northern foods plc
annual report 2003
wwwnorthernfoodscouk
northern foods plc annual report 2003 our business
northern foods is a leading uk food producerwe operate
in eight core product areas which benefit from long term
demographic and lifestyle trends favouring high quality 
foods that are convenient to eat
our focus is on serving the leading retailers and we 
have strong market positions in the supply of high 
quality chilled foods under their retail nameswe also 
have successful brands in biscuitsfrozen food and 
savoury products
designed and produced by
fitchlondon
front cover photography 
nick sinclair
printed in england by
the colourhouse
contents
01 financial highlights
02 chairman’s statement
03 chief executive’s statement 
04 financial review
06 report of the directors
10 directors’ remuneration report
19 independent auditors’ report
20 consolidated profit and loss account
21 consolidated balance sheet
22 consolidated cash flow statement
23 reconciliation of net cash flow to movement in net debt
statement of total recognised gains and losses
reconciliation of movements in equity shareholders’ funds
24 company balance sheet
25 accounting policies
27 notes to the accounts
45 five year record
46 investor information
47 shareholder analysis
48 company information financial highlights  01 northern foods plc
financial highlights
2003
 continuing sales up 50 to £14212m
driven by convenience up 7 9
 continuing operating profit

up £06m to £1156m
– disappointing performance in biscuits 
offsets good progress elsewhere
– convenience up 85
– grocery down 97
 earnings per share

up 65 to 1481p
benefits from lower tax charge and share 
buyback programme
 dividend increased 61 to 87p per share
– dividend cover

increased
 profit on sale of ski and munch bunch brands 
less operational costs lifts frs 3 pretax profit 
by 27 5 and earnings per share by 619
 net debt reduced by £901m
– £1001m returned to shareholders through 
dividends and share buybacks
– disposal proceeds £145m
– strong operational cash generation
 biscuit stabilisation and recovery plans in place
– accelerated new product development programme
– cost reduction initiatives
– price increases successfully implemented
 further groupwide initiatives to reduce cost base

