman’s review
04 chief executive’s review
08 performance review
26 corporate responsibility report
32 board of directors and company
secretary
33 report of the directors
35 corporate governance report
40 directors’ remuneration report
52 statement of directors’ responsibilities
53 independent auditors’ report – group
54 consolidated income statement
55 consolidated balance sheet
56 consolidated cash flow statement
57 reconciliation of net cash flow
to movements in net debt
consolidated statement of 
recognised income and expense
consolidated statement of 
changes in equity 
58 notes to the consolidated 
financial statements
83 independent auditors’ report – company
84 company balance sheet
85 company cash flow statement
company statement of 
recognised income and expense
company statement of changes 
in equity
86 notes to the company financial
statements
93 five year record
94 shareholder analysis
95 financial calendar
company information
96 investor information
ibc principal operations
northern foods is in the business of making great tasting 
food from our 19 sites across the uk and ireland we produce
outstanding branded and retailer own brand ready meals
sandwiches  salads pizza biscuits and puddings
our divisions
chilled
£4467m
continuing revenue up 74 
to £4467m 200506 £4161m
frozen
£2445m
revenue up 27 to £2445m
200506 £2381m
bakery
£1 97 3m
continuing revenue declined by 51
to £1973m 200506 £2078m
front cover moroccan cous cous and tortellini with sweetflamed peppers for sainsbury’s northern foods plc
2180 century way
thorpe park
leeds
ls15 8zb
tel 0113 390 0110
fax 0113 390 0211 
wwwnorthernfoodscom
making great tasting food
northern foods plc annual report 200607
northern foods plc annual report 200607


Summary:
 04 chief executive’s review northern foods plc
chief executive’s review
we will return northern foods to 
steady top and bottom line growth 
by making great tasting food that
shoppers want to buy again and again
stefan barden
chief executive northern foods plc chief executive’s review 05
delivering our agenda
the past year has been one of 
real progress for northern foods
the strategic review announced in
may 2006 set out our plans to create
a firm foundation on which to build
we set out to
 create a more focused business around
strong brands and growing retailer own 
label relationships through a major 
disposal programme
 simplify our chilled division
 achieve strong positive cash generation 
and effective capital management and
 reduce corporate central costs
i am pleased to report that we have successfully
delivered our disposal programme and have
achieved measurable progress against our
other objectives providing a firm foundation
for future growth across northern foods
creating a foundation for future growth
from this sound foundation i believe we can
deliver operational and revenue improvements
for the future
we have a clear strategy to
 focus on attractive market segments
 partner with customers who require
quality innovation and high levels 
of service
 deliver through a low cost high
performance business model
attractive market segments
we will focus particularly on markets with strong
growth potential which reflect the consumer
drivers of convenience indulgence and a healthy
balanced lifestyle five of our market segments
grew by an average of 9 last year – ready meals
sandwiches salads pizza and christmas puddings –
and in four of these segments we were ranked
number one or two in terms of revenueanother
key market for us is biscuitswhile it is not a major
sales growth opportunity for us we recognise
significant profit improvement potential and 
we remain committed to achieving this
these six segments account for 87 of our
revenuetop line growth will be limited to where
this can be delivered profitably in some areas 
we are capacity constrained but investment 
will be limited to ensure adequate returns are
achieved while we will continue to exit business
which remains unprofitable
partnering selected customers
we partner with customers and invest 
in assets that can give them competitive
advantage in their product ranges since we
focus on the premium tiers in retailer own
brand rob ranges – such as finest extra
special or the best – our products are
disproportionately important in building
retailers’ own brand images we strive to
deliver ‘shopper loyalty’ and above average
sales growth for retailers – not just products
our customers ask for slightly different things
but in general they all agree that they want
 great tasting food
 made safely
 delivered correctly and
 at the right price
success will come from continuing to listen 
to our customers and profitably delivering what
they require better than other manufacturers
and we are working to deliver this success
 independent tests show that many 
of our products taste better than those 
of our competitors repeat purchase rates 
for many of our products are regularly
amongst the best in our markets
 our food safety processes and technologists
are amongst the very best in the country
we are the only food manufacturer with 
a food laboratory that has dual accreditation
from the uk government’s accreditation
service ukas this covers both our food
testing laboratories and on site technical
evaluation activities and means we are 