figures quoted before goodwill amortisation and exceptional items 02  chairman’s statement northern foods plc
chairman’s statement
peter blackburn
trading results were below our original plan primarily due to disappointing
results in biscuits progress in other key areas resulted in earnings per 
share growth despite tightening market conditions disposal dilution and
significant cost pressures
we are responding to the challenges of our market place through
determined and coordinated actionwe are driving operational
improvements throughout the group notably by a greater focus on
leveraging synergies in productivity procurement and systems specific
action is being taken to stabilise and improve our performance in
biscuitswe will continue to review our portfolio to ensure that we
concentrate on activities where we can achieve and retain competitive
advantage and a strong customer franchise
results
continuing sales grew by 50 per cent to £14212 million driven by strong
progress in our convenience chilled food operations though total sales were
26 per cent lower as a result of the disposal of the ski and munch bunch
brands to nestlé uk in april 2002 underlying sales trends excluding the
effects of divestments and currency movements improved in the last three
months of the financial year after a slower performance in the third quarter
continuing operating profit before goodwill amortisation and exceptional
items was up 05 per cent at £1156 million with improved results from our
convenience operations offset by a decline in grocery as a result of our poor
performance in biscuits dilution from disposals and the cost of the share
buyback programme depressed profit before taxation goodwill amortisation
and exceptional items which was 35 per cent lower at £97 5 million
the reduction in share capital together with a lower underlying tax charge
resulted in enhanced earnings per share before goodwill amortisation 
and exceptional items which improved by 65 per cent to 1481 pence
the disposal of ski and munch bunch generated a £540 million exceptional
profit which has been partially offset by £426 million of reorganisation costs
and asset impairment as a result on an frs 3 basis pretax profit increased
by 27 5 per cent to £1058 million and earnings per share by 619 per cent 
to 1873 pence compared with the previous year
dividend and share buyback
the board recommends an increased final dividend of 545 pence per 
share 2002 515 pence together with the increased interim dividend 
of 325 pence paid in march this makes a total dividend for the year of 
870 pence a rise of 61 per cent we remain committed to a progressive
dividend policy taking account of the long term earnings potential and 
cash flow of the group
in addition we continued to make market purchases of our shares
for cancellation acquiring a total of 364 million shares representing 
65 per cent of our equity at a cost of £555 million this brings the
total to £1065 million since we began our share buyback programme
in february 2000
strategic priorities
in a climate of intense food retailer competition it is more important than
ever that northern foods leverages its scale advantages in procurement and
ensures that best practice in productivity food technology and systems is
applied throughout the group we are working with increasing dedication 
and effectiveness to ensure that we maximise these opportunities and deliver 
the planned returns on our investments the sale of ski and munch bunch 
has demonstrated our willingness to adjust our portfolio when appropriate
and we will continue to examine all aspects of our business to ensure that 
we focus on activities where we have a real competitive edge as the base 
for delivering shareholder value
the board
following extensive changes to the nonexecutive directorate in 2002 we
further improved the strength and balance of the board with the appointment
of two new executive directors in january 2003 matthew gribbin 45 has
been with northern foods for over 20 years and howard sims 55 joined 
the company in 1998 on the acquisition of cavaghan  gray plc of which 
he was chief executive
corporate social responsibility
northern foods has a long tradition of sensitivity to social issues and of
supporting the disadvantaged in our society during the year we have taken
further steps to clarify the principles on which we conduct our relations with
all our stakeholders shareholders employees customers and consumers
suppliers the communities in which we operate and the wider environment
outlook
sales in the first seven weeks of the current year are up 7 6 per cent overall
and up 95 per cent with our five largest customers this strong start was
assisted by the timing of easter and recent new business gains although we
anticipate that progress may moderate in the months ahead in a demanding
trading climate we are pursuing a range of initiatives to enhance efficiencies
and returns across the group action is being taken in our biscuit businesses 
to recover inflation reduce costs and accelerate new product development
this is helping to arrest the trend of the second half of last year though 
biscuit trading is expected to dampen grocery performance in the first half
the entire northern foods team shares my determination that the group 
will fulfil its potential by delivering appropriate returns on our investments
and maximising the potential of our strong positions in the growing
convenience food market
peter blackburn
chairman
28 may 2003 chief executive’s statement  03 northern foods plc
chief executive’s statement
jo stewart
our aim remains the creation of shareholder value as the most effective
added value food manufacturer addressing the uk retail market
by focusing on the supply of added value products to the major retailers
and on innovation and the highest food standards we have positioned
ourselves to benefit from the key long term trends in our market 
place organisational and strategic refinement combined with prudent
investment are designed to drive further improvements in our
competitiveness
market environment
in a time of increasing economic uncertainty the food market stands out 
for its long term overall stability the sectors on which we have chosen to
focus continue to outperform the market as a whole driven by consumer
demand for increasing convenience and quality the uk retailing
environment always demanding awaits the outcome of the competition
authorities’ review of the various options for further consolidation however
this finally unfolds we believe that northern foods is strongly placed as a
wellinvested business capable of meeting retailer needs for innovation
quality assurance service and value
retailer consolidation will inevitably be matched by rationalisation of their
supply base and some players will not survive this process this may lead 
to some instability but this should correct itself as a more stable supply base
emerges we are confident that northern foods will be a winner from the
further consolidation of food manufacturing in the uk
business focus
we continuously review our portfolio to ensure that we have the right 
profile to achieve the returns and value generation we seek the changes 
we have made in recent years through acquisitions disposals and
investments in new facilities have been designed to drive northern foods
further up the scale of both added value and convenience good examples 
of this include the development of new facilities to manufacture chilled 
ready meals and stonebaked pizzas and our withdrawal from van sales 
of savoury pastry products we remain confident that our recent major
investment and restructuring projects have been accurately targeted 
and will deliver the expected returns in the near term we anticipate levels 
of capital expenditure to be similar to last year as we concentrate on 
delivery from these past initiatives
trading
our convenience businesses have delivered good top line growth based 
on the positive consumer and retailer trends we had identified this has also
been translated into strong profit progress clearly performance in grocery
has been disappointing chiefly as a result of intense competitor activity in
biscuits including the entry of new players from the confectionery sector 
and significant increases in cocoa costs despite these wellpublicised issues
fox’s remains one of the strongest and most profitable brands in its sector
and urgent action is being taken to stabilise the business through accelerated
new product development price increases and cost reductions our other
grocery businesses principally in the frozen foods sector have continued 
to perform well
synergy development
central to the northern foods proposition is the belief that each of our
activities should have bespoke strategies tailored to their precise market 
type positioning and customer profile we then seek to overlay scale and
synergy benefits that reflect the size and strength of our group these are
concentrated in six key areas
– market development and customer relations including the identification
of market trends and opportunities and the exploitation of group strengths
to drive category management for our key customers
– productivity with an emphasis on continuously improving the effectiveness
of our manufacturing activities and supply chain
– procurement ensuring that correct standards are applied and cost
reduction strategies developed to optimise value in use of the materials 
we purchase
– food technology applying the latest scientific advances in a practical 
way to aid innovation and productivity across the business
– systems both in management processes and information technology
to provide a common platform for use within our business activities
– people including recruitment training and development and the effective
deployment of management resources
over the last year we have placed particular emphasis on productivity 
and procurement we have a common groupwide approach to the
measurement and improvement of manufacturing performance utilising 
a lean manufacturing template to drive efficiencies in our factories this 
is accompanied by the strengthening of our group buying disciplines for 
raw materials and packaging which will enhance consistency and quality 
as well as delivering cost savings
these initiatives are assisted by our investment in systems with the rollout
of a common sap platform for all our companies well advanced and poised
to deliver further benefits in the future
prospects
we will continue to refine our portfolio to ensure that it is attuned both 
to market trends and to our core competencies as a group relationships 
with our key retailer partners will continue to be fostered to ensure we
become even closer and more proactive with a high priority accorded to
innovation and synergies between our businesses exploited ever more
systematically our ability to cope with testing times has been strengthened
by the strategy and investments we have put in place and our teams have
demonstrated great resilience and dedication in defending and building our
business and seeking new opportunities for growth
jo stewart 
chief executive 04  financial review northern foods plc
financial review
sean christie
difficult trading in biscuits held back the results of our grocery division
but performance in almost all other areas was strong with returns on past
investments coming through
the reduced capital base following the disposal of ski and munch 
bunch to nestlé means that roic increases despite operating profit
being below our original targetthe wacc continues to fall resulting in 
an improved margin over the cost of funds one of our two key financial
performance measuresthe other metric growth in earnings per share
before goodwill amortisation and exceptional items was 65 per cent
with the trading uplift boosted by share buybacks and a lower tax charge
sales – continuing operations
sales were up 50 per cent driven by our convenience operationsprice
increases averaging 05 per cent were achieved recovering input cost
inflation third quarter sales were below our forecasts but we saw improved
trends in the final quarter
convenience
sales were up 7 9 per cent to £10141 million despite the effects of the poor
summer and the quieter third quarter with particularly strong performances
in recipe dishes chilled pizza and fresh chilled dairy products
grocery
overall sales were down 16 per cent at £407 1 million biscuits were the 
key problem with sales down overall despite the fox’s brand making volume
progress dalepak’s sales of frozen ready meals were also lower but there
were strong uplifts in frozen pizza and dalepak’s core grills and burgers range
operating profit – continuing operations before goodwill 
amortisation and exceptional items
operating profit was up 05 per cent with growth in convenience just
outweighing the grocery shortfall both divisions had to cope with a near
doubling of insurance costs which rose by £7 0 million across the group
convenience
convenience operating profit was up 85 per cent to £700 million despite
startup costs in recipe dishes and losses in the remaining eden vale business
following the sale of the ski and munch bunch brands to nestlé at the start
of the year significant profit uplift came from the restructuring of our 
tesco pizza and quiche operations and increased manufacturing throughput
at pork farms as a result of our deal with kerry foods in the prior year
speciality bread also performed well when solway our associate company
is added to our continuing businesses the convenience operating profit
shows an increase of 100 per cent
grocery
grocery operating profit declined by £49 million to £456 million biscuits
more than accounted for this shortfall which resulted from a combination 
of manufacturer driven promotional activity coupled with increases in cocoa
prices elsewhere in grocery we made reasonable profit progress with green
isle doing well and dalepak turning round the first half deficit and making
profit progress for the year
discontinued operations
these were the main cause of sales and profit shortfall with turnover 
reduced by £1054 million and operating profit before goodwill amortisation
and exceptional items by £101 million as a result of the disposals the key
elements were the divestment of the ski and munch bunch brands and 
of our van sales operations to kerry foods the lift lemon tea brand and our
v anderheul biscuit business in holland were also sold during the previous year
pretax profit before goodwill amortisation and exceptional items
pretax profit was down £35 million to £97 5 million with the discontinued
activities showing a net deficit of £32 million operating profit foregone less
the interest benefit on £145 million of disposal proceeds and the share
buyback programme increasing interest costs by £18 million our associate
solway made strong profit progress with our share up £10 million to £14
million as it recovered from the prior year’s factory commissioning problems
interest costs reduced by £50 million primarily as a result of the disposals
t axation
t axation on profit before goodwill amortisation and exceptional items for 
the year was 184 per cent this is lower than the basic uk tax rate primarily
because of the low rates of corporation tax which apply to our operations 
in ireland discounting of the deferred tax liability and the tax efficient
structuring of our funding arrangements including a nonrecurring element 
of £15 million relating to exchange losses excluding this itemthe 
underlying charge was 199 per cent
earnings per share 
earnings per share before goodwill amortisation and exceptional items were
up 65 per cent at 1481 pence with share buybacks and the lower tax charge
contributing to the progress on an frs 3 basis earnings per share were up
619 per cent at 1873 pence with profit on sale from the disposals less the
associated restructuring costs boosting the result
exceptional items and goodwill
there was a posttax exceptional net credit of £242 million versus a charge
of £101 million in the previous year the main features of this year’s credit
were profit on disposal of businesses of £540 million after charging goodwill
previously written off totalling £650 million less restructuring costs 
of £426 million the main element of which was a charge relating to asset
impairment at eden vale of £292 million this followed a full review of the
carrying value of the remaining assets at minsterley following the ski and
munch bunch sale other exceptional costs relate to redundancy disruption
and asset writeoffs following the disposals goodwill amortisation on past
acquisitions was £31 million versus £29 million last year
distributions to shareholders
during the year we returned £1001 million to shareholders via share
buybacks and dividends
buybacks
we bought 364 million shares back during the year 65 per cent of our
equity at a cost of £555 million which represented an average price of 
152 pence per share this was the largest annual programme we have
undertaken so far and helped mitigate the earnings dilution from disposals
we intend to continue to buy shares in the market as opportunities arise
dividends
we propose a final dividend of 545 pence making a total of 870 pence for
the year up 61 per cent on last year’s figure of 820 pence dividend cover
before goodwill amortisation and exceptional items increases to 18 times
due to the reduced shareholder base
acquisitions and divestments
the only divestment was the sale of the ski and munch bunch brands plus
the cuddington factory to nestlé for £145 million in april 2002 we made 
no acquisitions financial review  05 northern foods plc
capital expenditure
tight control of capital was a key theme during the year our facilities 
are wellinvested following expenditure over the last few years and capital
expenditure totalled £794 million compared with £1236 million in the 
prior year this spend was 13 times the depreciation charge of £627 million
the largest project in the year other than replacement capital was the
continuing drive to implement sap in all companies the main phase of 
which will be completed in the current year
cash flow
cash flow was very encouraging with a £901 million reduction in net debt
despite £1001 million being returned to shareholders the disposal proceeds
of £1450 million were the largest single contributor to this but strong
operational cash generation was also an important factor the working capital
outflow of only £119 million was caused primarily by the difference between
the actuarial based cash contributions to the pension fund and the ssap 24
basis used in the profit and loss account all of this meant trading cash flow
was far stronger than last year
treasury management
the treasury function of the group operates within a policy framework
approved and regularly reviewed by the board the department is not run 
as a profit centre and is subject to internal audit review its activities are
routinely reported to the board whilst each business in the group is
responsible for its own cash management all resulting cash flows and
balances are managed by the central treasury to minimise borrowings 
and interest costs
bank facilities
the group has a £450 million five year revolving credit facility which
together with the £90 million fixed rate bond form the committed 
core of our funding arrangements
liquidity
the group operates a policy of maintaining certainty of funding over 
the medium term by a combination of committed floating and fixed rate
facilities supplemented by uncommitted facilities the policy is to ensure
that forecast net borrowings plus a reasonable operating headroom 
are covered by committed facilities which mature at least 12 months 
after the year end
interest rates
the group manages its exposure to interest rate fluctuations on its
borrowings by operating with a mix of fixed and floating rate borrowings
the objective is to operate with fixed rate borrowings within a range 
of 20 per cent to 50 per cent of total borrowings over the medium term
although the group may operate outside of that range during the year
currency
the group operates primarily in the uk with only approximately 136 per
cent of sales arising from companies operating in currencies other than
sterling principally the euro group policy is to hedge against transactional
risk by spot and forward foreign exchange contracts we do not hedge
against translation
balance sheet
shareholders’ funds increased from £2882 million to £3661 million over the
year primarily as a result of the disposals borrowings fell from £4137 million
to £3236 million resulting in gearing of 884 per cent last year 1435 per
cent and interest cover before goodwill amortisation and exceptional items
rising to 60 times last year 51 times
return on investment before goodwill amortisation and exceptional items
adjusting the opening invested capital for the ski and munch bunch disposal
which completed on 2 april 2002 our roic posttax return on average
invested capital rises from 99 per cent last year to 100 per cent in the year
to march 2003 the cost of debt and equity capital continued to fall reducing
our wacc weighted average cost of capital which resulted in the margin
over cost of funds rising to 37 percentage points last year 26 percentage
points we will continue to manage both sides of the equation improving
roic whilst keeping our cost of capital down to maximise the return to
equity investors
pensions
the changes we have made to our pension funding arrangements have been
an important factor behind this year’s results depressed equity markets 
and increasing life expectancy are putting great strains on company 
pension funds we have taken steps to ensure the latter does not become 
an increasing burden to the company we decided to keep our final salary
scheme but have increased contributions for all employees by 40 per cent
from 5 to 7 per cent of earnings and removed a number of company 
funded early retirement provisions for future service our fund is relatively
immature with almost twice the level of contributions going in as pensions
paid out which leaves us able to take a long term view of investment 
returns we continue to charge pension costs against profits based 
on ssap 24 these results incorporate the latest triennial valuation as at
march 2002 and the increased employee contributions have offset the
increased cost the variation credit due to the amortisation of past surpluses
reduces the pension charge by £24million
the potential effects of adopting frs 17 are that the posttax balance sheet
deficit rises to £1435 million last year deficit £47 0 million reflecting the
trends seen in the equity markets the effect on pretax profit would have
been a reduction of £55 million made up of the loss of the ssap 24 credit
and other calculation differences between the two methodologies it is our
intention to continue to report profits under ssap 24 until the new standard
is implemented
information technology
one of the major capital projects has been the introduction of sap across 
the group permitting a move to state of the art systems for both financial
reporting and operational control our decentralised it arrangements 
have been replaced with a central structure it is our intention subject to
consultation to take all remaining it staff out of our operating companies
in the coming year saving costs and improving service another benefit 
from the implementation of sap is that again subject to consultation we
plan to centralise all financial accounting and reporting across the group
we propose to roll out the changes in the first half and expect the benefits 
to build steadily over the next two years
sean christie
finance director 06  report of the directors northern foods plc
report of 
the directors
the directors of northern foods plc present their report and the accounts
of the company for the year ended 31 march 2003
principal activities and business review
this report should be read in conjunction with the chairman’s statement the
chief executive’s statement and the financial review which together include
information about group activities the financial performance during the year
and likely developments
acquisitions and disposals
the following disposal took place in the year and is referred to in the
chairman’s statement and the financial review
– on 2 april 2002 convenience foods limited completed the sale of 
the ski and munch bunch brands together with the yogurt facility 
at cuddington to nestlé uk limited for £145 million in cash
dividend
an interim dividend of 325 pence per share was paid on 28 march 2003 
and the directors recommend a final dividend of 545 pence per share to be
paid on 29 august 2003 to shareholders on the register on 25 july 2003
share capital
pursuant to the authority granted by shareholders at the annual general
meeting on 18 july 2002 northern foods has implemented a share buyback
programme of up to 10 per cent of its equity this latest programme started
in july 2002 and to date 23495460 ordinary shares have been bought back
on 2 december 2002 options over 3883500 ordinary shares were
granted under the company’s executive share option scheme at a price 
of 16808 pence
options have been exercised under the company’s executive and savings
related share option schemes during the year ended 31 march 2003
as a result participants in these schemes were allotted 515437 new
ordinary shares in that period
options outstanding under the above schemes at 31 march 2003 were
19819809 from 1 april 2003 to 27 may 2003 49527 new ordinary shares
have been allotted on the exercise of options
substantial holders of stock
the directors have received notification of an interest of 3 per cent or more
in the issued share capital of the company from the following
legal  general investment management 301 per cent
sprucegrove investment management ltd 7 10 per cent
directors
the following were directors of the company during the year
helen alexander resigned 31 december 2002
peter blackburn
sean christie 
colin dyer 
jonathan fry resigned 28 may 2002
matthew gribbin appointed 27 january 2003
tony hobson appointed 28 may 2002
orna nichionna appointed 28 may 2002
howard sims appointed 27 january 2003
jo stewart
nonexecutive directors
directors’ biographical details are set out on page 24 of the annual review
in accordance with the company’s articles of association p h blackburn
c dyer a j hobson o g nichionna and a j stewart retire and being eligible
offer themselves for reelection
m t gribbin and h r sims having been appointed directors since the 2002
annual general meeting offer themselves for election
the executive directors’ service contracts including that of a j stewart the
retiring executive director and those of m t gribbin and h r sims executive
directors who are standing for election are referred to in the directors’
remuneration report all the executive directors’ service contracts are
terminable by the company giving one year’s notice
the interests of the directors in the share capital of the company as at
31 march 2003 are shown in the directors’ remuneration report other 
than service contracts no director has a material beneficial interest in any
contract to which the company or any of its subsidiaries was a party 
during the year
social responsibility
the report entitled ‘recognising our social responsibilities’ on pages 18 
to 20 of the annual review gives further details of our commitments to our
employees local communities the environment and to ethical trading
employee share schemes
the company operates savingsrelated and executive share option schemes
reference to which is made under the section ‘share capital’ above
more than 13000 current employees pensioners and former employees
have shares held on their behalf by the trustees of the company’s previous
profit sharing scheme
health and safety
northern foods’ commitment to health and safety is set out in the
company’s policy statement and summarised in the social responsibility
report in the annual review annual objectives are set at the beginning of the
financial year and performance is monitored and reviewed by the executive
committee a separate report is prepared on health and safety performance
and is available on request
charitable and political contributions
during the year the group donated £266000 for charitable purposes the
group’s donations for the previous financial year totalled £445000 details
of the support for local communities are included in the social responsibility
report in the annual review there were no political contributions
product development
lifestyle changes and consumers’ desire for greater choice and convenience
require a continuous programme of investment in catalogue refreshment
new products and product innovation northern foods’ specialist new
product development teams work with major retail customers to address
these needs each northern foods company has the facilities and resources
to ensure that its products meet the highest standards of quality safety 
and added value report of the directors  07 northern foods plc
food safety
northern foods as one of the leading uk food producers maintains its
absolute commitment to the safety of its products this requires the 
highest operational standards in its facilities careful design of processes and
products and approval of only those suppliers who can meet the company’s
standards for food safety and integrity throughout the supply chain from
farmer to consumer northern foods also requires high standards from
employees and contractors visiting its factories the company’s proactive
approach to food safety includes the setting of standards and policy food
safety training for all employees accreditation of northern foods’ central
laboratory for microbiological and chemical analysis assessment and
approval of suppliers and audits of the quality management systems 
of the company’s own sites against the northern foods standard
supplier payment policy
it is the company’s policy that payments to suppliers are made in
accordance with the terms and conditions agreed between the company 
and its suppliers provided that all trading terms and conditions have been
met suppliers are paid on average within 28 days 2002 33 days of receipt
of invoice
annual general meeting
the notice convening the company’s annual general meeting to be held 
at 1230 pm on thursday 17 july 2003 is contained in the circular sent to
shareholders with this report
going concern
after making enquiries the directors have a reasonable expectation that the
group has adequate resources to continue in operational existence for the
foreseeable future for this reason they continue to adopt the going concern
basis in preparing the accounts
auditors 
deloitte  touche have expressed their willingness to continue in office 
as auditors of the company and a resolution proposing their reappointment
will be submitted to the company’s annual general meeting
corporate governance
compliance
throughout the year ended 31 march 2003 northern foods has been 
in compliance with the provisions set out in section 1 of the combined
code on corporate governance annexed to the listing rules issued by 
the financial services authority
directors’ responsibilities
company law requires the directors to prepare accounts for each financial
year which give a true and fair view of the state of affairs of the company
and the group and of the profit or loss for that period
in preparing those accounts the directors are required to
– select suitable accounting policies and then apply them consistently
– make judgements and estimates that are reasonable and prudent 
– state whether applicable accounting standards have been followed subject
to any material departures disclosed and explained in the accounts
the directors confirm that the accounts comply with the above
requirements
the directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of 
the company and the group and enable them to ensure that the accounts
comply with the companies act 1985 they are also responsible for
safeguarding the assets of the company and the group and hence for 
taking reasonable steps for the prevention and detection of fraud and 
other irregularities
the board and executive committee
the board of directors generally meets eight times a year all directors
attended every board meeting during the year except that c dyer was
unable to attend one meeting
j m fry was the senior independent director until his resignation from 
the board on 28 may 2002 when he was succeeded by a j hobson
all the nonexecutive directors are considered by the board to be
independent they have wideranging experience and all currently occupy
or have occupied senior positions in industry
under the company’s articles of association all directors are subject to 
reelection at intervals of no more than three years the nonexecutive
directors stand for reelection each year
nonexecutive directors receive a range of information about the company
upon appointment an induction programme is arranged including site 
visits the board aims to hold one or more meetings each year at an
operating location
the board has specifically reserved a formal schedule of matters for its
decision these include responsibility for approving overall group strategy
and financial policy board membership and board committees acquisitions
and divestments and major capital expenditure
northern foods has an executive committee which meets monthly and 
is responsible for the management of the group the executive committee
consists of the four executive directors three other senior group executives
and the company secretary senior executives below board level are
periodically invited to attend board meetings to make presentations on 
their areas of responsibility
audit committee
the audit committee comprises c dyer chairman p h blackburn
a j hobson and o g nichionna it meets at least twice a year and 
oversees the group’s internal audit function and reviews compliance 
with the auditors’ recommendations accounting standards regulations 
and statutes and reports on the systems of internal control and risk
management the company’s external auditors attend audit committee
meetings at least twice a year and also have the opportunity of private
meetings with the committee the committee also reviews the annual 
and interim financial statements before they are submitted to the board
remuneration committee
the remuneration committee comprises a j hobson chairman
p h blackburn c dyer and o g nichionna it establishes board policy in
respect of all terms of employment for executive directors the directors’
remuneration report can be found on pages 10 to 18
nomination committee
the nomination committee comprises p h blackburn chairman c dyer
a j hobson and o g nichionna the committee regularly reviews the
structure size and composition of the board it selects and recommends
suitable candidates for appointment as directors of the companythe
committee also makes recommendations to the board in relation to
succession planning 08  report of the directors northern foods plc
report of 
the directors continued
independent advice
there is an agreed procedure by which members of the board may take
independent professional advice in the furtherance of their duties all
directors have access to the advice and services of the company secretary
whose removal may only be effected with the approval of the board
relations with shareholders
the board attaches high importance to maintaining good relationships 
with all shareholders who are kept informed of significant company
developments
the board regards the annual general meeting as an opportunity to
communicate directly with private investors and to encourage participative
dialogue regular presentations on company direction are also made to
institutional shareholders
auditors – nonaudit services
the internal audit function having previously been conducted by deloitte 
 touche is now carried out by a newly formed inhouse internal audit
department staffed by qualified accountants including an internal audit
manager
other nonaudit services are awarded to providers with the appropriate
experience who provide the service at a competitive rate the auditors 
would not be selected if the nature of the work presented a threat to the
independence of the audit team
the audit committee keeps under review the independence and objectivity
of the internal audit function and the external audit function the audit
committee reviews the nature scope and findings of internal audit the
auditors report to the directors and the audit committee on the actions 
they take to comply with professional and regulatory requirements and 
best practice required to ensure their independence
internal control
the directors have responsibility for the group’s system of internal control
which covers all aspects of the business this includes financial operational
compliance control and risk management the directors set policies and seek
regular assurance that the system of internal control is operating effectively
whilst the directors acknowledge their responsibility for the system of
internal control any such system can provide only reasonable and not
absolute assurance against material misstatement or loss and is designed
to manage rather than eliminate the risk of failure to achieve business
objectives
the combined code requires the directors to review the effectiveness 
of the group’s systems of internal control the key elements of the group’s
internal control systems and review processes are set out as follows
– background
the risk culture in the group is based on a local flexible response to business
issues short lines of communication ensure a rapid upward information 
flow this culture has developed from the nature of the business focused 
as it is primarily on short shelf life foods
the executive committee provides top down strategic input where
formality is necessary for example on food safety finance or health and
safety matters then policies and procedures are in place to ensure that 
the operating companies conform
the following summarises the way the group assesses and mitigates risk
– policies
the board sets policy over key areas of risk which are applicable to all
companies dealing inter alia with controls over food safety accounting
treasury capital expenditure health and safety personnel and information
technology
– group organisation and controls
the business is run on a decentralised basis each of the principal operating
companies has a full management team under the control of a company
managing director responsible for strategic direction and day to day
running each operating company is required to prepare detailed annual
budgets and strategic plans budgets are reviewed and updated on a 
regular basis each company prepares weekly and monthly accounts and
performance is monitored against the original and any updated budget
the group’s executive committee meets on a formal basis each month 
to review the above
the group operates investment approval procedures for capital projects 
and acquisitions which require executive committee or board approval
depending upon the level of spend
the companies are supplemented by a corporate management resource 
and by specialist central functions these specialist functions which provide
the technical skills to support the companies and provide assurance over 
the major areas of risk are as follows
financial and it internal audit reviews the standard of internal financial
control and the accuracy of financial reporting through a rolling cycle of
audit visits
technical services provides risk management in the areas of food 
safety food quality fire prevention and approval of contractors providing
building engineering and professional services the food technology 
team assesses and approves raw material suppliers audits the quality
management systems in the group’s operating companies provides
guidance on compliance with foodrelated and environmental legislation
sets technical standards and offers expertise on a wide range of food
science and technology issues the engineering team sets standards for
building construction and fire risk management maintains a database of
approved contractors provides an expert consultancy for the acquisition
management and disposal of physical assets as well as assessing and
approving suppliers of capital equipment and nonsaleable revenue items report of the directors  09 northern foods plc
health and safety provides professional advice on best practice and also
audits health and safety procedures within 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
insurance in conjunction with the group’s external insurance brokers
through a group programme ensures adequate cover for major losses with
appropriate levels of deductible this cover is reviewed and negotiated
annually
personnel through its management resources review ensures the adequacy
of existing management and plans succession
group executives oversee the companies under their control and also have
groupwide responsibility for the major customers
the audit committee oversees both internal and external audit procedures
and deals with significant control issues raised
– review process
the management of business risks continues to be an essential part of
ensuring that the group and each operating company meets its objectives
and delivers value for shareholders
the formal process for reviewing business risks has been embedded in the
budget process each company is required to carry out a formal review 
to assess business risks in terms of impact and likelihood and the controls 
in place to manage those risks as part of the budget process companies 
are required to formulate action plans where appropriate to improve
controls progress of these plans is reviewed by the group executive and 
the internal auditors
companies and specialist functions report by exception on any matters
arising during the year to the monthly group executive 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 accounts and that it is regularly reviewed by the board 
and accords with turnbull guidance
following the publication of the higgs report on the role and effectiveness 
of nonexecutive directors the smith report on audit committees and 
the setting up of a working group to be chaired by sir bryan nicholson
the board will give full consideration to the changes to be made to the
combined code in due course
by order of the board
julian wild
company secretary
28 may 2003 10  directors’ remuneration report northern foods plc
directors’ remuneration 
report
introduction
the board has prepared this report in accordance with the requirements of
the directors’ remuneration report regulations 2002 the report also meets
the relevant requirements of the combined code annexed to the listing
rules issued by the financial services authority
it covers the remuneration policy the level and components of directors’
remuneration a number of formal disclosures relating to individual directors’
remuneration and a performance graph of the company’s performance
as required by the regulations a resolution to approve the report will be
proposed at the annual general meeting of the company
the regulations require the auditors 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 as amended by the regulations
remuneration committee
the members of the remuneration committee were j m fry chairman –
resigned 28 may 2002 a j hobson chairman – appointed 28 may 2002
h a alexander resigned 31 december 2002 p h blackburn c dyer and 
o g nichionna appointed 28 may 2002 all were independent non
executive directors the committee makes recommendations to the board
no director plays a part in any discussion about his or her remuneration
the remuneration committee has been formally delegated the authority 
by the board of directors to establish policy in respect of all terms of
employment for executive directors
advisers to the remuneration committee
the remuneration committee appointed hewitt bacon  woodrow to
provide advice on matters of future remuneration policy during the year
they are also scheme actuaries to the northern foods pension scheme
linklaters provided legal advice on share schemes and related matters 
and they also advise the company secretarial function the remuneration
committee appointed dla to advise on matters relating to the revision 
of directors’ contracts dla also provided specific employment law advice 
to the company’s legal department
in determining directors’ remuneration for the year and in considering
proposals for the future the committee consulted a j stewart chief
executive the secretary to the remuneration committee is e cockburn
personnel executive who also provided information on pay practice in
respect of executive directors and senior management
remuneration policy 
the group’s remuneration policy is designed to support the recruitment
motivation and retention of employees remuneration is considered within
the overall context of the sector of which the group is a part and the group’s
individual businesses the objective continues to be to pay at the relevant
midmarket level with a package designed to align interests of the employees
with shareholders and with a reasonable proportion of total remuneration
dependent upon individual and group performance the policy is described 
in more detail below for directors
remuneration policy for nonexecutive directors
fees for the nonexecutive directors are recommended by executive directors
and then approved by the board based upon a range of external information
and set within the aggregate limits contained in the articles of association
there is no other remuneration except where the company meets
authorised expenses of nonexecutive directors incurred on northern foods
activities they are not eligible for pension scheme membership and do not
participate in any of the group’s annual or long term incentive schemes
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 company’s overall performance the remuneration committee’s 
policy is to offer remuneration packages which are capable of attracting
retaining and motivating executive directors of high calibre to ensure that
the company is managed effectively to the benefit of shareholders the
remuneration committee also takes account of the remuneration awarded 
to managers throughout northern foods in setting the remuneration 
of the executive directors
the remuneration committee is currently reviewing the policy on total
remuneration for executive directors it continues to aim for a structured 
and balanced remuneration package for each executive director by 
looking at each element as well as the package as a whole
the remuneration committee believes that an increasing proportion of the
total remuneration of a director should be performance related and proposes
changes to both the short and long term incentive arrangements changes
to the annual incentive plan will be introduced for 20032004 the increase
in annual bonus opportunity for executive directors is set against the
introduction of stretching annual performance objectives in addition to the
current target of growth in earnings per share a proportion of any annual
bonus earned will be paid as deferred shares through the new share bonus
plan encouraging executive directors to grow their personal shareholding in
the group changes to the long term incentive arrangements proposed for
20042005 will include a review of performance targets ensuring continued
alignment of individual and shareholder interests
salary will continue to be set by reference to the median level of the relevant
employment market the remuneration committee has used annual surveys
conducted by external remuneration consultants to provide information 
on market practice focusing on comparisons with companies which are 
of a similar size and which share similar characteristics the remuneration
committee consults with the chief executive about its proposals relating 
to the remuneration of other executive directors and senior management
the five main components of the remuneration package for executive
directors and senior management in 20032004 are
– basic annual salary
– the possibility of an annual cash bonus based upon performance 
of the individual and the group
– a deferred annual bonus where a cash bonus is paid
– participation in long term incentive plans with returns based upon
the group and individual performance
– pension and other benefits directors’ remuneration report  11 northern foods plc
share and bonus schemes are structured to provide a strong alignment 
of interest between the individual and the shareholder
in order to encourage and reward performance there is a significant
proportion of potential reward dependent upon company and individual
performance as shown below nearly 40 per cent of directors’ total
remuneration is dependent upon target performance with a maximum
percentage at grant of 45 per cent
the overall balance of the fixed and variable pay at current value for
20032004 exclusive of pension benefits is illustrated below the table is 
a theoretical model and assumes that on target performance is achieved 
for both short and long term incentives the value of the long term incentive
is calculated using black scholes methodology the share price used is as at
31 march 2003 and an average option life of six and a half years is assumed
basic salary variable pay
as proportion as proportion
of total of total
remuneration remuneration
m s christie 62 38
m t gribbin 62 38
h r sims 62 38
a j stewart 62 38
salary 
salaries of executive directors are reviewed annually at the beginning of 
each financial year by the remuneration committee taking into account any
changes in the individual’s responsibilities performance and development
the company’s overall performance and external factors the remuneration
committee’s objective is and will continue to be to maintain salaries at
around the median level of the relevant employment market
salaries were reviewed for the chief executive and finance director in 
march 2003 with increases taking effect from 1 april 2003 salaries for the
two newly appointed executive directors m t gribbin and h r sims were
considered in january 2003 and took effect from 27 january 2003 they 
will not be reviewed until april 2004
in addition to basic salary all the executive directors receive certain benefits
principally a car private medical insurance and a pension salary is the only
pensionable remuneration
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 remuneration committee to 
take account of current business plans
the remuneration committee has reviewed the annual incentive plan
and the target and the maximum potential award for 20032004 have
been increased for this year better to reflect current market practice for
comparator companies the target incentive for an executive director 
is now 40 per cent of basic salary for good performance in the case of
exceptional results the incentive payment may increase up to a maximum 
of 60 per cent of basic salary
one quarter of any annual incentive earned will be paid as deferred shares
through the company’s share bonus plan shares acquired through the share
bonus plan will be purchased in the market and held in trust for the executive
for a period of three years these shares will be forfeited should the executive
director leave prior to the third anniversary during this retention period the
participants will not be entitled to dividends on the shares
the target set for 20032004 is made up of both financial and business
performance measures the financial element includes profit performance
and earnings per share growth targets the business element is related 
to a small number of commercially sensitive strategic objectives for each
individual and the senior management team overall the performance
targets selected are considered appropriately stretching by the remuneration
committee
the targets for the chief executive and the finance director in 20012002
and 20022003 were based upon growth over the year in northern foods’
earnings per share there is a threshold below which no payment is made
the payment for reaching target was set at 25 per cent of salary with a
maximum potential bonus of 35 per cent no annual bonuses were paid 
to executive directors in respect of 20012002 an accrued bonus in 
respect of 20022003 will be paid in june 2003 and is included in t able 1 
on page 14
the targets for m t gribbin and h r sims were based equally upon growth
over the year in northern foods’ earnings per share together with profit
after interest of the operating companies for which the individual director
was responsible the payment for reaching target was set at 25 per cent 
of salary with a maximum potential bonus of 35 per cent m t gribbin and
h r sims were not executive directors in 20012002 an accrued bonus in
respect of 20022003 will be paid in june 2003 and is included in t able 1
on page 14
long term incentive share plans
the group’s long term incentive grants have been developed to reflect
market practice and to provide long term management focus and motivation
the remuneration committee believes that a significant element of
executive remuneration should be linked to the delivery of above average
long term returns for shareholders executives’ interest in both relative 
and absolute share price performance is important and this is facilitated 
by share schemes and the encouragement to grow a significant personal
shareholding in the group
long term incentives are provided to executive directors in the form of
restricted shares and share options executive directors and senior executives
are eligible to receive awards under only one of these arrangements in any
one financial year
long term incentive arrangements for executive directors are currently being
reviewed by the remuneration committee with the objective of seeking
shareholder approval for the introduction of any new arrangements in 2004
until such review is concluded the policy for the 20032004 financial period
is set out below 12  directors’ remuneration report northern foods plc
directors’ remuneration
report continued
executive share options
participation in the executive option scheme is at the discretion of the
remuneration committee executive directors are eligible to receive a grant
of options if they hold at the time of any grant unexercised options worth
on aggregate less than four times salary options are granted at market
value under either the company share option plan inland revenue approved
or executive share option scheme unapproved
directors can exercise options in the seven year period following the third
anniversary of grant and before the tenth anniversary subject to satisfaction
of the performance condition
consistent with best practice it is the remuneration committee’s intention
that grants will continue to be made annually to executive directors in the
future such grants will normally be equivalent to one times salary
in making option grants the remuneration committee sets the performance
target to be achieved before such options can be exercised the performance
condition requires that the remuneration committee must be satisfied that
over the three year performance period the real growth in earnings per 
share is greater than 3 per cent per annum compound if the performance
condition is not satisfied after the initial three year performance period the
period will be extended and performance will be retested at the end of year
four and if necessary again at the end of year five against the full period
from grant the options will lapse if the performance condition has not been
met by the end of year five of the performance period
the remuneration committee believes that the performance condition for 
the long term incentive arrangements should align the interests of directors
with those of shareholders the remuneration committee also believes 
that real growth in earnings per share will only be achieved through the
delivery of both the commercial and financial objectives of the company
furthermore executives will only benefit from the plan if real growth in the
earnings per share target is achieved and there is growth in the share price
grants were made on 2 december 2002 to the executive directors
allocations were as shown on page 16
long term incentive plan
the plan is designed to align the interests of senior management with 
the interests of shareholders the benefits available to senior management
participating in the plan will only accrue to them if the company has
delivered significant benefits to shareholders over a three year period
participation in this incentive plan is at the discretion of the remuneration
committee
under the plan the remuneration committee awards shares in the company
to senior management conditional upon the achievement of corporate
performance targets over a period of three years the number of shares
conditionally awarded to each participant is determined by the remuneration
committee the market value of shares which may be conditionally 
awarded to a participant in any year will be limited to a maximum 
of 75 per cent of salary
performance is assessed against two criteria by comparing the growth 
in total shareholder return in terms of share price growth and dividends
to that of the total shareholder return of the companies comprising the 
ftse food producers index excluding unilever and by assessing the
underlying performance of northern foods by reference to the real 
growth in earnings per share over the same period
the total shareholder return performance is assessed by reference to a vesting
scale whereby for the full award to qualify for vesting the total return to the
company’s ordinary shareholders during the three year performance period
places it in the top quartile of the comparator group if the company’s
performance is ranked at 50 per cent or lower all of the conditional awards will
lapse where the company is placed between 50 per cent and the top quartile
the maximum number of shares available for vesting will be calculated on
a straight line basis with 25 per cent of the conditional award being available
when the company is placed at 51 per cent and the entire award being
available where the company is placed in the top quartile
the remuneration committee assesses the underlying performance of the
company as measured by growth in earnings per share to determine the
proportion of the available shares that will vest
the remuneration committee believes that the performance condition for
the long term incentive arrangements should align the interests of directors
with those of shareholders the remuneration committee selected the
relative total shareholder return compared with companies in the ftse food
producers index excluding unilever as a measure that reflects corporate
performance relative to companies with similar characteristics and subject 
to similar market conditions unilever is excluded from the comparator group
on the basis of size and product diversity the remuneration committee also
believes that real growth in earnings per share is an appropriate measure 
of the underlying financial performance of the company
the companies currently comprising the ftse food producers index are
associated british foods northern foods
cadbury schweppes robert wiseman dairies
dairy crest sygen
devro t ate  lyle
geest uniq
the three year performance period for the 1999 plan ended on 31 march
2002 the committee assessed the extent to which the performance
condition had been achieved and 30 per cent of the conditional awards made
under the plan vested on 26 july 2002 the balance of the conditional award
lapsed shares awarded under the plan will be 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
trustee how to vote at the end of the retention period the shares will 
be transferred to participants from the trust
all employee share schemes
an approved savingsrelated share option scheme is open to all eligible
employees in the uk and overseas executive directors’ interests in savings
related options are shown in t able 2 on page 17  directors’ remuneration report  13 northern foods plc
pension arrangements
executive directors are members of the company pension scheme
their dependants are eligible for dependants’ pensions and the payment 
of a lump sum in the event of death in service the pension arrangements
provide for a pension on retirement at age 60 of two thirds basic annual
salary after 20 or more years’ eligible service subject to inland revenue 
rules no other payments to directors are pensionable none of the current
directors’ benefits from the company scheme are restricted by current
inland revenue limits and there are no additional payments unfunded
promises or similar arrangements
additional directorships
executive directors are encouraged to hold a maximum of one non
executive directorship in a listed business in a noncompeting sector
fees for such directorships are retained by the executive director
directors’ contracts
it is the company’s policy that executive directors should have secure
agreements with an indefinite term providing for a maximum of one
year’s notice all executive directors have contracts which are subject 
to one year’s notice by either party
in the event of early termination the directors’ contracts provide for
compensation up to a maximum of basic salary company car private
medical insurance and pension for the notice period
the details of the directors’ contracts are summarised in the table below
date of contract notice period
m s christie 1 april 1996 12 months
m t gribbin 1 april 2003 12 months
h r sims 1 april 2003 12 months
a j stewart 1 april 1996 12 months
the contracts for a j stewart and m s christie have been amended from 
the previous arrangements where they benefited from a two year contract
reducing in length over the succeeding year being renewed to the full two
year period on 1 april each year
m t gribbin and h r sims who are proposed for election to the board and
a j stewart who is proposed for reelection at the annual general meeting
have service contracts which provide for a notice period of one year
p h blackburn c dyer a j hobson and o g nichionna who are also
proposed for reelection being nonexecutive directors do not have a service
contract they are appointed for a three year term at the end of which any
extension is considered and decided upon by the full board they stand for
reelection by the shareholders annually
performance graph
in accordance with the requirements of the directors’ remuneration 
report regulations 2002 the following graph shows the company’s 
five year performance measured by total shareholder return compared 
with the performance of the ftse 250 index also measured by total
shareholder return
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
total shareholder return measures share price growth with any dividends
deemed to be reinvested gross on the exdividend date the total shareholder
return shown is based on daily spot prices
60
1998 1999
northern foods
40
80
100
120
140
20
0
total shareholder return 1 april 1998 to 31 march 2003
ftse 250 index
2000 2001 2002 2003 14  directors’ remuneration report northern foods plc
directors’ remuneration
report continued
the information on pages 14 to 18 has been audited by the company’s external auditors
1 directors’ remuneration and pension entitlements 
the following table shows an analysis of the salary benefits and bonus elements of remuneration for the individual directors holding office during the year
ended 31 march 2003 t able1 pension entitlements are shown below t able 2 and interests under long term incentive arrangements are shown on pages
15 to 17 
accrued
salary annual
fees benefits bonus total total
t able 1 2003 2003 2003 2003 2002
directors’ remuneration ££££ £
executive directors
m s christie 255000 19369 25000 299369 254122
m t gribbin appointed 27 january 2003 41827 2446 4167 48440 –
h r sims appointed 27 january 2003 41827 2421 2083 46331 –
a j stewart 400000 16146 25000 441146 379735
nonexecutive directors
h a alexander resigned 31 december 2002 21744 – – 21744 25000
p h blackburn 125000 – – 125000 26346
c dyer 29244 – – 29244 25000
j m fry resigned 28 may 2002 6410 – – 6410 40000
c r haskins retired 1 february 2002 –––– 112259
a j hobson appointed 28 may 2002 33949 – – 33949 –
o g nichionna appointed 28 may 2002 25462 – – 25462 –
980463 40382 56250 1077095 862462
notes to t able 1
figures for directors are prorated to reflect date of appointment or resignation
benefits benefits include private medical insurance and company car
annual bonus no annual bonus was paid to executive directors in respect of 20012002 a bonus will be paid in june 2003 in respect of 20022003
there was nil compensation for loss of office paid to or receivable by any director nor any other payments paid to or receivable by any director in connection 
with the termination of qualifying services
transfer
accrued additional accrued value of transfer transfer increase in
pension real pension pension real increase value value transfer
at increase earned at in year less at at value less
31 march in in 31 march directors’ 31 march 31 march directors’
t able 2
2002 year inflation year 2003 contributions 2002 2003 contributions
directors’ pension entitlements £ £ £ £££ £ ££
executive directors
m s christie 87 059 8961 1480 10441 97500 61750 683072 819094 119872
m t gribbin 52736 8995 897 9892 62628 66079 356922 514922 147550
appointed 27 january 2003
h r sims 107 770 7570 1832 9402 117172 107239 1365593 1634345 266085
appointed 27 january 2003
a j stewart 155382 25109 2641 27750 183132 300755 1798398 2311452 487721
notes to t able 2
calculated as at 31 march 2003
the company provides executive directors with a pension which is payable at age 60 equal to two thirds base salary reduced where service to age 60 is less
than 20 years member contributions are 7 per cent of base salary each year death in service cover is a lump sum of four times pensionable earnings
on the death of a director or a retired director a spouse’s pension of 50 per cent would be payable
early retirement may be granted with the consent of the company and the trustees of the scheme from age 50 but benefits are reduced by 4 per cent per
annum for ages 50 up to 59 years once in payment pensions are increased in line with inflation up to a ceiling of 3 per cent per annum in respect of
pensionable service accrued to 31 march 1997 and inflation up to a ceiling of 5 per cent per annum on service accrued thereafter the trustees with the
consent of the company have discretion to apply such greater increase as they consider appropriate directors’ remuneration report  15 northern foods plc
2 long term incentive plan ltip
details of the ltip and related performance criteria are described in the directors’ remuneration report on page 12
there were no awards made during the year ended 31 march 2003 the outstanding awards were granted on 9 september 1999 and 7 september 2000
there were no other outstanding awards
the performance condition for both the 1999 and 2000 awards is linked to relative total shareholder return and growth in earnings per share and is described
in detail on page 12
1999 award
the three year performance period for the 1999 award ended on 31 march 2002 the performance condition for the 1999 award is described on page 12 
of this report the remuneration committee’s assessment of the extent to which the performance condition had been met translated to a partial vesting 
of 30 per cent of the conditional award on 26 july 2002 as detailed below
value of
value of shares shares
shares vested transferred transferred
vested shares to nominee to nominee
2002 2002 2002 2002
number £ number £
m s christie 39651 59711 26962 40602
m t gribbin appointed 27 january 2003 21171 31882 14396 21679
h r sims appointed 27 january 2003 25708 38714174 81 26325
a j stewart 60491 91094 41133 61943
147 021 221401 99972 150549
notes to the table
at the time the awards vested m t gribbin and h r sims were not directors of the company
the conditional award was made on 9 september 1999
the price of a northern foods plc share at grant was 122p
total number of shares vested 1100407
total number of shares transferred to nominee after deductions for income tax 759612
the value of the shares vested was discounted by 20 per cent for income tax purposes
total number of shares lapsed 2567 820
the price of a northern foods plc share on vesting was 1505911p
2000 award
the performance period for the 2000 awards ended on 31 march 2003 however the remuneration committee has not yet assessed whether or not and the
extent to which the performance condition has been met therefore it is not known to what extent the 2000 conditional awards will vest the table below
shows the ordinary shares conditionally awarded to the directors on 7 september 2000 as at 31 march 2003
the total number of shares comprised in the conditional awards for all management including executive directors is 4392028 this takes account of awards
which have lapsed when participants left employment
maximum
potential
award
number
7 september
2000
m s christie 157 674
m t gribbin appointed 27 january 2003 82604
h r sims appointed 27 january 2003 100465
a j stewart 240697
581440
notes to the table
at the time the awards were made m t gribbin and h r sims were not directors of the company 16  directors’ remuneration report northern foods plc
directors’ remuneration
report continued
3 directors’ share options
details of grants exercises and lapses of options to individual directors under the executive share option schemes t able 1 and the savingsrelated share
option scheme t able 2 are as follows
date balance at granted lapsed balance at
from 31 march during during 31 march
t able 1
date of option which expiry 2002
†
year year 2003
executive share options grant price p exercisable date number number number number
m s christie 9 jul 92 21040 9 jul 95 8 jul 02 a 28231 – 28231 –
15 jul 94 14560 15 jul 97 14 jul 04 a 35285 – – 35285
3 aug 95 13320 3 aug 98 2 aug 05 b 31051 – – 31051
17 jul 96 12800 17 jul 99 16 jul 06 b 100921 – – 100921
19 nov 01 15717 19 nov 0418 nov 11c 19087 – – 19087
19 nov 01 15717 19 nov 0418 nov 11d 130913 – – 130913
2 dec 02 16808 2 dec 05 1 dec 12 d – 150000 – 150000
345488 150000 28231 467257
m t gribbin 3 aug 95 13320 3 aug 98 2 aug 05 b 12702 – – 12702
appointed 27 january 2003 17 jul 96 12800 17 jul 99 16 jul 06 b 25406 – – 25406
19 nov 01 15717 19 nov 0418 nov 11c 19087 – – 19087
19 nov 01 15717 19 nov 0418 nov 11d 60913 – – 60913
2 dec 02 16808 2 dec 05 1 dec 12 d – 80000 – 80000
118108 80000 – 198108
h r sims 19 nov 01 15717 19 nov 0418 nov 11c 19087 – – 19087
appointed 27 january 2003 19 nov 01 15717 19 nov 0418 nov 11d 6 0913 – – 60913
2 dec 02 16808 2 dec 05 1 dec 12 d – 80000 – 80000
80000 80000 – 160000
a j stewart 9 jul 92 21040 9 jul 95 8 jul 02 a 42347 – 42347 –
15 jul 94 14560 15 jul 97 14 jul 04 a 70570 – – 70570
3 aug 95 13320 3 aug 98 2 aug 05 b 118558 – – 118558
17 jul 96 12800 17 jul 99 16 jul 06 b 102332 – – 102332
19 nov 01 15717 19 nov 0418 nov 11c 19087 – – 19087
19 nov 01 15717 19 nov 0418 nov 11d 230913 – – 230913
2 dec 02 16808 2 dec 05 1 dec 12 d – 250000 – 250000
583807 250000 42347 791460
notes to t able 1
a the options listed were originally granted under the company’s approved share option scheme 1984
there was no performance condition attached to this grant of options
b these options were granted under the company’s executive share option scheme 1994
these options were subject to a performance target measured by reference to a total shareholder return
the company met the performance condition by finishing above the median point against the comparator group of companies
c these options were granted under the company’s approved company share option plan 1998 these options are subject to a performance target measured
by reference to earnings per share the target requires that the real growth in earnings per share over the three year performance period is greater than
3 per cent per annum compound the performance condition allows for retesting after years 4 and 5 against the full period from grant the performance
condition is described in detail on page 12
d these options were granted under the company’s executive share option plan 1994 these options are subject to a performance target measured 
by reference to earnings per share the target requires that the real growth in earnings per share over the three year performance period is greater than 
3 per cent per annum compound the performance condition allows for retesting after years 4 and 5 against the full period from grant the performance
condition is described in detail on page 12
no director exercised an option during the financial year
at the time grants were made m t gribbin and h r sims were not directors of the company
†
balance at 31 march 2002 or at date of appointment
the midmarket price of the company’s shares was 1745p at 28 march 2002 and 1235p at 31 march 2003
during the year the market price ranged between 1120p and 187 0p directors’ remuneration report  17 northern foods plc
3 directors’ share options continued
date balance at balance at
from 31 march 31 march
t able 2
date of which expiry option 2002 2003
savingsrelated share options grant exercisable date price p number number
m s christie 14 aug 00 1 oct 05 31 mar 06 9400 10771 10771
m t gribbin appointed 27 january 2003 14 aug 00 1 oct 03 31 mar 0494 00 6183 6183
h r sims appointed 27 january 2003 14 aug 00 1 oct 05 31 mar 06 9400 10771 10771
a j stewart 14 aug 00 1 oct 05 31 mar 06 9400 10771 10771
notes to t able 2
at the time grants were made m t gribbin and h r sims were not directors of the company
the options listed were granted at 80 per cent of the prevailing midmarket share price under the company’s savingsrelated share option scheme 1996
there were no options granted exercised or lapsed during the year
share option gains
no options were exercised during the year
4 directors’ aggregate remuneration
the total amounts for directors’ remuneration and other benefits were as follows
2003 2002
£ £
emoluments 1077095 862462
gains on exercise of options – –
total 1077095 862462
aggregate emoluments described above do not include any amounts in respect of the long term incentive plan there have been no money purchase
contributions 18  directors’ remuneration report northern foods plc
directors’ remuneration
report continued
5 directors’ interests in shares
the interests of the directors in the share capital of the company at 1 april 2002 and 31 march 2003 are detailed below
ordinary shares share options ltip
number number number
description 31 march 1 april 31 march 1 april 31 march 1 april
of interest 2003 2002
† 
2003 2002
†
2003 2002
†
executive directors
m s christie beneficial 70628 43666 478028 356259 157674 289846
m t gribbin appointed 27 january 2003 beneficial 410688 410566 204291 204291 82604 82604
h r sims appointed 27 january 2003 beneficial 38895 38895 170771 170771 100465 100465
a j stewart beneficial 126707 85574 802231 594578 240697 442336
nonexecutive directors
p h blackburn beneficial 40000 15000
c dyer beneficial 10000 10000
a j hobson appointed 28 may 2002 beneficial 4000 –
o g nichionna appointed 28 may 2002 beneficial 4000 –
notes to the table
†
balance at 1 april 2002 or at date of appointment
m s christie m t gribbin h r sims and a j stewart qualified as did all employees with over four years’ service to participate in the company’s previous 
profit sharing scheme and their beneficial holdings of ordinary shares shown above include their current entitlements under this scheme
the company’s register of directors’ interests which is available for inspection in accordance with the provisions of the companies act 1985 contains full
details of directors’ shareholdings options and ltip awards
at 31 march 2003 the executive directors of northern foods plc as potential beneficiaries of the northern foods employee share ownership trust were
interested in 4212749 ordinary shares held by the trustee
by order of the board
tony hobson
chairman
remuneration committee
28 may 2003 independent auditors’ report  19 northern foods plc
independent
auditors’ report
to the members of northern foods plc
we have audited the accounts of northern foods plc for the year ended
31 march 2003 which comprise the profit and loss account the balance
sheets the cash flow statement the statement of total recognised gains 
and losses and the related notes 1 to 29 together with the reconciliation 
of net cash flow to movement in net debt the reconciliation of movements
in equity shareholders’ funds and accounting policies these accounts have
been prepared under the accounting policies set out therein we have also
audited the information in the part of the directors’ remuneration report
that is described as having been audited
this report is made solely to the company’s members as a body in
accordance with section 235 of the companies act 1985 our audit work
has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditors’ report and 
for no other purpose to the fullest extent permitted by law we do not
accept or assume responsibility to anyone other than the company and 
the company’s members as a body for our audit work for this report
or for the opinions we have formed
respective responsibilities of directors and auditors
as described in the statement of directors’ responsibilities the company’s
directors are responsible for the preparation of the annual report and
the accounts in accordance with applicable united kingdom law and
accounting standards they are also responsible for the preparation of the
other information contained in the annual report including the directors’
remuneration report our responsibility is to audit the accounts and the 
part of the directors’ remuneration report described as having been audited in
accordance with relevant united kingdom legal and regulatory requirements
and auditing standards
we report to you our opinion as to whether the accounts give a true 
and fair view and whether the accounts and the part of the directors’
remuneration report described as having been audited have been properly
prepared in accordance with the companies act 1985 we also report 
to you if in our opinion the report of the directors is not consistent 
with the accounts if the company has not kept proper accounting records
if we have not received all the information and explanations we require 
for our audit or if information specified by law regarding directors’
remuneration and transactions with the company and other members 
of the group is not disclosed
we review whether the corporate governance statement reflects the
company’s compliance with the seven provisions of the combined code
specified for our review by the listing rules of the financial services
authority and we report if it does not we are not required to consider
whether the board’s statements on internal control cover all risks and
controls or form an opinion on the effectiveness of the group’s corporate
governance procedures or its risk and control procedures
we read the report of the directors and the other information contained 
in the annual report for the above year as described in the contents section
including the unaudited part of the directors’ remuneration report and
consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the accounts
basis of audit opinion
we conducted our audit in accordance with united kingdom auditing
standards issued by the auditing practices board an audit includes
examination on a test basis of evidence relevant to the amounts and
disclosures in the accounts and the part of the directors’ remuneration
report described as having been audited it also includes an assessment 
of the significant estimates and judgements made by the directors in the
preparation of the accounts and of whether the accounting policies are
appropriate to the circumstances of the company and the group
consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information 
and explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts and the
part of the directors’ remuneration report described as having been audited
are free from material 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 accounts and the part 
of the directors’ remuneration report described as having been audited
opinion
in our opinion
–the accounts give a true and fair view of the state of affairs of the
company and the group as at 31 march 2003 and of the profit of the
group for the year then ended and
–the accounts and the part of the directors’ remuneration report described
as having been audited have been properly prepared in accordance with
the companies act 1985
deloitte  touche
chartered accountants and registered auditors
leeds
28 may 2003
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 20  consolidated profit and loss account northern foods plc
consolidated profit and loss account
for the year ended 31 march 2003
before before
goodwill goodwill goodwill goodwill
amortisation amortisation amortisation amortisation
and and and and
exceptional exceptional exceptional exceptional
items items total items items total
31 march 31 march 31 march 31 march 31 march 31 march
2003 2003 2003 2002 2002 2002
notes £m £m £m £m £m £m
group turnover
– continuing 14212 – 14212 13538 – 13538
– discontinued ––– 1054– 1054
group turnover 1 14212 – 14212 14592 – 14592
cost of sales 2 10233 319 10552 10696 215 10911
gross profit 3979 319 3660 3896 215 3681
net operating expenses 2 2823 131 2954 2645 30 267 5
operating profit before goodwill amortisation
– continuing 5 1156 426 730 1150 159 991
– discontinued ––– 101 64 37
1156 426 730 1251 223 1028
goodwill amortisation – 24 24 – 22 22
operating profit 13 1156 450 706 1251 245 1006
share of associated undertakings 4 14 07 07 0407 03
profit on disposal of businesses 5 – 540 540 –72 72
profit on ordinary activities before interest 1170 83 1253 1255 180 107 5
net interest payable 6 195 – 195 245 – 245
profit on ordinary activities before taxation 975 83 1058 1010 180 830
t axation on profit on ordinary activities 7 179 128 51 236 50 186
profit on ordinary activities after taxation 8 796 211 1007 774130 64 4
equity dividends 9 449 – 449 451 – 451
retained profit for the year 24 347 211 558 323 130 193
basic earnings per ordinary share 10 1481p 1873p 1391p 1157p
diluted earnings per ordinary share 10 1802p 1137p
dividend per ordinary share 870p 820p
average number of shares million 5376 5564
analysis of earnings before interest tax depreciation and amortisation ebitda
operating profit before goodwill amortisation