able to deliver independent third party
audits and assessments we have been
instrumental in codifying many of the
chilled food industry’s hygiene and
manufacturing policies and standards
 our service delivery to customers remains
consistently at the very highest levels
we regularly receive customer accolades
and awards in this area we are building 
a reputation as a ‘can do’ manufacturer
able to respond to customer requests
quickly be it step changes in product
demand or delivering a high quality 
new product brief within days and
 our products are seen as being good value
for money although we do not focus on
lower quality ‘value’ products
low cost operating model
our strategy is being delivered through the
expert management teams we have in place 
in each of our retained businesses each team
has responsibility and accountability for its
own performance each knows its market and
customer base and can respond quickly and
profitably to opportunities and challenges 
in their target market
y ear on y ear
market growth 
ready meals
6
sandwiches
7
salads wet and prepared
8
pizza frozen and chilled
8
christmas puddings
9
biscuits
8
average growth
we are focused on attractive
markets growing at a 
weighted average of 6
6
tns mat 250307
7
tns impulse food on the go mat 250307
8
ac nielsen scantrack mat 240307
9
internal estimate including retail and own brand 
catering events and other
7
13
15
9
1
1
6 06 chief executive’s review northern foods plc
chilled division
our ready meals business competes in 
a market created by northern foods and 
ms in partnership some 30 years ago
this business has been one of our most
challenging in recent years in spite of making
great products we have failed to deliver an
acceptable level of profitability excess market
capacity and a high ‘cost to serve’ operating
model have adversely impacted margins
our chilled simplification programme is
starting to deliver demonstrable improvement
the uk retail ready meals market is now worth
more than £15 billion and is growing at nearly
7 annually
6
 increasingly constrained market
capacity coupled with our complexity
reduction programme should allow margin
recovery ahead of considering new investment
our ready meals revenue continues to
improve and in the last quarter we became
market leader with a 19 value share
10

our great tasting meals reflect the unique
skills of our chefs and production teams
coupled with our ingredient sourcing and
manufacturing capabilities these drive 
high levels of repeat purchase and resultant 
retailer demand on which we are capitalising
concurrently we are working to improve our
margins through correctly pricing our core
business and ensuring we charge fully for 
the value of meeting customers’ additional
requirements
our ready meals recovery programme will
take time to deliver and may not be a smooth
path but we believe we have the right plans in
place to continue this business unit’s recovery
our other chilled business unit is sandwiches
 salads this business requires an exceptional
focus on service due to the very short shelf life
of its chilled products less than 48 hours from
time of manufacture and sometimes even
shorter we have a critical role in helping
retailers maximise their own sales while
minimising waste by delivering their daily
orders exactly as requested this is a real
challenge in the changeable british climate
which causes day to day orders to fluctuate
significantly
the largest market within this business unit is
sandwiches the uk multiple retailer sandwich
market is worth £577m and is growing at 13
annually
7
 consumers are reducing homemade
consumption in favour of quality products in
an ever increasing choice of carriers breads
and fillings northern foods is ranked number
three in this market with a 14
7
share and
our two sandwich customers tesco and ms
are the market leaders offering good growth
potential for us our customers’ summer
product launches will benefit from our strong
innovation capability with many of our breads
and wraps coming directly from our in house
traditional bakery
the wet and prepared salads markets together
are worth £407m and are growing at an
average of 15 annually
8
 healthy living 
and summer eating are driving demand and
northern foods’ market share reached 18 
in 200607
8
 putting us at number two in 
the market again outstanding service and
premium quality credentials underpin our
successwe operate close to capacity in the peak
summer months and have committed to a
£9m expansion of our corby production facility
frozen division
our frozen business produces and markets
strong brands which we continue to expand
and develop in pizza we have the uk’s
number one brand goodfella’s with 315 
of the frozen segment
8
 we are not however
restricted to frozen pizza the total uk pizza
market is valued at nearly £700m and growing
at 9 annually
8
 in addition to goodfella’s
we produce the leading rob chilled pizza
range for tesco we are currently exploring
how best to leverage our market leadership
and technology capability across the combined
frozen and chilled segments at the same time
we continue to grow and consolidate our
leadership in frozen successfully innovating
and refreshing the product range indeed
goodfella’s solos was named the fastest