and exceptional items 1156 1251
add associate 14 04
depreciation 627 637
ebitda before exceptional items 1797 1892 consolidated balance sheet  21 northern foods plc
consolidated balance sheet
as at 31 march 2003
31 march 31 march
2003 2002
notes £m £m
fixed assets
intangible fixed assets 11 414 423
t angible fixed assets 12 6706 6959
investments 13 215 229
7335 7611
current assets
stocks 14 851 830
debtors 15 2116 1948
investments 16 106 91
cash at bank and in hand 18 335 229
3408 3098
creditors amounts falling due within one year 17 3221 3037
net current assets 187 61
total assets less current liabilities 7522 767 2
creditors amounts falling due after more than one year
convertible subordinated bonds 2008 905 903
loans and other creditors 2325 3246
17 3230 4149
provisions for liabilities and charges 22 631 641
net assets 3661 2882
capital and reserves
calledup share capital 23 1308 1398
share premium account 24 574 57 0
revaluation reserve 24 39 43
capital redemption reserve 24 191 100
other reserves 24 67 67
profit and loss account 24 1482 704
equity shareholders’ funds 3661 2882
a j stewart director
m s christie director
28 may 2003 22  consolidated cash flow statement northern foods plc
consolidated cash flow statement
for the year ended 31 march 2003
31 march 31 march
2003 2002
notes £m £m
net cash inflow from operating activities 19 1516 117 8
returns on investments and servicing of finance
interest received 04 03
interest paid on finance leases 06 11
other interest paid 184 27 0
net cash outflow from returns on investments and servicing of finance 186 27 8
t axation 94 110
capital expenditure and financial investment
purchase of tangible fixed assets 800 1190
sales of tangible fixed assets 37 36
grants received 03 20
net cash outflow from capital expenditure and financial investment 760 1134
acquisitions and disposals
cash outflow on acquisitions 27 44 17 2
cash inflow on disposals 27 1450 132
net cash inflowoutflow from acquisitions and disposals 1406 40
equity dividends paid 451 433
cash inflowoutflow before management of liquid resources and financing 1431 817
management of liquid resources
increase in current asset investments 1620 15 05
financing
decreaseincrease in shortterm borrowings 47 121
revolving credit facility 1100 800
repayment of amounts borrowed 74 06
new loans 500 –
capital element of finance lease rental payments 64 91
785 824
purchase of own shares 550 93
issue of equity share capital net of costs 05 21
net cash outflowinflow from financing 1330 752
increasedecrease in cash in the year 86 7 0 reconciliation of net cash flow to movement in net debt
statement of total recognised gains and losses  reconciliation of movements in equity shareholders’ funds  23 northern foods plc
reconciliation of net cash flow
to movement in net debt
for the year ended 31 march 2003
31 march 31 march
2003 2002
notes £m £m
increasedecrease in cash in the year 86 7 0
cash outflow from movement in liquid resources 15 05
cash outflowinflow from movement in short term borrowings 47 121
new loans 500 –
decreaseincrease in revolving credit facility 1100 800
repayment of amounts borrowed 74 06
capital element of finance lease rental payments 64 91
changes in net debt resulting from cash flows 886 889
exchange adjustments 17 02
amortisation of bond and financing costs 02 02
movement in net debt in the year 901 893
net debt at 31 march 2002 4137 3244
net debt at 31 march 2003 20 3236 4137
statement of total recognised gains and losses
for the year ended 31 march 2003
31 march 31 march
2003 2002
£m £m
profit attributable to equity shareholders 1007 644
currency translation differences 121 11
total recognised net gains for the year 1128 633
reconciliation of movements in equity
shareholders’ funds
for the year ended 31 march 2003
31 march 31 march
2003 2002
notes £m £m
profit attributable to equity shareholders 1007 644
currency translation differences 121 11
total recognised net gains for the year 1128 633
equity dividends 9 449 451
new share capital subscribed net of costs 2324 05 21
repurchase of shares 2324 555 93
goodwill previously written off included in retained profit for the year 650 26
movement in equity shareholders’ funds 779 136
opening equity shareholders’ funds 2882 2746
closing equity shareholders’ funds 3661 2882 24  company balance sheet northern foods plc
company balance sheet
as at 31 march 2003
31 march 31 march
2003 2002
notes £m £m
fixed assets
t angible fixed assets 12 2456 2627
investments 13 5328 5215
7784 7842
current assets
debtors 15 4831 5112
cash at bank and in hand 36 23
4867 5135
creditors amounts falling due within one year 17 4165 4511
net current assets 702 624
total assets less current liabilities 8486 8466
creditors amounts falling due after more than one year
convertible subordinated bonds 2008 905 903
loans and other creditors 2182 3000
17 3087 3903
provisions for liabilities and charges 22 189 17 1
net assets 5210 4392
capital and reserves
calledup share capital 23 1308 1398
share premium account 24 574 57 0
revaluation reserve 24 39 43
capital redemption reserve 24 191 100
profit and loss account 24 3098 2281
equity shareholders’ funds 5210 4392
a j stewart director
m s christie director
28 may 2003 accounting policies  25 northern foods plc
accounting
policies
basis of accounting
the accounts are prepared under the historical cost convention except 
for the revaluation of properties which is incorporated in the accounts
the accounts are prepared in accordance with applicable accounting
standards
a summary of the more important group accounting policies applied
consistently is set out below
basis of consolidation
accounts of all subsidiary undertakings are consolidated for the periods
during which they were members of the group all principal companies 
in the group account to 31 march associated undertakings are dealt 
with on an equity accounting basis
turnover
turnover consists of sales to third parties net of trade discounts and
excluding vat and sales related taxes
foreign currencies
transactions in foreign currencies are recorded at the rate of exchange at 
the date of transaction or if hedged at the forward contract rate monetary
assets and liabilities in foreign currencies are expressed in sterling at the 
rates of exchange ruling at the balance sheet date or if hedged at the
forward contract rate
results of overseas subsidiary undertakings are translated at an average 
rate for the year and the balance sheet translated at the rates ruling at the
balance sheet date all exchange differences arising on consolidation are
taken direct to reserves any other exchange differences are dealt with in
the profit and loss account
stocks
these are valued at the lower of cost and net realisable value cost includes
an addition for production overheads where appropriate
goodwill
goodwill being the excess of the consideration over the fair value of the
separable net tangible assets at the date of acquisition of newly acquired
businesses or subsidiary undertakings is recorded as an intangible fixed asset
under frs 10 ‘goodwill and intangible assets’ in the absence of indications
to the contrary purchased goodwill will be amortised over 20 years prior 
to the implementation of frs 10 the group’s policy was to write off all
goodwill directly to reserves on disposal or closure of a previously acquired
business the attributable amount of goodwill previously written off to
reserves is included in determining the profit or loss on disposal
fixed assets
fixed assets are valued at cost or valuation less any provision for
impairment with subsequent additions at cost surpluses arising from 
the revaluation of properties are taken direct to reserves net revaluation
surpluses realised in respect of properties sold are transferred from the
revaluation reserve to retained earnings
assets acquired under finance leases are capitalised as tangible fixed assets
and the outstanding instalments exclusive of interest are included in loans
interest is charged against profits in proportion to the amount of loan
outstanding
interest incurred on borrowings to finance construction of fixed assets 
is capitalised up to the date of commissioning
operating lease rentals are charged to the profit and loss account on
a straight line basis over the lease term
depreciation
freehold land is not depreciated other fixed assets are generally written 
off in equal instalments over their expected useful lives as follows
buildings 2050 years
or over the remaining life of the lease if shorter
plant and equipment 515 years
motor vehicles 410 years
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 income so as to match them with the expenditure 
to which they relate
t axation
current tax including uk corporation tax and overseas tax is provided 
at amounts expected to be paid or recovered using the tax rates and laws 
that have been enacted or substantially enacted by the balance sheet date
deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right 
to pay less tax in the future have occurred at the balance sheet date timing
differences are differences between the group’s taxable profits and its results 
as stated in the accounts that arise from the inclusion of gains and losses in
tax assessments in periods different from those in which they are recognised
in the accounts
deferred tax is not recognised when fixed assets are revalued unless by the
balance sheet date there is a binding agreement to sell the revalued assets
and the gain or loss expected to arise on sale has been recognised in the
accounts neither is deferred tax recognised when fixed assets are sold 
and it is more likely than not that the taxable gain will be rolled over being
charged to tax only if and when the replacement assets are sold 26  accounting policies northern foods plc
accounting
policies continued
deferred tax is measured at the average tax rates that are expected to apply
in the periods in which the timing differences are expected to reverse based
on tax rates and laws that have been enacted or substantially enacted by the
balance sheet date deferred tax is measured on a discounted basis to reflect
the time value of money over the period between the balance sheet date
and the dates on which it is estimated that the underlying timing differences
will reverse the discount rates used reflect the posttax yields to maturity
that can be obtained on government bonds with similar maturity dates and
currencies to those of the deferred tax liabilities
pension benefits
the costs of providing pensions and other postretirement benefits are
charged to the profit and loss account on a consistent basis over the 
service lives of employees such costs are calculated by reference 
to actuarial valuations and variations from such regular costs are spread 
over the remaining service lives of the current employees
associates
in the group accounts investments are accounted for using the equity
method the consolidated profit and loss account includes the group’s share
of associates’ profits less losses while the group’s share of net assets of the
associates is shown in the consolidated balance sheet goodwill arising on
the acquisition of associates is accounted for in accordance with the policy
set out above any unamortised balance of goodwill is included in the
carrying value of investments in associates
financial instruments
forward foreign exchange contracts and currency options are used 
to hedge foreign transactional cash flows and accordingly any gains and
losses on these contracts are recognised in the profit and loss account 
when the underlying transaction is settled
amounts payable or receivable in respect of any interest rate swap
agreements used to manage interest rate exposures are recognised 
as adjustments to interest expense over the period of the contracts notes to the accounts  27 northern foods plc
notes to the
accounts
1 turnover and segmental analysis 
operating operating
profit before profit before
goodwill goodwill
amortisation amortisation
and and net net
external external exceptional exceptional operating operating
turnover turnover items items assets assets
2003 2002 2003 2002 2003 2002
area of activity £m £m £m £m £m £m
continuing operations
convenience 10141 9402 700 645 5337 5528
grocery 4071 4136 456 505 2571 2399
14212 13538 1156 1150 7908 7927
discontinued operations
convenience – 1003 – 100 – 147
grocery – 51 – 01 – –
– 1054 – 101 – 147
total group 14212 14592 1156 1251 7908 807 4
of the goodwill amortisation which relates wholly to continuing operations £14m 2002 £13m relates to convenience and £10m 2002 £09m relates
to grocery of the pretax exceptional items £134m credit 2002 charge of £117m relates to convenience and £20m charge 2002 charge of £34m
relates to grocery the share of associated undertakings of £14m 2002 £04m and the associated goodwill amortisation of £07m 2002 £07m relates 
to convenience interest of £195m 2002 £245m cannot be allocated to a segment
2003 2002
analysis of net assets £m £m
fixed assets 7335 7611
stocks 851 830
debtors 2116 1948
creditors 2394 2315
net operating assets 7908 807 4
current taxation 97 129
deferred taxation 631 641
dividend payable 283 285
trading capital employed 6897 7019
net borrowings 3236 4137
net assets 3661 2882
operating operating
profit before profit before
goodwill goodwill
amortisation amortisation
and and
external external exceptional exceptional operating operating
turnover turnover items items assets assets
2003 2002 2003 2002 2003 2002
geographical area – by origin £m £m £m £m £m £m
united kingdom 12281 12744 958 107 6 6854 7231
other europe 1931 1848 198 17 5 1054 843
total group 14212 14592 1156 1251 7908 807 4
turnover by geographical market amounted to £13109m 2002 £13503m in the uk £1089m 2002 £1080m to other europe and £14m 
2002 £09m to other markets 28  notes to the accounts northern foods plc
notes to the
accounts continued
2 analysis of profit and loss account
before goodwill before goodwill
goodwill amortisation goodwill amortisation
amortisation and amortisation and
and exceptional exceptional and exceptional exceptional
items items total items items total
2003 2003 2003 2002 2002 2002
£m £m £m £m £m £m
cost of sales 10233 319 10552 10696 215 10911
net operating expenses
distribution costs 2008 35 2043 1899 – 1899
administrative expenses 830 96 926 760 30 790
other operating income 15 – 15 14 – 14
total net operating expenses 2823 131 2954 2645 30 267 5
the above figures for 2002 include cost of sales £782m distribution costs £187m and administrative expenses of £48m relating to discontinued operations
administrative expenses of £96m 2002 £30m includes £24m 2002 £22m goodwill amortisation the exceptional items are explained in note 5
3 operating profit
2003 2002
£m £m
this is stated after charging
depreciation including £31m 2002 £49m on finance leases 627 637
exceptional provision for impairment of fixed assets 292 31
amortisation of goodwill 24 22
auditors’ remuneration – audit services 03 03
– nonaudit services 04 04
directors’ remuneration 11 09
operating lease charges in respect of
plant and machinery 148 160
land and buildings 28 27
information concerning individual directors’ remuneration pension entitlements shareholdings and share options are shown in the directors’ remuneration
report
nonaudit services comprise £03m 2002 £03m in respect of internal audit and £01m 2002 £01m in respect of other services the internal audit
function has been carried out by deloitte  touche under a five year contract which ended in march 2003 internal audit is to be performed by a newly
formed inhouse internal audit department
4 share of associated undertakings
2003 2002
£m £m
income from interest in associated undertakings 14 04
goodwill amortisation of associated undertakings 07 07
07 03 notes to the accounts  29 northern foods plc
5 exceptional items
2003 2002
£m £m
operating exceptional items
restructuring costs 426 223
nonoperating exceptional items
profit on disposal of businesses 540 72
operating exceptional items
the restructuring costs primarily relate to the remaining eden vale business at minsterley following the sale of ski and munch bunch costs arising on the
closure of the paynes’ factory in croydon and at pork farms following the sale of its van operations and sausage business these costs include fixed asset
impairment of £292m relating to eden vale
nonoperating exceptional items
the profit on disposal of businesses relates to the sale of ski and munch bunch together with the cuddington production facility this is after deducting
£650m of goodwill previously written off to reserves
6 net interest payable
2003 2002
£m £m
bank interest receivable 04 03
interest payable on convertible subordinated bonds 61 61
interest payable on bank loans overdrafts and other loans 131 17 4
interest payable on finance leases 06 11
share of associates’ interest payable 01 02
195 245
capitalised interest amounted to £nil 2002 £09m 30  notes to the accounts northern foods plc
notes to the
accounts continued
7 t axation on profit on ordinary activities
2003 2002
£m £m
united kingdom taxation
corporation tax at 30 2002 30 85 123
deferred taxation 77 88
162 211
overseas taxation
current taxation 14 19
deferred taxation 03 06
17 25
179 236
exceptional items
current taxation 35 56
deferred taxation 93 06
128 50
t axation on profit on ordinary activities 51 186
united kingdom corporation tax includes an amount of £04m 2002 £03m in respect of associated undertakings deferred taxation relates to origination
and reversal of timing differences
the corporation tax charge for the year is lower than the standard uk corporation tax rate of 30 per cent the differences are explained below
2003 2002
£m £m
profit on ordinary activities before taxation 1058 830
t axation on profit on ordinary activities at the standard uk corporation 
tax rate of 30 2002 30 317 249
factors affecting the charge
expenses not deductible for tax purposes 03 02
capital allowances in excess of depreciation 38 51
short term timing differences – pension prepayment 42 53
lower tax rates on overseas earnings 45 33
adjustments to tax charge in respect of previous periods 15 17
goodwill not deductible for tax purposes 09 09
net exceptional credits not taxable 69 11
double tax relief on overseas dividends 20 –
t ax relief on loss on exchange 15 –
t ax relief on overseas investments 14 –
other 07 09
current taxation charge for year 64 86
factors affecting future current tax charges are as follows
the group expects to continue to claim capital allowances in excess of depreciation in future years at similar levels based on current investment plans
the group’s overseas tax rates are lower than those in the uk due primarily to the profits earned by the irish subsidiaries and no significant changes are
expected in the irish tax rates the tax relief on loss on exchange is not expected to continue in the future notes to the accounts  31 northern foods plc
8 profit for the financial year 
of the profit for the financial year a profit of £1817m 2002 loss of £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 profit and loss account
9 equity dividends
2003 2002
£m £m
ordinary – interim paid 325p per share 2002 305p per share 167 166
– final proposed 545p per share 2002 515p per share 282 285
449 451
10 earnings per ordinary share
2003 2002
£m £m
profit before tax 1058 830
add back goodwill amortisation 31 29
operating exceptional items 426 223
profit on disposal of businesses 540 7 2
975 1010
less taxation excluding tax relating to goodwill amortisation and exceptional items 179 236
earnings used for calculation of earnings per share before goodwill amortisation and 
exceptional items 796 77 4
earnings used for basic earnings per share 1007 644
interest saved on conversion of debt 43 43
earnings used for diluted earnings per share 1050 687
2003 2002
no of no of
shares shares
m m
weighted average number of shares in issue 5422 5619
less shares owned in employee share ownership trust 46 55
weighted average number of shares 5376 5564
add back dilutive effect of convertible bond 406 406
dilutive effect of share save 33 37
dilutive effect of share option 03 03
dilutive effect of ltip 09 31
weighted average number of shares used for calculation of diluted earnings per share 5827 6041
2003 2002
pence pence
basic earnings per share – after goodwill amortisation and exceptional items 1873 1157
adjusted earnings per share – before goodwill amortisation and exceptional items 1481 1391
diluted basic earnings per share 1802 1137
the adjusted earnings per share figure has been calculated to provide a clearer understanding of the trading performance of the group 32  notes to the accounts northern foods plc
notes to the
accounts continued
11 intangible fixed assets
goodwill
£m
cost
at 31 march 2002 472
exchange differences 16
at 31 march 2003 488
amortisation
at 31 march 2002 49
provided during the year 24
exchange differences 01
at 31 march 2003 74
net book amounts
at 31 march 2003 414
at 31 march 2002 423
12 t angible fixed assets
plant
freehold long short fixtures 
property leases leases vehicles total
group £m £m £m £m £m
cost or valuation
at 31 march 2002 2795 5744 07 9193 12969
additions 86 01 02 705 794
disposals 59 02 – 461 522
reclassifications 10 01 – 09 –
disposal of businesses 7 4 – – 412 486
exchange differences 32 04– 112 14 8
at 31 march 2003 2790 576 409 9128 12903
analysis
valuation – 1978 67 56 – – 123
cost 2723 520 409 9128 12780
2790 57 6 409 9128 12903
depreciation
at 31 march 2002 656 148 45 5161 6010
charge for the year 53 10 14550 627
exceptional provision for impairment – – – 292 292
disposals 51 – – 433 484
reclassifications – 01 – 01 –
disposal of businesses 22 – – 283 305
exchange differences 03 01 – 53 57
at 31 march 2003 639 158 59 5341 6197
net book amounts
at 31 march 2003 2151 418 350 3787 6706
at 31 march 2002 2139 426 362 4032 6959
at 31 march 2003 plant fixtures and vehicles included capitalised leases at a cost of £487m and depreciation of £348m 2002 £648m and £430m
at 31 march 2003 the original cost of the group’s tangible fixed assets was £12831m and the depreciation thereon £6165m 2002 £12893m and £597 7m notes to the accounts  33 northern foods plc
12 t angible fixed assets continued
plant 
freehold long short fixtures 
property leases leases vehicles total
company £m £m £m £m £m
cost or valuation
at 31 march 2002 23044 51 382 253 3390
additions 74– – 104178
disposals 64 – – – 64
disposal of businesses 7 4 – – – 7 4
group transfers 30 02 – 217 185
at 31 march 2003 2270 453 382 140 3245
analysis
valuation – 1978 67 56 – – 123
cost 2203 397 382 140 3122
227 0 453 382 140 3245
depreciation
at 31 march 2002 469 118 45 131 763
charge for the year 43 09 14 03 69
disposals 21 – – – 21
disposal of businesses 22 – – – 22
at 31 march 2003 469 127 59 134 789
net book amounts
at 31 march 2003 1801 326 323 06 2456
at 31 march 2002 1835 333 337 122 2627
at 31 march 2003 the original cost of the company’s tangible fixed assets was £317 4m and the depreciation thereon £757m 2002 £3314m and £730m
13 fixed asset investments
employee
share share in
ownership associated
trust undertakings total
group £m £m £m
at 31 march 2002 7 6 153 229
share of profit retained by associated undertakings – 09 09
vesting of own shares 16 – 16
goodwill amortisation – 07 07
at 31 march 2003 60 155 215
the employee share ownership trust esot holds shares which are primarily used to satisfy awards made under the northern foods long term incentive
plan at 31 march 2003 the esot held 4212749 2002 5313156 shares with a market value of £52m 2002 £93m the esot has waived its rights to
dividends on these shares the profit and loss account charge in relation to the scheme amounts to £nil further details of the esot are summarised in the
directors’ remuneration report
the group’s share of the postacquisition profit retained by associated undertakings including goodwill amortisation at 31 march 2003 is £nil 2002 loss 
of £02m goodwill relating to associates net of amortisation amounts to £107m 34  notes to the accounts northern foods plc
notes to the
accounts continued
13 fixed asset investments continued
2003 2002
company £m £m
subsidiary undertakings
shares at cost
at 31 march 2002 5462 5496
cost of shares acquired 1400 45
cost of shares disposed 812 7 9
at 31 march 2003 6050 5462
long term loans due from subsidiary undertakings 1203 1450
long term loans due to subsidiary undertakings 2146 1934
5107 497 8
investment in associated undertakings
at 31 march 2002 and 31 march 2003 161 161
own shares at cost 60 76
total fixed asset investments 5328 5215
principal operating subsidiary undertakings at 31 march 2003
convenience foods limited
f w farnsworth limited
fletchers bakeries limited
northern foods grocery group limited
nft distribution limited
batchelors limited ireland
green isle food group limited ireland
cavaghan  gray group limited
cavaghan  gray limited
directly owned by northern foods plc
the above subsidiary undertakings are wholly owned ordinary shares operate and are incorporated in the united kingdom except where otherwise stated
all are engaged in food manufacture and distribution the company owns 40 per cent of the ordinary share capital of solway foods holdings limited a food
manufacturer which is incorporated in the united kingdom
14 stocks 
group group
2003 2002
£m £m
raw materials 410 440
work in progress 36 29
finished goods 405 361
851 830 notes to the accounts  35 northern foods plc
15 debtors
group group company company
2003 2002 2003 2002
£m £m £m £m
amounts falling due within one year
trade debtors 1448 1402 – –
corporation tax – – 134 135
other debtors 108 126 26 20
pension prepayment 474 336 474 332
other prepayments 86 84 20 23
amounts due from subsidiary undertakings – – 4177 4602
2116 1948 4831 5112
16 current asset investments
group group
2003 2002
£m £m
at 31 march 2002 91 86
purchased during the year 308 141
sold during the year 293 136
at 31 march 2003 106 91
analysis of investments
listed investments 75 66
other investments 31 25
106 91
the listed investments all of which are quoted on recognised stock exchanges are shown at the lower of cost and market value there is no material
difference between cost and market value
17 creditors
group group company company
2003 2002 2003 2002
£m £m £m £m
amounts falling due within one year
bank overdrafts 04 01 128 131
bank loans 301 329 295 322
loan notes note 21 62 81 03 05
other loans note 21 150 – 150 –
finance leases 67 64 – –
total borrowings falling due within one year note 18 584 475 576 458
trade creditors 1233 1156 49 20
other creditors including social security 410 339 82 96
accruals and deferred income 614 653 51 47
corporation tax 97 129 – –
proposed dividend 283 285 283 285
amounts due to subsidiary undertakings – – 3124 3605
3221 3037 4165 4511
amounts falling due after more than one year
bank loans 06 12 – –
revolving credit facility 2006 note 21 1900 3000 1900 3000
convertible subordinated bonds 2008 note 21 905 903 905 903
other loans note 21 282 – 282 –
finance leases – 67 – –
total borrowings falling due after more than one year note 18 3093 3982 3087 3903
accruals and deferred income 137 167 – –
3230 4149 3087 3903
obligations under finance leases of £67m 2002 £131m are secured on the assets to which they relate 36  notes to the accounts northern foods plc
notes to the
accounts continued
18 analysis of borrowings
group group company company
2003 2002 2003 2002
total borrowings £m £m £m £m
repayable within one year
bank overdrafts 04 01 128 131
bank loans 301 329 295 322
loan notes note 21 62 81 03 05
other loans note 21 150 – 150 –
finance leases 67 64 – –
amounts falling due within one year 584 475 576 458
repayable after more than one year
bank loans 06 12 – –
revolving credit facility 2006 note 21 1900 3000 1900 3000
convertible subordinated bonds 2008 note 21 905 903 905 903
other loans note 21 282 – 282 –
finance leases – 67 – –
amounts falling due after more than one year 3093 3982 3087 3903
total borrowings 3677 4457 3663 4361
group group 
2003 2002
£m £m
borrowings falling due within one year 584 475
borrowings falling due after more than one year 3093 3982
total group borrowings 3677 4457
less cash at bank and in hand 335 229
current asset investments note 16 106 91
net borrowings 3236 4137
liquidity risk
the group operates a policy of maintaining certainty of funding over the medium term by a combination of committed floating and fixed rate facilities
supplemented by uncommitted facilities the policy is to ensure that forecast net borrowings plus a reasonable operating headroom are covered by
committed facilities which mature at least 12 months after the year end at the balance sheet date £2600m 2002 £1500m remained undrawn on 
the revolving credit facility
maturity of financial liabilities
the maturity profile of the group’s financial liabilities at 31 march 2003 was as follows
group group company company
2003 2002 2003 2002
£m £m £m £m
in one year or less or on demand 584 475 576 458
in more than one year but not more than two years 166 79 160 –
in more than two years but not more than five years 2022 3000 2022 3000
in more than five years 905 903 905 903
total borrowings 3677 4457 3663 4361
further details of the group’s facilities are set out in note 21
interest rate risk
the group manages its exposure to interest rate fluctuations on its borrowings by operating with a mix of fixed and floating rate borrowings the objective
for the mix of fixed and floating rate is to operate with fixed rate borrowings within a range of 20 per cent to 50 per cent of total borrowings over the
medium term although the group may operate outside of that range during the year
the group’s fixed rate debt is based principally on the £9128m 675 per cent convertible subordinated bonds 2008 detailed in note 21 the group does 
not use derivatives for interest rate management notes to the accounts  37 northern foods plc
18 analysis of borrowings continued
interest rate risk profile of financial assets
group group
2003 2002
£m £m
assets held as part of the financing arrangements of the group
cash at bank and in hand 276 126
foreign currency deposits
euro 55 102
other currency 04 01
current asset investments 106 91
441 320
the euro deposits comprise floating rate deposits at 25 per cent 2002 33 per cent
current asset investments comprise fixed rate sterling deposits and securities of £69m 2002 £29m with a weighted average interest rate of 67 per cent
2002 65 per cent and a weighted average period to maturity of 27 years 2002 11 years the remaining current asset investments comprise overseas
fixed rate deposits of £12m with a weighted average interest rate of 49 per cent and a weighted average period to maturity of 40 years and sterling
securities of £25m which do not bear any interest
interest rate risk profile of financial liabilities
floating rate fixed rate floating rate fixed rate
financial financial group financial financial group
liabilities liabilities total liabilities liabilities total
2003 2003 2003 2002 2002 2002
currency £m £m £m £m £m £m
sterling 2705 972 3677 3347 1110 4457
the fixed rate financial liabilities comprise the convertible subordinated bonds and finance leases
fixed rate liabilities
weighted weighted
weighted average weighted average
average period for average period for
interest which rate interest which rate
rate is fixed rate is fixed
2003 2003 2002 2002
currency  years  years
sterling 67 50 67 51
the floating rate liabilities comprise amounts drawn on the revolving credit facility bank loans loan notes and other loans bearing interest by reference to 
market rates
fair values of financial assets and financial liabilities
the book value of the convertible subordinated bonds was £905m 2002 £903m and the fair value was £914m 2002 £903m based on the quoted
market price at the balance sheet date the fair value of forward foreign exchange contracts by reference to market exchange rates at the balance sheet date
was a cost of £17m 2002 £nil the book value of other financial assets and liabilities approximates to fair value due to their short maturities
currency exposure
the group operates primarily in the uk with only approximately 136 per cent of sales arising from companies operating in currencies other than sterling
principally the euro giving rise to an exposure to the euro group policy is to hedge against transactional risk by spot and forward foreign exchange contracts
but not to hedge against translation the average and closing rates used in the accounts to translate euro to sterling were 11559  £1 and 114581  £1
respectively 2002 1162  £1 and 116323  £1 38  notes to the accounts northern foods plc
notes to the
accounts continued
18 analysis of borrowings continued
the monetary assets and liabilities of the group that are not denominated in the functional currency of the relevant operating companies involved were 
as follows
net foreign currency assetsliabilities
other other
sterling currencies total sterling currencies total
2003 2003 2003 2002 2002 2002
functional currency of group operating companies £m £m £m £m £m £m
sterling – 01 01 –01 01
euro 188 – 188 42 04 38
188 01 187 42 03 39
19 reconciliation of operating profit to net cash inflow from operating activities
2003 2002
£m £m
operating profit per profit and loss account 706 1006
adjust for noncash items
depreciation 627 637
exceptional provision for impairment of fixed assets 292 31
loss on sale of tangible fixed assets – 02
amortisation of goodwill 24 22
amortisation of bond and financing costs 02 02
government grants 16 15
929 67 9
operating working capital movements
stock increase 25 53
debtors increase 141 222
creditors increasedecrease 47 232
119 507
net cash inflow from operating activities 1516 117 8
20 analysis of net debt
at 31 march cash other non exchange at 31 march
2002 flow cash changes movement 2003
£m £m £m £m £m
cash 229 88 – 18 335
overdrafts 01 02 – 01 04
net cash 228 86 – 17 331
debt due after one year 3915 82402 – 3093
debt due within one year 410 103 – – 513
finance leases 131 64– – 67
current asset investments 91 15 – – 106
total net debt 4137 886 02 17 3236 notes to the accounts  39 northern foods plc
21 financing
convertible subordinated bonds 2008
the bonds are in issue in registered form in amounts of £1000 or multiples thereof or in bearer form in denominations of £1000 and £50000 and unless
previously redeemed purchased or converted will be redeemed at their principal amount by 8 august 2008 interest is payable at the rate of 675 per cent
per annum semiannually on 8 february and 8 august in each year the bonds were originally convertible into ordinary shares of the company at 326p per
ordinary share following the demerger of the dairy business in march 1998 the conversion price was adjusted to 225p in accordance with the trust deed
the company has had the option since 31 august 1998 to redeem the bonds in multiples of £10m at their principal price
revolving credit facility 2006
the five year syndicated revolving credit facility for £450m was entered into in september 2001 at 31 march 2003 borrowings under this facility were
£1900m these borrowings are repayable in periods of up to one year but are capable of being immediately refinanced as part of the committed revolving
credit facility
loan notes
loan notes due within one year include £59m which bear interest by reference to london interbank market rates these can be redeemed in amounts of
£100 or multiples thereof at their nominal principal amount semiannually on 30 june and 31 december each year loan notes not previously redeemed will
be redeemed at their nominal amount by 31 december 2003
other loan notes due within one year include £03m which bear interest at 1 per cent below the base rate they can be redeemed in amounts of £10000 
or multiples thereof at their nominal principal amount semiannually on 30 june and 31 december each year loan notes not previously redeemed will be
redeemed at their nominal amount by 30 june 2005
other loans
other loans of £432m arise from the issue of preference shares by a subsidiary to a third party undertaking this would normally be disclosed as a minority
interest but in accordance with paragraph 49 of frs 4 has been disclosed as a liability interest is payable on the loan by reference to libor
other facilities and interest rates
at 31 march 2003 the group had in place other uncommitted facilities with a number of banks which totalled £800m 2002 £1040m the group’s
borrowings under the revolving credit and uncommitted facilities bear interest at rates which generally fluctuate in line with market rates
22 provisions for liabilities and charges
deferred 
taxation
group £m
at 31 march 2002 641
credited to profit and loss account 13
other movements 03
at 31 march 2003 631
company
at 31 march 2002 17 1
charged to profit and loss account 18
at 31 march 2003 189
group group company company
2003 2002 2003 2002
deferred tax liabilities are analysed as follows £m £m £m £m
amounts provided in respect of
accelerated capital allowances 613 693 131 162
other timing differences 135 93 135 93
undiscounted provision for deferred tax 748 786 266 255
discount 117 145 77 84
discounted provision for deferred tax 631 641 189 17 1 40  notes to the accounts northern foods plc
notes to the
accounts continued
23 share capital
2003 2003 2002 2002
number amount number amount
million £m million £m
authorised ordinary shares of 25p each 7600 1900 7600 1900
allotted called up and fully paid ordinary shares of 25p each
at 31 march 2002 5591 1398 5637 1409
shares issued for cash under company share option schemes 05 01 16 04
repurchase of shares 364 91 62 15
at 31 march 2003 5232 1308 5591 1398
during the year 364m ordinary shares of 25p each were purchased by the group in the market for cancellation at a cost of £555m including stamp duty
commission and levies
details of movements in share capital are shown in the report of the directors at 31 march 2003 options were outstanding on 19819809 ordinary shares
exercisable at various dates to december 2012 at subscription prices ranging from 940p to 2104p
24 reserves
capital profit
share revaluation redemption other and loss 
premium reserve reserve reserves account
group £m £m £m £m £m
at 31 march 2002 57 0 43 100 67 704
retained profit for the year – – – – 558
premiums on shares issued under company share option schemes net of costs 04– – – –
repurchase of shares – – 91 – 555
goodwill previously written off included in retained profit for the year – – – – 650
other movements – 04 – – 04
exchange differences – – – – 121
at 31 march 2003 574 39 191 67 1482
at 31 march 2003 prior to the implementation of frs 10 the accumulated amount of goodwill written off against consolidated reserves was £237 2m
2002 £3022m
capital profit
share revaluation redemption and loss
premium reserve reserve account
company £m £m £m £m
at 31 march 2002 57 0 43 100 2281
retained profit for the year – – – 1368
premiums on shares issued under company share option schemes net of costs 04– – –
repurchase of shares – – 91 555
other movements – 04 – 04
at 31 march 2003 574 39 191 3098 notes to the accounts  41 northern foods plc
25 pensions 
pensions
the pensions costs for the uk principally relate to the northern foods pension scheme ‘the scheme’ which is a defined benefit scheme providing 
members with benefits based on pay and service the assets of the scheme are held in trustee administered funds separate from the finances of the group
ssap 24
the pension cost relating to the scheme is assessed in accordance with the advice of an independent qualified actuary hewitt bacon  woodrow using 
the projected unit method for the purposes of determining pension costs the most significant assumptions adopted were as follows
rate of increase in pensionable earnings 39 per cent per annum
rate of increase to pensions in payment 28 per cent per annum
rate of investment return 7 3 per cent per annum
the most recent actuarial valuation of the scheme was carried out as at 31 march 2002 using a market based approach the market value of the scheme’s
assets was £4499m which represented 95 per cent of the value of accrued benefits allowing for assumed future increases in earnings on the basis of the
assumptions adopted for that valuation
as required by ssap 24 the figures included in the accounts in respect of the group’s pension schemes are based on actuarial valuations carried out at
31 march 2002 this does not take into account any impact of the fall in general stock markets since that date any such impact will be reflected in the next
triennial valuation based upon which subsequent pension costs will be determined until adoption of frs 17 
the contribution rate for the year ended 31 march 2003 was 127 per cent of pensionable earnings and the agreed contribution rate for the next 2 years 
is 127 per cent of pensionable earnings
frs 17
additional disclosure regarding the group’s defined benefit schemes are required under the transitional provisions of frs 17 
the actuarial valuation described above has been updated at 31 march 2003 by an independent qualified actuary hewitt bacon  woodrow using revised
assumptions that are consistent with the requirements of frs 17  investments have been valued for this purpose at fair value
for the purposes of determining the scheme liabilities under frs 17 the most significant assumptions adopted were as follows
2003 2002
 
rate of increase of salaries 36 39
rate of increase to pensions in payment 25 28
rate of increase to deferred pensions 30 30
discount rate 59 63
inflation assumption 26 29
the fair value of the assets in the scheme together with those of the overseas schemes the present value of the liabilities and the expected rate of return at
31 march 2003 and 31 march 2002 were as follows
2003 2002
long term long term
expected rate expected rate
of return 2003 of return 2002
£m £m
equities 83 2647 83 3706
bonds 50 1037 60 1000
other 40 290 50 31
total fair value of assets 3974 4737
present value of scheme liabilities 6009 5409
deficit in scheme 2035 67 2
related deferred tax asset 600 202
net pension deficit 1435 47 0 42  notes to the accounts northern foods plc
notes to the
accounts continued
25 pensions continued
if the group had adopted frs 17 early the group’s profit and loss account reserve at 31 march 2003 and 31 march 2002 would have been restated as follows
2003 2002
£m £m
group profit and loss account reserve excluding pension deficit 1482 704
pension deficit 1435 47 0
ssap 24 prepayment 474 336
deferred tax on ssap 24 prepayment 141 100
group profit and loss account reserve 286 02
the amounts charged to operating profit under frs 17 would have been as follows
2003
£m
current service cost 204
net operating charge 204
the amounts credited to net finance income under frs 17 would have been as follows
2003
£m
expected return on pension scheme assets 373
interest on pension scheme liabilities 343
net finance income 30
the amounts included within the group’s statement of total recognised gains and losses under frs 17 would have been as follows
2003
£m
difference between actual and expected return on scheme assets 1279
experience gains and losses arising on the scheme liabilities 70
effects of changes in assumptions underlying the present value of the scheme liabilities 230
total actuarial gains and losses recognised in group’s statement of total recognised gains and losses 1439
deferred tax movement 423
total actuarial gains and losses recognised in group’s statement of total recognised gains and losses net of deferred tax 1016
the movement in deficit during the year under frs 17 would have been as follows
2003
£m
deficit in scheme at the beginning of the year 672
movement in year
current service cost 204
contributions 254
other finance income 30
exchange adjustments 04
actuarial loss 1439
deficit in scheme at the end of the year 2035
related deferred tax asset 600
net pension deficit at the end of the year 1435 notes to the accounts  43 northern foods plc
25 pensions continued
the experience gains and losses under frs 17 would have been as follows
2003
difference between the expected and actual return on scheme assets
amount £m 1279
percentage of scheme assets  322
experience gains and losses on scheme liabilities
amount £m 70
percentage of the present value of scheme liabilities  12
total actuarial gain or loss recognised in the statement of total recognised gains and losses
amount £m 1439
percentage of the present value of scheme liabilities  239
26 financial commitments
capital expenditure authorised by the directors and to which the group and the company are contracted amounts to £10m 2002 £66m for the group and
£nil 2002 £nil for the company
group group company company
2003 2002 2003 2002
annual commitments existing under noncancellable operating leases £m £m £m £m
leases relating to land and buildings which expire
within one year – 01 – –
in the second to fifth years inclusive 15 08 – –
over five years 12 15 – –
27 24 – –
leases relating to plant and machinery which expire
within one year 21 28 02 03
in the second to fifth years inclusive 80 91 06 04
over five years 36 11 – –
137 130 08 07
27 acquisitions and disposals
acquisitions
the group paid a further deferred consideration of £44m during the year in connection with the acquisition of the entire share capital of lacemont limited 
in january 2001
disposals
on 2 april 2002 the group disposed of the ski and munch bunch brands together with the yogurt facility at cuddington to nestlé uk limited for a cash
consideration of £145m this resulted in a profit on sale of £54m after charging goodwill previously written off to reserves of £65m 44  notes to the accounts northern foods plc
notes to the
accounts continued
28 contingent liabilities
contingent liabilities existed at 31 march 2003 in relation to guarantees given by the parent company on behalf of subsidiary undertakings together with
contingencies in the normal course of the group’s business the parent company has guaranteed the overdrafts of subsidiary undertakings amounting to £nil
various group undertakings are also parties to litigation none of which is considered material
29 employees
2003 2002
group number number
average number employed during the year
production 18504 19102
distribution 1742 1888
administration 1765 1941
22011 22931
2003 2002
£m £m
remuneration
wages and salaries 3714 3788
social security costs 265 285
other pension costs 119 120
4098 4193 five year record  45 northern foods plc
five year
record
profit and loss account 1999 2000 2001 2002 2003
turnover continuing £m 11456 12031 12561 13538 14212
discontinued £m 1403 1360 1218 1054 –
total £m 12859 13391 1377 9 14592 14212
operating profitcontinuing £m 9741032 1089 1150 1156
discontinued £m 124 142 140 101 –
total £m 1098 11741229 1251 1156
 of turnover  85 88 89 86 81
share of associated undertakings £m 19 02 1404 14
net interest payable £m 17 2 17 4 202 245 195
profit before taxation £m 945 1002 1041 1010 975
profit after taxation £m 699 748 792 77 4 796
exceptional items after taxation £m – 213 55 101 242
goodwill amortisation £m – 13 21 29 31
profit after taxation frs 3 £m 699 522 826 644 1007
earnings per share
before goodwill amortisation and exceptional items p 118 126 137 139 148
after goodwill amortisation and exceptional items p 118 88 143 116 187
dividend per share p 68 7 3 7 7 82 87
dividend cover times 17 18 18 17 18
asset analysis
operating assets £m 5544 637 2 6952 807 4 7908
other liabilities and provisions £m 1057 954 962 1055 1011
trading capital employed £m 4487 5418 5990 7019 6897
accumulated goodwill written off £m 3048 3061 3082 3085 2466
total invested capital £m 7535 847 9 907 2 10104 9363
net borrowings £m 1760 2769 3244 4137 3236
total equity funds invested £m 577 5 5710 5828 5967 6127
equity shareholders’ funds £m 2727 2649 2746 2882 3661
net gearing  645 1045 1181 1435 884
interest cover times 65 68 62 51 60
capital expenditure £m 1105 880 783 1236 794
shareholder value analysis
profit before interest £m 1117 117 6 1243 1255 1170
attributable taxation £m 299 306 310 309 238
normalised operating profit after tax nopat £m 818 87 0 933 946 932
return on average invested capital roic  117 109 106 99 100
†
weighted average cost of capital wacc  80 7 6 7 3 7 3 63
margin over cost of funds  37 33 33 26 37
post tax return on average equity funds invested  125 130 137 131 132
stated before goodwill amortisation and exceptional items
†
stated after reducing the 2002 invested capital by £87m to reflect the sale of the ski and munch bunch brands and associated assets on 2 april 2002
the years ending 1999 to 2001 have been restated to comply with frs 19 ‘deferred tax’ 46  investor information northern foods plc
investor
information
financial calendar 2003
final results announcement 28 may
annual report and annual review issued 13 june
latest date for receipt of forms of proxy 15 july
annual general meeting 17 july
shares quoted exdividend 23 july
record date for final dividend 25 july
halfyearly interest payment on convertible subordinated bonds 8 august
final dividend payment on ordinary shares 29 august
interim results announcement november 
2004
halfyearly interest payment on convertible subordinated bonds 8 feb
interim dividend payment on ordinary shares march
financial year end 31 march shareholder analysis  47 northern foods plc
shareholder analysis
at 19 may 2003
holders shares held
 of number  of
number holders ’000s capital
by classification
individuals 41482 9045 64987 1242
banks and nominees 3951 862 430930 8236
corporate shareholders 312 068 16283 311
investment companies 26 006 320 006
insurance companies 69 015 7414 142
pension funds 20 004 3316 063
45860 10000 523250 10000
by size of holding
1100 6585 1436 310 006
101500 15605 3403 4063 078
5011000 7323 1597 5488 105
10012000 6043 1318 9074 173
20015000 6339 1382 20816 398
500150000 3409 743 40161 767
50001100000 191 042 13546 259
100001 and over 365 079 429792 8214
45860 10000 523250 10000 48  company information northern foods plc
company
information
registered office
beverley house
st stephen’s square
hull hu1 3xg
telephone 01482 325432
facsimile 01482 226136
website wwwnorthernfoodscouk
registered in england and wales
no 471864
auditors
deloitte  touche
merchant bankers
n m rothschild  sons limited
stockbrokers
hoare govett limited
cazenove  co ltd
registrar to the ordinary shareholders
computershare investor services plc
po box 435
owen house
8 bankhead crossway north
edinburgh eh11 4br
telephone 0870 702 0134
email webqueriescomputersharecouk
website wwwcomputersharecom
principal paying and conversion agent and
registrar to the convertible bond holders
j p morgan chase bank
1 chaseside
bournemouth
dorset bh7 7da our business
northern foods is a leading uk food producerwe operate
in eight core product areas which benefit from long term
demographic and lifestyle trends favouring high quality 
foods that are convenient to eat
our focus is on serving the leading retailers and we 
have strong market positions in the supply of high 
quality chilled foods under their retail nameswe also 
have successful brands in biscuitsfrozen food and 
savoury products
designed and produced by
fitchlondon
front cover photography 
nick sinclair
printed in england by
the colourhouse
contents
01 financial highlights
02 chairman’s statement
03 chief executive’s statement 
04 financial review
06 report of the directors
10 directors’ remuneration report
19 independent auditors’ report
20 consolidated profit and loss account
21 consolidated balance sheet
22 consolidated cash flow statement
23 reconciliation of net cash flow to movement in net debt
statement of total recognised gains and losses
reconciliation of movements in equity shareholders’ funds
24 company balance sheet
25 accounting policies
27 notes to the accounts
45 five year record
46 investor information
47 shareholder analysis
48 company information northern foods plc
annual report 2003
wwwnorthernfoodscouk
northern foods plc annual report 2003 northern foods plc
annual review 2003
wwwnorthernfoodscouk designed and produced by
fitchlondon
principal photography 
directors – bill robinson
food products – jean cazals
peoplemanufacturing – nick sinclair
printed in england by
the colourhouse
company
information
registered office
beverley house
st stephen’s square
hull hu1 3xg
telephone 01482 325432
facsimile 01482 226136
website wwwnorthernfoodscouk
registered in england and wales
no 471864
auditors
deloitte  touche
merchant bankers
n m rothschild  sons limited
stockbrokers
hoare govett limited
cazenove  co ltd
registrar to the ordinary shareholders
computershare investor services plc
po box 435
owen house
8 bankhead crossway north
edinburgh eh11 4br
telephone 0870 702 0134
email webqueriescomputersharecouk
website wwwcomputersharecom
principal paying and conversion agent 
and registrar to the convertible bond holders
j p morgan chase bank
1 chaseside
bournemouth
dorset bh7 7da
annual
report
the northern foods annual review 2003 aims to give shareholders 
a clear and concise overview of the group’s business and prospects
for this reason the review contains a summary financial statement 
rather than the full accounts
the annual review does not contain sufficient information to allow 
for as full an understanding of the results and state of affairs of the 
group as would be provided by the northern foods annual report 2003
if you would like to receive a copy of the annual report please contact
public relations department
northern foods plc
beverley house
st stephen’s square
hull hu1 3xg
telephone 01482 325432
our business
northern foods is a leading uk food producerwe operate
in eight core product areas which benefit from long term
demographic and lifestyle trends favouring high quality 
foods that are convenient to eat
our focus is on serving the leading retailers and we 
have strong market positions in the supply of high 
quality chilled foods under their retail nameswe also 
have successful brands in biscuits frozen food and 
savoury products
contents
01 financial highlights
02 our core product areas
04 chairman’s statement
06 chief executive’s statement 
08 operating review
18 recognising our social responsibilities
21 financial review
24 board of directors
25 summary report of the directors
independent auditors’ statement
26 summary directors’ remuneration report
31 consolidated profit and loss account
32 consolidated balance sheet
33 consolidated cash flow statement
analysis of activities
34 five year record
35 financial calendar
investor information
36 principal operations
company information
annual report  financial highlights  01 northern foods plc
financial highlights
2003
 continuing sales up 50 to £14212m
driven by convenience up 7 9
 continuing operating profit