growing brand in the uk in 2006
11

with frozen pizza representing 51 of
divisional revenue our other frozen food
brands represent valuable parts of our
portfolio both the green isle and donegal
catch brands are market leaders in ireland and
are well placed to capitalise on healthy eating
trends for example our donegal catch fish
business has grown 20 over the past year
through the delivery of healthy innovative
product ranges we see significant scope to
expand our product portfolio through different
routes to the consumer and we will update 
on these programmes when appropriate
meanwhile grassington’s food co our 
meatfree range of vegetable meals and meal
accompaniments has consolidated its position
in the uk our total meatfree market share
has overtaken linda mccartney to become
number two in the market
8
 at the same 
time we are working to resolve our areas of
underperformance within the frozen division
which have been adversely affected by healthy
eating trends the meat and pastry markets
have faced significant challenges in the past
year as consumers change their diets as a
result our dalepak meat grill and holland’s
meat pie brands have disappointed and we are
working hard on plans to improve performance
to meet our strict shareholder return criteria
10
tns 12 weeks ending 250307
11
the grocer january 2007
we manage a portfolio of strong retained businesses
ready meals sandwiches  salads pizza biscuits puddings northern foods plc chief executive’s review 07
bakery division
in biscuits we participate in one of the largest
snacking product markets worth £187 billion
annually but a combination of our limited
market share at 11
12
and annual market
growth of only 1
8
make this a difficult space
in which to operate however after a recent
profit decline we do believe that we have
stabilised the business and that there is good
value to be created through focusing on product
innovation and selected investment our
initiatives focus on simplification automation
and innovation driven top line growth
to deliver this improvement better we have
reorganised our management team around
three segments each of which addresses a
different consumer need requires a different
customer sales pitch and has a different
supply chain structure and assets
 ‘everyday’ biscuits under the fox’s brand
continues to meet consumer needs through
its strong stable of subbrands including
rocky echo and classic and will be
supported by expansion into the ‘indulgent’
and ‘children’s biscuits’ segments where
market growth exists
 in ‘seasonal’ biscuits we enjoy segment
leadership with a portfolio led by the
creations brand and a large range of
bespoke products for retailers production 
is complex and labour intensive and 
will benefit from targeted automation
 in ‘retailer own brand’ biscuits we are a
strong and innovative partner for our retailer
customers and will exploit surplus capacity
from our asset base where a low cost
position can be sustained
overall we look to deliver medium term
improvement in our biscuits business as our
newly installed teams implement their plans
finally our puddings business has good
growth potential over two thirds of all
christmas puddings purchased are made 
by us
9
and we have identified a further
expansion opportunity in the premium
christmas market this year we will test
market a premium matthew walker christmas
pudding drawing on original victorian recipes
this will be the definitive christmas pudding
consumer research has helped develop an
exciting concept from the ‘original’ christmas
pudding maker and retailers will benefit from
the branded price premium
reduced factory complexity costs will result
from offering the brand to many of our
smaller trade customers who currently have
their own bespoke recipes at high cost to both
partners a successful test will result in a full
launch in 2008
outlook
the past year has been one of real progress 
for northern foods as we delivered against
our key objectives successfully completing 
our disposal programme and creating a
focused business for the future
this year will see further progress in the
transition of the group we expect to see
continued opportunities for revenue growth
and improved performance particularly 
in the attractive chilled markets however
challenges remain especially in biscuits
where we are experiencing a sustained
increase in input costs
nonetheless i am confident that our increased
focus and improved financial position mean
we are well placed to deliver steady top 
and bottom line growth and create value 
for shareholders
stefan barden
30 may 2007
ready meals
our great tasting ready meals
which reflect the unique skills of 
our chefs and production teams
are driving market growth
sandwiches
 salads
our customers will benefit from 
our strong innovation capability and 
our outstanding reputation for service
pizza
in pizza we have the uk’s 
number one brand – goodfella’s
we have a strong innovation 
agenda for this year
biscuits
biscuits is a profit not a top line 
growth opportunity for us
puddings
building on our heritage this year 
will see us launch the ‘definitive
christmas pudding’ under 
the matthew walker brand
12
internal estimate combined retail and own brand share
this year will see further progress 
in the transition of the group