up £06m to £1156m
– disappointing performance in biscuits 
offsets good progress elsewhere
– convenience up 85
– grocery down 97
 earnings per share

up 65 to 1481p
benefits from lower tax charge and share 
buyback programme
 dividend increased 61 to 87p per share
– dividend cover

increased
 profit on sale of ski and munch bunch brands 
less operational costs lifts frs 3 pretax profit 
by 27 5 and earnings per share by 619
 net debt reduced by £901m
– £1001m returned to shareholders through 
dividends and share buybacks
– disposal proceeds £145m
– strong operational cash generation
 biscuit stabilisation and recovery plans in place
– accelerated new product development programme
– cost reduction initiatives
– price increases successfully implemented
 further groupwide initiatives to reduce cost base

figures quoted before goodwill amortisation and exceptional items 02  our core product areas northern foods plc
our core
product
areas
1 recipe dishes
the uk market leader in high quality
chilled recipe dishes developing 
and manufacturing products which
include a wide range of italian pasta
meals and snacks indian chinese and
other international dishes together
with traditional british specialities
2 chilled savoury products
manufacturing savoury products
under the pork farms bowyers and
hollands brands and major retailers’
labels products include hot and
coldeating pies pasties sausage
rolls quiches flans and scotch eggs
3 speciality bread
a leading manufacturer of fresh 
and frozen speciality bread products
for the retail and foodservice sector
principal product lines include rolls
baps muffins burger buns scones
doughnuts tea cakes fruited bread
croissants baguettes panettone and
other speciality loaves
13
24 our core product areas  03 northern foods plc
4 breadbased snacks
manufacturing fresh chilled
sandwiches filled rolls and pizzas
under the labels of major retailers
5 cakes and puddings
the uk’s leading supplier of own
label cakes to the major retailers and
the country’s largest manufacturer 
of both branded and retailer label
christmas puddings
6 fresh chilled dairy products
manufacturing fresh chilled dairy
products including dairy desserts
yogurt fromage frais and cottage
cheese for major retailers’ labels
7 biscuits
fox’s is the uk’s largest
manufacturer of premium quality
biscuits the complementary 
elkes business produces everyday
and everyday treat biscuits mainly
under retailers’ labels
8 frozen foods
producing deep pan thin and crispy
and speciality frozen pizzas under 
the goodfella’s brand and retailers’
labels dalepak manufactures
grillsteaks burgers and a growing
range of meatfree products
57
68 04  chairman’s statement northern foods plc
aim
 creation of 
shareholder value
framework 
for success
 clear strategy
 coordinated 
group action
 increased 
competitiveness
progress
 increased focus 
on core areas
 operational 
improvements
 market challenges
particularly biscuits
chairman’s statement
peter blackburn chairman’s statement  05 northern foods plc
trading results were below our original plan primarily due 
to disappointing results in biscuits progress in other key areas
resulted in earnings per share growth despite tightening market
conditions disposal dilution and significant cost pressures
we are responding to the challenges of our market place through
determined and coordinated actionwe are driving operational
improvements throughout the group notably by a greater focus on
leveraging synergies in productivity procurement and systems specific
action is being taken to stabilise and improve our performance in
biscuitswe will continue to review our portfolio to ensure that we
concentrate on activities where we can achieve and retain competitive
advantage and a strong customer franchise
results
continuing sales grew by 50 per cent to £14212 million driven by strong
progress in our convenience chilled food operations though total sales were
26 per cent lower as a result of the disposal of the ski and munch bunch
brands to nestlé uk in april 2002 underlying sales trends excluding the
effects of divestments and currency movements improved in the last three
months of the financial year after a slower performance in the third quarter
continuing operating profit before goodwill amortisation and exceptional
items was up 05 per cent at £1156 million with improved results from our
convenience operations offset by a decline in grocery as a result of our poor
performance in biscuits dilution from disposals and the cost of the share
buyback programme depressed profit before taxation goodwill amortisation
and exceptional items which was 35 per cent lower at £97 5 million
the reduction in share capital together with a lower underlying tax charge
resulted in enhanced earnings per share before goodwill amortisation 
and exceptional items which improved by 65 per cent to 1481 pence
the disposal of ski and munch bunch generated a £540 million exceptional
profit which has been partially offset by £426 million of reorganisation costs
and asset impairment as a result on an frs 3 basis pretax profit increased
by 27 5 per cent to £1058 million and earnings per share by 619 per cent 
to 1873 pence compared with the previous year
dividend and share buyback
the board recommends an increased final dividend of 545 pence per 
share 2002 515 pence together with the increased interim dividend 
of 325 pence paid in march this makes a total dividend for the year of 
870 pence a rise of 61 per cent we remain committed to a progressive
dividend policy taking account of the long term earnings potential and 
cash flow of the group
in addition we continued to make market purchases of our shares 
for cancellation acquiring a total of 364 million shares representing 
65 per cent of our equity at a cost of £555 million this brings the 
total to £1065 million since we began our share buyback programme 
in february 2000
strategic priorities
in a climate of intense food retailer competition it is more important than
ever that northern foods leverages its scale advantages in procurement and
ensures that best practice in productivity food technology and systems is
applied throughout the group we are working with increasing dedication 
and effectiveness to ensure that we maximise these opportunities and deliver 
the planned returns on our investments the sale of ski and munch bunch 
has demonstrated our willingness to adjust our portfolio when appropriate
and we will continue to examine all aspects of our business to ensure that 
we focus on activities where we have a real competitive edge as the base 
for delivering shareholder value
the board
following extensive changes to the nonexecutive directorate in 2002 we
further improved the strength and balance of the board with the appointment
of two new executive directors in january 2003 matthew gribbin 45 has
been with northern foods for over 20 years and howard sims 55 joined 
the company in 1998 on the acquisition of cavaghan  gray plc of which 
he was chief executive
corporate social responsibility
northern foods has a long tradition of sensitivity to social issues and of
supporting the disadvantaged in our society during the year we have taken
further steps to clarify the principles on which we conduct our relations with
all our stakeholders shareholders employees customers and consumers
suppliers the communities in which we operate and the wider environment
outlook
sales in the first seven weeks of the current year are up 7 6 per cent overall
and up 95 per cent with our five largest customers this strong start was
assisted by the timing of easter and recent new business gains although we
anticipate that progress may moderate in the months ahead in a demanding
trading climate we are pursuing a range of initiatives to enhance efficiencies
and returns across the group action is being taken in our biscuit businesses 
to recover inflation reduce costs and accelerate new product development
this is helping to arrest the trend of the second half of last year though 
biscuit trading is expected to dampen grocery performance in the first half
the entire northern foods team shares my determination that the group 
will fulfil its potential by delivering appropriate returns on our investments
and maximising the potential of our strong positions in the growing
convenience food market
peter blackburn
chairman
28 may 2003 strategy
 product focus on
high added value
 customer focus on
major uk food
retailers
 operational focus 
to increase
competitiveness 
framework 
for success
 matching products
to lifestyle trends
 market growth 
in eight core
product areas
 growth in 
major retailers’
market share
 investment and
rationalisation
 development 
of synergies 
progress
 strong convenience
sales growth
 grocery sales 
growth reduced by 
biscuit performance
 continued growth
with our five largest
customers
 major investment
projects complete
 initiatives to realise 
synergy benefits 
underway 
06  chief executive’s statement northern foods plc
chief executive’s statement
jo stewart chief executive’s statement  07 northern foods plc
our aim remains the creation of shareholder value 
as the most effective added value food manufacturer
addressing the uk retail market
by focusing on the supply of added value products to the major retailers
and on innovation and the highest food standards we have positioned
ourselves to benefit from the key long term trends in our market 
place organisational and strategic refinement combined with prudent
investment are designed to drive further improvements in our
competitiveness
market environment
in a time of increasing economic uncertainty the food market stands out 
for its long term overall stability the sectors on which we have chosen to
focus continue to outperform the market as a whole driven by consumer
demand for increasing convenience and quality the uk retailing
environment always demanding awaits the outcome of the competition
authorities’ review of the various options for further consolidation however
this finally unfolds we believe that northern foods is strongly placed as a
wellinvested business capable of meeting retailer needs for innovation
quality assurance service and value
retailer consolidation will inevitably be matched by rationalisation of their
supply base and some players will not survive this process this may lead 
to some instability but this should correct itself as a more stable supply base
emerges we are confident that northern foods will be a winner from the
further consolidation of food manufacturing in the uk
business focus
we continuously review our portfolio to ensure that we have the right 
profile to achieve the returns and value generation we seek the changes 
we have made in recent years through acquisitions disposals and
investments in new facilities have been designed to drive northern foods
further up the scale of both added value and convenience good examples 
of this include the development of new facilities to manufacture chilled 
ready meals and stonebaked pizzas and our withdrawal from van sales 
of savoury pastry products we remain confident that our recent major
investment and restructuring projects have been accurately targeted 
and will deliver the expected returns in the near term we anticipate levels 
of capital expenditure to be similar to last year as we concentrate on 
delivery from these past initiatives
trading
our convenience businesses have delivered good top line growth based 
on the positive consumer and retailer trends we had identified this has also
been translated into strong profit progress clearly performance in grocery
has been disappointing chiefly as a result of intense competitor activity in
biscuits including the entry of new players from the confectionery sector 
and significant increases in cocoa costs despite these wellpublicised issues
fox’s remains one of the strongest and most profitable brands in its sector
and urgent action is being taken to stabilise the business through accelerated
new product development price increases and cost reductions our other
grocery businesses principally in the frozen foods sector have continued 
to perform well
synergy development
central to the northern foods proposition is the belief that each of our
activities should have bespoke strategies tailored to their precise market 
type positioning and customer profile we then seek to overlay scale and
synergy benefits that reflect the size and strength of our group these are
concentrated in six key areas
– market development and customer relations including the identification
of market trends and opportunities and the exploitation of group strengths
to drive category management for our key customers
– productivity with an emphasis on continuously improving the effectiveness
of our manufacturing activities and supply chain
– procurement ensuring that correct standards are applied and cost
reduction strategies developed to optimise value in use of the materials 
we purchase
– food technology applying the latest scientific advances in a practical 
way to aid innovation and productivity across the business
– systems both in management processes and information technology
to provide a common platform for use within our business activities
– people including recruitment training and development and the effective
deployment of management resources
over the last year we have placed particular emphasis on productivity 
and procurement we have a common groupwide approach to the
measurement and improvement of manufacturing performance utilising 
a lean manufacturing template to drive efficiencies in our factories this 
is accompanied by the strengthening of our group buying disciplines for 
raw materials and packaging which will enhance consistency and quality 
as well as delivering cost savings
these initiatives are assisted by our investment in systems with the rollout
of a common sap platform for all our companies well advanced and poised
to deliver further benefits in the future
prospects
we will continue to refine our portfolio to ensure that it is attuned both 
to market trends and to our core competencies as a group relationships 
with our key retailer partners will continue to be fostered to ensure we
become even closer and more proactive with a high priority accorded to
innovation and synergies between our businesses exploited ever more
systematically our ability to cope with testing times has been strengthened
by the strategy and investments we have put in place and our teams have
demonstrated great resilience and dedication in defending and building our
business and seeking new opportunities for growth
jo stewart 
chief executive chilled product
characteristics
 short shelf life
 product variety
 product complexity
 low stock levels
manufacturing
challenges
 frequent
production of full
portfolio
 short production
runs
 limited opportunity
for automation
 just in time
distribution
framework
for success
progress
report
 sophisticated
customer order and
data collection
systems
 productivity
improvement
 multiskilled teams
 cost control
08  operating review  convenience northern foods plc
convenience
manufacturing 
challenges using technology to replicate authentic 
cooking methods
mirroring traditional chinese wok cooking a unique inline induction
wok has been developed and installed at pennine foods the continuous
wok process combines steam microwave and induction cooking 
and was developed by our engineering and technical teams on site 
to provide product taste and texture authenticity
sales of chinese recipe dishes made at pennine foods for marks 
 spencer increased by 15 per cent during the year underpinned 
by the company’s culture of technical and product innovation
waste reduction through electronic data capture
using technology to overcome manufacturing challenges electronic
tagging of work in progress allows automatic shop floor data collection
and transmission increasing visibility and control and leading to
reduced cost and wastage
we have piloted a radio frequency identification rfid system at 
our pork farms bowyers’ site in nottingham with direct interfaces 
to our sap system the rfid tags are attached to each raw material
container and these containers are then tracked through the processes
of cleaning ingredient weighing and chilling data is automatically
added and stored on the tag at each stage then read and compared
against standard recipe requirements and production plans
in conjunction with our suppliers and customers rfid technology 
can potentially be used to track raw material and product movements
throughout the supply chain
efficiency of distribution channels
the constraints of short shelf life products necessitate speed and
efficiency of distribution our distribution agreement with kerry and 
the sale of our pork farms van sales operation completed at the end 
of last year has reduced our distribution costs increased efficiencies
and enabled the business to focus successfully on the growth of the
pork farms brand with major retailers
growth in the cold pie market sector accelerated during the year 
to 9 per cent and the pork farms brand advanced within this to 
over 23 per cent of this market brand sales to asda were particularly 
strong exceeding budgeted levels by almost 60 per cent
operating review  convenience  09 northern foods plc
the pace of change in chilled
food production continues to
grow product diversification and
innovation to satisfy sophisticated
consumer tastes are increasing
operational challenges for market
leading manufacturers
the key characteristic of chilled
convenience food is its short 
shelf life which necessitates short
frequent production cycles 
of a complex product portfolio
the manufacturing processes demand 
a firm focus on cost and variance 
control to drive efficiencies innovation 
in advanced food technology provides 
a competitive edge which is reliant
upon the flexibility and expertise 
of our employees
balancing taste nutrition and efficiency
the cavaghan  gray fish businesses have further developed
production methods this year harnessing new technology and product
innovation to match increasing consumer demand for high quality 
fish products
investment in a new fish frying process at cavaghan  gray in
grimsby was completed in the fourth quarter the new frying process
produces a very light batter coating in tune with consumer trends
towards healthier eating and the factory has subsequently gained 
over £7 million of coated fish business from marks  spencer
against a background of reductions in north sea fishing quotas and
rising raw fish prices an advanced grading weighing and freezing
system has been installed in aberdeen processing and freezing times
have been reduced from 23 hours to less than 10 minutes with
corresponding improvements in efficiency and product quality 10  operating review  convenience northern foods plc
sales profit and efficiency gains
from restructuring 
following our £16 million restructuring and investment in dedicated
production facilities which we completed in 2001 our tesco pizza and
savoury products factories have made very good progress this year
the pizza factory achieved substantial sales and profit growth with
annual sales of the thin and crispy range up by 25 per cent to march
2003 core sales growth has been accompanied by a successful new
product development programme including smaller size 8 inch thin 
and crispy pizzas in april 2002 an ultra thin range in september 2002
healthy living pizzas in january 2003 and a new deep pan range in
march 2003
at trafford park bakery a culture of continuous improvement has
continued to increase sales and deliver profit growth the highly
automated production of folded pastry products and quiche is
supported by crossfunctional action teams these action teams focus
on increasing efficiency and reducing waste and are accompanied by
weekly good manufacturing practice audits and a joint communications
initiative with union officials improvements in systems planning 
and plant maintenance have increased process reliability and reduced
downtime with the consequent increase in service levels leading
to further sales growth
convenience
continued operating review  convenience  11 northern foods plc
effective category management
successful category management is dependent upon a clear analysis 
and understanding of consumer shopping patterns
consumers are likely to shop for a variety of eating occasions from
children’s teatime to a lunchtime buffet a quick snack or a late 
supper this analysis underpins range development and extension
with portion sizes packaging convenience and taste all reflecting 
the intended eating occasion
riverside bakery has worked closely with sainsbury’s during the year 
to further develop the t aste the difference premium quiche range
the addition of new flavours and sizes has seen sales rise by over 
50 per cent
efficiency improvements at cavaghan  gray
cavaghan  gray’s hull factory has continued to build sales of
safeway recipe dishes with relaunched american traditional british
eat smart and vegetable accompaniment ranges
the site is safeway’s category owner for traditional recipe dishes and
now manufactures every product in this category traditional category
sales grew by over 50 per cent to march 2003 building on a successful
relaunch programme in autumn 2002
sales in the growing vegetable accompaniments sector have also
increased dramatically following the autumn launch of safeway’s
additions range
the factory has seen good improvement in efficiencies with significant
increases in labour and materials utilisation during the year and the
systematic implementation of northern’s four primary operational key
performance indicators which are common throughout the group
the site’s continued focus is to increase sales to reach profitable levels
within the planned timeframe
cost control at eden vale
following the disposal of ski and munch bunch in april 2002 we began
to reshape the remaining eden v ale chilled desserts facility in minsterley
we have reduced the cost base and won some additional business from
marks  spencer and safeway the factory began production of marks 
spencer’s count on us yogurt range in november 2002 followed by the
whisp range of lightly whipped yogurt in january 2003 and both ranges
are showing good sales growth
the restructuring of the business has included a reduction in the
workforce the closure of the dairy ingredients operation and the
creation of new operational teams to match the changing business
focus these actions have more than halved the overhead costs 
of the business
the minsterley factory also produces a range of mars desserts
including galaxy milky way and starburst mars and bounty desserts
were added in september 2002 further business gains are needed 
in order to utilise the factory’s capacity and increase profitability from
its restructured cost base to the required level frozenambient
product
characteristics
 longer shelf life
 higher sales per
product line
 branded product
opportunities
 able to hold stock 
manufacturing
challenges
 longer production
runs
 further opportunity
for automation
 high promotional
activity
 warehouse stock
distribution
framework
for success
progress
report
 operational
efficiency
 investment
in automation
 commercial
expertise
 cost control
12  operating review  grocery northern foods plc
grocery
manufacturing 
challenges
northern foods grocery division
consists of our businesses
manufacturing frozen and ambient
products these products are
characterised by a longer shelf life
and the consequent ability to hold
stock in turn this leads to longer
production runs and the opportunity
for automation profitable
production is underpinned by high
levels of operational efficiency 
and cost control in wellinvested
automated facilities
the key grocery markets for
northern foods of biscuits frozen
pizza and grills offer branded product
opportunities and success in these
markets requires high levels of
commercial expertise our progress
this year has been strong in our
frozen foods sector however the
mature biscuit market has seen very
high levels of branded promotional
activity these difficult market
conditions have been reflected 
in the disappointing performance 
of our biscuit companies biscuit company plans for recovery
difficult trading in the biscuit market affected the performance of elkes 
and fox’s biscuits this year each of our biscuit businesses has pursued 
a differentiated and well defined long term strategy to compete in this
mature market however trading conditions this year have led to profit
reductions at both companies
the factors contributing to these difficult trading conditions include 
a decline in the chocolate biscuit bar everyday and treat biscuit sectors
of the market in which our companies compete in addition fierce
branded competitor activity and aggressive promotional campaigns
particularly in the chocolate biscuit bar sector have been compounded
by the entry of confectionery manufacturers into the market a third
contributing factor during the year was a rise in cocoa prices which
reduced margins at fox’s biscuits particularly in the second half
against this background fox’s biscuits is continuing to defend its
premium niche market position cocoa cost inflation has now largely
been recovered through price increases and a programme of cost
reduction will also have a positive impact on profitability
sales growth for fox’s biscuits will continue to be driven through
innovation and a new range of mini biscuits was launched in march
2003 to build on the strength of the rocky brand rocky rounds
a bitesize variant packaged in mini bags will capitalise on the growing
consumer trend to eat outside of the home the mini biscuits are
produced at fox’s biscuits in kirkham
operational excellence at elkes biscuits underpins the company’s
primary activity in the private label biscuit market investment in
highly automated plant long production runs and high efficiencies 
are key to elkes’ profit performance
the private label sector within the biscuit market has declined 
by 6 per cent during the year and overcapacity in the market has 
further intensified competition elkes’ sales fell during the year with 
a corresponding profit reduction
elkes has responded to the market challenges in a number of ways
including a major cost reduction initiative the team is also continuing
to develop strong relationships with its key retailer customers and 
has been successful in winning additional business
in order to differentiate its product offering two character licensed
chocolate biscuit bars featuring the simpsons were launched in
october 2002 and sales are exceeding expectations the character
licensing concept has been well supported by our retailer customers
and further developments are planned
operating review  grocery  13 northern foods plc 14  operating review  grocery northern foods plc
streamlining processes and strengthening 
core product sales at dalepak
a project to streamline production at dalepak’s leeming bar factory 
was completed during the year with new freezing equipment revised
factory layout and a segregated meatfree production area delivering
significant production efficiencies
the simplification of factory processes has been accompanied by a
comprehensive branded relaunch of dalepak products the new brand
identity covers a focused range of core meat and meatfree products 
in premium sectors of the frozen grills and burgers markets
dalepak’s focus on a smaller number of core products has driven 
good year round sales performance with all retailers underpinned 
by nonpromotional sales growth particularly with tesco and asda
this focus on simplification of process and products combined 
with overhead cost control helped achieve a significant increase 
in dalepak’s profitability for the year
commercial expertise in brands
in a highly competitive market place goodfella’s pizzas gained share
during the year following a full brand relaunch in october supported 
by a strong television advertising and marketing campaign
the thin and crispy deep pan and ciabatta style pizzas made at green
isle’s naas and longford factories were all upgraded and relaunched
as a result goodfella’s has now achieved the leading brand position 
in the frozen pizza market with a market share of 19 per cent
no1
brand position 
in frozen pizza
grocery
continued operating review  synergy benefits  15 northern foods plc
development of
group synergies
 markets and
customer relations
 productivity
 people
 systems
 procurement
 technology
framework
for success
progress
report
 identification of market trends and
development of key customer relationships
 increased efficiency and productivity
 employee skills commitment and motivation
 common systems to optimise ways of working
 increasing valueinuse and ensuring robust
traceability systems
 innovation and advancement in food production
synergy benefits
in key spheres 
of activity
northern foods has a devolved
management structure which
ensures that each of our operating
companies formulates and drives 
a tailored strategy for growth 
based on a clear and accurate
understanding of its source 
of competitive advantage within 
its market
the group has identified six key areas
of synergy in which group activities
add value to the performance of 
our operating companies these six
areas cover market development 
and customer relations productivity
people systems procurement 
and technology
our framework for success
recognises the contribution that 
the development of these group
synergies can make to well defined
and well executed operating
company strategies 16  operating review  synergy benefits northern foods plc
responsiveness and innovation
the challenge for successful food manufacturers is to continue to
develop products which match the needs and lifestyles of consumers
increasingly busy lifestyles have led to a reduction in the amount
of time consumers choose to spend in the kitchen and also to an
increase in the number of snacks eaten outside the home these twin
facets of convenience and snacking are driving growth in northern’s
core market segments consumer demand for premium quality and
taste also underpin this growth in high added value product markets
reflecting these trends towards increased convenience and premium
products we supported marks  spencer’s christmas individual
customer order programme for meal accompaniments en croute
products party food and desserts at evesham foods and cavaghan 
 gray carlisle all customer order sales estimates were far exceeded 
in a short prechristmas period making accurate and flexible planning
of labour and production essential
other innovative premium christmas products included cocktail glass
shots developed by park cakes these four flavours of small alcoholic
mousses packaged in glass capitalised on the factory’s high technical
and operational competency and exceeded rate of sale forecasts
developing key customer relationships
our ability to identify and respond to market trends is an important
component of our relationships with our retail customers we continue
to develop partnerships with the major food retailers and sales to our
top five customers made up over 70 per cent of our total sales during
the year the total market share of those top five customers also
continues to grow and currently represents over 60 per cent of retail
food sales
employee skills commitment and motivation
northern has long identified people as an essential driver of
performance we therefore continue to invest in the development 
of our people we focus on communicating effectively and we 
recognise the importance of employee commitment to the business
this year we have continued to develop the key skills knowledge and
experience necessary to support our business initiatives in particular
we are supporting the development of lean manufacturing through a
strengthened programme of development for operations managers we
have redefined and relaunched our management competency framework
and managers are recruited appraised and developed in line with this
communication continues to be an important focus both at group 
and operating company levels we are undertaking an evaluation 
and review of our employee forums to ensure their effectiveness as 
a method of communication and consultation improvements in
methods of communication with all employees will be influenced by
the views expressed by employees in a second biennial groupwide
survey carried out in spring 2003
we have continued to evolve our voluntary employee benefits
schemes using the breadth of the group to add value for employees
and pensioners we have also introduced a group programme to
recognise longserving employees following a detailed review 
of our pension scheme we announced in june 2002 our intention
to continue to operate the final salary scheme for all employees
with the costs of pension provision rising due to increasing longevity
and lower stock market returns employee contributions to the
defined benefits scheme were raised by 2 per cent in august 2002
increasing procurement value ensuring robust
traceability systems
northern’s partnership with suppliers is fundamental to our
commitment to food safety traceability and quality we have
continued to consolidate our supply base working with a reducing
number of suppliers and developing strategic partnerships for the
supply of key materials these partnerships are built upon northern’s
code of practice for suppliers detailing our food safety and food
management standards and are backed by terms and conditions 
of supply designed to minimise business risk
during the year 20022003 northern’s specialist team increased 
the efficiency of the procurement of nonsaleable materials supply
and service level agreements have been negotiated for engineering 
and nonconsumable items improving effectiveness in these areas
synergy benefits
continued operating review  synergy benefits  17 northern foods plc
innovation and advancement in food production
food safety and quality carry the highest priority across northern
foods our technical standards are backed by a robust audit
programme of both our own sites and our raw materials suppliers
we pursue a culture of continuous technical improvement through 
the expertise and knowledge of our people investment in high quality
technical facilities and a critical attention to detail throughout all
elements of the manufacturing process ideas innovation and best
practice are shared throughout the business and operational problem
solving can be supported through specific research projects
during this year a steering group has formalised a technical
competency framework defining the knowledge and experience
necessary for successful technical management
investing in technology
the opening of a new technical centre at smiths flour mills in january
2003 demonstrates northern’s commitment to technical innovation
the centre houses evaluation and test equipment to replicate
manufacturing processes and will be used by both group and external
customers the facility will be used in the process of new product
development and will help to extend northern’s expertise in cereal
technology
our chilled savoury products business at palethorpes has also completed
the development of technical facilities during the year as part of 
a £3 million extension project the centre will facilitate new product
development processes building on close cooperation between the
company’s development chefs retailer customers and factory teams
increasing efficiency and productivity
further improvements in productivity and operational effectiveness have
been secured across our operating companies this year with a group
wide improvement of over 6 per cent in overall effective efficiency this
has been secured through a number of complementary initiatives co
ordinated by senior operations directors within our companies we have
a robust framework of key performance indicators kpis in place across
all of our sites and a group template for manufacturing improvement
sites have developed individual manufacturing improvement plans
drawing upon the tools and techniques of lean manufacturing these
plans are being implemented by dedicated manufacturing improvement
managers and line managers
multiskilled teams driving productivity gains
the development of methods of knowledge sharing and team working
has been a key theme across the group with crossfunctional working
parties contributing to real efficiency improvements
close links between planning technical production and development
functions and the involvement of all levels of employees have improved
product quality speed and efficiency of production in the cookhouse 
at riverside bakery in nottingham these efficiency gains have been
brought about as a result of new training methods and a streamlined
process of product development developed by the working party
systems
the full benefits of an integrated kpi reporting and measuring 
system will be realised once our phased rollout of sap is complete
by the end of september 2003 the sap implementation of our 
core financial sales and distribution systems will cover all of our
companies the second phase of our sap rollout has implemented
common manufacturing systems in a third of our companies and 
will be complete by the end of 2004 our stakeholders
 shareholders
 employees
 customers
 suppliers
 the community
 the wider 
environment
 creating
shareholder value
 making the most 
of all our people
developing
responsible
relationships
throughout the
supply chain with
both customers
and suppliers
 contributing to 
local communities
 measuring and
managing our
impact on the
environment
framework
for success
progress
report
recognising our social
responsibilities
18  social responsibility northern foods plc social responsibility  19 northern foods plc
measuring and managing our impact 
on the environment
northern foods manages its impact on the environment by reducing
emissions and increasing efficiency in the use of resources
a clear policy framework has been drawn up at group level and
communicated throughout our operating companies we have made
considerable efforts to improve our measurement and recording
systems our participation in the seventh business in the community
corporate environment engagement index showed an improvement 
of 17 percentage points from the previous year
northern foods met its group target for energy efficiency
improvement in line with the climate change levy agreement
the majority of our qualifying sites exceeded the required 2 per 
cent reduction in energy consumption per tonne of product and the 
group will continue to qualify for a climate change levy discount 
until at least 2005 we have developed a computerised programme 
to help all of our factories monitor energy consumption and
performance against target
our focus on the efficient use of resources has ensured that we
continue to meet all of our obligations under the packaging 
waste regulations we have investigated the commercial viability 
of alternatives to landfill for the disposal of biodegradable food 
waste and have undertaken pilot composting and anaerobic 
digestion projects
we have continued our development of an environmental
management system gunstones bakery our initial pilot programme
reached acorn level 5 at both sites following an external audit and
certification by the british standards institute
contributing to our local communities
we continue to support communities near to our operating companies
through donations employee secondments and employee fundraising
cash donations are made through the northern foods social
responsibility committee and through a growing network of site
based local charity committees these cash donations totalled
£266000 in the year and included support for agencies working 
in the developing world
we also continue to offer graduate trainee managers the opportunity 
to carry out a two week assignment with a local community
organisation and last year about a third volunteered to do so
many other employees are active in their local communities in a wide
variety of roles such as mentors trustees and fundraisers creative
fundraising ideas and ongoing commitment have helped to build and
extend good links between our sites employees and local communities
principal donations
addiction rehabilitation centre manchester
apex trust north west
barnardos sheffield
children’s university hull
citizens advice bureau grimsby
common purpose hull
disability rights advisory service hull
fairbridge salford
family service unit sheffield
farm africa
foyer federation sheffield
hope for the homeless worksop
hull compact
hull independent housing aid centre
lifeshare limited manchester
lifestyle hull
manor reborn sheffield
minshull street day centre manchester
new bridge
nottingham on board
oxfam
park lane college leeds
princess royal trust for carers accrington
reach
samaritans
sobriety project y orkshire
tim parry johnathan ball trust warrington
y oung people in bassetlaw
y oung potential nottinghamshire
developing responsible relationships throughout
the supply chain
northern foods has a long history of trading fairly and responsibly
throughout the supply chain with the increasing consolidation of 
our supply base we have continued to work closely with suppliers to
ensure that they can consistently match all of northern’s high standards
these include our raw material product standards commercial
standards technical standards and animal welfare standards
we are working towards monitoring the ethical standards of our
suppliers and collaborating with other parts of the supply chain to ensure
that monitoring is carried out efficiently and to appropriate standards
northern foods has always
recognised the importance of its
relationships with major stakeholders
we have a firm commitment to
creating value for our shareholders
and we recognise the crucial role
that employees and suppliers play 
in fulfilling that commitment
our customers and consumers rely
on our competency and integrity and
fulfilling this responsibility well is key
to the group’s long term success
we have a responsibility for the 
impact our business has on the wider
environment we are working hard 
to manage this impact and have
continued to develop environmental
initiatives during this year
our relationships with local community
groups have also continued to develop
this year the interdependence of 
our factories employees and members 
of the community underlines the
importance of local links and the
facilitation of these links has provided
the main thrust of northern’s
community involvement this year making the most of all of our people
the group’s responsibilities to its employees are undertaken seriously
and proactively we have strong health and safety policies and
practice we are committed to fair employment and provide varied
training and development opportunities across our sites
we have many positive partnerships and joint initiatives with the
trade unions who represent our employees and we also promote good
consultation and communication with employees who are not trade
union members
a safe working environment
northern is committed to providing a safe place of work for our
employees we recognise the important role that team leaders play 
in promoting health and safety in our factories and have developed
a supervising for safety programme to underpin that commitment
an innovative training programme supported by a practical tool 
kit helps team leaders to carry out their day to day responsibilities
the programme has reached over 400 supervisors this year
delivered through specially trained health and safety managers and 
coordinators many of northern’s operating companies have been
presented with awards for health and safety performance with
pennine foods walter hollands and palethorpes each receiving a gold
award from the royal society for the prevention of accidents elkes
biscuits received an award from the health and safety executive for 
a successful and original programme of onsite activities in support 
of european week of safety and health held in october 2002
we recognise that our responsibility for the provision of a safe working
environment extends to contractors’ employees working at our sites
and we therefore pioneered the development of a safety passport
scheme accredited by the chartered institution of occupational 
safety and health we work in partnership with contractors providing
support and training to ensure that our health and safety standards
are met by all workers at all northern’s sites as a result hundreds 
of contractors’ employees have been awarded safety passports 
on completion of the training programme
developing for the future
northern continues to invest in training and development activities 
to ensure the skills and knowledge of our employees match current
and future business needs
the development of future business leaders has been a key focus this
year with the creation of two new groupwide business management
courses for senior and younger managers we have also worked 
in partnership with cranfield university to develop a tailormade
programme for senior operations managers
the northern foods manufacturing management postgraduate
certificate has been updated with the assistance of the accrediting
body sheffield hallam university it continues to provide a flexible
modular training programme with business benefits accruing from
workrelated projects which form part of the curriculum
in support of changing business needs our operating companies 
have also undertaken a wide range of employee training initiatives
include literacy and numeracy training and a range of national
vocational qualifications nvqs for line operatives at gunstones
bakery all supervisors have been offered the opportunity to study 
for nvq level 3 in supervisory management
our operating companies’ commitment to accessible learning 
is demonstrated by the creation of learning resource centres at 
a number of sites each resource centre is available to employees 
and is equipped with training equipment audio visual facilities
networked computer systems and a library
fair employment
northern has always had a firm commitment to the principles of fair
employment we monitor employment patterns of gender race and
disability across the group and we continue to run groupwide equal
opportunities training courses to reinforce this commitment
a diversity working party of senior personnel directors from across 
the group was set up in august 2002 to assist in the evolution 
and promotion of equal opportunities for all employees cultural 
awareness and the reconsideration of work life balance issues are 
the first projects underway
some practical steps have already been taken in order to promote
cultural awareness for the benefit of employees and the business
at pennine foods in sheffield changes in working practices have been
implemented to take account of the religious needs of ethnic minority
employees changes were supported by management and supervisor
training and full briefings were given to all employees such steps have
helped pennine to attract skilled candidates from diverse backgrounds 
in a competitive recruitment market
20  social responsibility northern foods plc
recognising our social
responsibilities
continued financial review  21 northern foods plc
financial strategy
6
4
8
10
12
14
2
0
posttax return on average equity funds invested five year trend
before goodwill amortisation and exceptional items 
1999 2000 2001 2002 2003
eps
dividends
6
1999 2000 2001 2002 2003
4
8
10
12
14
16
2
0
earnings per share and dividend five year trend before 
goodwill amortisation and exceptional items p
 maximise financial
returns for equity
investors
framework 
for success
 earnings growth
 return on total
capital invested
higher than cost 
of capital
progress
 growth dampened
by biscuit trading
 share buybacks
efficient funding 
and disposals 
improved returns
financial review
sean christie return on average
invested capital roic
roic quoted before goodwill amortisation and exceptional items
2003 roic stated after reducing 2002 invested capital by £87 million to reflect 
the sale of the ski and munch bunch brands and associated assets on 2 april 2002     

weighted average cost 
of capital wacc
1999 2000 2001 2002 2003
margin over costs of funds 
4
2
6
10
8
12
0
22  financial review northern foods plc
difficult trading in biscuits held back the results of our 
grocery division but performance in almost all other areas
was strong with returns on past investments coming through
the reduced capital base following the disposal of ski and munch 
bunch to nestlé means that roic increases despite operating profit
being below our original targetthe wacc continues to fall resulting in 
an improved margin over the cost of funds one of our two key financial
performance measuresthe other metric growth in earnings per share
before goodwill amortisation and exceptional items was 65 per cent
with the trading uplift boosted by share buybacks and a lower tax charge
sales – continuing operations
sales were up 50 per cent driven by our convenience operationsprice
increases averaging 05 per cent were achieved recovering input cost
inflation third quarter sales were below our forecasts but we saw improved
trends in the final quarter
convenience
sales were up 7 9 per cent to £10141 million despite the effects of the poor
summer and the quieter third quarter with particularly strong performances
in recipe dishes chilled pizza and fresh chilled dairy products
grocery
overall sales were down 16 per cent at £407 1 million biscuits were the 
key problem with sales down overall despite the fox’s brand making volume
progress dalepak’s sales of frozen ready meals were also lower but there
were strong uplifts in frozen pizza and dalepak’s core grills and burgers range
operating profit – continuing operations before goodwill 
amortisation and exceptional items
operating profit was up 05 per cent with growth in convenience just
outweighing the grocery shortfall both divisions had to cope with a near
doubling of insurance costs which rose by £7 0 million across the group
convenience
convenience operating profit was up 85 per cent to £700 million despite
startup costs in recipe dishes and losses in the remaining eden vale business
following the sale of the ski and munch bunch brands to nestlé at the start
of the year significant profit uplift came from the restructuring of our 
tesco pizza and quiche operations and increased manufacturing throughput
at pork farms as a result of our deal with kerry foods in the prior year
speciality bread also performed well when solway our associate company
is added to our continuing businesses the convenience operating profit
shows an increase of 100 per cent
grocery
grocery operating profit declined by £49 million to £456 million biscuits
more than accounted for this shortfall which resulted from a combination 
of manufacturer driven promotional activity coupled with increases in cocoa
prices elsewhere in grocery we made reasonable profit progress with green
isle doing well and dalepak turning round the first half deficit and making
profit progress for the year
discontinued operations
these were the main cause of sales and profit shortfall with turnover 
reduced by £1054 million and operating profit before goodwill amortisation
and exceptional items by £101 million as a result of the disposals the key
elements were the divestment of the ski and munch bunch brands and 
of our van sales operations to kerry foods the lift lemon tea brand and our
v anderheul biscuit business in holland were also sold during the previous year
pretax profit before goodwill amortisation and exceptional items
pretax profit was down £35 million to £97 5 million with the discontinued
activities showing a net deficit of £32 million operating profit foregone less
the interest benefit on £145 million of disposal proceeds and the share
buyback programme increasing interest costs by £18 million our associate
solway made strong profit progress with our share up £10 million to £14
million as it recovered from the prior year’s factory commissioning problems
interest costs reduced by £50 million primarily as a result of the disposals
t axation
t axation on profit before goodwill amortisation and exceptional items for 
the year was 184 per cent this is lower than the basic uk tax rate primarily
because of the low rates of corporation tax which apply to our operations 
in ireland discounting of the deferred tax liability and the tax efficient
structuring of our funding arrangements including a nonrecurring element 
of £15 million relating to exchange losses excluding this itemthe 
underlying charge was 199 per cent
earnings per share 
earnings per share before goodwill amortisation and exceptional items were
up 65 per cent at 1481 pence with share buybacks and the lower tax charge
contributing to the progress on an frs 3 basis earnings per share were up
619 per cent at 1873 pence with profit on sale from the disposals less the
associated restructuring costs boosting the result
exceptional items and goodwill
there was a posttax exceptional net credit of £242 million versus a charge
of £101 million in the previous year the main features of this year’s credit
were profit on disposal of businesses of £540 million after charging goodwill
previously written off totalling £650 million less restructuring costs 
of £426 million the main element of which was a charge relating to asset
impairment at eden vale of £292 million this followed a full review of the
carrying value of the remaining assets at minsterley following the ski and
munch bunch sale other exceptional costs relate to redundancy disruption
and asset writeoffs following the disposals goodwill amortisation on past
acquisitions was £31 million versus £29 million last year
distributions to shareholders
during the year we returned £1001 million to shareholders via share
buybacks and dividends
buybacks
we bought 364 million shares back during the year 65 per cent of our
equity at a cost of £555 million which represented an average price of 
152 pence per share this was the largest annual programme we have
undertaken so far and helped mitigate the earnings dilution from disposals
we intend to continue to buy shares in the market as opportunities arise financial review  23 northern foods plc
dividends
we propose a final dividend of 545 pence making a total of 870 pence for
the year up 61 per cent on last year’s figure of 820 pence dividend cover
before goodwill amortisation and exceptional items increases to 18 times
due to the reduced shareholder base
acquisitions and divestments
the only divestment was the sale of the ski and munch bunch brands plus
the cuddington factory to nestlé for £145 million in april 2002 we made 
no acquisitions
capital expenditure
tight control of capital was a key theme during the year our facilities 
are wellinvested following expenditure over the last few years and capital
expenditure totalled £794 million compared with £1236 million in the 
prior year this spend was 13 times the depreciation charge of £627 million
the largest project in the year other than replacement capital was the
continuing drive to implement sap in all companies the main phase of 
which will be completed in the current year
cash flow
cash flow was very encouraging with a £901 million reduction in net debt
despite £1001 million being returned to shareholders the disposal proceeds
of £1450 million were the largest single contributor to this but strong
operational cash generation was also an important factor the working capital
outflow of only £119 million was caused primarily by the difference between
the actuarial based cash contributions to the pension fund and the ssap 24
basis used in the profit and loss account all of this meant trading cash flow
was far stronger than last year
treasury management
the treasury function of the group operates within a policy framework
approved and regularly reviewed by the board the department is not run 
as a profit centre and is subject to internal audit review its activities are
routinely reported to the board whilst each business in the group is
responsible for its own cash management all resulting cash flows and
balances are managed by the central treasury to minimise borrowings 
and interest costs
bank facilities
the group has a £450 million five year revolving credit facility which
together with the £90 million fixed rate bond form the committed 
core of our funding arrangements
liquidity
the group operates a policy of maintaining certainty of funding over 
the medium term by a combination of committed floating and fixed rate
facilities supplemented by uncommitted facilities the policy is to ensure
that forecast net borrowings plus a reasonable operating headroom 
are covered by committed facilities which mature at least 12 months 
after the year end
interest rates
the group manages its exposure to interest rate fluctuations on its
borrowings by operating with a mix of fixed and floating rate borrowings
the objective is to operate with fixed rate borrowings within a range 
of 20 per cent to 50 per cent of total borrowings over the medium term
although the group may operate outside of that range during the year
currency
the group operates primarily in the uk with only approximately 136 per
cent of sales arising from companies operating in currencies other than
sterling principally the euro group policy is to hedge against transactional
risk by spot and forward foreign exchange contracts we do not hedge
against translation
balance sheet
shareholders’ funds increased from £2882 million to £3661 million over the
year primarily as a result of the disposals borrowings fell from £4137 million
to £3236 million resulting in gearing of 884 per cent last year 1435 per
cent and interest cover before goodwill amortisation and exceptional items
rising to 60 times last year 51 times
return on investment before goodwill amortisation and exceptional items
adjusting the opening invested capital for the ski and munch bunch disposal
which completed on 2 april 2002 our roic posttax return on average
invested capital rises from 99 per cent last year to 100 per cent in the year
to march 2003 the cost of debt and equity capital continued to fall reducing
our wacc weighted average cost of capital which resulted in the margin
over cost of funds rising to 37 percentage points last year 26 percentage
points we will continue to manage both sides of the equation improving
roic whilst keeping our cost of capital down to maximise the return to
equity investors
pensions
the changes we have made to our pension funding arrangements have been
an important factor behind this year’s results depressed equity markets 
and increasing life expectancy are putting great strains on company 
pension funds we have taken steps to ensure the latter does not become 
an increasing burden to the company we decided to keep our final salary
scheme but have increased contributions for all employees by 40 per cent
from 5 to 7 per cent of earnings and removed a number of company 
funded early retirement provisions for future service our fund is relatively
immature with almost twice the level of contributions going in as pensions
paid out which leaves us able to take a long term view of investment 
returns we continue to charge pension costs against profits based 
on ssap 24 these results incorporate the latest triennial valuation as at
march 2002 and the increased employee contributions have offset the
increased cost the variation credit due to the amortisation of past surpluses
reduces the pension charge by £24 million
the potential effects of adopting frs 17 are that the posttax balance sheet
deficit rises to £1435 million last year deficit £47 0 million reflecting the
trends seen in the equity markets the effect on pretax profit would have
been a reduction of £55 million made up of the loss of the ssap 24 credit
and other calculation differences between the two methodologies it is our
intention to continue to report profits under ssap 24 until the new standard
is implemented
information technology
one of the major capital projects has been the introduction of sap across 
the group permitting a move to state of the art systems for both financial
reporting and operational control our decentralised it arrangements 
have been replaced with a central structure it is our intention subject to
consultation to take all remaining it staff out of our operating companies
in the coming year saving costs and improving service another benefit 
from the implementation of sap is that again subject to consultation we
plan to centralise all financial accounting and reporting across the group
we propose to roll out the changes in the first half and expect the benefits 
to build steadily over the next two years
sean christie
finance director 1
3
5
7
9
2
4
6
8
1 peter blackburn cbe 62 chairman 
•
†‡
joined the board in 2001 and was previously chairman and chief executive 
of nestlé uk limited he is a nonexecutive director of sig plc and 
compass group plc and is past president of the food and drink federation
he was awarded the cbe in 2003 for services to the food and drink industry
he chairs the nomination committee
2 jo stewart 53 chief executive 
joined northern foods in 1988 as managing director of fox’s biscuits having
previously held a number of senior posts at united biscuits he was appointed
to the board in 1994 as managing director of prepared foods and became
chief executive of northern foods in march 1998 he is a nonexecutive
director of enterprise inns plc
3 tony hobson 55 deputy chairman 
•
†‡
joined the board on 28 may 2002 he is a nonexecutive director of 
hbos plc jardine lloyd thompson group plc and glas cymru a chartered
accountant he was the group finance director of legal  general group plc
for 14 years until his retirement from the board in 2001 he was previously
the senior independent director of thames water plc until its acquisition 
by rwe in 2000 he chairs the remuneration committee
4 sean christie 45 finance director 
joined northern foods in 1979 and was finance director of pork farms and
fox’s biscuits and subsequently of northern foods’ prepared foods activities
prior to his appointment to the board in 1996 he is a nonexecutive director
of kingston communications hull plc
5 matthew gribbin 45
joined northern foods in 1981 and has held a number of senior positions
within the northern foods group he is a council member of the federation
of bakers
6 howard sims 55
joined northern foods in 1998 upon the acquisition of cavaghan  gray
group plc of which he was chief executive he had been employed by
cavaghan  gray since november 1971
7colin dyer 50
•
†‡ 
joined the board in 1997  he is chief executive officer of worldwide retail
exchange and was formerly chief executive officer of courtaulds textiles plc
he chairs the audit committee
8 orna nichionna 47
•
†‡ 
joined the board on 28 may 2002 she is a former partner of mckinsey 
 company she is a nonexecutive director of bank of ireland uk holdings
plc bristol  west plc bupa and is a trustee of the soil association
9 julian wild 50 company secretary
joined northern foods in 1979 he is a nonexecutive director of newlands
scientific plc and is a board member of the y orkshire cultural consortium
he is also a commissioner with the independent football commission
•
nonexecutive director

remuneration committee member
† audit committee member
‡ nomination committee member
board
of directors
24  board of directors northern foods plc summary report of the directors  independent auditors’ statement  25 northern foods plc
summary report
of the directors
independent
auditors’ statement
principal activities and business review
this report should be read in conjunction with the chairman’s statement the
chief executive’s statement and the financial review which together include
information about group activities the financial performance during the year
and likely developments
dividend 
an interim dividend of 325 pence per share was paid on 28 march 2003 
and the directors recommend a final dividend of 545 pence per share to be
paid on 29 august 2003 to shareholders on the register on 25 july 2003
directors
the directors are listed on page 24 together with their biographical details
and were directors of the company throughout the year except for
aj hobson and o g nichionna who were appointed on 28 may 2002
mtgribbin and h r sims who were appointed on 27 january 2003 and 
j m fry and h a alexander who resigned on 28 may 2002 and 31 december
2002 respectively
in accordance with the company’s articles of association p h blackburn
cdyer a j hobson o g nichionna and a j stewart retire and being eligible
offer themselves for reelection
m t gribbin and h r sims having been appointed directors since the 2002
annual general meeting offer themselves for election
corporate governance
throughout the year ended 31 march 2003 northern foods has been 
in compliance with the provisions set out in section 1 of the combined 
code on corporate governance annexed to the listing rules issued by
the financial services authority
in accordance with the principles of good corporate governance the 
company has the following main committees
audit committee
executive committee
nomination committee
remuneration committee
the directors confirm that they have reviewed the effectiveness of the group’s
system of internal control for the year ended 31 march 2003 and the period
to 28 may 2003 in line with the publication ‘internal control guidance for
directors on the combined code’
annual general meeting
the notice convening the company’s annual general meeting to be held 
at 1230 pm on thursday 17 july 2003 is contained in the circular sent to
shareholders with this review
auditors
deloitte  touche have expressed their willingness to continue in office
as auditors of the company and a resolution proposing their reappointment
will be submitted to the company’s annual general meeting
by order of the board
julian wild
company secretary
28 may 2003
to the members of northern foods plc
we have examined the summary financial statement which comprises the
summary directors’ remuneration report profit and loss account balance
sheet and cash flow statement
this report is made solely to the company’s members as a body in
accordance with section 251 of the companies act 1985 our 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 for 
our audit report or for the opinions we have formed
respective responsibilities of directors and auditors
the directors are responsible for preparing the summarised annual review
in accordance with applicable united kingdom law our responsibility is 
to report to you our opinion on the consistency of the summary financial
statement with the full annual accounts the report of the directors and 
the directors’ remuneration report and its compliance with the relevant
requirements under section 251 of the companies act 1985 and the
regulations made thereafter we also read the other information contained 
in the summarised annual review as described in the contents section
and consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the summary
financial statement
basis of opinion
we conducted our work in accordance with bulletin 19996 ‘the auditors’
statement on the summary financial statement’ issued by the united
kingdom auditing practices board
opinion
in our opinion the summary financial statement is consistent with the full
annual accounts the report of the directors and the directors’ remuneration
report of northern foods plc for the year ended 31 march 2003 and the
companies act 1985 and the regulations made thereunder
deloitte  touche
chartered accountants and registered auditors
28 may 2003
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 northern foods plc
summary directors’
remuneration report
introduction
the board has prepared this report in accordance with the requirements of
the directors’ remuneration report regulations 2002 the report also meets
the relevant requirements of the combined code annexed to the listing
rules issued by the financial services authority
it covers the remuneration policy the level and components of directors’
remuneration a number of formal disclosures relating to individual directors’
remuneration and a performance graph of the company’s performance
as required by the regulations a resolution to approve the report will be
proposed at the annual general meeting of the company
the regulations require the auditors 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 as amended by the regulations
remuneration committee
the members of the remuneration committee were j m fry chairman –
resigned 28 may 2002 a j hobson chairman – appointed 28 may 2002
h a alexander resigned 31 december 2002 p h blackburn c dyer and 
o g nichionna appointed 28 may 2002 all were independent non
executive directors the committee makes recommendations to the board
no director plays a part in any discussion about his or her remuneration
the remuneration committee has been formally delegated the authority 
by the board of directors to establish policy in respect of all terms of
employment for executive directors
advisers to the remuneration committee
the remuneration committee appointed hewitt bacon  woodrow to
provide advice on matters of future remuneration policy during the year
they are also scheme actuaries to the northern foods pension scheme
linklaters provided legal advice on share schemes and related matters 
and they also advise the company secretarial function the remuneration
committee appointed dla to advise on matters relating to the revision 
of directors’ contracts dla also provided specific employment law advice 
to the company’s legal department
in determining directors’ remuneration for the year and in considering
proposals for the future the committee consulted a j stewart chief
executive the secretary to the remuneration committee is e cockburn
personnel executive who also provided information on pay practice in 
respect of executive directors and senior management
remuneration policy 
the group’s remuneration policy is designed to support the recruitment
motivation and retention of employees remuneration is considered within
the overall context of the sector of which the group is a part and the group’s
individual businesses the objective continues to be to pay at the relevant
midmarket level with a package designed to align interests of the employees
with shareholders and with a reasonable proportion of total remuneration
dependent upon individual and group performance the policy is described 
in more detail below for directors
remuneration policy for nonexecutive directors
fees for the nonexecutive directors are recommended by executive directors
and then approved by the board based upon a range of external information
and set within the aggregate limits contained in the articles of association
there is no other remuneration except where the company meets authorised
expenses of nonexecutive directors incurred on northern foods activities
they are not eligible for pension scheme membership and do not participate
in any of the group’s annual or long term incentive schemes
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 company’s overall performance the remuneration committee’s 
policy is to offer remuneration packages which are capable of attracting
retaining and motivating executive directors of high calibre to ensure that 
the company is managed effectively to the benefit of shareholders the
remuneration committee also takes account of the remuneration awarded 
to managers throughout northern foods in setting the remuneration 
of the executive directors
the remuneration committee is currently reviewing the policy on total
remuneration for executive directors it continues to aim for a structured 
and balanced remuneration package for each executive director by 
looking at each element as well as the package as a whole
the remuneration committee believes that an increasing proportion of the
total remuneration of a director should be performance related and proposes
changes to both the short and long term incentive arrangements changes 
to the annual incentive plan will be introduced for 20032004 the increase
in annual bonus opportunity for executive directors is set against the
introduction of stretching annual performance objectives in addition to the
current target of growth in earnings per share a proportion of any annual
bonus earned will be paid as deferred shares through the new share bonus
plan encouraging executive directors to grow their personal shareholding in
the group changes to the long term incentive arrangements proposed for
20042005 will include a review of performance targets ensuring continued
alignment of individual and shareholder interests
salary will continue to be set by reference to the median level of the relevant
employment market the remuneration committee has used annual surveys
conducted by external remuneration consultants to provide information 
on market practice focusing on comparisons with companies which are 
of a similar size and which share similar characteristics the remuneration
committee consults with the chief executive about its proposals relating 
to the remuneration of other executive directors and senior management
the five main components of the remuneration package for executive
directors and senior management in 20032004 are
– basic annual salary
– the possibility of an annual cash bonus based upon performance 
of the individual and the group
– a deferred annual bonus where a cash bonus is paid
– participation in long term incentive plans with returns based upon 
the group and individual performance
– pension and other benefits
share and bonus schemes are structured to provide a strong alignment 
of interest between the individual and the shareholder
in order to encourage and reward performance there is a significant
proportion of potential reward dependent upon company and individual
performance as shown below nearly 40 per cent of directors’ total
remuneration is dependent upon target performance with a maximum
percentage at grant of 45 per cent
the overall balance of the fixed and variable pay at current value for
20032004 exclusive of pension benefits is illustrated below the table is 
a theoretical model and assumes that on target performance is achieved 
for both short and long term incentives the value of the long term incentive 
is calculated using black scholes methodology the share price used is as at
31 march 2003 and an average option life of six and a half years is assumed
26  summary directors’ remuneration report summary directors’ remuneration report  27 northern foods plc
basic salary variable pay
as proportion as proportion
of total of total
remuneration remuneration
m s christie 62 38
m t gribbin 62 38
h r sims 62 38
a j stewart 62 38
salary 
salaries of executive directors are reviewed annually at the beginning of 
each financial year by the remuneration committee taking into account any
changes in the individual’s responsibilities performance and development
the company’s overall performance and external factors the remuneration
committee’s objective is and will continue to be to maintain salaries at
around the median level of the relevant employment market
salaries were reviewed for the chief executive and finance director in 
march 2003 with increases taking effect from 1 april 2003 salaries for the
two newly appointed executive directors m t gribbin and h r sims were
considered in january 2003 and took effect from 27 january 2003 they 
will not be reviewed until april 2004
in addition to basic salary all the executive directors receive certain benefits
principally a car private medical insurance and a pension salary is the only
pensionable remuneration
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 remuneration committee to 
take account of current business plans
the remuneration committee has reviewed the annual incentive plan and 
the target and the maximum potential award for 20032004 have been
increased for this year better to reflect current market practice for
comparator companies the target incentive for an executive director is now
40 per cent of basic salary for good performance in the case of exceptional
results the incentive payment may increase up to a maximum of 60 per cent
of basic salary
one quarter of any annual incentive earned will be paid as deferred shares
through the company’s share bonus plan shares acquired through the share
bonus plan will be purchased in the market and held in trust for the executive
for a period of three years these shares will be forfeited should the executive
director leave prior to the third anniversary during this retention period the
participants will not be entitled to dividends on the shares
the target set for 20032004 is made up of both financial and business
performance measures the financial element includes profit performance
and earnings per share growth targets the business element is related 
to a small number of commercially sensitive strategic objectives for each
individual and the senior management team overall the performance 
targets selected are considered appropriately stretching by the remuneration
committee
the targets for the chief executive and the finance director in 20012002
and 20022003 were based upon growth over the year in northern foods’
earnings per share there is a threshold below which no payment is made
the payment for reaching target was set at 25 per cent of salary with a
maximum potential bonus of 35 per cent no annual bonuses were paid 
to executive directors in respect of 20012002 an accrued bonus in
respect of 20022003 will be paid in june 2003 and is included in t able 1
on page 29
the targets for m t gribbin and h r sims were based equally upon growth
over the year in northern foods’ earnings per share together with profit
after interest of the operating companies for which the individual director
was responsible the payment for reaching target was set at 25 per cent 
of salary with a maximum potential bonus of 35 per cent m t gribbin and
h r sims were not executive directors in 20012002 an accrued bonus in
respect of 20022003 will be paid in june 2003 and is included in t able 1
on page 29
long term incentive share plans
the group’s long term incentive grants have been developed to reflect 
market practice and to provide long term management focus and motivation
the remuneration committee believes that a significant element of 
executive remuneration should be linked to the delivery of above average
long term returns for shareholders executives’ interest in both relative 
and absolute share price performance is important and this is facilitated 
by share schemes and the encouragement to grow a significant personal
shareholding in the group
long term incentives are provided to executive directors in the form of
restricted shares and share options executive directors and senior executives
are eligible to receive awards under only one of these arrangements in any
one financial year
long term incentive arrangements for executive directors are currently being
reviewed by the remuneration committee with the objective of seeking
shareholder approval for the introduction of any new arrangements in 2004
until such review is concluded the policy for the 20032004 financial period
is set out below
executive share options
participation in the executive option scheme is at the discretion of the
remuneration committee executive directors are eligible to receive a grant 
of options if they hold at the time of any grant unexercised options worth 
on aggregate less than four times salary options are granted at market 
value under either the company share option plan inland revenue approved
or executive share option scheme unapproved
directors can exercise options in the seven year period following the third
anniversary of grant and before the tenth anniversary subject to satisfaction
of the performance condition
consistent with best practice it is the remuneration committee’s intention
that grants will continue to be made annually to executive directors in the
future such grants will normally be equivalent to one times salary
in making option grants the remuneration committee sets the performance
target to be achieved before such options can be exercised the performance
condition requires that the remuneration committee must be satisfied that
over the three year performance period the real growth in earnings per 
share is greater than 3 per cent per annum compound if the performance
condition is not satisfied after the initial three year performance period the
period will be extended and performance will be retested at the end of year
four and if necessary again at the end of year five against the full period 
from grant the options will lapse if the performance condition has not been
met by the end of year five of the performance period
the remuneration committee believes that the performance condition for 
the long term incentive arrangements should align the interests of directors
with those of shareholders the remuneration committee also believes 
that real growth in earnings per share will only be achieved through the
delivery of both the commercial and financial objectives of the company
furthermore executives will only benefit from the plan if real growth in the
earnings per share target is achieved and there is growth in the share price
grants were made on 2 december 2002 to the executive directors
the aggregate of all share options is shown in note 2 on page 30 28  summary directors’ remuneration report northern foods plc
summary directors’
remuneration report continued 
long term incentive plan
the plan is designed to align the interests of senior management with
the interests of shareholders the benefits available to senior management
participating in the plan will only accrue to them if the company has
delivered significant benefits to shareholders over a three year period
participation in this incentive plan is at the discretion of the remuneration
committee
under the plan the remuneration committee awards shares in the company
to senior management conditional upon the achievement of corporate
performance targets over a period of three years the number of shares
conditionally awarded to each participant is determined by the remuneration
committee the market value of shares which may be conditionally 
awarded to a participant in any year will be limited to a maximum 
of 75 per cent of salary
performance is assessed against two criteria by comparing the growth 
in total shareholder return in terms of share price growth and dividends
to that of the total shareholder return of the companies comprising the 
ftse food producers index excluding unilever and by assessing the
underlying performance of northern foods by reference to the real 
growth in earnings per share over the same period
the total shareholder return performance is assessed by reference to a vesting
scale whereby for the full award to qualify for vesting the total return to the
company’s ordinary shareholders during the three year performance period
places it in the top quartile of the comparator group if the company’s
performance is ranked at 50 per cent or lower all of the conditional awards will
lapse where the company is placed between 50 per cent and the top quartile
the maximum number of shares available for vesting will be calculated on 
a straight line basis with 25 per cent of the conditional award being available
when the company is placed at 51 per cent and the entire award being
available where the company is placed in the top quartile
the remuneration committee assesses the underlying performance of the
company as measured by growth in earnings per share to determine the
proportion of the available shares that will vest
the remuneration committee believes that the performance condition for 
the long term incentive arrangements should align the interests of directors
with those of shareholders the remuneration committee selected the 
relative total shareholder return compared with companies in the ftse food
producers index excluding unilever as a measure that reflects corporate
performance relative to companies with similar characteristics and subject 
to similar market conditions unilever is excluded from the comparator group
on the basis of size and product diversity the remuneration committee also
believes that real growth in earnings per share is an appropriate measure 
of the underlying financial performance of the company
the companies currently comprising the ftse food producers index are
associated british foods northern foods
cadbury schweppes robert wiseman dairies
dairy crest sygen
devro t ate  lyle
geest uniq
the three year performance period for the 1999 plan ended on 31 march
2002 the committee assessed the extent to which the performance
condition had been achieved and 30 per cent of the conditional awards made
under the plan vested on 26 july 2002 the balance of the conditional award
lapsed shares awarded under the plan will be 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
trustee how to vote at the end of the retention period the shares will 
be transferred to participants from the trust
all employee share schemes
an approved savingsrelated share option scheme is open to all eligible
employees in the uk and overseas executive directors’ interests in savings
related options are included in note 2 on page 30
pension arrangements
executive directors are members of the company pension scheme
their dependants are eligible for dependants’ pensions and the payment 
of a lump sum in the event of death in service the pension arrangements
provide for a pension on retirement at age 60 of two thirds basic annual
salary after 20 or more years’ eligible service subject to inland revenue 
rules no other payments to directors are pensionable none of the current
directors’ benefits from the company scheme are restricted by current 
inland revenue limits and there are no additional payments unfunded
promises or similar arrangements
additional directorships
executive directors are encouraged to hold a maximum of one non
executive directorship in a listed business in a noncompeting sector
fees for such directorships are retained by the executive director
directors’ contracts
it is the company’s policy that executive directors should have secure
agreements with an indefinite term providing for a maximum of one
year’s notice all executive directors have contracts which are subject 
to one year’s notice by either party
in the event of early termination the directors’ contracts provide for
compensation up to a maximum of basic salary company car private 
medical insurance and pension for the notice period
the details of the directors’ contracts are summarised in the table below
date of contract notice period
m s christie 1 april 1996 12 months
m t gribbin 1 april 2003 12 months
h r sims 1 april 2003 12 months
a j stewart 1 april 1996 12 months
the contracts for a j stewart and m s christie have been amended from 
the previous arrangements where they benefited from a two year contract
reducing in length over the succeeding year being renewed to the full two
year period on 1 april each year
m t gribbin and h r sims who are proposed for election to the board and
a j stewart who is proposed for reelection at the annual general meeting
have service contracts which provide for a notice period of one year
p h blackburn c dyer a j hobson and o g nichionna who are also
proposed for reelection being nonexecutive directors do not have a service
contract they are appointed for a three year term at the end of which any
extension is considered and decided upon by the full board they stand for 
reelection by the shareholders annually summary directors’ remuneration report  29 northern foods plc
performance graph
in accordance with the requirements of the directors’ remuneration 
report regulations 2002 the graph opposite shows the company’s 
five year performance measured by total shareholder return compared 
with the performance of the ftse 250 index also measured by total
shareholder return
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
total shareholder return measures share price growth with any dividends
deemed to be reinvested gross on the exdividend date the total shareholder
return shown is based on daily spot prices
1 directors’ remuneration and pension entitlements 
the following table shows an analysis of the salary benefits and bonus elements of remuneration of the directors holding office during the year ended
31 march 2003 t able1 pension entitlements and interests under long term incentive arrangements are shown on page 30
accrued
salary annual
fees benefits bonus total total
t able 1 2003 2003 2003 2003 2002
directors’ remuneration ££££ £
executive directors
m s christie 255000 19369 25000 299369 254122
m t gribbin appointed 27 january 2003 41827 2446 4167 48440 –
h r sims appointed 27 january 2003 41827 2421 2083 46331 –
a j stewart 400000 16146 25000 441146 379735
nonexecutive directors
h a alexander resigned 31 december 2002 21744 – – 21744 25000
p h blackburn 125000 – – 125000 26346
c dyer 29244 – – 29244 25000
j m fry resigned 28 may 2002 6410 – – 6410 40000
c r haskins retired 1 february 2002 –––– 112259
a j hobson appointed 28 may 2002 33949 – – 33949 –
o g nichionna appointed 28 may 2002 25462 – – 25462 –
980463 40382 56250 1077095 862462
notes to t able 1
figures for directors are prorated to reflect date of appointment or resignation
benefits benefits include private medical insurance and company car
annual bonus no annual bonus was paid to executive directors in respect of 20012002 a bonus will be paid in june 2003 in respect of 20022003
there was nil compensation for loss of office paid to or receivable by any director nor any other payments paid to or receivable by any director in connection 
with the termination of qualifying services
share option gains
no options were exercised during the year
60
1998 1999
northern foods
40
80
100
120
140
20
0
total shareholder return 1 april 1998 to 31 march 2003
ftse 250 index
2000 2001 2002 2003 30  summary directors’ remuneration report northern foods plc
1 directors’ remuneration and pension entitlements continued
t able 2
directors’ pension entitlements 2003 2002
aggregate company contributions in respect of directors to money purchase pension schemes – –
number of directors with retirement benefits accruing under
– money purchase schemes – –
– defined benefit schemes 4 2
2 directors’ interests in shares
the interests of the directors in the share capital of the company at 1 april 2002 and 31 march 2003 are detailed below
ordinary shares share options ltip
number number number
description 31 march 1 april 31 march 1 april 31 march 1 april
of interest 2003 2002
†
2003 2002
†
2003 2002
†
executive directors
m s christie beneficial 70628 43666 478028 356259 157674 289846
m t gribbin appointed 27 january 2003 beneficial 410688 410566 204291 204291 82604 82604
h r sims appointed 27 january 2003 beneficial 38895 38895 170771 170771 100465 100465
a j stewart beneficial 126707 85574 802231 594578 240697 442336
nonexecutive directors
p h blackburn beneficial 40000 15000
c dyer beneficial 10000 10000
a j hobson appointed 28 may 2002 beneficial 4000 –
o g nichionna appointed 28 may 2002 beneficial 4000 –
notes to the table
†
balance at 1 april 2002 or at date of appointment
m s christie m t gribbin h r sims and a j stewart qualified as did all employees with over four years’ service to participate in the company’s previous profit
sharing scheme and their beneficial holdings of ordinary shares shown above include their current entitlements under this scheme
the company’s register of directors’ interests which is available for inspection in accordance with the provisions of the companies act 1985 contains full
details of directors’ shareholdings options and long term incentive plan ltip awards
the midmarket price of the company’s shares was 1745p at 28 march 2002 and 1235p at 31 march 2003
during the year the market price ranged between 1120p and 187 0p
at 31 march 2003 the executive directors of northern foods plc as potential beneficiaries of the northern foods employee share ownership trust were
interested in 4212749 ordinary shares held by the trustee
by order of the board
tony hobson
chairman
remuneration committee
28 may 2003
summary directors’
remuneration report continued  consolidated profit and loss account  31 northern foods plc
before before
goodwill goodwill goodwill goodwill
amortisation amortisation amortisation amortisation
and and and and
exceptional exceptional exceptional exceptional
items items total items items total
31 march 31 march 31 march 31 march 31 march 31 march
2003 2003 2003 2002 2002 2002
£m £m £m £m £m £m
group turnover
– continuing 14212 – 14212 13538 – 13538
– discontinued ––– 1054 – 1054
group turnover 14212 – 14212 14592 – 14592
cost of sales 10233 319 10552 10696 215 10911
gross profit 3979 319 3660 3896 215 3681
net operating expenses 2823 131 2954 2645 30 267 5
operating profit before goodwill amortisation
– continuing 1156 426 730 1150 159 991
– discontinued ––– 101 64 37
1156 426 730 1251 223 1028
goodwill amortisation – 24 24 – 22 22
operating profit 1156 450 706 1251 245 1006
share of associated undertakings 14 07 07 04 07 03
profit on disposal of businesses – 540 540 –72 72
profit on ordinary activities before interest 1170 83 1253 1255 180 107 5
net interest payable 195 – 195 245 – 245
profit on ordinary activities before taxation 975 83 1058 1010 180 830
t axation on profit on ordinary activities 179 128 51 236 50 186
profit on ordinary activities after taxation 796 211 1007 77 4 130 644
equity dividends 449 – 449 451 – 451
retained profit for the year 347 211 558 323 130 193
basic earnings per ordinary share 1481p 1873p 1391p 1157p
diluted earnings per ordinary share 1802p 1137p
dividend per ordinary share 870p 820p
average number of shares million 5376 5564
analysis of earnings before interest tax depreciation and amortisation ebitda
operating profit before goodwill amortisation
and exceptional items 1156 1251
add associate 14 04
depreciation 627 637
ebitda before exceptional items 1797 1892
consolidated profit and loss account
for the year ended 31 march 2003 32  consolidated balance sheet northern foods plc
consolidated balance sheet
as at 31 march 2003
31 march 31 march
2003 2002
£m £m
fixed assets
intangible fixed assets 414 423
t angible fixed assets 6706 6959
investments 215 229
7335 7611
current assets
stocks 851 830
debtors 2116 1948
investments 106 91
cash at bank and in hand 335 229
3408 3098
creditors amounts falling due within one year 3221 3037
net current assets 187 61
total assets less current liabilities 7522 767 2
creditors amounts falling due after more than one year
convertible subordinated bonds 2008 905 903
loans and other creditors 2325 3246
3230 4149
provisions for liabilities and charges 631 641
net assets 3661 2882
capital and reserves
calledup share capital 1308 1398
share premium account 574 57 0
revaluation reserve 39 43
capital redemption reserve 191 100
other reserves 67 67
profit and loss account 1482 704
equity shareholders’ funds 3661 2882
a j stewart director
m s christie director
28 may 2003 consolidated cash flow statement  analysis of activities  33 northern foods plc
consolidated cash flow statement
for the year ended 31 march 2003
31 march 31 march
2003 2002
£m £m
net cash inflow from operating activities 1516 117 8
returns on investments and servicing of finance – net interest paid 186 27 8
t axation 94 110
purchase of tangible fixed assets net 760 1134
net cash outflow from capital expenditure and financial investment 760 1134
net cash inflowoutflow from acquisitions and disposals 1406 40
equity dividends paid 451 433
cash inflowoutflow before management of liquid resources and financing 1431 817
purchase of own shares 550 93
issue of equity share capital net of costs 05 21
exchange adjustments 17 02
amortisation of bond and financing costs 02 02
movement in net debt in the year 901 893
analysis of activities
for the year ended 31 march 2003
operating operating
profit before profit before
goodwill goodwill
amortisation amortisation
and and net net
external external exceptional exceptional operating operating
turnover turnover items items assets assets
2003 2002 2003 2002 2003 2002
area of activity £m £m £m £m £m £m
continuing operations
convenience 10141 9402 700 645 5337 5528
grocery 4071 4136 456 505 2571 2399
14212 13538 1156 1150 7908 7927
discontinued operations
convenience – 1003 – 100 – 147
grocery – 51 – 01 – –
– 1054 – 101 – 147
total group 14212 14592 1156 1251 7908 807 4 34  five year record northern foods plc
five year 
record
profit and loss account 1999 2000 2001 2002 2003
turnover continuing £m 11456 12031 12561 13538 14212
discontinued £m 1403 1360 1218 1054 –
total £m 12859 13391 1377 9 14592 14212
operating profit continuing £m 97 4 1032 1089 1150 1156
discontinued £m 124 142 140 101 –
total £m 1098 117 4 1229 1251 1156
 of turnover  85 88 89 86 81
share of associated undertakings £m 19 02 14 04 14
net interest payable £m 17 2 17 4 202 245 195
profit before taxation £m 945 1002 1041 1010 975
profit after taxation £m 699 748 792 77 4 796
exceptional items after taxation £m – 213 55 101 242
goodwill amortisation £m – 13 21 29 31
profit after taxation frs 3 £m 699 522 826 644 1007
earnings per share
before goodwill amortisation and exceptional items p 118 126 137 139 148
after goodwill amortisation and exceptional items p 118 88 143 116 187
dividend per share p 68 7 3 7 7 82 87
dividend cover times 17 18 18 17 18
asset analysis
operating assets £m 5544 637 2 6952 807 4 7908
other liabilities and provisions £m 1057 954 962 1055 1011
trading capital employed £m 4487 5418 5990 7019 6897
accumulated goodwill written off £m 3048 3061 3082 3085 2466
total invested capital £m 7535 847 9 907 2 10104 9363
net borrowings £m 1760 2769 3244 4137 3236
total equity funds invested £m 577 5 5710 5828 5967 6127
equity shareholders’ funds £m 2727 2649 2746 2882 3661
net gearing  645 1045 1181 1435 884
interest cover times 65 68 62 51 60
capital expenditure £m 1105 880 783 1236 794
shareholder value analysis
profit before interest £m 1117 117 6 1243 1255 1170
attributable taxation £m 299 306 310 309 238
normalised operating profit after tax nopat £m 818 87 0 933 946 932
return on average invested capital roic  117 109 106 99 100
†
weighted average cost of capital wacc  80 7 6 7 3 7 3 63
margin over cost of funds  37 33 33 26 37
posttax return on average equity funds invested  125 130 137 131 132
stated before goodwill amortisation and exceptional items
†
stated after reducing the 2002 invested capital by £87m to reflect the sale of the ski and munch bunch brands and associated assets on 2 april 2002
the years ending 1999 to 2001 have been restated to comply with frs 19 ‘deferred tax’ financial calendar  investor information  35 northern foods plc
investor
information
shareholder services and helpline
shareholders who change address want to have their dividends paid directly
into their bank account have a query regarding their shares or who otherwise
require some information about their holding should contact the registrar
computershare investor services plc on the dedicated northern foods
shareholder information telephone line 0870 702 0134 alternatively
they should write to the registrar computershare investor services plc at 
po box 435 owen house 8 bankhead crossway north edinburgh eh11 4br
or email their enquiry indicating that they are a northern foods shareholder
to webqueriescomputersharecouk
shareholder information on the internet
the northern foods website wwwnorthernfoodscouk provides shareholder
information including copies of the annual report and annual review the 
site also contains information on recent trends in the company’s share price
shareholders can gain access to their individual shareholder details via a
link to our registrar’s website and will then be required to pass an identity
check to access their personal shareholding alternatively shareholders can
gain access directly to the registrar’s website wwwcomputersharecom
from either site shareholders can download stock transfer dividend mandate
and change of address forms
dividend mandates
shareholders may choose to have dividends paid electronically into their 
bank or building society account using the bacs system this process ensures
that the amount of the dividend is passed directly into their account as
cleared funds on the date the payment is due confirmation of payment 
is contained in a dividend tax voucher which is posted to shareholders’
registered addresses at the time of payment this voucher should be kept
safely for future reference
any shareholder wishing to adopt this method of payment should complete
a dividend mandate form which can be found attached to the last dividend
warrant alternatively a form can be downloaded from the registrar’s 
website or requested by calling the above telephone helpline
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 oneforone
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
financial
calendar
2003
28 may final results announcement
13 june annual report and annual review issued
15 july latest date for receipt of forms of proxy
17 july annual general meeting
23 july shares quoted exdividend
25 july record date for final dividend
8 august halfyearly interest payment on convertible
subordinated bonds
29 august final dividend payment on ordinary shares
november interim results announcement
2004
8 february halfyearly interest payment on convertible
subordinated bonds
march interim dividend payment on ordinary shares
31 march financial year end principal
operations
northern foods head office
beverley house st stephen’s square hull hu1 3xg
telephone 01482 325432
technical services
farnsworth house lenton lane nottingham ng7 2ns
telephone 0115 986 8231
riverside and evesham foods
crossgate drive nottingham ng2 1lw
telephone 0115 986 6462
operations at nottingham and evesham
pork farms bowyers
queens drive nottingham ng2 1lu
telephone 0115 986 6541
operations at nottingham trowbridge and binghams sheffield
premium savoury products
maer lane market drayton tf9 3aw
telephone 01630 655095
operations at palethorpes market drayton trafford park bakery manchester
the pizza factory nottingham and dorset chilled foods shaftesbury
walter hollands
baxenden nr accrington bb5 2sa
telephone 01706 213591
the recipe dish company
drakehouse crescent waterthorpe sheffield s20 7jg
telephone 0114 247 6864
operations at pennine foods sheffield and fenland foods grantham
cavaghan  gray 
brunel house brunel way carlisle ca1 3nq
telephone 01228 518200
operations at carlisle aberdeen grimsby and hull
fletchers kara grain d’or
claywheels lane sheffield s6 1ly
telephone 0114 234 8171
operations at fletchers bakeries sheffield kara manchester 
and grain d’or harlesden
gunstones bakery
stubley lane dronfield sheffield s18 6pf
telephone 01246 414651
operations at dronfield and la baguette dorée barnsley
cakes and puddings
ashton road oldham ol8 2nd
telephone 0161 633 1181
operations at park cake bakeries oldham and bolton 
and matthew walker heanor
eden vale
station road minsterley shropshire sy5 0bn
telephone 01743 791301
fox’s biscuits
po box 10 batley wf17 5jg
telephone 01924 444333
operations at batley and kirkham 
elkes biscuits
dove valley bakeries cheadle road uttoxeter st14 7bt
telephone 01889 563131
green isle food group
ida industrial estate naas co kildare ireland
telephone 00 353 45 876511
operations at naas boyle gurteen portumna and longford
dalepak foods
dale house leeming bar northallerton dl7 9ul
telephone 01677 424111
operations at leeming bar and emile tissot telford
smiths flour mills
po box 3 eastgate worksop s80 1qy
telephone 01909 472216
operations at worksop langley mill and holbeach
nft distribution
azalea close clover nook industrial estate somercotes
alfreton de55 4qx
telephone 01773 523523
operations throughout the country
batchelors
7274 bannow road cabra west dublin 7  ireland
telephone 00 3531 8380133
operations at dublin and athy
fox’s confectionery 
sunningdale road braunstone leicester le3 1ue
telephone 0116 287 3561
36  principal operations northern foods plc designed and produced by
fitchlondon
principal photography 
directors – bill robinson
food products – jean cazals
peoplemanufacturing – nick sinclair
printed in england by
the colourhouse
company
information
registered office
beverley house
st stephen’s square
hull hu1 3xg
telephone 01482 325432
facsimile 01482 226136
website wwwnorthernfoodscouk
registered in england and wales
no 471864
auditors
deloitte  touche
merchant bankers
n m rothschild  sons limited
stockbrokers
hoare govett limited
cazenove  co ltd
registrar to the ordinary shareholders
computershare investor services plc
po box 435
owen house
8 bankhead crossway north
edinburgh eh11 4br
telephone 0870 702 0134
email webqueriescomputersharecouk
website wwwcomputersharecom
principal paying and conversion agent 
and registrar to the convertible bond holders
j p morgan chase bank
1 chaseside
bournemouth
dorset bh7 7da
annual
report
the northern foods annual review 2003 aims to give shareholders 
a clear and concise overview of the group’s business and prospects
for this reason the review contains a summary financial statement 
rather than the full accounts
the annual review does not contain sufficient information to allow 
for as full an understanding of the results and state of affairs of the 
group as would be provided by the northern foods annual report 2003
if you would like to receive a copy of the annual report please contact
public relations department
northern foods plc
beverley house
st stephen’s square
hull hu1 3xg
telephone 01482 325432
our business
northern foods is a leading uk food producerwe operate
in eight core product areas which benefit from long term
demographic and lifestyle trends favouring high quality 
foods that are convenient to eat
our focus is on serving the leading retailers and we 
have strong market positions in the supply of high 
quality chilled foods under their retail nameswe also 
have successful brands in biscuits frozen food and 
savoury products
contents
01 financial highlights
02 our core product areas
04 chairman’s statement
06 chief executive’s statement 
08 operating review
18 recognising our social responsibilities
21 financial review
24 board of directors
25 summary report of the directors
independent auditors’ statement
26 summary directors’ remuneration report
31 consolidated profit and loss account
32 consolidated balance sheet
33 consolidated cash flow statement
analysis of activities
34 five year record
35 financial calendar
investor information
36 principal operations
company information
annual report  northern foods plc
annual review 2003
wwwnorthernfoodscouk


Summary:
 financial highlights  01 northern foods plc
financial highlights
2003
 continuing sales up 50 to £14212m
driven by convenience up 7 9
 continuing operating profit

up £06m to £1156m
– disappointing performance in biscuits 
offsets good progress elsewhere
– convenience up 85
– grocery down 97
 earnings per share

up 65 to 1481p
benefits from lower tax charge and share 
buyback programme
 dividend increased 61 to 87p per share
– dividend cover

increased
 profit on sale of ski and munch bunch brands 
less operational costs lifts frs 3 pretax profit 
by 27 5 and earnings per share by 619
 net debt reduced by £901m
– £1001m returned to shareholders through 
dividends and share buybacks
– disposal proceeds £145m
– strong operational cash generation
 biscuit stabilisation and recovery plans in place
– accelerated new product development programme
– cost reduction initiatives
– price increases successfully implemented
 further groupwide initiatives to reduce cost base

figures quoted before goodwill amortisation and exceptional items